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

Saturday, October 8, 2016

week ending Oct 8

Fed Watch: Hard To Say That November Is Really "Live" - If there is one thing that I am fairly sure that monetary policymakers hate, it is the idea that the outcomes of their meetings are preordained. November appears to be just such a meeting. To be sure, Fed hawks want to believe the meeting is "live." The sizable group that dissented - or would have dissented if they were voting members - likely sees the case for a rate hike in November as even more pressing than in September. Remember, it is all about preemptive policy action from that contingent. If you thought delay was bad in September, it must be worse in November. But the doves - including a powerful group of permanent voting members - will likely have none of it. From their point of view, the case for a rate hike is no more pressing in November than September. Indeed, according to the the dot-plot, at least three would be happy taking a pass in December as well. And, although they would be loathe to admit it, within the context of a risk management framework the timing of the election argues against a hike as well. As I see it, the best the hawks can hope for is a strong statement about December. The data would have to very quickly turn very strong to give the hawks an upper hand in November. The only way to reinforce the idea that November is a "live" meeting is to continue to hold out the hope of a rate hike. But unless the doves budge between now and November, a rate hike is not happening. And the doves aren't likely to budge anymore than the hawks. It's kind of a stalemate at the moment, and everyone knows it. So reinforcing the the idea that a hike is going to happen when it isn't is not really an effective communication strategy. It is not exactly good policy guidance. Cleveland Federal Reserve President Loretta Master would also like you to believe November is "live." From Monday, via Bloomberg: “I would expect that the case would remain compelling” for a rate hike when the Federal Open Market Committee gathers in Washington Nov. 1-2, the week before Americans head to the polls, she told Kathleen Hays in an interview on Bloomberg Television Monday. Mester added that politics wouldn’t affect the decision.

JPMorgan Joins Yellen and Summers In Hinting The Fed May Buy Stocks Next -- During her latest testimony in Congress, when asked by rep Mick Mulvaney if the Fed has considered buying equities, Janet Yellen had a cryptic, yet open to interpretation answer: "the Federal Reserve is not permitted to purchase equities. We can only purchase U.S. treasuries and agency securities. I did mention in a speech in Jackson Hole, though, where I discussed longer term issues and difficulties we could have in providing adequate monetary policy.Accommodation may be somewhere in the future, down the line that this is the kind of thing that Congress might consider."  Then, the very next day, during a video conference Q&A, Yellen once again unexpectedly latched on to the topic of the Fed buying stocks, saying that "the idea of expanding into areas like equities might be “good thing to think about,”  Then, jumping on to the idea of nationalizing the stock market, none other than the world's most farcical former econopundit, Larry Summers, who has plunged to such recent depths he has to retweet himself on Twitter to get page views for his blog, "floated the idea of continuous purchases of stocks as a potential ingredient in a recipe for the developed world to strengthen economies struggling with subdued growth and inflation."  In a note released on Friday, the otherwise serious commentator Nick Panigirtzoglou, author of the closely followed "Flows and Liquidity" weekly publication, when discussing the limits of QE - a topic prominently touched upon by Bridgewater this past week, said the following: We believe that QE constraints are rather artificial. One of the channels via which QE operates is via bolstering the capacity of debt capital markets. Indeed, this year's big increase in spread product supply coincided with more QE by the ECB and the BoJ relative to the previous year. More bond issuance not only implies more credit creation, helping the economy, but also more QE capacity allowing central banks to purchase more assets in the future.But QE need not be confined to bond instruments in our mind. By limiting themselves to bonds, central banks are indeed deemed to face quantitative constraints given declining government bond issuance even as spread product issuance has increased. This year's purchases by the ECB, BoJ and the BoE account for 75% of total net bond issuance globally excluding EM local debt.

 This ‘bubble blind’ Fed is going to trigger another brutal recession—commentary - Michael Pento - Federal Reserve head Janet Yellen is keeping alive the tradition of her predecessors, Alan Greenspan and Ben Bernanke, by showing she is equally as blind-sighted to the bubbles central banks are blowing in the bond and equity markets. During her September press conference, Yellen stubbornly clung to the misconception that it is only possible to tell if a bubble exists after it bursts. And because of this delusion, in Yellen's eyes, 96 months of a virtual Zero Interest Rate Policy (ZIRP) is merely, and I quote, "a modest degree of accommodation." Her blinders are so opaque that she claims to see, "no signs of leverage building up." And her feckless ability to spot market imbalances even resulted in this doozy of a Yellen quote: "In general, I would not say that asset valuations are out of line with historical norms." Can it really be the case that the woman who holds a dictatorship on the cost of money, which is the most important price signal in an economy, is unaware that the stock market is at a level that is virtually the most overvalued in history? The median price-to-earnings, price-to-sales and total-market-cap-to-GDP ratios all show that the equity bubble is about as far detached from economic reality than at any other time in history.

The creators of bubble economies must be made to pay for their sins - Andy Xie, South China Morning Post - The US Federal Reserve decided not to raise interest rates in September, nearly a year after its first increase since 2008. While it argued it took no action because of low inflation expectations and low economic growth, it is really about bubbles. Since 2008, US household wealth has risen by US$6 for each dollar increase in nominal gross domestic product. The current level of household net wealth is 4.8 times GDP, higher than in 2000 or 2008, when the previous two bubbles burst. The Fed is scared that the same could happen now if it raises interest rates. But, if the rate is never raised, will the bubble last forever?  The Fed has been nursing a bubble economy for two decades. When Alan Greenspan mused over irrational exuberance, the Fed was still shy about running a bubble economy. But, when the Nasdaq took off in 1999, he let rip. After the internet bubble burst, he tolerated the rise of a property bubble. Bubbles lead to overinvestment in the East but overconsumption in the West  His successor, Ben Bernanke, watched over asset inflation in stocks, bonds and properties. The Fed is now explicit about running a bubble economy. It often quotes the magnitude of the increase in household wealth as a leading indicator for growth down the road. Unfortunately, in three cycles of bubbles, the linkage between asset markets and growth has become weaker and weaker. The Fed is puzzled by this and is still waiting for a growth boom after an increase in wealth of nearly twice the GDP. The US has become a bubble economy because its monetary policy accommodates the forced savings in East Asia. The rise of East Asia is based on its labour productivity. However, its policymakers have tried to juice the growth through forced savings to maximise investment. Net savings in East Asia are probably over 10 times those in America, with about the same GDP. The Fed’s accommodative policy and East Asia’s forced savings have led to global bubbles again and again. But, the bubbles have very different long-term consequences in the East and the West. Bubbles lead to overinvestment in the East but overconsumption in the West.

Is the Fed Playing Politics? - Kenneth Rogoff – In his recent debate with his opponent Hillary Clinton, Republican presidential candidate Donald Trump pressed his claim that US Federal Reserve Chair Janet Yellen is politically motivated. The Fed, Trump claims, is applying overdoses of monetary stimulus to hypnotize voters into believing that economic recovery is underway. It’s not a completely crazy idea, but I just don’t see it. If Yellen is so determined to keep interest rates in a deep freeze, why has she been trying in recent months to talk up longer-term rates by insisting that the Fed is likely to hike rates faster than the market currently believes?Central bankers have of course been known to help incumbents before elections, by allowing inflation to drift up and keep employment booming. During US President Richard Nixon’s 1972 re-election campaign, he sternly lectured Fed chair Arthur Burns on the need for pump-priming the economy to help him defeat his Democratic challenger, George McGovern. Nixon won resoundingly, but Burns’ policies helped set off the worldwide inflation of the 1970s and brought forward the breakup of the post-war system of fixed exchange rates. The long-term effects were catastrophic. Will Yellen launch a rerun of the bad old 1970s, when US inflation hit double digits? I doubt it. Although it is not hard to imagine that Yellen privately holds Trump in the same low regard he holds her, most observers see no signs that inflation is just around the corner.

Q2 Real GDP Per Capita: 0.71% Versus the 1.4% Headline Real GDP -- The Third Estimate for Q2 GDP, to one decimal, came in at 1.4 percent (1.41 to two decimal places), up a bit from from 1.1 percent in the Second Estimate. With a per-capita adjustment, the data is about half the headline number at 0.71 percent. The 10-year moving average illustrates that US economic growth has slowed dramatically since the last recession. Here is a chart of real GDP per capita growth since 1960. For this analysis we've chained in today's dollar for the inflation adjustment. The per-capita calculation is based on quarterly aggregates of mid-month population estimates by the Bureau of Economic Analysis, which date from 1959 (hence our 1960 starting date for this chart, even though quarterly GDP has is available since 1947). The population data is available in the FRED series POPTHM. The logarithmic vertical axis ensures that the highlighted contractions have the same relative scale. The chart includes an exponential regression through the data using the Excel GROWTH function to give us a sense of the historical trend. The regression illustrates the fact that the trend since the Great Recession has a visibly lower slope than long-term trend. In fact, the current GDP per-capita is 10.3% below the pre-recession trend.    The real per-capita series gives us a better understanding of the depth and duration of GDP contractions. As we can see, since our 1960 starting point, the recession that began in December 2007 is associated with a deeper trough than previous contractions, which perhaps justifies its nickname as the Great Recession.  The standard measure of GDP in the US is expressed as the compounded annual rate of change from one quarter to the next. The current real GDP is 1.41 percent. But with a per-capita adjustment, the data series is lower at 0.71 percent. The 10-year moving average illustrates that US economic growth has slowed dramatically since the last recession. Economists and financial journalists vary widely in their opinions about the current level of recession risk. The official call on recessions, of course, is the domain of the National Bureau of Economic Research, which makes the determination on recession start and end several months — sometimes more than a year — after the fact. GDP per capita, as we've seen, is a weaker series than GDP. What does it suggest about our current recession risk? The next chart shows the YoY change in real GDP per capita since 1960. We've again highlighted recessions. The red dots show the YoY real GDP for the quarter before the recession began, and the dotted line gives us a sense of how the current level compares to recession starts since 1960.

 IMF cuts growth forecasts for U.S. and neighbors - New weakness in North America, coming on top of concerns about China and Europe, is adding to a sense of “disquiet” about the global economic outlook, the International Monetary Fund said Tuesday. In its latest report on the global economic outlook, the IMF’s trimmed its forecast for U.S. growth this year by 0.6% and next year by 0.3%, and noted that the Federal Reserve has so far judged a second interest rate increase as too risky. This weakness is spilling over to the U.S.’s neighbors. Growth in Canada was trimmed by 0.2% for both this year and next as weakness in the U.S. compounded the setbacks stemming from the wildfires in Alberta that impacted oil output in the second quarter. And growth in Mexico was cut by 0.4% in 2016, due to weak export performance, and by 0.3% next year. For the global economy, the IMF made no changes to its forecast of 3.1% growth this year, down from 3.2% in 2015. Growth in 2017 is expected to rise to 3.4%. This pickup is expected to be based almost entirely on developments in emerging-market and developing economies. Two factors are at play — several countries like Brazil and Russia are coming out of deep recessions and other fast-growing countries carry more weight in the world economy. the IMF said. Growth in emerging-market and developing economies is expected to strengthen in 2016 to 4.2% after five consecutive years of deceleration.

GDP Now -- The Atlanta Fed forecast for Q3 GDP growth is now at 2.2 percent. That is down from an estimate of about 3.7 percent at the start of the quarter.  Via FRB Atlanta:  Latest forecast: 2.2 percent — October 3, 2016 The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 2.2 percent on October 3, down from 2.4 percent on September 30. After this morning’s construction spending report from the U.S. Census Bureau, the forecast of third-quarter real nonresidential structures investment growth fell from 8.4 percent to 4.7 percent and the forecast of third-quarter real government spending growth declined from 0.8 percent to 0.1 percent.

 GDP - 3Q16: Latest Forecast, Unchanged -- October 5, 2016 - Latest forecast, GDP, 3Q16: 2.2 percent — October 5, 2016 The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 2.2 percent on October 5, unchanged from October 3. Following yesterday's (Tuesday's) auto sales release from the U.S. Bureau of Economic Analysis, this morning's (Wednesday's) M3 manufacturing report from the U.S. Census Bureau, and this morning's Non-Manufacturing Report On Business from the Institute for Supply Management, the forecast of third-quarter real consumer spending growth increased from 2.7 percent to 2.9 percent and the forecast of third-quarter real equipment investment growth increased from –2.0 percent to 0.0 percent. The forecast of the contribution of net exports to third-quarter growth fell from 0.13 percentage points to –0.13 percentage points after this morning's international trade release from the U.S. Census Bureau.

Edward Harrison on Biz Cycle coming to its end -- Edward Lambert - In the video below, Edward Harrison of Boom/Bust says some important things. Watch after 25:30 minute point.

  • the unemployment rate is not a leading indicator for a recession. Unemployment can start to tick up as a recession is starting.
  • watch non-farm payrolls.
  • the Biz cycle is coming to its end.

So many well known economists got the business cycle wrong. They stated all along that the Fed should keep rates low until the recovery got going. They still see a large part of the cycle ahead. They see slack but they did not see an effective limit on the slack. The Fed missed a whole interest cycle. It is important to follow an interest cycle with proper rates that discipline production. If rates stay too low for too long, as we have seen, then zombies more and more infect productivity, prices and production.  But I totally agree with him. My models have been tracking the business cycle correctly for years. The ultimate end of the business is drawing upon us… I give it by middle of next year for sure, and as I have been saying all year, a 70% chance by the end of 2016.

What really explains why the US economy seems stuck in slow-growth mode (and this depressing chart)? -- What to make of the above chart? Its creator, Congress’ Joint Economic Committee, offers an opinion on what it calls the “new normal” or persistent economic stagnation: The United States is in the midst of the most lackluster economic recovery in modern American history.  Eight years of economic stagnation has cost the median American family a cumulative $69,000 of income. In addition, effective tax rates on American businesses remain among the most burdensome in the world, and the Obama Administration continues to increase regulations at a record pace. Furthermore, the Administration’s Keynesian approach to economic stimulus has failed to promote strong, sustainable economic growth. … This recovery is so far behind the average of other post-1960 recoveries that to catch up by 2016’s end would require historically unprecedented rates of economic growth.  Americans continue to await the strong economic growth and job creation they were promised. Unfortunately, many policies implemented by the Obama Administration and Congressional Democrats have stunted economic growth, discouraged job creation, and made more people reliant on government assistance.  The opportunity to restore America’s prosperity is still attainable, but commonsense action is essential.  Lower tax rates, a simplified tax code, reduced government spending, free trade, and less burdensome regulation are the path to restoring American growth and opportunity. Thanks, Obama! (And a non-sarcastic or ironic “thanks” to the JEC for mentioning “free trade.”) But seriously, when examining the “new normal,” one must also note growth was hardly gangbusters during the 2000-2007 period, averaging a bit less than 2.5% a year. And officially measured productivity growth also began to fade before the Great Recession and the implementation of Obamanomics.

Why Hurricane Matthew Is Unlikely to Cloud the National Economy - Hurricane Matthew is poised to inflict severe damage along the Atlantic coast. Already, the storm is responsible for the death of hundreds of people in Haiti, according to the Associated Press. In the U.S., schools and businesses—including Walt Disney Co.’sfour theme parks in Orlando—are closing and residents are evacuating. Airlines arecanceling flights.  The Energy Information Administration warned of wide-scale power outages and a possible impact on energy-related imports. No doubt, Matthew will disrupt lives and ripple through the economy. In one potential wrinkle, the two surveys for the Labor Department’s monthly jobs report cover employment status and hours worked next week. (The reference period for surveys is the week or pay period that includes the 12th of the month.) The report, due out Nov. 4, will be the last before the presidential election. For the establishment survey, which generates the net number of jobs created or lost during the month, a person who is paid for as little as one hour of work will still count as employed. For the household survey, which is used to find the unemployment rate, people who miss the entire week’s work for weather-related events are counted as employed whether or not they are paid. That survey also collects data on the number of people who had a job but were not at work or were reduced to part time due to bad weather, figures that often spike during, for example, severe winter storms. Hurricane Katrina made landfall on the Gulf Coast in late August 2005, making the September 2005 jobs report the first to show any impact from the storm. The initial reading showed​ employment for the month fell 35,000, which at the time marked the first decline in monthly employment in more than two years, according to archival records maintained by the Federal Reserve Bank of St. Louis. The Labor Department made note of Katrina and Hurricane Rita in the report, released Oct. 7, 2005, saying “efforts were made to contact households in storm-affected areas with the exception of Orleans and Jefferson parishes in Louisiana, which were under mandatory evacuation orders when interviewer instructions were issued.” Subsequent revisions showed employers added 68,000 jobs in September 2005, a slowdown from prior months, but still a gain. More broadly, the impact on national output and consumption is likely to be muted.

 Hillary Clinton Never Met A War She Didn't Want Other Americans To Fight -- Never before were the two leading presidential candidates so disliked. Both major parties have nominated candidates that most Americans desperately want to reject. There many reasons to oppose Hillary Clinton: a history of scandal, reaching back to Bill Clinton’s Arkansas governorship; greedy, grasping friendships with economic elites; and brutal partisan war against political opponents. She is smart, competent, and experienced, but so were Richard Nixon and Richard Cheney. Unfortunately, there is no guarantee that she would put her virtues to good use as president. She almost certainly would lead America into more foolish wars. About the only reason to hope for a Clinton victory is her flawed opponent, Donald Trump. Yet despite his many failings, he remains superior to Clinton when it comes to foreign policy. No one knows what Trump would do in a given situation, which means there is a chance he would do the right thing. In contrast, Clinton’s beliefs, behavior, and promises all suggest that she most likely would do the wrong thing, embracing a militaristic status quo which most Americans recognize has failed disastrously. In fact, her proclivity for promiscuous war-making has attracted the support of leading Neoconservatives, including some architects of the disastrous Iraq war, which as Senator she voted to authorize. Some otherwise obscure Neocons even have appeared in her campaign ads. Her record of backing every recent U.S. military intervention is far more attractive than Trump’s intermittently blustering rhetoric to war-happy Republican hawks.

U.S. officials take flight, despite TPP’s dim outlook : The prospects for congressional approval of the Trans-Pacific Partnership are more unlikely than ever, but that’s not stopping the Obama administration from proceeding as if the deal won’t eventually be implemented. Officials from the U.S. Trade Representative’s office and other agencies have traveled to Brunei, Malaysia, Singapore and Vietnam in recent weeks, to get those governments up to speed on implementing TPP provisions on intellectual property, labor, environment, customs, sanitary and phytosanitary measures, service, financial services and state-owned enterprises, USTR spokesman Matt McAlvanah told POLITICO. “We expect additional travel in the coming weeks and months to other TPP countries to discuss specific issues as well as overall progress on implementation,” he said. McAlvanah said the U.S. is also working on ways to help poorer TPP countries implement their obligations through capacity building and technical assistance by coordinating with donor countries. Government officials in Vietnam, Malaysia and other less developed countries will need special training and an overhaul of customs procedures and other functions to comply with their obligations under the deal.

Don’t Be Fooled: The TPP Is Not About National Security --During the 1993 U.S. congressional debate over the North American Free Trade Agreement, a Democratic Congressman with a solid pro-labor voting record asked me why I thought NAFTA would be bad for working people.  After I had given my answer, he responded: “Well, you may be right about the economics.” “But we have a 2000-mile border with Mexico. The President told me we need NAFTA to make it secure.” Who can argue against national security?NAFTA was the economic model for the ever more corporatist trade deals that followed, including the currently proposed 12-nation Trans-Pacific Partnership. The arguments for NAFTA also set the pattern for the debates over those deals. Whenever the economic case crumbles, “national security” becomes the fallback rationale. After a quarter century of off-shored jobs and depressed wages in the wake of corporate-driven trade de-regulation, the claim that the Trans-Pacific Partnership will make life better for American workers is so discredited that both Hillary Clinton and Donald Trump are opposed.

 ‘Hostage’ negotiations continue in New York - As the 15th round of Transatlantic Trade and Investment Partnership talks enter the second day in the Big Apple today, lawmakers in Washington had plenty to say about the European Union’s pattern of “hostage taking” in those negotiations.  "The EU's pattern of 'hostage taking' and other stall tactics has led us to where we are today — to a point where European leaders are expressing an inability and an unwillingness to complete a comprehensive agreement by the end of this year. However, we remain committed to continuing and elevating these negotiations," Senate Finance Chairman Orrin Hatch and House Ways and Means Chairman Kevin Brady say in a letter sent to U.S. Trade Representative Michael Froman late Monday. The congressional trade leaders urged Froman to make as much progress as possible this week in TTIP talks in order to create momentum for the deal next year. The lawmakers also sent a warning that they want to see a "comprehensive" agreement. "Congress will not accept an abbreviated or low-standard agreement simply because the Europeans have run out the clock," they say.

Hopes High as Services Negotiators Enter Final Sprint | Bloomberg BNA: — October could prove to be a critical month for the U.S., EU, Japan and other trading partners seeking to conclude a multi-trillion-dollar services agreement this year. The top trade negotiators involved in the Trade in Services Agreement (TiSA) will meet in Washington later this month to review their latest market access offers and prepare the groundwork for a final deal in December. The high-level meeting follows a successful September negotiating round and recent signals from Washington that a TiSA deal could be forged before the end of the year. TiSA participants, who collectively represent 70 percent of the world's $44 trillion services marketplace, are working to update the 1994 WTO General Agreement on Trade in Services (GATS) by increasing market access for more than a dozen services sectors. Market Access Questions This month, TiSA's 23 negotiating parties plan to unveil their second revised market access and national treatment commitments—which specify those sectors or services that TiSA parties wish to include or exclude from the final agreement. TiSA parties are interested to see how the EU improves its revised market access offer—which the U.S. criticized this summer for its extensive list of national treatment exemptions and its refusal to provide nondiscriminatory treatment to “new services,” which include those services that have not yet been created. European Trade Commissioner Cecilia Malmstroem in June said Brussels would improve its market access offer in October to reflect the services commitments in its most ambitious free trade agreement: the EU-Canada Comprehensive Economic and Trade Agreement (CETA) (106 ITD, 6/2/16). Though Malmstroem has been mum about her expectations for TiSA, she recently said the “coming months will be very important” for the proposed deal.

 US gives up its remaining control over the internet to ICANN - Forty seven years after the first message was sent over the forerunner to today’s pervasive global network, the US has given up its remaining control over the internet. The formal handover, which took effect on Saturday, followed a last-ditch attempt by a group of Republicans to block the move. They had argued that the US concession would open the door for authoritarian governments to get control of the network of networks, leading to greater censorship. However, supporters of the handover plan maintained that it was the only way to prevent a greater threat to the internet, since foreign governments who resented the US control would end up walling off their own national networks, eventually Balkanising the global system. On Friday, a judge in Texas refused to grant an injunction requested by four Republican state attorneys-general to bar the move. That followed the end of an attempted Congressional rebellion, led by senator Ted Cruz. ications. Control over addressing and naming on Saturday passed to Icann, an international body that had already been handling the system under a contract from Washington, but now operates independently. Icann has frequently been criticised for an alleged lack of accountability and opaque decision making, making its enhanced role controversial. It has been reconstituted under a new so-called multi-stakeholder structure that tries to share control between a wide range of interests, including technical experts, academics, representatives of civil society and governments, without giving control to any of them. In a statement welcoming the move, a group of big US companies, including Google, Disney and Verizon, cautioned that the new governance arrangement was still unproven.

Washington’s governing elites think we’re all morons, a new study says --Voters are angry at the political establishment and the political establishment doesn't much care for the voters either. In fact, they think voters are pretty damn stupid. That's the conclusion of a new survey of America's unelected governing elites by political scientists at Johns Hopkins University. While media outlets endlessly poll and probe the American people to understand why they feel so disenchanted with their government, Professor Benjamin Ginsberg and Senior Lecturer Jennifer Bachner instead looked at America's political ruling class for answers. The federal bureaucrats, think tank leaders, and congressional staff members they surveyed, Ginsberg said in an interview with VICE News, "have no idea what Americans think and they don't care. They think Americans are stupid and should do what they are told."It seems that the disenchantment is mutual.  In their new book What Washington Gets Wrong, Ginsberg and Bachner report that the overwhelming majority of D.C.'s Beltway Insiders think the American public is pitifully uninformed on government policy. 72 percent of those governing officials think the public has little or no knowledge about policies to aid the poor. 71 percent believe that they have little or no knowledge about science and technology. And across eight different policy areas, never more than 6 percent of those surveyed thought the public possessed a "great deal" of knowledge on the topic.With such a low opinion of the American public, perhaps it is not surprising that the vast majority of these political insiders believe they should ignore public opinion. At least 78 percent of those surveyed thought that actions in all eight policy areas should not always or even mostly heed popular sentiment.If the public resists, Ginsberg told VICE News, then bureaucrats "nudge people into obedience." In fact, 'nudge' has been the PR-friendly word of choice for bureaucratic regulations in the Obama era. Cass Sunstein, Obama's Administrator of the White House Office of Information and Regulatory Affairs, even co-wrote a book in 2008 called Nudge: Improving Decisions about Health Wealth, and Happiness that lays out how the government can use behavioral psychology to more efficiently achieve policy goals. They dubbed it libertarian paternalism.

A first step to progressive consumption taxes – Cochrane - What's an easy way to get going on progressive income taxes? Simply remove all limits on contributions to and withdrawals from IRAs.  Once people see that a consumption tax, in place of income tax, corporate tax, estate tax, etc. is much simpler and more economically efficient, the natural question is "what about progressivity?" The answer is that there are lots of ways to make a consumption tax progressive.  Most countries try to make it progressive by charging different rates for things that rich people buy vs. poor people. But that is a mistake as it distorts the economy. Even rich people can buy more tacos and less yachts, and maybe a poor person wanted to buy a yacht and start a rental business. An alternative implementation is to turn the current income tax system into a progressive consumption tax. If you can fully deduct savings from income, the "income" tax becomes a consumption tax. Alternatively, pay taxes on all "earned" income, but no tax on  dividends, interest, or capital gains. That works out to the same thing -- no tax distortion on whether you consume the day you get the income, or later after returns compound. That approach leads to all sorts of definitional problems, which is why I haven't been a huge fan. (Though I'm not strongly opinionated, recognizing that people who advocate it know a lot more about the tax code than I do.)  So, along comes Michael. Why not just remove all limits on IRAs? Contribute as many pre-tax dollars as you want. Interest, dividends, and capital gains accumulate tax free. No minimum distributions, estate taxes, etc. But when you take money out of the IRA, to consume it (otherwise you'd leave it in!) you pay income tax.

Why Cutting the Mortgage Interest Deduction Is No Longer a Third Rail - The housing industry has staunchly defended the mortgage interest tax deduction as an essential tool for promoting homeownership. But attitudes are softening, as data show the low- and moderate-income homebuyers who need the subsidy the most are getting the least benefit. If the deduction were to be discontinued, it would make housing a little less affordable than it is right now. But with interest rates remaining near all-time lows, it would have less of an effect on borrowers' wallets than it in the 1980s, when rates were above 10%.  "If you were going to do it [take away the deduction] and you were looking for the time to do it when it was least painful now would be the time to do it,"   Nearly 33.6 million taxpayers deducted $72.4 billion in mortgage interest from their 2014 taxes, and that figure could rise to as much as $96.4 billion by 2019, according to estimates by the Congressional Joint Committee on Taxation. That makes it one of the largest tax breaks taken by individuals and an easy target for policymakers looking to increase tax revenue without raising tax rates. Few lower-income borrowers itemize deductions on their tax return, a requirement to receive the benefit. And for those that do, "the benefits they get financially clearly are less than folks that are in the upper end of the income bracket. If you're in a 40% tax bracket, obviously that's going to be a much bigger subsidy to you than somebody that may be in a 15% tax bracket,"  Of those that claimed the deduction, 14.3 million returns were from taxpayers with household incomes between $100,000 and $200,000. They claimed a total deduction of $28.8 billion. An even bigger financial benefit went to taxpayers whose household income was over $200,000. That group represents 17% of returns claiming the benefit, but 42% of the total dollar amount deducted, or more than $30 billion. Meanwhile, only 2.9 million returns had household incomes of $50,000 or less. The total deduction claimed was $1.6 billion or just 2% of the dollar amount.

Taxing carried interest just right - Donald Marron - Hillary Clinton and Donald Trump agree on one thing: Managers of private equity funds should pay ordinary tax rates on their carried interest, not the lower rates that apply to long-term capital gains and dividends. I agree. Fund managers should pay ordinary rates on their carried interest. In a new paper, I argue that this is the right approach for a reason distinct from, and in addition to, the conventional concern about wealthy fund managers paying low tax rates. Taxing carried interest as capital gains creates a costly loophole when benefits to managers are not offset by corresponding costs to investors. Such offsets exist when investors are taxable individuals. In that case, carried interest merely transfers the capital gains preference from investors to managers. But there’s no offset when investors are tax-exempt organizations or corporations, neither of which gets a capital gains preference. By transferring their capital gains to the manager, rather than paying in cash, these investors create a capital gains preference that would otherwise not exist. Taxing carried interest as ordinary income eliminates that loophole. This perspective on the carried interest problem yields a second insight: Current proposals to reform carried interest taxation are incomplete. If carried interest is taxed as ordinary income for managers, the investors who provide that compensation should be able to deduct it from their ordinary income as an investment or business expense. That’s how we treat cash management fees. There is no reason to treat carried interest differently.

Apple is named the biggest corporate tax avoider in the US | Daily Mail - Apple has been named as the biggest corporate tax avoider in the United States after booking $218.55 billion (£171.6 billion) of profit offshore last year.The tech giant was able to save $65.08 billion (£51.1 billion) that it should have paid in tax thanks to its convoluted arrangements.The report revealed that last year three quarters of the Fortune 500 companies use subsidiaries in offshore tax havens where they sent a total of $2.42 trillion (£1.9 trillion) of income.In the US alone this amounted to $715.62 billion (£561.9 billion) in tax which they avoided paying.The report of said many of the biggest companies in the world use a foreign office to ‘disguise’ their profits as coming from another country even if they are not. It was published days after Apple announced that it is building a massive new campus in Battersea, South London. The 500,000 sq ft site will house Apple’s 1,400 employees in London and is part of a $9.93 billion (£7.8 billion) development of the site of a former power station. The report reveals that the the top 30 tax avoiders based in America collectively operated a staggering 2,509 tax haven subsidiaries. Apple was the top with three foreign subsidiaries, all in Ireland, but they constituted $218.55 billion (£171.6 billion) of profit booked overseas

 Donald Trump Tax Records Show He Could Have Avoided Taxes for Nearly Two Decades, The Times Found -- Donald J. Trump declared a $916 million loss on his 1995 income tax returns, a tax deduction so substantial it could have allowed him to legally avoid paying any federal income taxes for up to 18 years, records obtained by The New York Times show. The 1995 tax records, never before disclosed, reveal the extraordinary tax benefits that Mr. Trump, the Republican presidential nominee, derived from the financial wreckage he left behind in the early 1990s through mismanagement of three Atlantic City casinos, his ill-fated foray into the airline business and his ill-timed purchase of the Plaza Hotel in Manhattan. Tax experts hired by The Times to analyze Mr. Trump’s 1995 records said that tax rules especially advantageous to wealthy filers would have allowed Mr. Trump to use his $916 million loss to cancel out an equivalent amount of taxable income over an 18-year period.Photo: A line from one of Mr. Trump’s 1995 tax returns obtained by The New York Times. Although Mr. Trump’s taxable income in subsequent years is as yet unknown, a $916 million loss in 1995 would have been large enough to wipe out more than $50 million a year in taxable income over 18 years. The $916 million loss certainly could have eliminated any federal income taxes Mr. Trump otherwise would have owed on the $50,000 to $100,000 he was paid for each episode of “The Apprentice,” or the roughly $45 million he was paid between 1995 and 2009 when he was chairman or chief executive of the publicly traded company he created to assume ownership of his troubled Atlantic City casinos. Ordinary investors in the new company, meanwhile, saw the value of their shares plunge to 17 cents from $35.50, while scores of contractors went unpaid for work on Mr. Trump’s casinos and casino bondholders received pennies on the dollar.

A Minor Note on Trump's Tax Returns -- Hale Stewart - One of the greatest things about the internet is all sorts of people can write about a topic they don't know anything about and publish it.   This is exactly what's happening with Trump's tax returns.  All sorts of yahoos are making all sorts of guesses about what lurks beneath the surface. Most of what you're reading bullshit.  Here's why: we've only seen 3 pages from tax returns that contain a single piece of tax information: a $916 billion dollar loss.  Until we have all of his federal returns that explain not only every penny of that loss (pre-1995) and its potential application (post-1995) we know nothing.   Here's where this tax lawyer would start his analysis if I had the information: what are the components of his massive 1995 loss?  Losses are tax gold because they offset income.  And because they're so wonderful from a planning perspective, a loss as large as $915 billion would immediately attract IRS attention.  I'm assuming that, due to the loss's magnitude, the IRS has already audited this figure, probably multiple times.  But I'd at least like to know it's general components and how it was calculated.  I'm assuming (there's a dangerous word in the legal businsss) that depreciation accounts for most of it.  This is real estate tax 101 and wouldn't surprise anyone in the tax business.   Here's the second thing I'd want to know: was this applied as a net operating loss (NOL under section 172 of the code?  I'm assuming (again, dangerous word) that he applied it against future income, which is allowed under the code.  But, again, this is 100% conjecture and will be until we see the post-1995 returns. Here's what I can say were certainty: Trump had a really shitty year according to his 1995 tax returns. I mean really shitty.  In my opinion,

  • 1.) The IRS has probably audited the loss at least once and probably multiple times.  It's probably legit.
  • 2.) The size of the loss invalidates his claims to superior business acumen.  Instead, it shows that he really doesn't know what he's doing.

Judge Confirms Nothing Wrong With Trump's Released Tax Records, Leaker Probably Broke The Law - Appearing on Fox and Friends Monday morning, former New Jersey Superior Court Judge and Senior Judicial Analyst for Fox News Channel Andrew Napolitano explained that Donald Trump’s tax records that were released by the New York Times on Sunday show that the presidential nominee did nothing wrong. According to Napolitano, Trump was within the law when he declared a $916 million loss on his 1995 income tax returns, which amounts to a substantial deduction.When asked by Fox’s Steve Doocy if Trump did anything wrong, the former judge responded: “No.” “Congress has given guidelines, very lengthy, very complex guidelines,” the judge continued before going on to explain that the tax code in the U.S. would create a four foot standing pile of paper. “If a person goes through the tax code and finds ways to minimize their obligation, they are following the laws that congress has made available.” Napolitano told the Fox and Friend cast that the person who provided the tax records to the New York Times “probably broke the law” and is criminally liable.

Clinton Campaign Admits Hillary Used Same Tax Avoidance "Scheme" As Trump Well this is a little awkward. With the leaked 1995 Trump tax returns 'scandal' focused on the billionaire's yuuge "net operating loss" and how it might have 'legally' enabled him to pay no taxes for years, we now discover none other than Hillary Rodham Clinton utilized a $700,000 "loss" to avoid paying some taxes in 2015. The Clinton Campaign was quick to jump on the leaked Trump tax filing with Robby Mook tweeting...  Trump "apparently got to avoid paying taxes for nearly two decades—while tens of millions of working families paid theirs."  — Hillary Clinton (@HillaryClinton) October 2, 2016.  However, a look back at Hillary Clinton's tax returns from 2015 (here), proudly displayed by the campaign proving she has nothing to hide - shows something awkward on page 17... While not on the scale of Trump's business "operating loss", Hillary Clinton - like many 'wealthy' individuals is taking advantage of a legal scheme to use historical losses to avoid paying current taxes. As Bloomberg notes, this federal tax break is among the wealthy's most used avoidance schemes...

Clinton Foundation Hacked Exposing Thousands Of Donor Databases; "Pay To Play" Folder  --While the hack of the Clinton Foundation was foreshadowed two months ago, moments ago notorious hacker Gufficer 2.0, who previously was responsible for hacking the DNC and DNCC not to mention the resignation of Debbie Wasserman Shultz, announced that the moment "many of you have been waiting for" has come, by revealing that the Clinton Foundation has been hacked.  This is what Guccifer 2.0, who has denied being affiliated with the Russian government claiming that like the original Guccifer he is from Romania, posted moments ago on his website: So, this is the moment. I hacked the Clinton Foundation server and downloaded hundreds of thousands of docs and donors’ databases. Hillary Clinton and her staff don’t even bother about the information security. It was just a matter of time to gain access to the Clinton Foundation server. The unknown hacker has exposed 1,000 of Hillary donors (a small list of master donors can be found here)...

Washington Leads The World To War -- Paul Craig Roberts - What must the world think watching the US presidential campaign? Over time US political campaigns have become more unreal and less related to voters’ concerns, but the current one is so unreal as to be absurd. The offshoring of American jobs by global corporations and the deregulation of the US financial system have resulted in American economic failure. One might think that this would be an issue in a presidential campaign. The neoconservative ideology of US world hegemony is driving the US and its vassals into conflict with Russia and China. The risks of nuclear war are higher than at any previous time in history. One might think that this also would be an issue in a presidential campaign. Instead, the issues are Trump’s legal use of tax laws and his non-hostile attitude toward President Putin of Russia. One might think that the issue would be Hillary’s extremely hostile attitude toward Putin (“the new Hitler”), which promises conflict with a major nuclear power. As for benefitting from tax laws, Pat Buchanan pointed out that Hillary used to her benefit a loss almost as large as Trump’s and during the Arkansas years Hillary even took a tax deduction for itemized pieces of used clothing donated to a charity, including $2 for one of Bill’s used underpants. The vice presidential “debate” revealed that the Democratic Party’s candidate is so ignorant that he thinks Putin, who is democratically elected and has enormous public support, is a dictator.Here is what we know about the two presidential candidates. Hillary has a long list of scandals from Whitewater and Vince Foster to Benghazi and violation of national security protocols. She is bought-and-paid-for by the oligarchs on Wall Street, in the mega-banks, and in the military-security complex as well as by foreign interests. The proof is the Clinton’s $120 million personal fortune and the $1,600 million in their foundation. Goldman Sachs did not pay Hillary $675,000 for three 20-minute speeches for the wisdom they contained. What we know about Trump is that the oligarchic establishment cannot stand him and has ordered the Ministry of Propaganda, a.k.a., the US media, to destroy him. Clearly, Hillary is the candidate of the One Percent, and Trump is the candidate for the rest of us. Unfortunately, about half of the 99 percent is too dumb to know this.

Does the one percent deserve what it gets? - Nancy Folbre --The rich are not like you and me. They contribute far more to society than everybody else, so argues Harvard University economist Gregory Mankiw in his essay “Defending the One Percent.” Mankiw’s praise for talented superstars such as Steven Jobs, J.K. Rowling, and Steven Spielberg quickly blooms into a more general argument that competitive labor markets pay workers what they deserve. This is music to the ears of high earners, and it sings to a very human desire to believe that the world is fair.  But this argument is based on neoclassical economic theories that define the domain of human choice in narrow terms, minimizing the effects of bad luck, bad markets, and bad inequalities that often predetermine market outcomes. Mankiw’s argument leaves room for corporate bad behavior defined in narrow terms as “gaming the system.” But what he most deplores is government meddling with the system. Most economists do not explicitly endorse such views. But years of schooling in neoclassical economic theories predispose them to the view that perfectly competitive markets yield equitable as well as efficient outcomes. As a result, they often assess “rent seeking,” or efforts to get rich at someone else’s expense, by comparison with hypothetical market outcomes.  Rent seeking becomes just another name for interference with the magic meritocracy of the marketplace. From this perspective, efforts to increase the minimum wage can be considered just as unfair as efforts to challenge compensation practices for corporate chief executives and other well-heeled top managers. Like neoclassical economic theory in general, this approach is too narrow. Competitive markets comprise a relatively small part of an economy dominated by large multinational corporations—marketplaces and firms that are embedded in a global environment of unpriced goods and services. Efforts to get rich at someone else’s expense, which fall under the academic rubric of distributional conflict, are multidimensional. Forms of collective bargaining power based on citizenship, class, race and ethnicity, and gender, as well as other aspects of group identity, influence the resources that individuals bring to the labor market. They also influence the power that individuals possess to modify labor market outcomes. Some of us contribute more than members of the top one percent to the economy, and some of us contribute less. None of us gets exactly what we deserve. One difference between the rich and us is that they have more money. They also enjoy—both as cause and effect—a lot more power.  Link to paper.

The rich are also different from one another -- Tyler Cowen - That is my latest Bloomberg column, here is the introductory section:The richest Americans are much less likely to have inherited their wealth than their counterparts in many supposedly more egalitarian countries. They’re not remarkably rich in degrees from elite universities. Rich Democrats have more social connections than rich Republicans.These are some surprising insights from a new study of the very wealthy by Jonathan Wai of Duke University and David Lincoln of Wealth-X, based on data on 18,245 individuals with a net worth of $30 million or more.The study portrays high-net-worth individuals as a more idiosyncratic and diverse group than reductionist cliches about “the 1 percent” might suggest.Looking globally, extreme wealth is most closely connected to elite education in South Korea, Chile, and South Africa, and least so in Ukraine and Qatar. The U.S. is near the bottom of the top third of the country rankings for the tightness of this connection. Germany is close to the bottom, reflecting how German paths to riches run through forms of manufacturing and medium-sized business that are not so closely tied to elite higher education. And:  For all the talk of Sweden and Austria as relatively egalitarian societies, they are also the countries where the greatest proportion of high-net-worth individuals inherited their wealth: 43.8 percent and 49.6 percent, respectively. In the U.S., inherited wealth accounts for only 12.6 percent of the very wealthy individuals in the study’s sample. There is much more at the link.

Cathy O'Neil on Weapons of Math Destruction – (podcast, transcript) Cathy O'Neil, data scientist and author of Weapons of Math Destruction talks with EconTalk host Russ Roberts about the ideas in her book. O'Neil argues that the commercial application of big data often harms individuals in unknown ways. She argues that the poor are particularly vulnerable to exploitation. Examples discussed include prison sentencing, college rankings, evaluations of teachers, and targeted advertising. O'Neil argues for more transparency and ethical standards when using data.

Big Data Shows How Wall Street Profited From the Financial Crash: Big Data—those sprawling algorithms that can track and predict patterns in human behavior—often conjures up fears of a big-brother police state. But those same data-sets could be harnessed to uncover and expose Wall Street excesses. That’s the implication of two new new academic studies about the financial crisis. One study suggests politically connected executives traded on non-public information about the government’s subsequent bailout after the crisis hit. The other suggests that despite their claims to the contrary, many bank executives understood the risks they were taking in the lead-up to the crash, and sold their personal holdings in their firms before the crisis hit. The findings emerged as U.S. Sen. Elizabeth Warren, a Democrat, is demanding a formal investigation of why the Obama administration did not more forcefully prosecute financial firms after the crisis. The first paper used publicly available information to chart the possibility that individuals with close ties to regulators and politicians engaged in insider trades in the aftermath of the 2007-08 financial crisis. “Politically connected insiders had an information advantage during the crisis and traded to exploit this advantage,” concluded the study by researchers at the University of Colorado, Stanford University, the University of Navarra and the University of Pennsylvania. The study zeroed in on those who made trades after the announcement of the government's $700 billion Troubled Asset Relief Program (TARP), which bought up so-called “toxic” assets—mortgages and securities that had plummeted in value.

 Why Did the Recent Oil Price Declines Affect Bond Prices of Non-Energy Companies? – NY Fed - Oil prices plunged 65 percent between July 2014 and December of the following year. During this period, the yield spread—the yield of a corporate bond minus the yield of a Treasury bond of the same maturity—of energy companies shot up, indicating increased credit risk.  Surprisingly, the yield spread of non‑energy firms also rose even though many non‑energy firms might be expected to benefit from lower energy‑related costs. In this blog post, we examine this counterintuitive result. We find evidence of a liquidity spillover, whereby the bonds of more liquid non‑energy firms had to be sold to satisfy investors who withdrew from bond funds in response to falling energy prices.  Oil prices may affect the credit risk of firms via their profit margins—earnings divided by revenues—and leverage. Lower oil prices reduced the revenues and profits of firms with energy‑related products, and increased the leverage of those firms as they borrowed more to maintain operations. In turn, higher leverage and reduced profitability are expected to increase credit risk. These linkages are likely to be more pronounced for firms in energy‑related businesses as compared with non‑energy firms whose businesses are less affected by oil prices.  We measure credit risk by the yield spread on high-yield (HY) bond indexes of energy and non‑energy firms, adjusted for special features of the bonds—such as the firm’s option to call the bond before its maturity. Yield spreads of HY bonds represent, to a large extent, the additional credit risk of the corporate bond relative to a Treasury bond. We calculate the leverage and profits of individual firms in the energy and non‑energy indexes, respectively, and use the median value to represent the fundamentals of a typical firm in the index.

What’s Up With The Deep Dive In Treasury Term Premiums? -The 10-year Treasury Note’s term premium (an estimate of the extra compensation that the market demands for holding longer rather than shorter maturities) has been moderately negative for most of 2016, and there’s no sign that the red ink will fade any time soon. The sub-zero readings, based on New York Fed data, aren’t surprising in the current economic climate. The appetite for safe havens remains strong, largely because growth is expected to remain modest at best—in the US and around the world. But as the term premium ticks lower, the slide suggests that the bond market is moving deeper into uncharted territory. One way to think about the term premium is to view its ebb and flow as a sentiment measure related to the various concerns that traditionally drive the bond market: inflation expectations, the outlook for monetary policy, and a willingness (or a lack thereof) to forgo the potential for earning higher returns in other asset classes. By that standard, the dive in the 10-year term premium quantifies what’s been clear in the years since the 2008-2009 financial crisis: the crowd is anxious about the prospects for economic growth. To the extent that the term premium captures the mood, the year so far has been a milestone. As the chart below shows, the 10-year term premium dipped below zero in January and proceeded to trend lower in subsequent months, dispatching an unprecedented run in negative territory relative to the track record over the last half century. As of Oct. 3, 2016, the New York Fed’s estimate of the 10-year term premium: -0.57 percentage points. That’s modestly above the -0.76 reading that was briefly reached in July, but it’s reasonable to wonder if we’ll see even lower levels in the months ahead.

Fear of $10 Billion – NY Fed - Ten billion has become a big number in banking since the Dodd-Frank Act of 2010. When banks’ assets exceed that threshold, they face considerably heightened supervision and regulation, including exams by the Consumer Financial Protection Bureau, caps on interchange fees, and annual stress tests. There are plenty of anecdotes about banks avoiding the $10 billion threshold or waiting to cross with a big merger, but we’ve seen no systematic evidence of this avoidance behavior. We provide some supporting evidence below and then discuss the implications for size-based bank regulation—where compliance costs ratchet up with size—more generally.  What Changes at $10 Billion? Quite a lot. First, banks face an entirely new regulator: the Consumer Financial Protection Bureau (CFPB). The agency enforces nineteen consumer protection regulations (such as the Truth in Lending Act) and has rule-writing authority of its own. The CFPB’s examiner manual is 924 pages, which gives some indication of the scale and scope of the exams.  Second, banks above the $10 billion mark face a cap on the interchange fees they charge merchants when shoppers use their debit cards. Imposed by the Fed in 2011, the cap limits debit fees to $0.21 plus 0.05 percent of the transaction value, about half the average fee before. The cap saves merchants and customers (presumably), but costs banks; a study by Fed economists estimated that banks above $10 billion lose about $10 billion a year in aggregate income because of the cap, even allowing for potentially offsetting increases in other fees.  Lastly, banks with assets exceeding $10 billion for four consecutive quarters must conduct annual Dodd-Frank Act stress tests, which involve forecasting revenue, losses, capital, and other key variables under alternative macroeconomic scenarios, including adverse scenarios, provided by their primary supervisor. In addition to shouldering the cost of running the tests, banks have to publicly disclose their stress results.

 Supreme Court to weigh reach of insider trading law | Reuters: The U.S. Supreme Court is set to consider this week a closely watched insider trading case that could limit the ability of prosecutors to pursue such charges against hedge fund managers and other traders. The eight justices, who open their 2016-17 term on Monday, will hear arguments on Wednesday in the case of an Illinois man, Bassam Salman, who prosecutors said made nearly $1.2 million trading on inside information about mergers involving clients of Citigroup Inc(C.N), where his brother-in-law worked. It is the first time in two decades that the Supreme Court has taken up a case involving insider trading, a crime that the U.S. Congress has never defined and has left the courts and the Securities and Exchange Commission to shape. Salman was convicted of conspiracy and securities fraud charges arising from insider trading and sentenced in 2014 to three years in prison. At issue in Salman's appeal is whether the government in insider trading cases must prove that an alleged source of corporate secrets like the brother-in-law received a tangible benefit like cash in exchange for any tips. Lawyers and prosecutors say that requiring such proof would make it harder for authorities to pursue insider trading cases, potentially preventing prosecutions in which corporate executives tip friends or relatives without any tangible quid pro quo.

Bill Gross of Janus warns financial markets have become 'a Vegas casino' | Reuters: Global central bank policy makers have turned world financial markets into a casino, thanks to their unprecedented monetary policies, bond investor Bill Gross of Janus Capital Group (JNS.N) warned on Tuesday. “Our financial markets have become a Vegas/Macau/Monte Carlo casino, wagering that an unlimited supply of credit generated by central banks can successfully reflate global economies and reinvigorate nominal GDP growth to lower but acceptable norms in today's highly levered world,” Gross said in his latest Investment Outlook titled “Doubling Down.” Gross, who oversees the $1.5 billion Janus Global Unconstrained Bond Fund, recommended Bitcoin and gold for investors who are looking for places to preserve capital. "At some point investors – leery and indeed weary of receiving negative or near zero returns on their money, may at the margin desert the standard financial complex, for higher returning or better yet, less risky alternatives," Gross said. Gross has been lambasting ultra-loose central bank policies for hindering global economies by keeping so-called "zombie" corporations alive and inhibiting "creative destruction." For several years, Gross and others have warned that zero and negative interest rates not only fail to provide an easing cushion should recession occur, but they destroy capitalism's business models.

Blackstone Presents New Fee Scheme: Tricky Fees are Dead, Long Live Tricky Fees! -- Yves Smith - At a recent Wall Street Journal conference, one of Blackstone’s top private equity executives tried depicting the firm at on board with SEC oversight and gave a high level sketch of a new private equity fee structure, which was presented as a change from the old regime of charges that were invisible to investors but imposed large costs on portfolio companies. However, as we’ll show, the commitment to change is purely optical.  Even though Blackstone is eliminating its largest fees charged to portfolio companies – transaction fees and monitoring fees, and it uses this sacrifice to justify increasing its largest source of income, management fees. But how much sacrifice is really going on here? there’s every reason to believe Blackstone is leaving other mechanisms in place for extracting funds from portfolio companies. And even better from Blackstone’s perspective: these tricky fees are not offset against management fees as the old transaction and monitoring fees were, making the new scheme potentially even more lucrative than its predecessor.

Wells Fargo Account Scandal Extends to Small Business - Reuters - Wells Fargo & Co’s account scandal is not limited to its consumer banking sector, U.S. Senator David Vitter told the bank’s chief executive in a letter. Thousands of small business owners were also impacted by Wells Fargo’s practices, wrote Vitter, a Republican from Louisiana, in a letter dated Sept. 29 to Wells Fargo chief executive John Stumpf and seen by Reuters. Vitter demanded a “full accounting” of small business owners affected by “fraudulent activity.” Around 10,000 small business accounts were affected by improper Wells practices, people familiar with the matter said. A Wells Fargo spokeswoman could not immediately be reached for comment about Vitter’s letter. Vitter, who chairs the U.S. Senate’s small business committee, launched a probe on Sept. 20 into whether the bank’s opening of as many as 2 million accounts in customers’ names without their permission had any impact on small businesses. Wells Fargo spokeswoman Jennifer Langan said last week that Wells is reviewing earlier request letters sent by Vitter and will address them “in a timely manner.” The bank also plans to share information about its operations and lending with the U.S. Small Business Administration (SBA), Langan added at the time.

 First and Foremost, the Wells Fargo Scandal Is About Workers - When U.S. Labor Secretary Thomas Perez pledged last week to conduct a “top-to-bottom” probe into allegations that Wells Fargo’s aggressive sales quotas created a culture that led to rampant labor law violations, he underscored the fact that at the root of the scandal is a whole sector of exploited workers who not only often make paltry wages and rely on public assistance, but also say they were forced to work late, without overtime pay, to meet impossible sales goals, or were fired or demoted for refusing to open fake accounts to meet those goals.Wells Fargo CEO John Stumpf has tried to scapegoat his bank’s low-level employees and tellers, contending that the problem was limited to 5,300 workers who allegedly opened fraudulent accounts to get sales incentives, and were promptly fired once discovered, and that he had no knowledge of the rampant fraud.  “You squeezed your employees to the breaking point so they would cheat customers and you could drive up the value of your stock and put hundreds of millions of dollars in your own pocket,” Senator Elizabeth Warren said during her now-viral grilling of the CEO at a congressional hearing.Despite the extensive media coverage of the scandal, it’s gone almost entirely unnoticed that the revelations of the bank’s outrageous behavior were in large part a product of a three-year effort led by the union-backed Committee for Better Banks to organize frontline workers across the retail banking sector and to advocate for higher wages, an end to sales quotas, and ultimately, access to a union.

Wells Fargo 2.0: Massachusetts Charges Morgan Stanley With Dishonest Conduct To Cross-Sell Product --Step aside Wells Fargo fake account scandal: moments ago Reuters reported that Massachusetts has accused Morgan Stanley of running sales contests to cross-sell product. Here are the headlines:

  • Massachusetts charges Morgan Stanley with running unethical sales contests to cross sell products
  • Massachusetts accuses Morgan Stanley of dishonest, unethical conduct related to high-pressure sales contests
  • Massachusetts says conduct occurred in Massachusetts, Rhode Island * Massachusetts accuses brokers of pushing so-called "securities based loans" as a means to boost business
  • Massachusetts files administrative complaint seeking a fine, censure, and relief for customers who got the loans

Developing story.

OCC Hasn't Issued Wells Fargo's CRA Score in Eight Years - The Wells Fargo fake account scandal, first uncovered by the Los Angeles Times in 2013, is growing. Perhaps that is not surprising, given how egregious the scheme was and the tepid response from the bank. In creating a boiler-room sales environment, the bank failed its investors and front-line employees, but it also failed its customers and communities. While the Wells Fargo board faces an important decision about whether or not to fire CEO John Stumpf (it should), this scandal also makes it clear that the results of the Community Reinvestment Act exam of Wells Fargo from 2012 must be made public, and regulators should downgrade their CRA rating of the bank. We're approaching the 40th anniversary of the CRA, passed in response to communities of color being redlined. The CRA is one of the primary ways regulators measure if and how a bank is meeting the credit needs of its local communities. This can include financing for affordable housing, lending to small business owners, philanthropy and more. Bank regulators conduct a CRA exam and typically release the bank's CRA rating shortly thereafter. However, Wells Fargo has not had a new CRA rating released since 2008, even though its last CRA exam occurred in 2012. The absence of a recent CRA rating for Wells Fargo raises questions about enforcement of the CRA, including accountability for harmful practices. The public is encouraged to give feedback during a CRA exam, and advocates from around the country weighed in during Wells' 2012 exam. Citing the many negative impacts from Wells' lending, mortgage servicing and foreclosure practices, they urged a downgrade in Wells Fargo's rating from "Outstanding" to "Needs to Improve."

  The Wells Fargo scam is a gift to no one – CBInsight - While the Wells Fargo scandal might offer marketing opportunities for community banks, the megabank’s consumer fraud is far from a “gift” for the industry. Community bankers are stunned by the rampant fraud perpetrated on millions of Americans and want to ensure the negative backlash from outraged consumers and policymakers does not rub off on local institutions.According to state and federal allegations, Wells Fargo opened as many as 2 million fraudulent deposit and credit card accounts that customers didn’t want. Not only did the nation’s second-largest bank violate the trust of these consumers, it then fired roughly 2% of its 268,000 employees for engaging in its improper and illegal sales practices. And while the bank’s $185 million in fines may sound like a lot to the average Joe, it is decimal dust to a nearly $2 trillion-asset institution.Community banks have been down this road before, and it doesn’t end well. We know what’s on the horizon — the regulatory trickledown effect.Again and again, systemically risky banks have made reckless decisions, harmed consumers and wrought a broad-brush legislative and regulatory response. One only needs to look at the loss of 2,000 bank charters since 2009, the direct result of the financial crisis and countless other instances of Washington responding to misdeeds at the nation’s largest financial firms with regulations affecting banks large and small.

Wells Fargo banking scandal a financial crisis we can finally understand - For most Americans the fallout of the 2008 financial crisis was all too obvious. The economy imploded, jobs disappeared, house prices collapsed. But coming to grips with the reason it was happening – the run on mortgage-backed securities, collateralized debt obligations (AKA, CDOs), credit default swaps, synthetic derivatives, tranches – was not so easy. The mumbo jumbo mattered – and that’s what made it all the more infuriating. It was a banking crisis that only the insiders could decode. Even on the occasions (both then and since) when the bank CEOs have been dragged in front of Congress for what have become almost ritual attempts to humiliate and shame them, most of those efforts have been failures. Why? Partly because of the way the bankers dodged and dived, of course. And partly because the issues involved just didn’t make it easy for anyone to catch a dodging, weaving banker, advised by a canny, high-priced lawyer.   So let’s be grateful that the banks have finally provided us with a scandal that we can understand, and to the regulators, for (belatedly) addressing a real problem that too many Americans grapple with daily.  The Wells Fargo mess is the poster child for it all. Last month, the bank – one of the oldest in the country, with a tradition dating back to the Pony Express – disclosed that it would fork over $185m in penalties to regulators after an audit discovered that employees opened as many as 2m deposit and credit accounts in customers’ names but without their consent. Testifying before Congress, John Stumpf, the bank’s CEO and chairman, made much of the breach of trust on the part of more than 5,000 employees who opened the accounts, in an attempt to meeting sales quotas, either earning bonuses or simply holding on to their jobs. While initially he backed away from suggestions that he himself might have been held accountable, last week he discovered he will share some of their pain: independent directors announced they will implement salary and bonus clawbacks, and Stumpf’s own compensation will be on hold while the directors investigate.But Wells isn’t the only venerable Wall Street name to run afoul of regulators in recent days. Morgan Stanley, too, appears to have been putting pressure on its brokers to engage in “dishonest and unethical conduct”, according to the top securities regulator of Massachusetts, pushing them to cross-sell products.

'Two Million Felonies': Will The Wells Fargo Scandal Finally Change Wall Street? -- The State of California says it is suspending its "most highly profitable business relationships" with Wells Fargo for at least one year in response to the bank's "venal abuse of its customers," after that institution admitted to allowing (or encouraging) more than 5,000 employees to open some two million false accounts to meet sales quotas. Illinois is following suit, and the City of Chicago is considering similar action. Nothing clarifies the mind of a bank board member than the loss of lucrative business deals. Wells Fargo's CEO says he will pay a penalty for presiding over his bank's fraud wave. Could stricter sanctions follow, perhaps even a criminal investigation? We spoke with William K. Black Jr., economist and white-collar criminologist, about the implications of the Wells Fargo case and the laws that might have been broken. (See video above.) Prosecutions are very important. But something else is also worth remembering. Once upon a time there were social penalties to be paid for immoral and illegal behavior, even when that behavior took place in America's boardrooms. The fraudulent bankers who drove the savings and loan scandal of the Reagan era weren't just investigated and prosecuted. They were also condemned and ostracized. For a politician, to be associated with such a banker was to endanger one's political career. But, somewhere between the 1980s and the 2000s, something shifted in American culture. CEOs whose institutions committed extensive fraud in the runup to the 2008 crisis - and whose fraud typically continued afterward - managed to escape criminal investigation. They weren't asked to return their ill-gotten gains. Even their reputations didn't seem to suffer much. Politicians, including many Democrats, didn't hesitate to be seen in public with them. And instead of being socially ostracized, these bankers were often still lionized by financial reporters. Even now, JPMorgan Chase CEO Jamie Dimon -- who arguably runs one of the most crime- and scandal-plagued corporations in the world -- can say without apparent irony that he would "love to be president."

Regulators Need to Walk the Walk in Supporting Whistleblowers - As Congress has held hearings about the unfolding Wells Fargo scandal, several lawmakers have been particularly outraged by claims from numerous former employees that they faced retaliatory firing after trying to stop the improper practices by complaining to bank managers, human resources and compliance staff. Some senators, led by Democrat Elizabeth Warren of Massachusetts, have pressed the issue, calling on the Securities and Exchange Commission to investigate whether the bank fired whistleblowers. If such firings occurred, the congressional ire is fully justified because employer retaliation against whistleblowers strikes at the very heart of every regulatory compliance program. But U.S. bank regulators should be just as outraged; they need to protect whistleblowers openly and aggressively. The Ethics & Compliance Initiative, a national think tank for ethics and compliance professionals, issued a report this year concluding that "the greatest" ethics and compliance risk to an organization "is an environment where the employees are unwilling or unable to make management aware of their knowledge of or suspicions that wrongdoing is taking place." Regulators recognize this risk as well. The Office of the Comptroller of Currency, which regulates federally chartered banks, requires that institutions under its supervision (including Wells Fargo) adopt a corporate whistleblower policy that guarantees "a process for employees to report legitimate concerns about suspected illegal, unethical, or questionable practices with protection from reprisal." The absence of this check on corporate misbehavior is viewed by the agency as a threat to the safety and soundness of banking operations.But despite characterizing whistleblowers as a pillar of regulatory compliance, the OCC actually affords them very little direct support. Here, the OCC has broad authority to follow up on the whistleblower allegations. Perhaps the consent order could have established a special master or some neutral arbitration process that would have expeditiously heard claims and granted appropriate relief to injured employees, such as job reinstatement, back pay, damages and legal fees. At the House Financial Services Committee hearing with Wells CEO John Stumpf, Rep. Gwen Moore, D-Wis., asked the executive whether there was a fund set aside to compensation victims of the bank's retaliation. Stumpf responded by saying that the retaliation allegations were "very regrettable," and that the banking was taking them "very seriously." Cold comfort, indeed.

Calling All Wells Fargo Whistleblowers! --Yves Smith - Established readers may know that we published an extensive series in 2013 documenting pervasive abuses by Bank of America and PNC how they ran the Independent Foreclosure Review. That program was mandated by the OCC and Fed to require banks to investigate foreclosure abuses in 2009 and 2010 and compensate wronged homeowners.  The nine whistleblowers that we ultimately interviewed, starting with a single source who contacted the site, included extensive internal documents, as well as an economic model the scale and cost of the reviews, and an estimate of how much the consultant that was papering over the abuses at Bank of America earned from the exercise.  We were told by Congressional insiders that this account was so definitive that no one in the press or among the regulators, dared to defend the foreclosure reviews after that.  Given how much Congressional and media interest there deservedly is in the Wells Fargo scandal, we are very unlikely to play a similar role. However, our series of post does demonstrate that we can connect the dots and do original analysis in a way that is outside the purview of traditional media, and that in turn can advance the exposure of misconduct, not just of the immediate perps but that of other forms of outside enablers. We had a reader contact us in the comments section of a recent Wells post alleging that they saw misconduct first hand: I was a lead teller for 4 years trained many tellers who went on to be other things within the bank because they sold bogus or unnecessary products to clients. Many of the tellers that went on to do other things I went head to head in interviews but was told I wasn’t qualified (because my numbers didn’t meet protocol). My final straw was when a teller that I trained (who had no prior banking experience) and I applied for a job as a service manager they chose the other less experienced person over me. The person they hired would come to me asking me how to do this that and the other. I refused to train a person whom I would have to report to a lead teller. I am wondering how and IF I should look into this class action lawsuit. I missed out of wages and opportunities because of the bogus sales ethics. Anyone who knows retail banking will likely regard it as unheard to have a teller claim that they were involved in pushing Wells products. That’s not what tellers are normally asked to do.  So if you worked at Wells and saw bad conduct first hand, particularly retaliation against whistleblowers or employees who otherwise objected to unreasonable sales targets or bad practices, please let us know about it. The most valuable sort of information is documents, such as manuals and internal memos.   If you are currently at Wells, have records, or are concerned about your confidentiality, you can e-mail me at Be sure to write “Wells Fargo whistleblower” in the subject line.

GAO Calls On Government Leaders to Revisit Financial Regulatory Reform – Politicians, advocacy groups, and businesses have all seemed to call for financial regulatory reform during this election cycle. Now, even the U.S. Government Accountability Office (GAO) has joined the chorus. Recently, it issued a report on the state of the regulatory system, identifying areas for reform and calling on Congress and the President to work together to make changes. The GAO undertook to analyze a regulatory structure that has evolved over 150 years, one piece at a time in response to discreet crises. Its report seeks to show how well the basic components of the financial sector are working: depository institutions, securities and derivatives markets, and insurance. What the GAO finds is that the oversight of these different components is seriously fragmented, overly complex, and suffering from a lack of collaboration between both domestic and international institutions. The GAO found extensive fragmentation, overlap, and duplication – instances in which multiple federal agencies are involved in the same areas of oversight with similar goals and even overseeing the same institutions. For example, the report points out that four different agencies—the Office of the Comptroller of the Currency (OCC), the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA)—monitor the safety and soundness of depository institutions. When it comes to overseeing securities and derivatives markets, the report notes the overlapping involvement of the U.S. Securities and Exchange Commission (SEC), the U.S. Commodity Futures Trading Commission (CFTC), state regulators, the Financial Industry Regulatory Authority (FINRA), and the Municipal Securities Rulemaking Board (MSRB). The Federal Reserve can also oversee securities activity when the relevant institution is a bank-holding company.

Stupefied. How organisations enshrine collective stupidity and employees are rewarded for checking their brains at the office door - Each summer, thousands of the best and brightest graduates join the workforce. Their well-above-average raw intelligence will have been carefully crafted through years at the world’s best universities. After emerging from their selective undergraduate programmes and competitive graduate schools, these new recruits hope that their jobs will give them ample opportunity to put their intellectual gifts to work. But they are in for an unpleasant surprise. Smart young things joining the workforce soon discover that, although they have been selected for their intelligence, they are not expected to use it. They will be assigned routine tasks that they will consider stupid. If they happen to make the mistake of actually using their intelligence, they will be met with pained groans from colleagues and polite warnings from their bosses. After a few years of experience, they will find that the people who get ahead are the stellar practitioners of corporate mindlessness. One well-known firm that Mats Alvesson and I studied for our book The Stupidity Paradox (2016) said it employed only the best and the brightest. When these smart new recruits arrived in the office, they expected great intellectual challenges. However, they quickly found themselves working long hours on ‘boring’ and ‘pointless’ routine work. After a few years of dull tasks, they hoped that they’d move on to more interesting things. But this did not happen. As they rose through the ranks, these ambitious young consultants realised that what was most important was not coming up with a well-thought-through solution. It was keeping clients happy with impressive PowerPoint shows. Those who did insist on carefully thinking through their client’s problems often found their ideas unwelcome. If they persisted in using their brains, they were often politely told that the office might not be the place for them.

What Can Go Wrong When Banks Ship Jobs Overseas | American Banker: "Why do we want to pay you x amount of dollars when we can get three workers in India for the same price without paying any benefits?" a Bank of New York Mellon manager is said to have told a back-office worker who, along with some veteran co-workers, was laid off in late August. The manager could speak freely because the about-to-be-laid-off operations staffers were under a gag order — if they spoke to the press, their entire severance package would be revoked, the ex-worker recently told me on the condition his identity be protected. Company officials deny any recent layoff but say some jobs may have been lost to attrition, though documents supplied by the worker say 69 employees were subject to a layoff. Offshoring and layoffs, of course, are nothing new, nor probably are conversations like the one related by the worker. Banks were early participants in the offshoring movement, which started about 20 years ago. They have been under pressure from activist investors and other shareholders to cut expenses even as regulatory costs are on the rise, and sending work to India, the Philippines and other locations where salaries are still lower than in the U.S. and exchange rates are favorable is a means to that end. Yet the two decades of experience with offshoring has shown that shifting operations work from knowledgeable, local workers to people in another country with oftentimes limited training comes with risks — of errors, of misunderstandings and of security lapses. "I'm not sure offshoring is the greatest long-term macrostrategy, because as they offshore services, they become harder to manage," said Larry Tabb, the chief executive of Tabb Group, a New York consulting firm.The custody banks are under as much pressure as any financial services organization to rein in costs. State Street in Boston has announced plans to lay off 7,000 workers by 2020, and Bank of New York Mellon has been engaged in a multiyear cost-cutting plan. Samir Pandiri, global CEO of asset servicing at BNY Mellon, can testify to the advantages of offshoring but acknowledges that there are some challenges, too. About 40%-45% of the operations he supervises are in the United States, and the remainder are distributed equally between Europe and Asia

Where Fintech VCs Will Place Their Bets in 2017 | American Banker: Funding of fintech startups will cool in 2017, venture capitalists say, mainly because online lenders — the sector that first drew VCs' attention — have lost some of their allure. But at the same time, the VCs also anticipate growth in several other areas of financial services that are ripe for innovation, including wealth management, insurance and back-office operations. It's a natural evolution from the early days of modest fintech funding, before "fintech" became a household name, through its boom years — investment in U.S.-based financial technology startups grew from $1.6 billion in 2010 to $11.3 billion in 2015, according to Accenture — to an inevitable steadying of the market. "The first year I decided to do fintech investment, in 2002, there was $300 million total invested in fintech companies," said Matt Harris, managing director of Bain Capital Ventures. "Last year it was $10 or $12 billion. I don't think we're going back to $300 million. We might go down to $3 billion, which wouldn't be all bad." Amy Nauiokas, founder and president of Anthemis Group, a London-based venture investment and advisory firm focused on fintech companies, points out another reason funding should cool: Some of the startup venture capital firms that set up shop in the beginning of the movement have given up. "If I had a dime for every time I met an ex-financial-services professional who said they were going to set up a fintech fund and do some angel investing, I'd be very wealthy because everybody and their brother thought they could do it," she said. Some of these neo-VCs and their fintech protégés encountered regulatory resistance.

When Will Fintech Regulation Grow Up? | American Banker: Until recently, federal regulators appeared to be waiting for someone else to make the first move in fintech. But in March, the Office of the Comptroller of the Currency released a white paper calling for a new dialogue on "responsible innovation." Soon enough, representatives from across the financial industry — big banks, online lenders and virtual currency companies — proposed a range of solutions to the challenge of regulating fintech. While the proposals varied, they seemed to agree on one thing: Today's complex regulatory landscape could stifle innovation in the U.S. There are moving parts on both sides of the debate. Old-guard financial institutions are increasingly partnering with fintech companies. Still, other parts of fintech are attempting to distance themselves from the banking sector entirely. Meanwhile, regulators are struggling to unite in creating consistent rules of the road for these modern businesses. "We have so much regulation in finance that it's very hard to change one piece of the regulatory ecosystem without impacting others unintentionally," said Jo Ann Barefoot, a consultant who has advised both regulators and fintech companies. "Nobody would have designed the regulatory structure we have now, today." This is not purely politicking and policymaking, however. The complexities of the current system and uncertainty of the future threaten to leave fintech in the U.S. lagging behind the rest of the world, observers said.Fintechs have a beef with state-by-state licensing. It's burdensome. Virtual currency firms, for example, typically have to register as money transmitters in each jurisdiction they want to operate in and then comply with varying standards for things like net worth, bonding and investor due diligence. "It's completely fractured," . "What companies are looking for is to have one clear set of rules, and ideally [one] regulator that they can deal with." That's why many fintech companies were excited to hear the OCC is looking into the possibility of a national fintech charter — which would likely be similar in scope to the limited-purpose charters created for credit card companies and Internet banks. The OCC is still working on it. The agency is set to issue a framework this fall that will highlight some of the policy issues with which it is grappling.

These Startups Bridge the Digital Divide | American Banker: The migration to online and mobile has created a conundrum for banks. They have worked hard to sell the convenience of digital channels to the point that they now find themselves in reactive mode — they are waiting for customers to need something. The 20 startups selected for this year's FinTech Forward Companies to Watch are helping banks replicate, and in some cases enhance, the close bonds they often share with their customers in person through digital channels. The companies are redefining personal banking and personal security. They're using artificial intelligence to offer virtual assistance. And, through application programming interfaces, they are giving customers a complete picture of their finances so they have more control of them. Customer satisfaction depends largely on banks' ability to meet their expectations and maintain relationships with them. Thanks to tech giants like Facebook, Google and Apple, smartphone users are trained to seek virtual assistance; they routinely pull down a notification tab to view emails, reminders and other information. People expect the same ease of interacting with their banks. Enter artificial intelligence. Companies like Kasisto are offering conversational AI platforms that allow banks to connect with their customers through messaging apps. Personetics uses AI-powered predictive analytics to anticipate customer needs and provide insight and financial management advice. North Side offers personalized virtual bankers, with its natural-language understanding and dialogue technology, allowing consumers to speak with their banks. The goal isn't to replace human beings. Good machine learning platforms "have software mimic the humans and humans manage the software," said David Weiss, a senior analyst at Aite Group.

Sheila Bair Called the Financial Crisis. Here’s Her New Nightmare - In her new life as the first female president of Washington College, the nation’s 10th-oldest college, she’s more likely to host a dozen freshmen for monthly “Pizza with the Prez” than face down a roomful of angry bankers. But just as in 2006 at the FDIC when she foresaw the coming mortgage crisis, Bair sees a potential financial catastrophe looming in her new industry—a generation of overly indebted Americans who will be too weighed down by debt to contribute to the economy, tanking it once again. “In the aggregate, this is a huge problem,” Bair said.  In early 2014, Bair had set out to write a book, Bullies of Wall Street, explaining the 2008 financial crisis to young Americans. She wanted to warn tomorrow’s adults against repeating the mistakes of today’s. In researching the book, she began to pay attention to student loans. Bair hadn’t realized the extent to which Americans had loaded up on student debt in search of credentials in the aftermath of the financial crisis and were now struggling to pay it back. Some 43 million Americans, she learned, collectively carry nearly $1.4 trillion in student debt, making it the second-largest source of household debt after home mortgages, according to the Federal Reserve. The federal government owns or backs more than 90 percent of it. More than 42 percent of federally owned student loans aren’t being repaid as expected or on time. Bair saw a lot about student loans and higher education that reminded her of the dodgy pre-crisis era mortgage market.  She was stymied at the FDIC, but here she can do something—even on a small scale. So Bair has turned her campus into a laboratory. Her pioneering efforts to reduce student debt and make higher education more affordable could inspire other schools to do the same, said Larry Culp, chairman of the school’s board. “Other college presidents would study these issues endlessly,” Culp said. “She moved quickly.” If Bair is successful, and other schools follow her lead, perhaps this time the crisis she foresees doesn’t have to become reality.

Federal watchdogs issue new rules on prepaid cards: For many GenX consumers and millennials, a prepaid card is a lower-cost alternative to a traditional checking account. So why not require more protections on popular, reloadable plastic similar to protections for checking account holders? The Consumer Financial Protection Bureau will put new rules in place beginning October 2017, including disclosure requirements about fees and limit on losses consumers can face when a prepaid card is stolen or lost. “This rule closes loopholes and protects prepaid-card consumers when they swipe their card, shop online or scan their smartphone," said Richard Cordray, director of the CFPB. Pick up one of these cards from the shelf at the grocery store? Soon, there could be a standard form on the back of the package listing how much it will cost you to check your balance at an ATM or how much you would pay per month if you don't use the card for a year or so, and other potential fees. The back of the package might also note that after 30 days, the consumer could be offered overdraft coverage or credit, with fees attached to those transactions.Prepaid-card issuers will have to make sure the consumer can afford a credit card before offering the deal.

Users of popular prepaid debit cards finally get some federal consumer protections - Americans who use a fast-expanding array of prepaid cards for everyday transactions such as shopping, withdrawing money from ATMs and receiving pay or government benefits are getting new federal protections. The rules, which will be announced Wednesday and take effect in October 2017, will make fees clearer, limit fraud losses and place restrictions on card issuers when they extend credit to users. In finalizing regulations proposed nearly two years ago, the Consumer Financial Protection Bureau is taking aim at a booming industry that has sprung up as a popular alternative to cash and conventional checking accounts for low-income Americans. The new rules will apply broadly to prepaid and reloadable accounts, including electronic wallets and apps that allow person-to-person payments, the CFPB said.“Many consumers rely on prepaid cards to make purchases and access funds, but until now they were not guaranteed strong consumer protections under federal law,” said Richard Cordray, the consumer bureau’s director. “This rule closes loopholes and protects prepaid consumers when they swipe their card, shop online, or scan their smartphone,” he said. “And it backs up those protections with important new disclosures to let consumers know before they owe.” The cards, such as those issued by industry pioneer Green Dot Corp. of Pasadena, can be loaded with money by a consumer or a third-party, such as an employer using direct deposit. Many states now distribute tax refunds, unemployment checks and other government payments on prepaid cards. The amount of money on those cards increased dramatically to $65 billion in 2012 from just $1 billion in 2003, the CFPB said. By 2018, prepaid cards are expected to hold $112 billion.

CFPB Deluged with Letters on Payday Lending Plan | American Banker: The agency said Wednesday it has received more than 500,000 comments on the proposal — and many more may be filed in the coming days. Many pro-payday lending letters submitted by consumers are liable to be from customers pressured to write missives by the firms that exploit them, said Sen. Jeff Merkley, D-Ore.

There's Still Time to Stem Decline of Black-Owned Banks… - Today despite a growing black population of more than 45 million, there are only 23 black-owned banks in the United States, including just one in California — the $408 million-asset Broadway Federal Bank in Los Angeles. A closer look reveals why the viability of black-owned banks in this country is threatened. Not one black-owned bank has even in $1 billion in assets. Wells Fargo, for example, has assets that are 2,500 times greater than any black-owned bank in the countryPartly as a result of the small and ineffective size of black-owned banks, there is no national or statewide banking strategy to assist the black community in its efforts to reduce the impact of income and wealth inequality. Many predict that income inequality will only increase as the number of black-owned banks is projected to decline. According to William Michael Cunningham and Crystal Liu of Creative Investment Research, the number could decline from 23 to just four or five by 2028.   This is a complex problem in a nation of free enterprise. As formal barriers to segregation have fallen, the largest white-owned banks have increasingly targeted affluent blacks with a broad range of personal services that no small black-owned bank can compete with. Thus, black-owned banks are forced to serve the least profitable clients.  Our suggestion is that the federal regulators, led by the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp., develop a collaborative strategy with black-owned banks. But we believe that all major banks should be given an opportunity to participate.

First Step to Ending Sexism in Banking: Recognize It | Bank Think: The banking industry is a bastion of privilege. It is an industry blasted more than others for catering to the haves more than the have-nots. However, there is a more subtle realm of privilege that's also dangerous — one invisible to those who benefit from it and all too glaringly obvious to those who do not. Male bankers suffer from this blind spot, and as a result, are unknowingly benefiting from the oppression of their female colleagues. To be sure, privilege is not about individuals being bad or taking advantage of others. Rather, privilege is about entire systems favoring some groups over others. We, women and men, are all privileged in some way — be it class, race, orientation and/or education. The list goes on. But in banking, male privilege occurs because the gender has never experienced the same system as a woman. Here, dear male bankers, is what you need to know.  We're often told we are either "too bossy" or "too quiet." It's not uncommon for someone to ask a male colleague a question even though we are the expert in the room. That's in addition to research showing women are more likely to be interrupted than men. Worse, women are interrupted even more often when we are perceived to be in power. In fact, women who have battled to secure a seat at the conference table are able to voice their contribution only a quarter of the time, as men tend to dominate 75% of the conversation, according to research from Brigham Young University and Princeton. Despite being half of the population, women are not given equal representation in banking in print, on the conference stage, in executive leadership, in product development, in strategy or in the boardroom.When men dominate the work discussion, they handicap the contribution of women and suppress the dissent and debate that are necessary to arrive at the best possible solution. This unconscious behavior is encouraged from the moment we all enter grade school, where boys get more classroom speaking time than do girls.

 September 2016: Unofficial Problem Bank list declines to 177 Institutions, Q3 2016 Transition Matrix --This is an unofficial list of Problem Banks compiled only from public sources.  Here is the unofficial problem bank list for September 2016.  Update on the Unofficial Problem Bank List for September 2016.  During the month, the list fell from 184 institutions to 177 after eight removals and one addition.  Assets dropped by $1.1 billion to an aggregate $55.4 billion.  A year ago, the list held 276 institutions with assets of $82.0 billion.  This month, actions have been terminated against Frontier State Bank, Oklahoma City, OK ($661 million); Peoples State Bank of Commerce, Nolensville, TN ($152 million); North Georgia National Bank, Calhoun, GA ($119 million); Anchor Commercial Bank, Juno Beach, FL ($105 million); State Bank of Taunton, Taunton, MN ($50 million); and Mainstreet Bank, Ashland, MO ($44 million).  Allied Bank, Mulberry, AR ($66 million) failed on September 23rd and, in an infrequent event, Fidelity National Bank, Medford, WI closed through a voluntary liquidation on September 1st. The addition this month was First Trust & Savings Bank of Albany, Illinois, Albany, IL ($222 million). With it being the end of the third quarter, we bring an updated transition matrix to detail how banks are moving off the Unofficial Problem Bank List.  Since the Unofficial Problem Bank List was first published on August 7, 2009 with 389 institutions, a total of 1,713 institutions have appeared on a weekly or monthly list at some point.  Only 10.3 percent of the banks that have appeared on the list remain today.  In all, there have been 1,536 institutions that have transitioned through the list.  Departure methods include 875 action terminations, 400 failures, 245 mergers, and 16 voluntary liquidations.  Of the 389 institutions on the first published list, 20 or 5.1 percent still remain more than seven years later.  The 400 failures represent 23.4 percent of the 1,713 institutions that have made an appearance on the list.  This failure rate is well above the 10-12 percent rate frequently cited in media reports on the failure rate of banks on the FDIC's official list.

CMBS Delinquency Climbs to 2016 High - September 30-day rate 4.78% | Oct. 3, 2016 | Mortgage Daily: Last month, the rate of delinquency on securitized commercial real estate loans ascended to the highest level this year. Office loans led the rise. Delinquency of at least 30 days on loans that are held in commercial mortgage-backed securities closed out September 2016 at 4.78 percent. It turns out that 30-day delinquency has not been this high since December of last year, when the rate was previously reported at 5.17 percent.

Deutsche Bank Races Against Time to Reach U.S. Settlement: (Reuters) – Deutsche Bank is throwing its energies into reaching a settlement before next month’s presidential election with U.S. authorities demanding a fine of up to $14 billion for mis-selling mortgage-backed securities.The threat of such a large fine has pushed Deutsche shares to record lows, and a cut-price settlement is urgently needed to reverse the trend and help to restore confidence in Germany’s largest lender.Its shares won’t trade in Germany on Monday because of a public holiday, but they will resume trading on the U.S. market later on Monday. A media report late on Friday that Deutsche and the U.S. Department of Justice were close to agreeing on a settlement of $5.4 billion lifted the stock 6 percent higher, but that report has not been confirmed.The Wall Street Journal reported on Sunday that the bank‘s talks with the DOJ were continuing. Details are in flux, with no deal yet presented to senior decision makers for approval on either side, the paper said, citing people familiar with the matter.“Clearly, so long as a fine of this order of magnitude ($14 billion) is an even remote possibility, markets worry,” UniCredit Chief Economist Erik F. Nielsen wrote in a note on Sunday.

WSJ Reports "No Settlement Deal" Between Deutsche, DOJ As German Econ Minister Slams Deutsche Bank - As we predicted on Friday, and as we reported earlier today, the AFP "story" of a $5.4 billion revised settlement between DB and DOJ was indeed "sources" on Twitter, and had no basis in reality. The reason: not only has John Cryan barely started the negotiations with the DOJ, and is set to arrive in the US this week to beg for mercy, but as the WSJ, which broke the original settlement story more than two weeks ago just reported, Deutsche Bank’s settlement talks with the DOJ are continuing, "with no deal yet presented to senior decision makers for approval on either side." mThe talks are moving forward, but they have "not progressed to a degree that a proposed deal has reached senior-level review at the Justice Department or with Deutsche Bank’s supervisory board, people familiar with the matter said." While there is much more information one could hope for in what is now the most important litigation in capital markets, we will gladly take what the WSJ reports over the market-manipulating garbage spewed by AFP with the sole intent of getting both DB and the market to close higher.Some more details from the WSJ:"People familiar with the continuing settlement talks say details remain in flux.Justice Department lawyers have floated the possibility of also reaching accords with other European banks who have yet to resolve similar investigations and announce them at once, but no such move is certain, the people say." The WSJ also adds that CEO John Cryan plans to be in Washington, D.C. this week for meetings of the International Monetary Fund and World Bank. The visit has stoked speculation that he could delve in person into ongoing talks with the Justice Department. The Deutsche Bank spokesman declined to comment on any matters related to talks with Justice Department.

Germany’s Deutsche Bank, Again in Trouble, Received a U.S. Bailout Twice as Big as Lehman Brothers -- Pam Martens --The gyrations in Deutsche Bank’s shares last week together with a June report from the International Monetary Fund indicating that the bank was “the most important net contributor to systemic risks” has cast a trading pall over all of the global banks.Against that backdrop, most Americans would be stunned to learn that the German Deutsche Bank, which perpetually finds itself on the wrong side of the law, was bailed out in five separate U.S. emergency lending operations during the 2007-2010 financial crisis, receiving more than twice the emergency financial assistance as that received by Lehman Brothers, the failed U.S. investment bank. According to the Government Accountability Office (GAO), Deutsche Bank received cumulative loans totaling $77 billion under the Federal Reserve’s Primary Dealer Credit Facility (PDCF) and $277 billion in cumulative loans under the Term Securities Lending Facility (TSLF) for a total of $354 billion. Lehman Brothers received only $183 billion in Fed emergency lending programs according to the GAO report. (See GAO chart below.) These loans were made at below-market interest rates, thus constituting a bailout. But Deutsche Bank received additional forms of bailouts during the crisis. According to Fed data turned over to Bloomberg News after a multi-year court battle, two units of Deutsche Bank borrowed at least $2 billion in low-cost loans from the Fed’s Discount Window during the crisis. And, it was finally revealed  that Deutsche Bank was one of the banking behemoths that got a back-door bailout via the failed insurance giant, AIG. Deutsche Bank received $11.8 billion from the taxpayer for derivative transactions and securities lending obligations AIG was on the hook for. The U.S. government paid these obligations at 100 cents on the dollar, despite AIG being insolvent at the time and requiring a $185 billion taxpayer bailout itself for making casino-like bets with the big banks. Public pressure eventually forced AIG to release a chart of these taxpayer payments. One of the most egregious aspects of the bailout of Deutsche Bank is that it has serially defrauded both U.S. taxpayers and investors. Its history suggests it would have been far more appropriate to yank its charter in the U.S. than to bail it out using U.S. taxpayers’ dollars.

Systemic Risk: Deutsche Bank #1 at $100 Billion (BNP Paribas 2nd, Societe Generale 3rd) --Inquiring minds may be interested in a cornucopia of relevant numbers on Deutsche Bank including market cap, leverage, capitalization, deposits, liquidity, derivatives multiple ways, and systemic risk. Systemic risk numbers are from Nobel Laureate Robert Engle. Deutsche Bank by the Numbers

  • Systemic Risk: $100 billion (see explanation and chart below)
  • Notional derivatives: €42 trillion, an amount about the size of the German economy
  • Market value of Derivatives: €18 billion
  • Equity: €67 billion
  • Assets: €1.6 trillion
  • Leverage Ratio: 25-1
  • Level 3 assets: (Illiquid potentially mark-to fantasy assets) €32 billion
  • Outstanding Fines: €12.47 billion ($14 billion)
  • Ready liquidity: €220 billion
  • Investment bank employees: (Risk takers – M.R.Ts in EU regulatory circles) 1,871
  • MRT salaries: €2 billion
  • Market Cap: €16.2 billion

All numbers except market cap from Deutsche Bank’s Appetite for Risk Throws Off Its Balance.

Deutsche reawakens systemic fears amid talk of ‘Lehman moment’ - A big financial institution suffers a rapid, destabilising share price fall; talk spreads through the market of ‘another Lehman moment’.  Such a concern has been fanned by the poor performance of European banks with lenders in Italy and now Germany attracting hefty scrutiny from investors. Among the ranks of underperforming banks, Deutsche’s recent travails have electrified the conversation over systemic risk and whether the post-financial crisis reform of derivatives faces a serious test. “It is not so much the funding issues but rather derivatives exposures that are more likely to trouble markets going forward if Deutsche Bank concerns continue,” said Nikolaos Panigirtzoglou, an analyst at JPMorgan.One crucial distinction between today and the financial system of 2008 is that the markets to which the world’s largest investment banks are exposed, now operate in radically different ways. Investors have focused on the heavy capital requirements faced by Deutsche and others to compensate for any “risky” assets they hold on their balance sheets.The task of managing a counterparty’s exposure to derivatives has been one of the chief concerns of global policymakers in the past eight years. In particular, they have mandated that responsibility for liquid open-ended leveraged positions move away from the banks and into independent clearing houses.These risk management houses, such as LCH, CME Clearing and ICE Clear, are part of big exchange groups and bear most responsibility for stemming systemic risk. They stand between two parties in a trade, acting as the counterparty and managing the credit risk if one side defaults on payment. Users must post collateral and margin at the clearing house to backstop the trade.That should, in theory, go a long way to quarantine a collapsed bank as the market pricing for the exposure is set by a third party.

Deutsche Bank offers a tough lesson in risk - Martin Wolf, FT - All banks are weak, but some banks are weaker than others. This is the chief lesson of the market turmoil surrounding Deutsche Bank.  Above all, more than nine years after the start of the global financial crisis, worries over the health of the financial system remain significant, especially in Europe. The proximate cause of Deutsche Bank’s weakness has been the demand by the US Department of Justice for a settlement of $14bn of its case against the bank over its alleged mis-selling of mortgage-backed securities in America.  But the bank is structurally weak. Its name is also misleading: lacking a solid retail base in Germany’s highly fragmented banking system, it is mainly a global investment bank and so similar to Goldman Sachs. In an effort to retain high profitability, Deutsche Bank is highly leveraged by the standards of its peers. Roughly half of its €1.8tn in assets are linked to its trading activities, with a significant proportion of those assets (€28.8bn, in total) without market prices. Even by the standards of its peers, it is a highly-leveraged bank with a doubtful business and opaque assets. So what does all this turmoil tell us? A first lesson is that banks remain highly fragile businesses. By their nature, banks are highly leveraged entities with ultra-liquid liabilities and far more illiquid assets. The balance sheets of many banks are also huge. Customers view the liquid liabilities of banks as utterly reliable stores of value and means of payment. Banks are also highly interconnected, directly, via their transactions with one another and, indirectly, via euphoria and panic.  A second lesson is that the way in which all the regulators have gone about punishing banks for their many wrongdoings is unsatisfactory. It is indeed reasonable to punish shareholders for the misdeeds of the banks whose shares they own. Yet it must be doubted whether it makes sense to impose a penalty so large that it imperils the survival of an institution. Far more important, the idea that shareholders control banks is a myth. It is management that is responsible. What remains disheartening is that shareholders and a few small fry among the employees have been punished, but the decision makers who ran these institutions have escaped more or less unscathed. A third lesson is that banks are still undercapitalised, relative to the scale of their balance sheets, as Anat Admati and Martin Hellwig have pointed out. More immediately, we lack reliable means of rectifying this. So, while governments insist bailouts are ruled out, few believe this, particularly in the case of a bank of Deutsche’s importance. The European Central Bank has proposed temporary bailouts as an option. But it is hard to believe such bailouts would ever be reversed. In practice, private creditors would flee and the government would end up as the owner of the bank in question.

Uncle Sam May Tip Deutsche Bank Over the Edge -- On September 16, 2016, the US Justice Department threatened Deutsche Bank with a $14 billion fine for bond sales practices from before the 2007 Financial Crisis. Predictably, the share price immediately collapsed 8% and the financial markets went into a tizzy over equity holders losing value. This also rippled into other parts of the banking sector, for example hitting share prices of the Royal Bank of Scotland by 4%. For reference, the total market valuation as of this writing, September 29, 2016, for Deutsche Bank is 16 billion Euros, meaning the penalty the Justice Department is seeking is 88% of the total valuation of the bank and the announcement has wiped out 20% of the market value since the beginning of September. While the financial markets and media outlets are lamenting the loss of share valuation, there is a major stakeholder in this whole operation that is outright ignored. Because of the practice of fractional reserve banking, Deutsche Bank has managed to maneuver itself into a position where the leverage ratio is 3.5%. What this means is that, effectively, Deutsche Bank only has enough high quality assets to cover 3.5% of their liabilities. From a pure depositor standpoint, the FY2015 Annual Report shows that there are 567 billion Euros deposited in Deutsche Bank accounts but just 97 billion Euros of cash and central bank deposits to cover this. If this announcement were to cause just 18% of the deposits to be withdrawn, this would effectively cripple Deutsche Bank. Depositors aren’t the only risk, either, as hedge funds are also asking the bank to return their assets. Roughly 1.3 trillion Euros of assets is tied up in various loans, derivatives and investments. What this essentially means is that Deutsche Bank has only 97 billion in Euros as cash to cover 1.8 trillion Euros of promises to various entities. To put this in perspective, the entire GDP of Germany is 3.8 trillion Euros. On top of this, those existing revenue-generating assets are insufficient to cover the operating costs of the bank, so the justice Department’s fine creates a financial double-whammy that will almost certainly cause its collapse in the absence of some sort of bailout. This math should already raise significant questions. While Deutsche Bank has 67 billion Euros in equity using the accrual method of accounting, the market has already decided that the equity is really only worth 18 billion.

Will the Crisis of Confidence at Deutsche Bank Spread? -- NEP’s Bill Black recently appeared on Knowledge@Wharton’s radio show discussing the issues related to the settlement the DOJ is pursuing from Deutsche Bank. It has also appeared on the website. You can view it here.

 Deutsche Bank is Too Big to Fail, Too Big For Big Fines? -- New Economic Perspectives -- NEP’s Bill Black appears on The Real News Network. Topic of discussion is Deutsche Bank, the German bank that was at the center of the LIBOR scandal and is likely to face upwards of $5 billion in a settlement with the Justice Department. Video is below. If you would like to see with a transcript, it is here.

 Forget ‘too big to fail’ — the new concern is banks too weak to survive - A third of biggest banks in the world’s richest countries are so weak their problems could not be solved even by a recovery and rising interest rates, the International Monetary Fund said in a new report released Wednesday. About a third of European banks, with $8.5 trillion in assets, and a quarter of U.S. banks, with $3.2 trillion in assets, are in this too-weak-to-recover category, the IMF said. “This suggests the need for fundamental changes in both bank business models and system structure to ensure a vibrant and healthy banking system,” the IMF said in its update on global financial stability. Overall, bank balance sheets in general are stronger than they were before the financial crisis. But weak bank profitability has emerged as a key challenge that won’t be solved by a cyclical recovery. Banks need to generate profits to sustain capital levels through adverse economic cycles. Yet banks’ return on assets has only partially recovered since the crisis.In particular, euro-area banks are earning less than half their 2004-2006 average profits. In part, this is due to the challenging economic environment and low, even negative, interest rates, the IMF said. Regulators have also curtailed banking activity in capital market businesses. Revenue from market making and derivatives trading is one-third lower than during the pre-crisis period, the IMF estimated. Loan-loss provisioning is leading to lower profitability as well, especially in Europe which is lagging behind the U.S. in resolving bad loans.

Fannie and Freddie Investors Win Round in Suit Against he US - The United States government improperly withheld documents from investors who were suing the government over its decision in 2012 to seize all of the profits of Fannie Mae and Freddie Mac, the mortgage finance giants, a federal judge has ruled. The judge, Margaret M. Sweeney of the Court of Federal Claims in Washington, also ordered the release of the documents, some of which appear to reach the highest levels of the Obama administration.Her decision, released Monday, was a win for the investors, who have contended that the government’s surprise decision to begin extracting all profits from the mortgage finance giants was an illegal taking of private property.The government initially argued that it acted to protect taxpayers from future losses because the companies were in a death spiral, but the decision to funnel the profits into the Treasury’s general fund came just before Fannie and Freddie returned to profitability.In September 2008, the government took over Fannie and Freddie, victims of the mortgage crisis. They have since recovered, and as of September had returned $63.1 billion more to the Treasury than they drew down during the crisis.  Fairholme Funds, a mutual fund company that holds shares in Fannie and Freddie, sued the government in 2013. Through the discovery process, the plaintiffs have been trying to learn why the Obama administration abruptly changed the terms of the companies’ rescue four years ago. Lawyers for the government have responded to the suit with demands for unusual secrecy. The government has withheld 12,000 documents, including emails, memorandums and reports, asserting that they were protected by privilege of three types: privilege of the deliberative process, of bank examination and of presidential communications. Asserting presidential privilege in such a suit is highly unusual.

HUD Watchdog Goes After Covenants on Down-Payment Assistance Loans: Evergreen Home Loans has been tagged by the Department of Housing and Urban Development Office of Inspector General for allowing restrictive covenants in down-payment assistance loans. The Bellevue, Wash.-based lender has allowed the City of Las Vegas to include covenants in second mortgages requiring the repayment of the down-payment assistance provided by the city. The 14 borrowers received down-payment assistance ranging from $7,500 to $25,000, according to the audit released this month. However, the borrowers are required to repay the down-payment assistance if they sell, transfer or lease the property within a certain time frame. This repayment practice "violated HUD regulations," the HUD IG says in the audit report. "This condition occurred because Evergreen did not have procedures to identify unallowable restrictive covenants and underwriters did not always exercise sound judgment and due diligence when underwriting FHA loans," according to the Sept. 13 audit report. The OIG recommends that Evergreen work with the Federal Housing Administration to nullify the conveyance restrictions or indemnify FHA against possible future loan losses of $867,134.

FHA Loans Lead the Decline in Defect Risk: Though they have a reputation for being precarious, Federal Housing Administration loans are leading the decline in mortgage application defect risk, according to First American Financial Corp. First American reported that its monthly Loan Application Defect Index for August released Friday remained unchanged from July and was 14.6% down from 2015. But the defect risk score for FHA, Veterans Affairs and U.S. Department of Agriculture loans dropped even more. "While FHA loans are generally considered to have higher credit risk than conventional loans, according to the defect index, conventional loan risk is down 14.6% over a year ago, compared with a year-over-year decline of 17.7% for transactions involving FHA/VA/USDA loans," First American chief economist Mark Fleming said in a news release. "In fact, loan application and defect risk on transactions involving FHA/VA/USDA loans has declined more in recent years than the defect risk for conventional mortgages." Additionally, Fleming said transactions involving FHA, VA and USDA loans are currently 14.5% less risky than transactions involving conventional loans. Looking at risk on a state and local market basis, Maine had the largest increase in defect frequency of any state at 19.2%, while St. Louis was the only city to see higher defect frequency with a 2.7% uptick.

A Simpler Path to Housing Finance Reform?: — A former top regulator of Fannie Mae and Freddie Mac wants to abandon the development of the common securitization platform and use the existing Ginnie Mae platform to issue government-guaranteed mortgage-backed securities. Edward DeMarco, a former director of the Federal Housing Finance Agency, argues in a new paper that utilizing Ginnie would make for a smoother transition to a new system. "We believe that using Ginnie Mae's platform and world-recognized nameplate as a U.S. government backstop guarantor of MBS, but with private capital upfront, provides an easy transition" to a reformed secondary market, he said. "This structure would replace the failed duopolistic GSE system with one of competitive private insurers, a vibrant market for mortgage credit risk, ownership structures that require lenders to have some skin in the game, and appropriate government standard-setting and oversight to ensure a deep and liquid MBS market," according to the paper, which was issued last week. The plan envisions FHFA as the overseer of the new secondary market structure while Ginnie would be moved out of the Department of Housing and Urban Development and re-established as a separate government corporation with authority over its budget, hiring and compensation. Under the plan, Ginnie would still securitize Federal Housing Administration, Department of Veterans Affairs and Rural Housing Service guaranteed loans in addition to those of the government-sponsored enterprises. The plan, from DeMarco and Michael Bright, director of the Milken Institute's Center for Financial Markets, would encourage private firms to put capital upfront via credit risk transfers. Fannie and Freddie have already experimented with such transfers, which many observers see as a critical step toward a new housing finance system.

Fitch: Banks cut back on mortgage servicing staff by 50% - HousingWire: Bank mortgage servicers cut mortgage servicers by 50% in the past two years, according to the latest quarterly U.S. RMBS Servicer Handbook by Fitch Group, which deals in financial information services with operations in more than 30 countries. This decline in staff is due to a decrease in portfolio sizes as loan performance improve among borrowers, according to the report. Foreclosure inventory and completed foreclosures decreased significantly in July from last year, according to the July 2016 National Foreclosure Report released by CoreLogic, a global property information, analytics and data-enabled solutions provider. While banks are cutting back, however, nonbank servicers are still focusing on growth. Borrowers at nonbanks generally require more frequent interaction, driving the need for more staff. While the average number of full-time mortgage servicing employees at banks decreased to 4,000, down from 8,000 two years ago, the same can’t be said for nonbanks. The number of mortgage servicing employees at nonbanks actually remained stable at 2,000 for the same time period. Lower mortgage delinquencies aren’t the only thing causing banks to lay off employees. High credit quality portfolio additions brought on by origination activity also contributed to the decrease. Bank servers now manage twice as many mortgages per employee compared to nonbank servicers. This comparison is not likely to change anytime soon, according to Fitch.

Hiring in Nonbank Mortgage Sector Slows in August: Hiring by independent mortgage banking and brokerage firms slowed in in August, after adding 5,100 full-time loan officers and other employees to their workforce in July. The Bureau of Labor Statistics reported Friday that lenders in the nonbank mortgage and brokerage sector added 900 employees to their payrolls in August. Total employment in this sector rose to 312,800 — the highest since 2008. The slowdown came as both new and existing home sales declined in August and sales in previous months were revised downward, according to economists at Wells Fargo Securities. The economists note that the lack of new and existing homes for sale is creating a drag on sales and the inventory issue is not going to be "rectified soon." But they are still bullish on the housing market. "The August soft patch has not altered our outlook. Sales of new homes through the first eight months of this year are running 13.3% ahead of the same period in 2015 and starts of new single-family homes are up 9.1%," according to an Oct. 3 WFS Housing Chartbook.

 Ohio's fast-track foreclosure law targets vacant homes, but it's not a panacea (photos, video) | An Ohio law that took effect Wednesday could cut the length of the foreclosure process for vacant homes from years to mere months. That seems like a good thing for a state grappling with thousands of abandoned houses, which drag down the values of surrounding properties and act as magnets for crime. Yet Ohio's new fast-track foreclosure program isn't garnering universal support. While the mortgage industry touts the law as a model for other states to mimic, some housing advocates in Northeast Ohio are skeptical – and worried about legislative add-ons they fear will do more harm than help.Still, aspects of the law are chafing some researchers and public officials, who worry about the potential for eroded homeowner protections and lost local-government control. And even proponents of the legislation aren't sure how effective the fast-track program will be. Nobody's arguing against the guiding principle: Pushing vacant properties through the court system more quickly will reduce the window for deterioration and increase the odds that empty homes will be renovated and reoccupied, saving money for taxpayers and lenders alike. "We end up in this cycle where we're draining local resources to take care of these things. And there's no resolution," said Rep. Jonathan Dever, a Cincinnati-area Republican and attorney who sponsored the legislation. "We needed something to deal with these things."

Black Knight August Mortgage Monitor: "Purchase Lending Highest Since 2007" -- Black Knight Financial Services (BKFS) released their Mortgage Monitor report for August today. According to BKFS, 4.24% of mortgages were delinquent in August, down from 4.87% in August 2015. BKFS also reported that 1.04% of mortgages were in the foreclosure process, down from 1.48% a year ago. This gives a total of 5.28% delinquent or in foreclosure. Press Release: Black Knight’s Mortgage Monitor: 42 Percent of Q2 2016 Refinances Were Cash-Out Transactions, Largest Quarterly Sum of Equity Tapped Since 2009  This month, Black Knight took a close look at mortgage refinance activity through the first half of 2016. As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, borrowers are continuing the trend of drawing upon growing equity in their homes, though at nowhere near the levels at which they had pre-crisis. “The roughly 350,000 cash-out refinances in Q2 2016 accounted for 42 percent of all refinances in the quarter, and marked the ninth consecutive quarterly increase in cash-out lending, not only by count, but also by the amount of equity tapped,” said Graboske. “At $22.6 billion, that works out to approximately $65,000 in equity tapped per borrower. While that per-borrower number is slightly down from Q1 2016 – but $6,000 higher than one year ago – the $22.6 billion total is the largest equity sum tapped since Q2 2009. Just to put that into perspective, though, it’s still a nearly 80 percent lower equity draw than at the peak in Q3 2005. And, given that we saw over $550 billion in tappable equity growth last year alone, this equates to borrowers only tapping into 15 percent of the growth in equity over the past 12 months, without even touching the $4.5 trillion balance in tappable equity available.  This month, Black Knight also found that the remaining inventory of loans in active foreclosure is declining at the fastest rate since 2014, and the rate of reduction has been accelerating throughout 2016.

Cash-Out Refis Jump in Second Quarter: Black Knight: Cash-out refinances rose to the highest level seen since the second quarter of 2009, according to data analyzed by Black Knight Financial Services. Black Knight found that $22.6 billion in equity was accessed via cash-out refinances. While this is the highest amount tapped since the second quarter of 2009, the figure is still 80% below the all-time high set in the third quarter of 2005. "Today's cash-out refinance borrowers continue to present a relatively low-risk profile, historically speaking," Black Knight Executive Vice President Ben Graboske said in a news release Monday. "The average credit score of 748 among Q2 2016 cash-out refinance borrowers is 67 points higher than that of the low point recorded in Q3 2006, and is in fact nearly 60 points higher than the overall average credit score from 2005 through 2007." Altogether, there were roughly 350,000 cash-out refinances during the quarter, representing 42% of all refinances. It was also the ninth consecutive quarter where the number of refinances grew. The amount taken out per borrower — roughly $65,000 — was lower than the first quarter, but still $6,000 higher than a year ago, according to Graboske. "All in all, it's clear that cash-outs are helping to prop up the refinance market — their 42% share is up from only 30% in early 2015 when interest rates had also dropped," Graboske said. "What's more, refi volumes are down from 2015 — at least through the second quarter — but while overall they're down 9% from Q1 2015, rate/term refinances are actually down 25% over that same period."

  Share of mortgages going to blacks has tumbled nearly 40% from the peak - It’s a lot harder to get a mortgage now than it was during the boom years, and the homeownership rate has tumbled.  But one group of borrowers has seen the situation noticeably deteriorate.  African-Americans accounted for 8.7% of all home purchase loans in 2006, according to data out Thursday from the Federal Reserve. In 2015, they made up 5.5%. That’s a 37% decline.  The Fed’s report, drawn from data from the Home Mortgage Disclosure Act, shows that African-Americans have made some progress during the recovery. Their share of mortgages was as low as 4.8% in 2013. But that 37% decline is steeper than other minority groups. Hispanics saw a 29% decline during the same period, and a category called “other minority” declined 27%. Whites now have an 11% greater share than in 2006, and Asians have increased their share by 18%. African-Americans still have the highest denial rate for home purchase loans: 20.8%. That’s more than double the 10% rate of denials for whites. What’s more, African-Americans overwhelmingly rely on mortgages that are backed by the government, noted the Center for Responsible Lending in a statement Friday. Some 70.2% of African-American borrowers were government-backed, nearly double the share of such loans to white borrowers.

Owners at “Leaning Tower of San Francisco” Knock Condo Values to Zero - So what’s a condo worth in the 58-story Millennium Tower at 301 Mission St., the most luxurious condo tower in San Francisco, which has sunk 16 inches since its completion in 2008 and began leaning in 2009? The tilt has reached 2 inches. Majestic finger-pointing has ensued. Lawyers have been unleashed. Investigations, studies, and counter-studies have commenced. No one is certain how to repair it, or if it is repairable at all. A few things are certain: Large amounts of moolah will change hands, lawyers will get rich, and if taxpayers don’t watch out, the moolah may well change from their hands to other people’s hands – because the city of San Francisco has been dragged up to its eyeballs into this. Lenders too are on the hook. California is one of the dozen or so “non-recourse” states. Standard purchase mortgages are non-recourse: they’re secured only by the property. When push comes to shove, borrowers might be tempted to let the bank worry about their properties in the leaning tower of San Francisco. Below is an image of the Millennium Tower via Google Earth. Note the construction site to the right and in front of it. That’s the future Transbay Terminal, the construction of which is being amply and conveniently blamed for the sinking and leaning, though the sinking and leaning seems to have started before ground was even broken:

MBA: "Mortgage Applications Increase in Latest Weekly Survey" -From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey Mortgage applications increased 2.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 30, 2016. .. The Refinance Index increased 5 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.1 percent from one week earlier. The unadjusted Purchase Index decreased 0.2 percent compared with the previous week and was 14 percent lower than the same week one year ago... The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.62 percent, the lowest level since July 2016, from 3.66 percent, with points decreasing to 0.32 from 0.33 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index since 1990. Refinance activity has increased this year since rates have declined. Mortgage Purchase IndexThe second graph shows the MBA mortgage purchase index. The purchase index was "14 percent lower than the same week one year ago". Don't read too much into the year-over-year decline - remember last year there was a 27% jump in applications the week prior to the TILA-RESPA regulatory change. Next week applications will be up year-over-year.

 CoreLogic: House Prices up 6.2% Year-over-year in August - The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).  From CoreLogic: CoreLogic US Home Price Report Shows Prices Up 6.2 Percent Year Over Year in August 2016 Home prices nationwide, including distressed sales, increased year over year by 6.2 percent in August 2016 compared with August 2015 and increased month over month by 1.1 percent in August 2016 compared with July 2016, according to the CoreLogic HPI...“Home prices are now just 6 percent below the nominal peak reached in April 2006,” said Dr. Frank Nothaft, chief economist for CoreLogic. “With prices forecasted to increase by 5 percent over the next year, prices will be back to their peak level in 2017.” “Housing values continue to rise briskly on stronger fundamental and investor-fueled demand, as well as lack of adequate supply,” said Anand Nallathambi, president and CEO of CoreLogic. “This continued price appreciation is contributing to a growing affordability crisis in many markets around the country.”This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100. The index was up 1.1% in August (NSA), and is up 6.2% over the last year. This index is not seasonally adjusted, and this was another solid month-to-month increase. The index is still 6.0% below the bubble peak in nominal terms (not inflation adjusted). CoreLogic YoY House Price IndexThe second graph shows the YoY change in nominal terms (not adjusted for inflation). The YoY increase had been moving sideways over the last two years. The year-over-year comparison has been positive for fifty five consecutive months since turning positive year-over-year in February 2012.

Vancouver Imposed 15% Foreign Tax in July, September Home Sales Plunged 33% -- Vancouver hopes to burst its massive property bubble that was fueled by foreign buying, mostly from China. In July, British Columbia imposed a 15% tax on foreign sales for the Vancouver region, effective August. Tax rates on vacant properties also changed. The results are in: Vancouver Home Sales Fall 33% in September, Most in Six Years. “Vancouver home sales fell 33 percent in September, the most since 2010, adding to evidence measures taken by the provincial government to curb price gains are working. Sales in the Pacific coast city dropped to 2,253 in the month, from 3,345 a year earlier, the Real Estate Board of Greater Vancouver said Tuesday. It was the largest decrease since 2010, and comes after British Columbia imposed a 15 percent tax, which took effect in August, on purchases by foreigners. With Vancouver among global cities most at risk of a housing bubble, according to UBS Group AG, authorities are taking steps to slow the pace of gains. The federal government unveiled new rules on Monday to close a loophole that gave some non-residents a tax break when they sold a home. The changes also tighten mortgage insurance eligibility requirements even for borrowers with large down payments. That follows British Columbia’s new foreign-buyer levy, as well as Vancouver Mayor Gregor Robertson’s plan for the city to start taxing vacant homes next year. The benchmark price for a detached property in Vancouver rose 34 percent in September from the same month last year to C$1.58 million ($1.2 million). Prices for all residential properties in metro Vancouver climbed to C$931,900, a 29 percent increase on the year and a 0.1 percent drop from the prior month.

U.S. construction spending falls in headwind for third quarter GDP | Reuters: U.S. construction spending fell in August for the second straight month to its lowest level in eight months, an unexpected drop driven by weakness across public and private sectors. The successive declines suggest home building might not help economic growth in the third quarter. The Commerce Department said on Monday construction spending dropped 0.7 percent in August to a seasonally adjusted annual rate of $1.142 trillion, the lowest since December 2015. Economists had expected outlays to rise 0.2 percent. The government also revised downward its estimate for July, saying spending declined 0.3 percent rather than the initial estimate that outlays were unchanged. In August, private construction spending fell 0.3 percent, with outlays on residential construction down by the same amount. Spending on private nonresidential structures fell 0.4 percent in August. Public construction spending dropped 2.0 percent in August to the lowest level since March 2014, with lower spending reported for highways and schools.

Construction Spending declined in August -- Earlier today, the Census Bureau reported that overall construction spending declined in August: The U.S. Census Bureau of the Department of Commerce announced today that construction spending during August 2016 was estimated at a seasonally adjusted annual rate of $1,142.2 billion, 0.7 percent below the revised July estimate of $1,150.6 billion. The August figure is 0.3 percent below the August 2015 estimate of $1,145.2 billion.  Private spending and public spending decreased in August: Spending on private construction was at a seasonally adjusted annual rate of $871.6 billion, 0.3 percent below the revised July estimate of $874.6 billion. ...In August, the estimated seasonally adjusted annual rate of public construction spending was $270.5 billion, 2.0 percent below the revised July estimate of $276.0 billion. This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted. Residential and public spending have slumped a little recently. Private residential spending has been generally increasing, but is 34% below the bubble peak. Non-residential spending is now 2.0% above the previous peak in January 2008 (nominal dollars). Public construction spending is now 17% below the peak in March 2009, and only 3% above the austerity low in February 2014. The second graph shows the year-over-year change in construction spending. On a year-over-year basis, private residential construction spending is up 1%. Non-residential spending is up 4% year-over-year. Public spending is down 9% year-over-year. Looking forward, all categories of construction spending should increase in 2016. Residential spending is still fairly low, non-residential is increasing - although there has been a recent decline in public spending.

August 2016 Construction Spending Now In Contraction: The headlines say construction spending was down, and was significantly below expectations. This series is now in contraction after almost 5 years in expansion. Public construction continues go deeper in contraction, whilst private construction is now showing signs of a short term down trend. Overall, however - construction is now contracting after spending nearly 5 years expanding year-over-year. The backward revision for the previous months were upward. This was well below expectations. Continued headwinds to 3Q2016 GDP.

Econintersect analysis:

  • Growth deceleration 0.9 % month-over-month and down 0.1 % year-over-year.
  • Inflation adjusted construction spending down 0.8 % year-over-year.
  • 3 month rolling average is 3.2 % BELOW the rolling average one year ago, and decelerated 1.0 % month-over-month. As the data is noisy (and has so much backward revision) - the moving averages likely are the best way to view construction spending.
  • Backward revision for the last 3 months was up.

US Census Analysis:

  • Down 0.7 % month-over-month and down 0.3 % year-over-year (versus the reported +1.5 % year-over-year growth last month).
  • Market expected -0.3 % to 0.5 % month-over-month (consensus +0.3) versus the -0.7 % reported

US Construction Spending Crashes Into Contraction For First Time In 5 Years --For the first time in 5 years, US construction spending fell YoY in August. The 2nd monthly drop in a row and large downward revisions reduced construction spending to its weakest since 2015. Public construction spending dropped consierably more than private, with highway construction tumbling. This is the biggest drop in over 5 years...At a time when seasonally, construction spending has picked up...Spending on private construction was at a seasonally adjusted annual rate of $871.6 billion, 0.3 percent below the revised July estimate of $874.6 billion. Residential construction was at a seasonally adjusted annual rate of $449.2 billion in August, 0.3 percent (±1.3%)* below the revised July estimate of $450.4 billion. Nonresidential construction was at a seasonally adjusted annual rate of $422.4 billion in August, 0.4 percent below the revised July estimate of $424.2 billion. In August, the estimated seasonally adjusted annual rate of public construction spending was $270.5 billion, 2.0 percent below the revised July estimate of $276.0 billion. Educational construction was at a seasonally adjusted annual rate of $66.9 billion, 0.4 percent (±3.9%)* below the revised July estimate of $67.2 billion. Highway construction was at a seasonally adjusted annual rate of $84.6 billion, 2.9 percent below the revised July estimate of $87.2 billion.

Reis: Apartment Vacancy Rate unchanged in Q3 at 4.4% - Reis reported that the apartment vacancy rate was at 4.4% in Q3 2016, unchanged from Q2, and up from 4.3% in Q3 2015. The vacancy rate peaked at 8.0% at the end of 2009, and bottomed at 4.2% in 2014 and early 2015. A few comments from Reis Economist Barbara Denham: For the sixth quarter in a row, new construction exceeded net absorption in the apartment market but only by a slim margin: 37,744 in completed units to 37,693 absorbed units. ... While there is a chance that the vacancy rate for the third quarter could still increase once the data is finalized, we had anticipated this and do not fear that rent growth will slow dramatically. In fact, rent growth in the third quarter, 0.9%, was in line with our forecasts and demonstrates the health of the apartment market. New construction should continue to exceed net absorption in most of the coming quarters .....Asking and effective rents both grew by 0.9% during the third quarter, slightly below last quarter's growth of 1.1% and well short of the post-recovery high of 1.7% quarterly growth rate seen in Q3 2015. We had expected rent growth to slow so do not view this deceleration as cause for alarm. In fact, the gap between asking rents and effective rents - that net out concessions such as free rent - has not widened in the last few quarters which suggests that landlords generally remain confident that conditions will continue to improve in the wake of stronger job growth, although rents have declined in a few of the top submarkets. The deceleration in rent growth is seen in the year-over-year growth rates. Since Q3 2015, asking and effective rents have grown 3.8%, a decline from the 4.6% year-over-year growth in asking rents and 4.5% growth rate in effective rents.

Reis: Office Vacancy Rate unchanged in Q3 at 6.0% -- Reis released their Q2 2016 Office Vacancy survey this morning. Reis reported that the office vacancy rate declined to 16.0% in Q2, from 16.1% in Q1. This is down from 16.4% in Q3 2015, and down from the cycle peak of 17.6%.  From Reis Senior Economist and Director of Research Ryan Severino:  The national vacancy rate was unchanged in the third quarter at 16.0%. It had fallen for the eight previous quarters. While one quarter does not make for a trend, the year's overall performance has been lackluster. Vacancy has fallen only 20 basis points year to date, in 2015 the vacancy rate fell 40 basis points. ...  For the third consecutive quarter, the absolute levels of construction and absorption declined. While any pullback in a given quarter should not be viewed with alarm, the second consecutive quarterly deceleration was a bit surprising, particularly on the demand side. Once again, new supply exceeded net absorption this quarter which was unexpected. Only conversion activity prevented the national vacancy rate from increasing during the quarter. Net absorption had been outpacing new construction so consistently over the last two years that this second quarter of a reverse in this trend – new supply exceeding net absorption – was somewhat concerning. ...Both asking and effective rents growth decelerated to 0.3% and 0.4%, respectively from 0.6% growth (for both) in the previous quarter, the twenty-third consecutive quarter of asking and effective rent growth. The 12-month changes for asking and effective rent growth both also slowed slightly versus the figures from the last two quarters.

 Reis: Regional Mall Vacancy Rate decreased in Q3 2016, Strip Mall Vacancy Rate increased --Reis reported that the vacancy rate for regional malls decreased to 7.8% in Q3 2016, from 7.9% in Q2, and down from 7.9% in Q3 2015. This is down from a cycle peak of 9.4% in Q3 2011. For Neighborhood and Community malls (strip malls), the vacancy rate increased to 10.0% in Q3 2016 from 9.9% in Q2, and was unchanged year-over-year from 10.0% in Q3 2015. For strip malls, the vacancy rate peaked at 11.1% in Q3 2011. Comments from Reis Economist Barbara Byrne Denham :The national vacancy rate for neighborhood and community shopping centers increased to 10.0% in the third quarter. In contrast to last quarter, net absorption fell short of new construction although overall occupancy did increase. The vacancy rate for malls declined to 7.8%. For the second straight quarter, the two retail subtypes see-sawed in opposite directions.The retail industry has suffered from store closures across the U.S. Reis has been tracking store closures for the larger, more high-profile brands across the country. The Reis database includes 280 store closures in 59 of the 80 primary retail metros that Reis tracks totaling 12.8 million square feet of closed stores across the U.S. The major brands of stores include Walmart, Kohls, Sports Authority, Pathmark, Superfresh, A&P, Waldbaums, Haggen and Kmart. Many of these closures were concentrated in a handful of metro areas including Chicago, Central NJ, Northern NJ, Philadelphia, Long Island, San Diego and Los Angeles – all of which had more than 400,000 square feet of store closures from 2015 through July of this year.

Leading Index for Commercial Real Estate "stumbles" in September --This index is a leading indicator for new non-residential Commercial Real Estate (CRE) investment, except manufacturing. From Dodge Data & Analytics: Dodge Momentum Index Stumbles in September The Dodge Momentum Index fell 4.3% in September to 129.0 from its revised August reading of 134.8 (2000=100). The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The decline in September was the result of a 5.3% drop in institutional planning and a 3.6% decrease in commercial planning, retreating from the strong performance in August which benefitted from an influx of large projects ($100 million +) into planning. September’s decline follows five consecutive months of gains for the Momentum Index, and resumes for now the saw-tooth pattern that’s often been present in the data since 2014. Even with the recent volatility on a month-to-month basis, the Momentum Index continues to trend higher, signaling that developers have moved plans forward despite economic and political uncertainty. With the September release the Momentum Index is 5.1% higher than one year ago. The institutional component is 5.4% above its September 2015 reading, while the commercial component is up 4.9%

Fed: Q2 Household Debt Service Ratio Very Low - The Fed's Household Debt Service ratio through Q2 2016 was released last week: Household Debt Service and Financial Obligations Ratios. I used to track this quarterly back in 2005 and 2006 to point out that households were taking on excessive financial obligations. These ratios show the percent of disposable personal income (DPI) dedicated to debt service (DSR) and financial obligations (FOR) for households. Note: The Fed changed the release in Q3 2013. The household Debt Service Ratio (DSR) is the ratio of total required household debt payments to total disposable income. The DSR is divided into two parts. The Mortgage DSR is total quarterly required mortgage payments divided by total quarterly disposable personal income. The Consumer DSR is total quarterly scheduled consumer debt payments divided by total quarterly disposable personal income. The Mortgage DSR and the Consumer DSR sum to the DSR. This data has limited value in terms of absolute numbers, but is useful in looking at trends. The graph shows the Total Debt Service Ratio (DSR), and the DSR for mortgages (blue) and consumer debt (yellow).The overall Debt Service Ratio increased slightly in Q2, and has been moving sideways and is near a record low.  Note: The financial obligation ratio (FOR) was unchanged in Q2 and is also near a record low (not shown)The DSR for mortgages (blue) are near the low for the last 35 years.  This ratio increased rapidly during the housing bubble, and continued to increase until 2007. With falling interest rates, and less mortgage debt (mostly due to foreclosures), the mortgage ratio has declined significantly. The consumer debt DSR (yellow) has been increasing for the last three years.  This data suggests aggregate household cash flow has improved.

Consumer Delinquencies Hit New Low; Trend to Continue, ABA Says: Consumer delinquencies fell last quarter to their lowest point in at least 15 years, according to quarterly data released Thursday by the American Bankers Association. The percentage of overdue closed-end loans was 1.35% in the second quarter, down three basis points from the first quarter. The ABA's so-called composite ratio tracks delinquencies in eight closed-end installment loan categories including personal, home equity and direct auto loans. It defines a delinquency as a payment that is 30 days or more overdue. The latest figure was the lowest since at least 2001, and it marked nearly four years of delinquencies below the 15-year average of 2.21%. A big reason for the latest decline was the 30-day delinquency rate on home equity loans, which dipped four basis points from the first quarter to 2.70%. "Rising home prices have restored equity, providing even more incentive for borrowers to stay current with their payments," ABA Chief Economist James Chessen said in a news release. However, home equity line delinquencies rose 6 points to 1.21%. Overall, delinquencies fell in three of the eight closed-end loan categories compared with the first quarter. Among those on the rise were delinquencies in indirect auto loans, which rose 11 basis points to 1.56%.The ABA studies delinquencies in three categories of open-end loans. One of those, bank card delinquencies, ticked up one basis point to 2.48%, but that figure is far below the 15-year average of 3.70%. Consumers' continued financial discipline is said to have balanced out the increase in purchase volumes. The ABA predicts that delinquencies will hover around historic lows "over the next several quarters," in part because consumers have strong debt-to-income ratios and because bankers are said to be more cautious about gauging applicants' ability to pay.

Consumer Credit Has Second Biggest Jump On Record, As Student And Car Loans Soar --It will likely not come as a big surprise that at a time when US personal savings are once again declining, perhaps as a result of soaring health insurance costs, that US consumers are forced to borrow increasingly more to make ends meet. And, as expected, the latest consumer credit report confirmed this, when moments ago the Federal Reserve announced that in August, total US credit surged by $25.9 billion on a seasonally adjusted basis, smashing expectations of a $16.5 billion increase, and the third biggest monthly jump since 2001. The spike was driven by a major jump in non-revolving credit, while revolving, or credit card, debt also spiked substantially in the last full month of summer. Broken out, revolving credit rose by $2.9 billion... ... while non-revolving credit increased by a whopping $20 billion,the third highest monthly increase this decade. But what was perhaps most interesting is that on a non-seasonally adjusted basis, when removing the artificial Arima-X-13 seasonal factors, August consumer credit soared by a near record $46.8 billion, an absolute outlier month, and surpassed just once in history. So for all those who, still, erroneous claim that US consumers are deleveraging, show them this chart, because the scramble if not so much into revolving debt then certainly into government-funded auto and student loans, is unlike anything ever seen. And speaking of just those two kinds of debt, here they are broken out: they have both never been higher.

Prepaid Debit Cards Users Will Get New Federal Protections - The New York Times: Prepaid debit cards are a financial lifeline for many people, but a risky one. They lack many of the basic consumer protections that credit cards and bank debit cards are required to offer. That will change next year, with a raft of new federal rules intended to clamp down on a product that has been growing rapidly despite concerns about high fees, poor disclosures and weak protections for customers when something goes wrong.Beginning in October 2017, packages containing prepaid debit cards — which are typically sold in convenience stores and other establishments — will be required to carry a standardized disclosure of the card’s monthly fee. They will also have to detail charges for cash withdrawals, customer service calls, reloading the card and other activities.   Such fees, which average around $11 a month and can swallow most of the card’s initial value, have been termed predatory by consumer watchdogs. The new rules, announced early Wednesday by the Consumer Financial Protection Bureau, are meant to shed light on a product that is often the subject of complaints.“The rules bring prepaid cards out of the shadows, with protections that in many ways are stronger than those for traditional bank accounts,” said Lauren Saunders, the associate director of the National Consumer Law Center, which lobbied for the new rules. For instance, she said, the rules require clear fee disclosures and limits on overdraft fees — protections she would like to see extended to bank accounts.Prepaid card issuers will also have to offer liability protection on par with the coverage that applies to credit cards. If a customer’s prepaid card is lost or stolen and the cardholder notifies the provider within two days of discovering the loss, responsibility for unauthorized charges will generally be capped at $50.The new requirements are the result of a process begun more than four years ago by the Consumer Financial Protection Bureau, which was concerned about the proliferation of loosely regulated cards.

U.S. Economic Confidence Changed Little in September -- The modest improvement in Americans' economic confidence first evident after the Democratic National Convention continued for a second consecutive month. Gallup's U.S. Economic Confidence Index averaged -10 for the month of September, in line with August's average of -11 and five points higher than the index's 12-month low in July.  The index began the year close to its current level, with January's score at -11. Confidence fell from -10 in March to -14 in April amid rising gas prices and reports of slow economic growth in the first quarter. The index slipped to -15 in July, nominally the worst reading since September 2014. But despite its relatively low monthly average, confidence rebounded in the final week of July. As the Democratic Party assembled in Philadelphia for its July 25-28 national convention, Democrats' confidence in the economy rallied and the July 25-31 weekly average increased by six points to -10.Although the August and September monthly economic confidence averages represent an improvement from the index's recent slump, they remain below the post-recession high of +3 recorded in January 2015. Long-term economic confidence has broadly improved since October 2008, when it fell to a record low of -60. But, much like the economy itself, Americans' recovering confidence in the economy has not always been smooth, with several sharp drops in August 2011 (-52) and October 2013 (-35), even as the general trend has been one of upward movement.  For the week of Sept. 26-Oct. 2, confidence in the economy improved slightly, with the index's weekly average climbing from -12 to -9.

Who Pays Most for Housing, Health Care and Groceries -- The U.S. is a big, diverse country where household budgets vary—you might spend twice as much on health care in Alaska as in Utah. Total personal-consumption expenditures, not adjusted for inflation, rose 3.6% last year, down from 4.4% growth in 2014, according to Commerce Department data on state-level consumer spending during 2015 released Tuesday. Growth ranged from highs of 5.2% in the District of Columbia and 5% in Florida to a low of 1.5% in Wyoming. Per capita, average spending in 2015 was $38,196. D.C. had the highest per-person spending, at $55,078—capital-area residents tend to have high earnings and expenditures—followed by $49,717 in Massachusetts. At the low end, per-capita spending was $29,330 in Mississippi.  Some more highlights from the per-capita PCE data in 2015:

  • Each New Jersey resident on average spent twice as much on housing and utilities as did a West Virginian—$9,482 in the Garden State versus $4,573 in the Mountain State. D.C. had the highest per-person housing expenditures at $10,569.
  • Health-care spending per person was twice as high in Alaska ($9,645) as it was in Utah ($4,796). Again, D.C. topped the list at per-capita health-care spending of $11,021.
  • The nation’s highest grocery bills were in Vermont, where per-capita spending on food and beverages purchased for off-premises consumption last year was $4,196. That was almost twice the level in Oklahoma, where per-capita grocery spending was $2,282.
  • North Dakotans had the biggest energy bills, with per-capita spending on gasoline and other energy goods totaling $2,994 in 2015. That was nearly six times the per-capita energy spending of $509 in Hawaii.

Why America Pays 50% More for Chicken -  What do you call it when would-be competitors embark on a unified strategy to limit supply, drive up prices, and bilk customers of their hard-earned cash? An antitrust conspiracy, of course. But what do you call it when producers of chickens, a staple of the American diet (Wall Street even has a chicken wing index), allegedly go so far as killing their birds early, shipping more eggs, and buying one another’s products to keep public supply low? According to food distributors suing the industry, it’s called “capacity discipline.” The $29 billion industry that churns out 90 percent of America’s chickens has engaged in a price-fixing scheme for years, according to the first of a half-dozen lawsuits filed in Chicago federal court this month. And that artificial premium has been passed on to consumers: You’ve been paying 50 percent more for that supermarket rotisserie bird, the lawsuits claim. While producers have been accused of rigging the market before, this litigation may be the largest effort yet to bring such practices to light. For decades, the price of a broiler—the standard, non-organic, non-halal, non-kosher chicken that makes up 98 percent of what’s sold—followed a boom and bust pattern: Rising demand led to higher prices and more production, then to oversupply and a drop in prices. In 2008 that began to change. The reason, according to the 113-page lawsuit, is that the producers launched a coordinated strategy, one facilitated by shared proprietary information and countless industry events involving top executives. All of the companies raised fewer chickens, holding down supply and driving up the price of the country’s most popular meat.

U.S. Apparel Retailers Mostly Report Lower September Sales - - A sampling of U.S. apparel retailers on Thursday mostly reported lower sales at established stores for the month of September. Sales during the month were impacted by unseasonably warm weather that delayed purchases of fall apparel and also reflected lackluster back-to-school spending. September is a transition month, marking the end of the back-to-school shopping, which is a necessity, and ahead of the all-important holiday season. The back-to-school season is the second-biggest selling period for retailers after the Christmas holiday season. In late September, data showed that consumer confidence in the U.S. unexpectedly improved in the month of September to its highest level since the recession. The Conference Board said its consumer confidence index jumped to 104.1 in September from an upwardly revised 101.8 in August. Sales at established stores or comparable-store sales is a key retail industry performance metric to gauge activity at store locations that have been open for at least a year. L Brands, Inc. ( LB ), the operator of Victoria's Secret and Bath & Body Works chains, said its September comparable store sales increased 3 percent, reflecting strength in its Bath & Body Works brand. This compared to an increase of 8 percent in the year-ago period. Net sales for the month were $971.4 million, up 6 percent from $919.9 million last year. However, the company noted that the September merchandise margin rate was down significantly to last year and below expectations.

Gun sales hit 17th straight monthly record, up 27 percent -- Gun sales hit the 17th consecutive monthly record in September according to FBI data released on Monday, and overall sales are up 27 percent compared to the same period last year. A total of 1,992,219 background checks were processed through the bureau's National Instant Criminal Background Check System for the month of September, higher than the 1,795,102 conducted in September 2015. The number of checks run through the FBI's NICS system is a reliable indicator of how firearm sales are trending, though there is no precise correlation between the number of checks and the number of guns being sold. Licensed dealers are required to run a check in the database every time they make a sale, but sometimes turn buyers down. A total of 1,992,219 background checks were processed through the bureau's National Instant Criminal Background Check System for the month of September, higher than the 1,795,102 conducted in September 2015.    Sales have surged in the wake of ammunition shortages and fears that the Obama administration may seek to restrict Second Amendment rights in the president's waning days in office. Experts say the equipment being sold indicates interest has spiked out of growing interest in self-defense and hunting. "Sales of handguns and AR's have been very strong for the past two months. Hunting rifles have been about average for this time of year,"  "Ammunition sales are definitely following that pattern with sales of 9mm ammo and .223 ammo being extremely strong."   A year-over-year record has been set every month since May 2015. The September figure brings the total for the first nine months of the year to 19,872,694, and puts this year on easily track to break last year's 12-month record, when 23,141,970 sought to purchase firearms.

U.S. Light Vehicle Sales increase to 17.7 million annual rate in September -- Based on a preliminary estimate from WardsAuto, light vehicle sales were at a 17.65 million SAAR in September.  That is down about 2% from September 2015, and up 4.3% from the 16.92 million annual sales rate last month. This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for September (red, light vehicle sales of 17.65 million SAAR from WardsAuto). This was above the consensus forecast of 17.4 million SAAR (seasonally adjusted annual rate). The second graph shows light vehicle sales since the BEA started keeping data in 1967. Vehicle SalesNote: dashed line is current estimated sales rate. Sales for 2016 - through the first nine months - are up slightly from the comparable period last year. After increasing significantly for several years following the financial crisis, auto sales are now moving mostly sideways ...

Light Vehicle Sales Per Capita: Our Latest Look at the Long-Term Trend - DShort - Note: The charts below have been updated to include today's preliminary report on U.S. Light Vehicle sales from Motor Intelligence. For the past few years we've been following a couple of transportation metrics: Vehicle Miles Traveled and Gasoline Volume Sales. For both series we focus on the population adjusted data. Let's now do something similar with the Light Vehicle Sales report from the Bureau of Economic Analysis. This data series stretches back to January 1976. Since that first data point, the Civilian Noninstitutional Population Age 16 and Over (i.e., driving age not in the military or an inmate) has risen about 64%.Here is a chart, courtesy of the FRED repository, of the raw data for the seasonally adjusted annualized number of new vehicles sold domestically in the reported month. This is a quite noisy series, to be sure. The absolute average month-over-month change is 4.4%. The latest data point is the preliminary September count published by Motor Intelligence, which shows a seasonally adjusted annual rate of 17.76 million units, which is a 4.5% increase from the previous month ... quite close to that 4.4% absolute average change. The first chart shows the the series since 2007, which illustrates the dramatic impact of the Great Recession. The blue line smooths the volatility with a nine-month exponential moving average suggested by our friend Bob Bronson of Bronson Capital Markets Research. The moving average reduces the distortion of seasonal sales events (e.g., Memorial Day and Labor Day weekend) and thus helps us visualize the trend. Here is a the complete series data from 1976. We've added a linear regression (the red line) is added to further illustrate the direction of the long-term trend. In the chart above, the latest moving average value is 2.3% below its record high in November 2005. Here is the same chart with two key modifications:  The moving-average for the per-capita series peaked in 1986. Twenty-nine-plus years later, it is now down 26.8% from that 1986 peak.

Headline August 2016 Wholesale Sales Improved: The headlines say wholesale sales were up month-over-month with inventory levels significantly reduced but remaining at levels associated with recessions. Our analysis shows a significant improvement of the 3 month averages but they still remain in contraction. We continue to be mystified in the wobble in this data set - there is something wrong with either data collection or methodology. This sector improved significantly this month but the rolling averages are marginally in a recession. The big growth this month came from chemicals and drugs - go figure! I wish I could say something profound but this data resembles a crazy quilt which has not pattern or logic. Look at the growth of the unadjusted data month-over-month. Note that Econintersect analysis is based on the change from one year ago:

  • unadjusted sales rate of growth accelerated 13.4 % month-over-month.
  • unadjusted sales year-over-year growth is up 6.7 % year-over-year (it was down 6.7 % last month)
  • unadjusted sales (but inflation adjusted) up 7.5 % year-over-year
  • the 3 month rolling average of unadjusted sales accelerated 2.1 % month-over-month, and down 0.2 % year-over-year.
  • unadjusted inventories statistically unchanged year-over-year (up 0.5 % month-over-month), inventory-to-sales ratio is 1.38 which historically is well above recessionary levels.

US Census Headlines based on seasonally adjusted data:

  • sales up 0.7 % month-over-month, up 0.6 % (last month was reported down 1.0 %) year-over-year
  • inventories down 0.2 % month-over-month, inventory-to-sales ratios were 1.33 one year ago - and are now 1.34.

Rail Week Ending 01 October 2016: September Loadings Down 4.8 Percent: Week 39 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. However, the data was marginally better compared to last week. We review this data set to understand the economy. If coal and grain are removed from the analysis, rail has recently been declining around 5% - but this week was -3.5%. 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 should emerge from year-over-year contraction somewhere around the end of the year. 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: Carload traffic in September totaled 1,068,644 carloads, down 5.4 percent or 61,455 carloads from September 2015. U.S. railroads also originated 1,040,934 containers and trailers in September 2016, down 4.2 percent or 45,192 units from the same month last year. For September 2016, combined U.S. carload and intermodal originations were 2,109,578, down 4.8 percent or 106,647 carloads and intermodal units from September 2015. In September 2016, nine of the 20 carload commodity categories tracked by the AAR each month saw carload gains compared with September 2015. These included: grain, up 11.2 percent or 9,860 carloads; waste and nonferrous scrap, up 28.8 percent or 3,725 carloads; and nonmetallic minerals, up 7.5 percent or 1,414 carloads. Commodities that saw declines in September 2016 from September 2015 included: coal, down 13.1 percent or 53,896 carloads; petroleum and petroleum products, down 21.6 percent or 11,810 carloads; and primary metal products, down 9.5 percent or 3,459 carloads. Excluding coal, carloads were down 1.1 percent or 7,559 carloads in September 2016 from September 2015. Total U.S. carload traffic for the first 36 weeks of 2016 was 9,737,216 carloads, down 10.5 percent or 1,142,905 carloads, while intermodal containers and trailers were 10,083,612 units, down 3.2 percent or 333,619 containers and trailers when compared to the same period in 2015. For the first nine months of 2016, total rail traffic volume in the United States was 19,820,828 carloads and intermodal units, down 6.9 percent or 1,476,524 carloads and intermodal units from the same point last year.

Trade Deficit at $40.7 Billion in August -- From the Department of Commerce reported: The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $40.7 billion in August, up $1.2 billion from $39.5 billion in July, revised. August exports were $187.9 billion, $1.5 billion more than July exports. August imports were $228.6 billion, $2.6 billion more than July imports.The trade deficit was larger than the consensus forecast of $39.0 billion. The first graph shows the monthly U.S. exports and imports in dollars through August 2016. mports and exports both increased in August. Exports are 14% above the pre-recession peak and up 1% compared to August 2015; imports are down 1% compared to August 2015. It appears trade might be picking up a little. The second graph shows the U.S. trade deficit, with and without petroleum. U.S. Trade Deficit The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products. Oil imports averaged $39.38 in August, down from $41.02 in July, and down from $49.33 in August 2015. The petroleum deficit has generally been declining and is the major reason the overall deficit has declined a little since early 2012. The trade deficit with China decreased to $33.9 billion in August, from $35.0 billion in August 2015. The deficit with China is a substantial portion of the overall deficit, but the deficit with China has been declining.

August Trade Deficit Up 1.2B from Revised July -- DShort -The U.S. International Trade in Goods and Services, also known as the FT-900, is published monthly by the Bureau of Economic Analysis with data going back to 1992. The monthly reports include revisions that go back several months. This report details U.S. exports and imports of goods and services. . Since 1976, the United States has had an annual negative trade deficit. The International Monetary Fund and the International Bank for Reconstruction and Development (the original World Bank which is still in existence) came out of the Bretton Woods agreement. Here is an excerpt from the latest report: The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $40.7 billion in August, up $1.2 billion from $39.5 billion in July, revised. August exports were $187.9 billion, $1.5 billion more than July exports. August imports were $228.6 billion, $2.6 billion more than July imports.The August increase in the goods and services deficit reflected a decrease in the goods deficit of less than $0.1 billion to $60.3 billion and a decrease in the services surplus of $1.2 billion to $19.6 billion.  Year-to-date, the goods and services deficit decreased $4.3 billion, or 1.3 percent, from the same period in 2015. Exports decreased $62.4 billion or 4.1 percent. Imports decreased $66.8 billion or 3.6 percent. Today's headline number of -40.73B was worse than the forecast of -39.30B. The previous month was revised downward by 73M. This series tends to be extremely volatile, so we include a six-month moving average.  Here is a snapshot that gives a better sense of the extreme volatility of this indicator.

August 2016 Trade Data Shows Pickup: quick recap to the trade data released today shows an improving view of global trade. The unadjusted three month rolling average value of goods exports accelerated with the three month rolling averages in insignificant contraction., The unadjusted three month rolling average value imported goods accelerated with the rolling average in expansion. Many care about the trade balance which grew from last month. Trade looked better this month - but still not great. The interesting event is that the trade balance grew which is not positive for 3Q2016 GDP. There was insignificant backward revision. In any event, the trends are moving in the right direction to support an economic pickup.

  • Import goods growth has positive implications historically to the economy - and the seasonally adjusted goods and services imports were reported up month-over-month. Econintersect analysis shows unadjusted goods (not including services) growth accelerated 7.8 % month-over-month (unadjusted data) - up 2.1 % year-over-year (up 4.3 % year-over-year inflation adjusted). The rate of growth 3 month trend is accelerating.
  • Exports of goods were reported up, and Econintersect analysis shows unadjusted goods exports growth acceleration of (not including services) 6.4 % month-over month - down 0.2 % year-over-year (up 2.2 % year-over-year inflation adjusted). The rate of growth 3 month trend is accelerating.
  • The change in seasonally adjusted (but not inflation adjusted) exports was attributed to gold exports. Import increase was due to capital goods.
  • The market expected (from Bloomberg) a trade balance of $-44.0 B to $-37.0 B (consensus $39.0 billion deficit) and the seasonally adjusted headline deficit from US Census came in at $40.7 billion.
  • It should be noted that oil imports were up 31 million barrels from last month, and up 39 million barrels from one year ago.
  • The data in this series is noisy, and it is better to use the rolling averages to make sense of the data trends.

The headline data is seasonally but not inflation adjusted. Econintersect analysis is based on the unadjusted data, removes services (as little historical information exists to correlate the data to economic activity), and inflation adjusts. Further, there is some question whether this services portion of export/import data is valid in real time because of data gathering concerns. Backing out services from import and exports shows graphically as follows:

US Trade Deficit Unexpectedly Grows In August, Pressuring Q3 GDP - While the recently reported advance trade data showed a far better than expected recent trade picture for the US, today's official international trade data showed another modest disappointment, with the US trade deficit in August growing from an upward revised $39.6 billion to $40.7 billion, well above the expected $39.3 billion, as imports increased more than exports. The goods deficit decreased less than $0.1 billion in August to $60.3 billion. The services surplus decreased $1.2 billion in August to $19.6 billion. A detailed breakdown, reveals that exports of goods and services increased $1.5 billion, or 0.8 percent, in August to $187.9 billion. Exports of goods increased $1.2 billion and exports of services increased $0.3 billion.

  • The increase in exports of goods reflected an increase in industrial supplies and materials ($1.4 billion). A decrease in capital goods ($0.7 billion) was partly offsetting.
  • The increase in exports of services mainly reflected an increase in travel (for all purposes including education) ($0.2 billion).

Imports of goods and services increased $2.6 billion, or 1.2 percent, in August to $228.6 billion. Imports of goods increased $1.1 billion and imports of services increased $1.5 billion.

  • The increase in imports of goods reflected an increase in capital goods ($1.2 billion). A decrease in industrial supplies and materials ($0.8 billion) was partly offsetting.
  • The increase in imports of services reflected an increase in charges for the use of intellectual property ($1.2 billion), which included payments for the rights to broadcast the 2016 Summer Olympic Games.

The regional trade breakdown was as follows: the August figures show surpluses, in billions of dollars, with Hong Kong ($2.4), South and Central America ($1.7), Saudi Arabia ($0.8), Singapore ($0.7), United Kingdom ($0.4), and Brazil ($0.2). Deficits were recorded, in billions of dollars, with China ($29.2), European Union ($12.3), Japan ($5.7), Germany ($5.3), Mexico ($5.2), South Korea ($2.5), Italy ($2.4), France ($2.0), India ($1.9), Taiwan ($1.5), Canada ($1.1), and OPEC ($0.3).

Soybean-Adjusted U.S. Export Growth -- I have argued that China’s current account surplus may paint a misleading picture of China’s trade position, as it isn’t clear that tourism imports have really increased from a bit over $100 billion to a bit over $300 billion in 10 quarters (the number of tourists travelling abroad has likely grown by about 25 percent over the same period, with rapid growth in the the number of tourists visiting Japan and Thailand offsetting the fall in tourists visiting Hong Kong). I can easily imagine how China is running a bigger goods and services trade surplus than now appears in the official data, as some of the reported increase in tourism could be a hidden capital outflow. And now the U.S. trade data may need to be adjusted too. The headline deficit likely understates the underlying deficit just a bit right now. The issue in the U.S. is quite different than the issue in China. The surge in U.S. soybean exports is real. Very real. Soybeans are easy to count and measure. There has been a big jump in exports. U.S. soybean exports typically peak in q4 and q1, after the U.S. harvest (Brazil and Argentina in turn supply the global market in April and May after their harvest). The seasonal adjustment smooths out a true seasonal spike in U.S. exports. So when a weak harvest in South America (due in part to a drought in Brazil) leads to large out-of-season U.S. exports in July and August—well, it has a big impact on the seasonally adjusted data. Seasonally adjusted agricultural export volumes (seasonally adjusted) reached an average of $13 billion a month in July and August. $9 billion (in 2010 dollars) has been the recent norm.   The jump in soybean exports was big enough to impact the overall trade data.  Manufacturing exports (using the sum of autos, capital goods and consumer goods exports as a proxy) are down 2.3 percent year over year in the past few months, even while non-petrol goods exports (which counts agricultural exports) have recovered a bit thanks to the rise in soybean exports. And the underlying trade deficit is also a bit bigger than implied by the monthly data from July and August. The fall in the deficit is real (the U.S. is exporting more) but not likely to persist.

Donald Trump: Bill Ford Meets With Trump on Mexico Comments: – Ford Motor Co Executive Chairman Bill Ford Jr. said on Wednesday he has met with Donald Trump to talk about the Republican presidential candidate’s extensive criticism of the automaker’s investments in Mexico.Ford told the Economic Club of Washington that he thought Trump’s criticism of the No. 2 automaker’s foreign investments were “infuriating and “frustrating” because of the company’s extensive investments and employment in the United States. Trump has threatened if elected to impose hefty tariffs on Ford imports from Mexico.Ford told reporters after the event that the session with Trump was a “great meeting” that took place a few months ago.“He was very thoughtful, asked good questions,” Ford said of Trump. “He certainly knows the facts.” Asked if Trump had changed his mind about his criticism, Ford did not directly answer but said, “The campaign trail is a different animal than anything I’m ever familiar with.”A person briefed on the matter said the meeting took place in New York this summer at the real estate mogul’s Trump Tower. The automaker had previously invited Trump to visit its headquarters at Dearborn, Michigan but he has not taken the company up on the offer.

US factory orders increase slightly in August: New orders for U.S. factory goods increased slightly in August, a further sign that the manufacturing sector is beginning to regain some steam. The Commerce Department said on Wednesday that new orders for manufactured goods rose 0.2 percent after a downwardly revised 1.4 percent increase in July. It was the second straight monthly increase following two months of weakness. Economists polled by Reuters had forecast factory orders declining 0.1 percent in August after a previously reported 1.9 percent jump in July. The department also said orders for non-defense capital goods excluding aircraft increased 0.9 percent in August compared to the 0.6 percent rise it reported last week. Core capital goods are seen as a measure of business confidence and spending plans on equipment. Core capital goods shipments, which are used to calculate business equipment spending in the gross domestic product report, edged down 0.1 percent in August. They were previously reported to have fallen 0.4 percent. Manufacturing, which comprises about 12 percent of the economy, has been hampered by weak global demand and the residual effects of a strong dollar. The Institute of Supply Management reported on Monday that its national factory activity index rebounded back into expansionary territory after slumping the previous month. Inventories of factory goods rose 0.2 percent in August while shipments were unchanged. As a result, the inventories-to-shipments ratio was unchanged at 1.36.

Factory Orders Decline For 22th Straight Month - Longest Non-Recessionary Streak In US History - Presented with little comment but despite a modest beat MoM (+0.2% vs -0.2% exp) thanks to notable downward revisions (+1.4% rev vs +1.9% prev), year-over-year data remains in decline for the 22nd month in a row. This is by far the longest streak of contraction in US history and obviously has never before occurred without a US recession.

August 2016 Manufacturing New Orders Improved: US Census says manufacturing new orders improved. Our analysis agrees. The rolling averages improved but remain in contraction. According to the seasonally adjusted data, defense is the reason there was any strength in this report - most everything was weak.Our analysis shows more strength than the headline summary - but the data in this series is noisy so I would rely on the unadjusted 3 month rolling averages which say there was a moderate improvement this month - but this series remains in contraction year-over-year.US Census Headline:

  • The seasonally adjusted manufacturing new orders is up 0.2 % month-over-month, and down 2.6 % year-to-date (last month was down 3.1 % year-to-date)..
  • Market expected (from Bloomberg / Econoday) month-over-month growth of -0.5 % to 0.3 % (consensus -0.2 %) versus the reported +0.2 %.
  • Manufacturing unfilled orders down 0.1 % month-over-month, and down 2.0 % year-to-date.

Econintersect Analysis:

  • Unadjusted manufacturing new orders growth accelerated 7.4 % month-over-month, and up 1.1 % year-over-year.
  • Unadjusted manufacturing new orders (but inflation adjusted) up 3.6 % year-over-year.
  • Three month rolling new order rolling averages accelerated 0.5 % month-over-month, but is down 3.6 % year-over-year.
  • Unadjusted manufacturing unfilled orders growth accelerated 0.2 % month-over-month, and down 2.0 % year-over-year
  • As a comparison to the inflation adjusted new orders data, the manufacturing subindex of the Federal Reserves Industrial Production growth decelerated 0.4 % month-over-month, and down 0.2 % year-over-year.

Markit Manufacturing PMI "Growth Eases Again in September" -- The final September US Manufacturing Purchasing Managers' Index conducted by Markit came in at 51.5, down from the 52.0 August final. Today's headline number came in slightly above the consensus of 51.4. Markit's Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Here is the opening from the latest press release:  U.S. manufacturers signalled another moderate upturn in both production volumes and incoming new work during September, but the latest survey indicated a further loss of growth momentum from July’s recent peak. Softer overall growth was attributed to generally subdued client demand, alongside a drop in new export sales for the first time in four months. [Press Release]  Here is a snapshot of the series since mid-2012.

ISM Manufacturing index increased to 51.5 in September  --The ISM manufacturing index indicated expansion in September. The PMI was at 51.5% in August, up from 49.4% in August. The employment index was at 49.7%, up from 48.3% in August, and the new orders index was at 55.1%, up from 49.1% in August. From the Institute for Supply Management: September 2016 Manufacturing ISM® Report On Business®  . "The September PMI® registered 51.5 percent, an increase of 2.1 percentage points from the August reading of 49.4 percent. The New Orders Index registered 55.1 percent, an increase of 6 percentage points from the August reading of 49.1 percent. The Production Index registered 52.8 percent, 3.2 percentage points higher than the August reading of 49.6 percent. The Employment Index registered 49.7 percent, an increase of 1.4 percentage points from the August reading of 48.3 percent. Inventories of raw materials registered 49.5 percent, an increase of 0.5 percentage point from the August reading of 49 percent. The Prices Index registered 53 percent in September, the same reading as in August, indicating higher raw materials prices for the seventh consecutive month. Manufacturing expanded in September following one month of contraction in August, with nine of the 18 industries reporting an increase in new orders in September (up from six in August), and 10 of the 18 industries reporting an increase in production in September (up from eight in August)."

ISM Manufacturing Index: A September Bounce Back into Expansion --   Today the Institute for Supply Management published its monthly Manufacturing Report for September. The latest headline Purchasing Managers Index (PMI) was 51.5 percent, a partial bounce of 2.1 percent from the 3.2 percent decline the previous month. Today's headline number was above the forecast of 50.3 percent. Here is the key analysis from the report: "The September PMI® registered 51.5 percent, an increase of 2.1 percentage points from the August reading of 49.4 percent. The New Orders Index registered 55.1 percent, an increase of 6 percentage points from the August reading of 49.1 percent. The Production Index registered 52.8 percent, 3.2 percentage points higher than the August reading of 49.6 percent. The Employment Index registered 49.7 percent, an increase of 1.4 percentage points from the August reading of 48.3 percent. Inventories of raw materials registered 49.5 percent, an increase of 0.5 percentage point from the August reading of 49 percent. The Prices Index registered 53 percent in September, the same reading as in August, indicating higher raw materials prices for the seventh consecutive month. Manufacturing expanded in September following one month of contraction in August, with nine of the 18 industries reporting an increase in new orders in September (up from six in August), and 10 of the 18 industries reporting an increase in production in September (up from eight in August)." [source] Here is the table of PMI components.

 US Manufacturing "Slowed To A Crawl" In September As New Orders Hit 9-Month Lows -- Despite the weakest new orders in 9 months, Markit US Manufacturing PMI managed a slightly better than expected 51.5 final print for September (still 3mo lows). Ironically, ISM data bounced perfectly to 51.5 also, after tumbling to 49.4 in August. New orders bounced in ISM data as did production, the opposite of PMI data, but as Market concluded, "Manufacturing growth slowed to a crawl in September, suggesting the economy is stuck in a soft-patch."  Of the 18 manufacturing industries, seven reported growth in September and 11 industries reporting contraction.Manufacturing output subdued...September PMI data highlighted that production growth eased to a three-month low, driven by a weaker upturn in new work and greater efforts to streamline stocks of finished goods. The latest increase in new business volumes was the slowest seen so far in 2016. Some survey respondents commented on delays to decision making among clients ahead of the presidential election.Moreover, there was an additional drag from export sales, with new work from abroad falling fractionally in September, which contrasted with the solid expansion seen in August. Manufacturers noted that the strong dollar continued to exert a negative influence on new export orders. And rather coincidentally, ISM bounced to perfectly match PMI...

  New York ISM Employment Crashes At Fastest Pace Ever To 7-Year Lows --For the second month in a row, New York Purchasing Managers saw contraction in the headline, printing 49.6 (below 50). Though a slight improvement from August's 47.5, the outlook tumbled to 59.5 (from 65.5) but it was the carnage in the jobs market that is most notable. ISM NY Employment crashed from 54.9 to 33.9 - its biggest drop ever - back to June 2009 lows...

ISM Non-Manufacturing Index increased sharply to 57.1% in September --The September ISM Non-manufacturing index was at 57.1%, up from 51.4% in August. The employment index increased in September to 57.2%, up from 50.7% in August. Note: Above 50 indicates expansion, below 50 contraction. From the Institute for Supply Management:September 2016 Non-Manufacturing ISM Report On Business® . "The NMI® registered 57.1 percent in September, 5.7 percentage points higher than the August reading of 51.4 percent. This represents continued growth in the non-manufacturing sector at a faster rate. The Non-Manufacturing Business Activity Index increased substantially to 60.3 percent, 8.5 percentage points higher than the August reading of 51.8 percent, reflecting growth for the 86th consecutive month, at a noticeably faster rate in September. The New Orders Index registered 60 percent, 8.6 percentage points higher than the reading of 51.4 percent in August. The Employment Index increased 6.5 percentage points in September to 57.2 percent from the August reading of 50.7 percent. The Prices Index increased 2.2 percentage points from the August reading of 51.8 percent to 54 percent, indicating prices increased in September for the sixth consecutive month. According to the NMI®, 14 non-manufacturing industries reported growth in September. The comments from the respondents are mostly positive about business conditions and the overall economy. A degree of uncertainty does exist due to geopolitical conditions coupled with the upcoming U.S. presidential election." This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index. This was well above the consensus forecast of 52.9, and suggests faster expansion in September than in August.

ISM Non-Manufacturing: A Stunning September PMI Bounce --The Institute of Supply Management (ISM) has now released the September Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services PMI. The headline Composite Index is at 57.1 percent, a stunning 5.7 percent bounce from last month's disappointing 51.4 percent. Today's number came in well above the forecast of 53.0 percent. The September bounce is the largest month-over-month increase in the history of this series. Here is the report summary: "The NMI® registered 57.1 percent in September, 5.7 percentage points higher than the August reading of 51.4 percent. This represents continued growth in the non-manufacturing sector at a faster rate. The Non-Manufacturing Business Activity Index increased substantially to 60.3 percent, 8.5 percentage points higher than the August reading of 51.8 percent, reflecting growth for the 86th consecutive month, at a noticeably faster rate in September. The New Orders Index registered 60 percent, 8.6 percentage points higher than the reading of 51.4 percent in August. The Employment Index increased 6.5 percentage points in September to 57.2 percent from the August reading of 50.7 percent. The Prices Index increased 2.2 percentage points from the August reading of 51.8 percent to 54 percent, indicating prices increased in September for the sixth consecutive month. According to the NMI®, 14 non-manufacturing industries reported growth in September. The comments from the respondents are mostly positive about business conditions and the overall economy. A degree of uncertainty does exist due to geopolitical conditions coupled with the upcoming U.S. presidential election." [Source]  Unlike its much older kin, the ISM Manufacturing Series, there is relatively little history for ISM's Non-Manufacturing data, especially for the headline Composite Index, which dates from 2008. The chart below shows Non-Manufacturing Composite. We have only a single recession to gauge is behavior as a business cycle indicator.

Markit Services PMI Up 1.3% Month-over-Month -- DShort - The final September US Services Purchasing Managers' Index conducted by Markit came in at 52.3 percent, up 1.3 percent from the final July estimate. The consensus was for 51.9 percent (the September Markit preliminary reading). Markit's Services PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Here is the opening from the latest press release: U.S. service providers indicated an upturn in business activity growth from the six-month low recorded during August. Nonetheless, the pace of expansion remained modest and softer than its post-crisis trend, largely reflecting subdued new business gains in recent months. [Press ReleaseHere is a snapshot of the series since mid-2012.   Here is an overlay with the equivalent PMI survey conducted by the Institute for Supply Management, which they refer to as "Non-Manufacturing" (see our full article on this series here). Over the past year the ISM metric has been significantly the more volatile of the two.

Weekly Initial Unemployment Claims decline to 249,000, 4-Week Average Lowest Since 1973 -- The DOL reported: In the week ending October 1, the advance figure for seasonally adjusted initial claims was 249,000, a decrease of 5,000 from the previous week's unrevised level of 254,000. The 4-week moving average was 253,500, a decrease of 2,500 from the previous week's unrevised average of 256,000. This is the lowest level for this average since December 8, 1973 when it was 252,250. There were no special factors impacting this week's initial claims. This marks 83 consecutive weeks of initial claims below 300,000, the longest streak since 1970. The previous week was unrevised. The following graph shows the 4-week moving average of weekly claims since 1971.

Hurricanes and Weekly Unemployment Claims -- Major hurricane Matthew might cause severe damage on the east coast of Florida over the next couple of days. From the NHC: At 1100 AM EDT (1500 UTC), the eye of Hurricane Matthew was moving toward the northwest near 14 mph (22 km/h) between Andros Island and Nassau in the Bahamas.  . On the forecast track, Matthew should cross the northwestern Bahamas later today and move close to or over the east coast of the Florida peninsula through Friday night. Matthew is a category 4 hurricane on the Saffir-Simpson Hurricane Wind Scale. Some additional strengthening is possible, and Matthew should remain a Category 4 hurricane while it approaches the Florida coast.The forecast track is for Matthew to rake the east coast of Florida and Georgia, and then - hopefully - turn out to the Atlantic. Depending on the damage, we might see a spike in unemployment claims over the next few weeks related to the hurricane. The following graph shows the 4-week moving average of weekly claims since 2000. The dashed line on the graph is the current 4-week average. Notice that there was a spike in claims following Hurricane Katrina in 2005, and also a smaller spike in claims related to Hurricane Sandy in 2012.

 ADP Employment Tumbles Near 3-Year Lows As Manufacturing Slump Continues -- The US economy added 154k jobs in September according to ADP, missing expectations of 165k and down from 175k revised lower in August. This is the weakest print since April as manufacturing slows (down 6k) once again, near 3 year lows. Payrolls for businesses with 49 or fewer employees increased by 34,000 jobs in September, down from 68,000 in August. Employment at companies with 50-499 employees increased by 56,000 jobs, up from last month’s 40,000. Employment at large companies – those with 500 or more employees – increased by 64,000, down from 67,000 in the prior month. Companies with 500-999 employees added 8,000 and companies with more than 1,000 employees added 56,000 in September. Goods-producing employment was up by 3,000 jobs in September, following August losses of 9,000. The construction industry added 11,000 jobs, following August losses of 2,000 jobs. Meanwhile, manufacturing jobs were down 6,000 in September, after losing 4,000 in the previous month. The decoupling between manufacturing and services employment continues to grow... Service-providing employment rose by 151,000 jobs in September. The ADP National Employment Report indicates that professional/business services contributed 45,000 jobs, down from 53,000 in August. Trade/transportation/utilities increased by 15,000 jobs in September, down from 26,000 jobs added the previous month. Financial activities added 11,000 jobs, down from last month’s gain of 15,000 jobs.  Of course there is this: ADP Services Employment at record highs as Restaurant Performance Index plunge to 7 year lows...

US layoffs jump in September by 38% from August, according to Challenger: The number of announced layoffs by U.S.-based companies rose in September to the highest level in two months, global outplacement consultancy Challenger, Gray & Christmas reported Thursday. Employers announced plans to cut 44,324 jobs last month, a 38 percent increase from August, when total job cuts of 32,2188 fell to lowest total since May. September's was the highest monthly total since July, when 45,346 layoffs were announced, Challenger said. Despite the monthly rise, September's total was 25 percent below the announced job cuts a year ago. The biggest job cutter last month was the education sector, rising by 363 percent to 8,671. Fueling the cuts was the collapse of for-profit college ITT Technical Institute, which sustained 8,000 job losses. Cuts in the computer industry in September totaled 4,152 jobs. The sector's year-to-date layoffs were second only to the energy sector, which announced 98,733 cuts for the nine-month period. "This year could be particularly volatile in the fourth quarter, with employers holding off on significant moves until they see election results. It's not simply who wins the White House, but there are Senate races and countless ballot initiatives on issues like minimum wages that will influence business strategies going forward,"

ADP: Private Employment increased 154,000 in September -- From ADP: Private sector employment increased by 154,000 jobs from August to September according to the September ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
..Goods-producing employment was up by 3,000 jobs in September, following August losses of 9,000. The construction industry added 11,000 jobs, following August losses of 2,000 jobs. Meanwhile, manufacturing jobs were down 6,000 in September, after losing 4,000 in the previous month.  Service-providing employment rose by 151,000 jobs in September. ...Mark Zandi, chief economist of Moody’s Analytics, said, “The current record of consecutive monthly job gains continued in September. With job openings at all-time highs and layoffs near all-time lows, the job market remains in full-swing. Job growth has moderated in recent months, but only because the economy is finally returning to full-employment.” 
This was below the consensus forecast for 170,000 private sector jobs added in the ADP report.

 Anticipating the September Employment Data: 154K New Nonfarm Private Jobs --The economic mover and shaker this week is Friday's employment report from the Bureau of Labor Statistics. This monthly report contains a wealth of data for economists, the most publicized being the month-over-month change in Total Nonfarm Employment (the PAYEMS series in the FRED repository). Today we have the September estimate of 154K new nonfarm private employment jobs from ADP, a decline from August's 175K, which was a small downward revision of 2K. July was revised downward by 1K. The 154K estimate came in below the consensus of 166 for the ADP number. The forecast for the forthcoming BLS report is for 175K nonfarm new jobs (the actual PAYEMS number). Here is an excerpt from today's ADP report:“Job gains in September eased a bit when compared to the past 12-month average,” said Ahu Yildirmaz, vice president and head of the ADP Research Institute. “We also observed softening this month in trade/transportation/utilities, possibly due to a continued tightening U.S. labor market and lackluster consumer spending.” Mark Zandi, chief economist of Moody’s Analytics, said, “The current record of consecutive monthly job gains continued in September. With job openings at all-time highs and layoffs near all-time lows, the job market remains in full-swing. Job growth has moderated in recent months, but only because the economy is finally returning to full-employment.” Here is a visualization of the two series over the previous twelve months.

A Closer Look at This Morning's ADP Employment Report -- In this morning's ADP employment report we got the September estimate of 154K new nonfarm private employment jobs from ADP, a decline from August's 175K, which was a small downward revision of 2K. July was revised downward by 1K. The popular spin on this indicator is as a preview to the monthly jobs report from the Bureau of Labor Statistics. But the ADP report includes a wealth of information that's worth exploring in more detail. Here is a snapshot of the monthly change in the ADP headline number since the company's earliest published data in April 2001. This is quite a volatile series, so we've plotted the monthly data points as dots along with a six-month moving average, which gives us a clearer sense of the trend.   As we see in the chart above, the trend peaked 20 months before the last recession and went negative around the time that the NBER subsequently declared as the recession start. At present the six-month moving average has been hovering in a relatively narrow range around 200K new jobs since around the middle of 2011.  ADP also gives us a breakdown of Total Nonfarm Private Employment into two categories: Goods Producing and Services. Here is the same chart style illustrating the two. The US is predominantly a services economy, so it comes as no surprise that Services employment has shown stronger jobs growth. The trend in Goods Producing jobs went negative over a year before the last recession. At present this series is drifting into contraction with job losses for six of the past eight months. For a sense of the relative size of Services over Goods Producing employment, the next chart shows the percentage of Services Jobs across the entire series. The latest data point is a record high. There are a number of factors behind this trend. In addition to our increasing dependence of Services, Goods Production employment continues to be impacted by automation and offshoring. The percentage in the chart above leveled off in late 2010 but began drifting higher in early 2015.

September Employment Report: 156,000 Jobs, 5.0% Unemployment Rate -From the BLSTotal nonfarm payroll employment increased by 156,000 in September, and the unemployment rate was little changed at 5.0 percent, the U.S. Bureau of Labor Statistics reported today. Employment gains occurred in professional and business services and in health care. The change in total nonfarm payroll employment for July was revised down from +275,000 to +252,000, and the change for August was revised up from +151,000 to +167,000. With these revisions, employment gains in July and August combined were 7,000 less than previously reported. Over the past 3 months, job gains have averaged 192,000 per month.  In September, average hourly earnings for all employees on private nonfarm payrolls rose by 6 cents to $25.79. Over the year, average hourly earnings have risen by 2.6 percent.The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes). Total payrolls increased by 156 thousand in September (private payrolls increased 167 thousand). Payrolls for July and August were revised down by a combined 7 thousand. This graph shows the year-over-year change in total non-farm employment since 1968. In September, the year-over-year change was 2.45 million jobs. A solid gain. The third graph shows the employment population ratio and the participation rate. The Labor Force Participation Rate increased in September to 62.9%. This is the percentage of the working age population in the labor force. A large portion of the recent decline in the participation rate is due to demographics. The Employment-Population ratio increased to 59.8% (black line).

September Jobs Report: New Jobs Below Forecast, UR Ticks Up to 5.0% - This morning's employment report for September showed a 156K increase in total nonfarm payrolls along with a 23K downward revision for July and a 26K upward revision for August (a net revision loss of 7K). The unemployment rate remained rose from 4.9% to 5.0%. The consensus was for 175K new jobs and the unemployment rate to remain at 4.9%. Regarding the 0.1% rise in the unemployment rate: At two decimal places, the change was only 0.04% (from 4.92% to 4.96%). Here are two excerpts from the Employment Situation Summary released this morning by the Bureau of Labor Statistics:Total nonfarm payroll employment increased by 156,000 in September, and the unemployment rate was little changed at 5.0 percent, the U.S. Bureau of Labor Statistics reported today. Employment gains occurred in professional and business services and in health care....The change in total nonfarm payroll employment for July was revised down from +275,000 to +252,000, and the change for August was revised up from +151,000 to +167,000. With these revisions, employment gains in July and August combined were 7,000 less than previously reported. Over the past 3 months, job gains have averaged 192,000 per month. Here is a snapshot of the monthly percent change in Nonfarm Employment since 2000. We've added a 12-month moving average to highlight the long-term trend.The unemployment peak for the current cycle was 10.0% in October 2009. The chart here shows the pattern of unemployment, recessions and the S&P Composite since 1948. Unemployment is usually a lagging indicator that moves inversely with equity prices (top series in the chart).  Now Let's take a look at the unemployment rate as a recession indicator, or more specifically the cyclical troughs in the UR as a recession indicator. The next chart features a 12-month moving average of the UR with the troughs highlighted. As the inset table shows, the correlation between the MA troughs and recession starts is remarkably close. Note that technically the MA is still trending downward in the latest report, but we have to calculate it to three decimal places to see the MoM change: 4.945% to 4.938%.

Slower Pace of Job Growth Continues Into the Fall - Dean Baker - The Labor Department reported that the economy added 156,000 jobs in September, somewhat less than most economists had projected. The job growth figures were also on net revised down slightly for the prior two months, so that the average for the last three months stands at 192,000. The unemployment rate edged up to 5.0 percent, but this was due to a large number of people entering the workforce, as the employment-to-population ratio (EPOP) also rose by 0.1 percentage point to 59.8 percent, just below the 59.9 percent peak the recovery hit in March. The EPOP for prime age workers reversed its decline last month and stood at 78.0 percent. However this is still more than two full percentage points below its pre-recession peak. Other news in the household survey was mostly positive. The number of people involuntarily working part-time hit a new low for the recovery. It is now down by more than 3.3 million from the recession peak, although it is still more than 40 percent higher than pre-recession levels. The duration measures of unemployment all fell, with the share of long-term unemployed dropping by 1.2 percentage points, a new low for the recovery. One negative in the household survey was a modest decline in the share of unemployment due to voluntary job leavers, which remains more than a full percentage point below its pre-recession peak and is four percentage points below the peak hit in 2000. Most demographic groups saw little change in their unemployment rates, with the major exception of Hispanics. The unemployment rate for Hispanics rose by 0.8 percentage points to 6.4 percent. This was due to a rise of 0.6 percentage points for both adult men and adult women (age 20 and older) and an increase of 3.5 percentage points for teens. These numbers are erratic, so this could just be a statistical fluke, but this sort of single month increase in an otherwise healthy labor market is cause for concern. On the establishment side, the big job gainers were health care, with 32,700 new jobs; professional technical services, which added 29,900; restaurants with 29,700; construction with 23,000 jobs; temporary help with 23,200; and retail, which added 22,000. Manufacturing lost 13,000 jobs, and government lost 11,000. The growth in health care jobs is the second consecutive month of relatively slow growth. The sector added 22,300 jobs in August after adding an average of almost 38,000 over the prior 12 months (August to August). There has been little trend in temporary employment, with total growth of just 54,400 over the last year. The manufacturing sector has been shedding jobs for most of the year and is now down 76,000 jobs since January. The loss of government jobs was almost all due to local education. This reversed gains reported the prior two months that largely reflected earlier starts to the school year. Employment in the mining sector finally stabilized in September. This sector has lost 220,000 jobs since its peak in September of 2014, or 25.8 percent of total employment. This is the result of massive over supply, which has led to a crash in the world price of oil and other sources of energy. There was a modest increase in average weekly hours, reversing the decline reported for August. The average hourly wage grew at a 2.6 percent annual rate over the last three months, compared with the average for the prior three months, the same as the pace in August. Because there has been a modest decline in average hours, the average weekly wage has risen by just 2.3 percent over the last year. For production workers, who have seen a larger drop in hours, the average weekly wage has risen by just 2.0 percent.

September Employment Report Card: Modest - (6 graphs) The BLS announced this morning that the establishment survey data revealed only a modest increase in employment of 156,000 for September. In addition, the July number was revised down from 275,000 to 252,000 but August was revised up from 151,000 to 167,000, so overall pretty much a wash as to the overall state of employment. The labor market has averaged around 200,000 per month over the previous year. It appears clear from this report that it provides little help in assessing the next FOMC move. Private sector employment was up 167,000 and government employment fell 11,000. This was consistent with the GDP report for Q2, which reported that state and local government spending had fallen. The mining and logging sector (oil sector is included) showed no decline in employment, the first non-negative number in two years. Employment in the manufacturing sector shrank for the second consecutive month, down 16,000 in August and 13,000 this month. The services sector gained 157,000 jobs. Average weekly hours rose slightly from 34.3 to 34.4. The household survey showed a somewhat more robust looking labor market. The number of employed according that survey increased 354,000, with the labor force increasing 444,000. The overall impact drove the labor force participation rate up from 62.8 to 62.9.The increase in the labor force moved the unemployment rate up slightly from 4.92% to 4.96%, so does not look quite as drastic as going from 4.9% to 5.0% as reported. Looking at the composition of the unemployed since 2007 shows that job losers as a fraction of the unemployed are even lower than they were in 2007 and reentrants are a higher fraction of the unemployed. Job losers at the nadir of the recession accounted for about 65% of the unemployed but only about 50% today. On the other hand new entrants accounted for about 6.5% of the unemployed at the nadir and now account for over 10%. The graph below shows how each of those changed since 2007. The number of persons unemployed 27 weeks and longer fell slightly but is moving quite sluggishly and as a fraction of the unemployed remains at about a quarter, still higher than any time since 1948. Once again the employment report does not help much in assessing what the FOMC will do at the next meeting. While the report showed continuing strength in the labor market and according to some beat expectations…still nothing to write home about.

 September Jobs Report – The Numbers - American employers continued to add jobs at a modest pace last month, the Labor Department said Friday. It was the 72nd consecutive month that total nonfarm payrolls rose, marking six full years of continuous job creation in the wake of the 2007-09 recession. The highly anticipated September jobs report was released roughly a month before Election Day and could reverberate in the ongoing campaigns for control of the White House and Congress. Here are the details from Friday’s report. Nonfarm employers added 156,000 jobs in September, less than the 170,000 expected by economists. Payroll growth in July and August was revised 7,000 lower. During the third quarter, job growth averaged 192,000 per month—up from 146,000 in the second quarter and roughly matching the monthly average of 196,000 in the first three months of the year. Payrolls averaged growth of 229,000 last year. The unemployment rate in September was 5%, edging up from 4.9% in August. Economists had expected a September reading of 4.9%. The jobless rate has hovered at or just below 5% for the past year. The labor-force participation rate, measuring the share of adult Americans who are employed or actively looking for a job, ticked up to 62.9% in September from 62.8% in August. Workforce participation peaked in 2000 and is expected to decline further in the coming years due to demographic and other forces. But the measure picked up over the past year, a sign the tightening labor market is drawing would-be workers off the sidelines. That’s helped pin the unemployment rate in place despite continued employment gains. A broad measure of unemployment and underemployment was 9.7% last month, holding steady from August and July but down from 10% a year earlier. The gauge known as the U-6 includes unemployed Americans, workers who are stuck in part-time jobs because they can’t find full-time work, and people who are marginally attached to the labor force. Average hourly earnings for private-sector workers were up 2.6% in September from a year earlier. After years of wage growth stuck around 2%, pay raises began to move higher in 2015 and into this year—outpacing the long-sluggish pace of price inflation. Average hourly earnings last month were $25.79, up 6 cents from August.

US Private Payrolls Rise At Moderate Pace In September -- US companies added new jobs at a slightly lower rate than expected in September, according to this morning’s update form the Labor Department. Private payrolls increased by 167,000 last month, a touch below the consensus forecast. The moderate increase is below the 192,000 average gain for the past year, which suggests that today’s release will leave the crowd guessing about the timing of the next interest rate hike by the Federal Reserve. But while the latest report reflects a moderate increase at best, the year-over-year gain for private payrolls held steady at a healthy 1.9% rate for the fifth month in a row. On a monthly basis, September’s advance marks an improvement over August’s revised gain of 144,000, the smallest increase since the incremental decline in the workforce in May. The monthly comparisons have been unusually noisy this year, but the steady annual increase at roughly 1.9% over the last five months suggests that the labor market is settling into a slower-but-still-healthy rate of growth. Yesterday’s update on jobless claims certainly supports the case for expecting job growth to roll on. New applications for unemployment benefits fell last week and the unadjusted year-over-year change fell more than 10% for the first time since July. The message in this leading indicator: payrolls will continue to expand.  Although it’s encouraging to see the year-over-year trend in private payrolls holding steady at a respectable 1.9% rate, it’s clear that the peak has passed for job growth, which is a nearly 2.6% annual pace as of February 2015. It’s unlikely that growth will return to that rate until after the next recession. The good news is that the next recession remains a low-probability event for the near-term horizon. That was true last month, as discussed here, and today’s employment report doesn’t alter the moderately upbeat outlook for the US macro trend. It’s unclear if this amounts to compelling evidence for the Federal Reserve on the subject of tightening monetary policy at next month’s FOMC meeting. But for the moment, US business cycle risk remains low.

September 2016 BLS Jobs Growth Was Not Excellent For The Second Month: The BLS job growth again was ok, not excellent. The unadjusted data was slightly below par for times of economic expansion - but not terrible. This report is similar to last month. To sum this report up - employment is continuing to tread water - growing only as fast as theoretical working population growth. However, note that the household survey added 444,000 to the workforce (which is the reason the unemployment rate grew). There was really nothing good or nothing really terrible - although manufacturing declined. The year-over-year rate of growth was unchanged from last month. There was much mixed data within this report. The rate of growth for employment was unchanged this month (red line on graph below). This is a year-over-year analysis which has no seasonality issues.

  • The unadjusted jobs increase month-over-month well below average for times of economic expansion.
  • Economic intuitive sectors of employment were mixed.
  • This month's report internals (comparing household to establishment data sets) was moderately inconsistent with the household survey showing seasonally adjusted employment improving 354,000 vs the headline establishment number of growing 156,000. The point here is that part of the headlines are from the household survey (such as the unemployment rate) and part is from the establishment survey (job growth). From a survey control point of view - the common element is jobs growth - and if they do not match, your confidence in either survey is diminished. [note that the household survey includes ALL jobs growth, not just non-farm).
  • The household survey added 444,000 people to the workforce.
  • The NFIB statement on jobs growth this month is at the end of this post.
  • BLS reported: 156K (non-farm) and 167K (non-farm private). Unemployment rate was up 0.1 % to 5.0 %.
  • ADP reported: 154 K (non-farm private)
  • In Econintersect's September 2016 economic forecast released in late August, we estimated non-farm private payroll growth at 100,000 (based on economic potential) and 150,000 (fudged based on current overrun of economic potential)

Payrolls Rise 156K, Missing Expectations, Unemployment Rate Rises To 5.0% - With Wall Street all bulled up on the economy, expecting a print of 175K while the whipser number was decidedly higher, and closer to 200K thanks to Goldman's optimism, moments ago the BLS reported that in September the US created only 156K jobs, missing expectations, and down from the upward revised 167K in August, leaving the question of whether the Fed will hike imminently, unanswered. However, offsetting the September miss, last month's disappointing print of 151K was revised to 167K. At the same time, the change in total nonfarm payroll employment for July was revised down from +275,000 to +252,000. With these revisions, employment gains in July and August combined were 7,000 less than previously reported. Over the past 3 months, job gains have averaged 192,000 per month. The household survey employment number of 151.968MM was 354K bigger than last month, and pushed the annual increase higher by 2.0%, the biggest since March 2016. The unemployment rate, at 5.0%, and the number of unemployed persons, at 7.9 million, changed little in September, up 0.1% from August and the highest in 6 months. Both measures have shown little movement, on net, since August of last year. The participation rate rose by 0.1% t 62.9% as people not in the labor force declined by 207K. However, while the headline print may have been disappointing, which would be good news for the market, what may have prompted the market to reassess a delay in Fed hikes is that average hourly wages rose 0.2% sequentially, in line with expectations, and with average weekly hours worked rising also as expected at 34.4, up from 34.3 in August, this means that Average weekly earnings rebounded strongly from 1.5% to 2.3% in September. More details from the report: Total nonfarm payroll employment rose by 156,000 in September. Thus far this year, job growth has averaged 178,000 per month, compared with an average of 229,000 per month in 2015. In September, employment gains occurred in professional and business services and in health care. Professional and business services employment rose by 67,000 in September and has risen by 582,000 over the year. Over the month, job gains occurred in management and technical consulting services (+16,000), and employment continued to trend up in administrative and support services (+35,000). Health care added 33,000 jobs in September. Ambulatory health care services added 24,000 jobs over the month, and employment rose by 7,000 in hospitals. Over the past 12 months, health care has added 445,000 jobs.Employment in food services and drinking places continued to trend up in September (+30,000) and has increased by 300,000 over the year. Retail trade employment continued to trend up over the month (+22,000). Within the industry, job gains occurred in clothing and clothing accessories stores (+14,000) and in gasoline stations (+8,000). Over the year, employment in retail trade has risen by 317,000. Mining employment was unchanged in September after declining by 220,000 from a peak in September 2014.

September jobs report: mixed news showing further deceleration approaching a peak:

  • +156,000 jobs added
  • U3 unemployment rate rose +0.1% from 4.9% to 5.0%
  • U6 underemployment rate unchanged at 9.7%
  • Not in Labor Force, but Want a Job Now:  up +255,000 from 5.833 million to 6.088 million  
  • Part time for economic reasons: down -159,000 from 6.053 million to 5.984 million
  • Employment/population ratio ages 25-54: up +0.2% from 77.8% to 78.0% (tie for post-recession high)
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.06 from $21.63 to $21.68,  up +2.6% YoY. (tied for post-recession high)  (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)
  • the average manufacturing workweek rose 0.1 from 40.7 to 40.8 hours.  This is one of the 10 components of the LEI, and is a positive. 
  • construction jobs rose by +23,000 YoY construction jobs are up +218,000.   
  • manufacturing jobs fell by -13,000, and are down -47,000 YoY
  • temporary jobs - a leading indicator for jobs overall - increased by 23,200 (this made a peak in December, and recently has been stabilizing).
  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - increased by 284,000 from 2,290,000 to 2.574,000.  The post-recession low was set 1 year ago at 2,095,000.
  • Professional and business employment (generally higher- paying jobs) increased by 67,000 and are up +582,000 YoY.
  • the index of aggregate hours worked in the economy rose by 0.4  from  105.4 to 105.8
  • the index of aggregate payrolls rose  0.9 from 129.6 to  130.5.

The September Jobs Report in 10 Charts --Employers added 156,000 jobs in September and the unemployment rate was little changed at 5%. Here’s a look into some of the details and historical context. While not the weakest report of 2016, September’s monthly job creation of 156,000 is somewhat below the average of recent years. In the first nine months of 2016, job growth has been slower than the same period in 2014 and 2015. At this point, the final three months of the year are unlikely to be enough time to regain that pace. The headline unemployment rate of 5% counts those who are unemployed and actively seeking work. The Labor Department also produces broader measures of unemployment and underemployment that include those who are so discouraged they’ve stopped looking for employment and part-time workers who would like full-time hours. All four measures soared during the recession, gradually fell in recent years, and have mostly held steady in recent months. Measures of wage growth have gradually climbed in recent years and improved in this month’s report. The number of Americans in the labor force—that is, those who are working, or actively seeking work—gradually declined from 2000 until 2015, though it appears to have ticked up over the last year. A large part of the labor force’s decline was driven by retirements in the baby boomer generation. Among workers ages 25 to 54, the ages when people are most likely to be out of school, but not yet retiring, participation and employment rates are much higher and have been improving over the past year. For those who do find themselves unemployed, the average length of unemployment has gradually fallen. Unemployment rates vary significantly by race and gender. Unemployment rates also vary significantly for Americans with different levels of education attainment. The unemployment rate for those without a high school diploma has climbed sharply over the past two months. Over the past year, the shift toward a more white-collar and service-oriented economy has continued. Professional and business services, along with health care and education services, added a significant number of jobs while employment dropped in the mining and manufacturing industries.

Employment Comments: Another Decent Report - The headline jobs number was decent. Private sector job growth was solidly above the consensus forecast (167,000 vs forecast of 144,000), however public employment declined by 11,000. Even though the unemployment rate ticked up to 5.0%, both the participation rate and employment-population ratio also increased. And wage growth is increasing (slowly). Job growth has averaged 178,000 per month this year. In September, the year-over-year change was 2.45 million jobs - a solid gain. This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees. Nominal wage growth was at 2.6% YoY in September. This series is noisy, however overall wage growth is trending up. Note: CPI has been running around 2%, so there has been real wage growth. Since the overall participation rate has declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old. In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle. The 25 to 54 participation rate increased in September to 81.5%, and the 25 to 54 employment population ratio increased to 78.0%. The participation rate has been trending down for this group since the late '90s, however, with more younger workers (and fewer older workers), the participation rate might move up some more. The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in September at 5.9 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job. The number of persons working part time for economic reasons decreased in September. This level suggests slack still in the labor market. These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged at 9.7% in September. This graph shows the number of workers unemployed for 27 weeks or more. According to the BLS, there are 1.974 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 2.006 million in August. This is generally trending down, but is still high. There are still signs of slack (as example, elevated level of part time workers for economic reasons and U-6), but there also signs the labor market is tightening. Overall this was another decent report.

Part-Time Jobs Soar By 430,000 As Multiple Jobholders Surge To August 2008 Levels -- While today's headline jobs print was somewhat disappointing, with the Establishment Survey missing the expected print of 175K, and growing by 156K, it was offset by a far higher 354K jump in the household survey which offset last month's weakness. But while the quantitative headline aspect is open to interpretation, the qualitative component of the September jobs print was downright ugly for two key reasons. First, looking at the composition of jobs, full-time jobs declined by 5,000 to 142,296K while part-time jobs soared by 430,000...Worse, however, than even the breakdown in September job quality, was another seldom-touted series: the number of Multiple jobholders, or people who are forced to hold more than one job due to insufficient wages. It was here that the red flashing light came on because as a result of the 301K monthly surge in Americans holding more than one job, the 5th highest monthly spike in the past decade, the total number of Multiple jobholders soared to 7.863 million, the highest number since the financial crisis, and a number surpassed just once in the past decade: in August of 2008, just before all hell broke loose. It also begs the question how many of the 156K jobs "added" were double counted as a result of a number of multiple jobholders that was double this amount. So yes: overall job growth continues to chug along, if at a modestly disappointing pace, at least in September, the quality of the added jobs was absolutely woeful.

Are There Really 55 Million Freelancers in America? - It is no secret that the labor force is constantly changing. According to the Bureau of Labor Statistics (BLS), the size of the civilian labor force was 159.463 million as of August 2016 in America. With unemployment at 4.9%, the labor force participation rate was 62.8% in August. What is amazing, and what may be very hard for the BLS to account for, is the number of freelancers who contribute to the economy. A fresh report from the Freelancers Union now shows that nearly 55 million Americans are freelancing. If you tally this up against the Labor Department data it means that 35% of the work force is made up of freelancers. The Freelancers Union has released its “Freelancing in America” report for the third year. The view is that the number of freelancers is growing and that the freelance economy has added 2 million workers since 2014. The report also shows that these independent workers are “emerging as a powerful economic and political force” and that freelancers contributed $1 trillion dollars to the economy this year. According to Thursday’s report, the majority of freelancers are freelancing by choice. Here’s another astronomical sum in their report: 50% of freelancers were shown as saying that there is no amount of money that would get them to go take a traditional job and stop freelancing. Another point made was that most freelancers made more freelancing than they did with a full-time job within one year. This report also showed that the full-time freelancers work less than 40 hours per week, about 36 hours on average. According to the BLS, the average workweek of all U.S. workers was 34.3 hours in August.

 A Good Truck Driver Is Hard to Find in Tight U.S. Job Market -Getting a signing bonus is often associated with top young athletes. Now, taking a job driving a chemical truck in the U.S. can earn you a signing bonus of as much as $5,000 — and then there are also recruiting bonuses, retention bonuses and safety bonuses. Those are the tactics that Randy Strutz, president of Quality Carriers in Tampa, Florida, is using to fill positions as unemployment lingers near the lowest level since before the last recession. The situation is cropping up across more industries in the U.S., as businesses feel increasing pressure to offer better wages and incentives to attract workers. “It’s been a challenge to get good, qualified drivers,” said Strutz, who supervises about 2,500 truckers at the company owned by private-equity firm Apax Partners. “I expect we’ll probably have to spend more money to find applicants.” The extent to which a tight labor market drives wage growth is a crucial factor for Federal Reserve Chair Janet Yellen and her colleagues as they debate the timing of the first interest-rate increase since December. Last month the central bank held off from a hike -- in a decision that spurred three hawkish dissents for the first time in five years -- with Yellen saying that employment figures suggest the economy “has a little more room to run than might have been previously thought.”

The Financial Plight of White Working Class Males -- With the US presidential election about five weeks away, the popular press has feasted on the campaign events and survey results, with the primary focus on the Trump spectacle. The fundamental question remains: How did The Don succeed in winning the Republican Party nomination in the first place? And how could he remain in contention in the wake of his bizarre campaign rhetoric? A provocative new report from Sentier Research gives us insight into what might be the key factor in the Trump phenomenon: A secular decline in the financial well-being of white working class males and what we can infer as the resulting anger directed at the political powers that be.  Here is the opening from the press release for Sentier Research study: The “working class” in America has frequently been defined as white males with a high school education working at wage and salary jobs. Some have said that this is one of the groups that has been “left behind” and newly energized during this year’s election process. This statistical brief compares changes in earnings experienced by white males and contrasts those experiences for high school graduates and college graduates between 1996 and 2014 within age cohorts. The Sentier method compares the incomes of white male high-school graduates with incomes of white male college graduates based on data from the US Census Bureau's Annual Social and Economic Supplement (ASEC) of the Current Population Survey (CPS). The focus is on the change in income from 1996 to 2014 for ten 2-year age cohorts. The youngest cohort consists of the 25-26 year-olds in 1996 who were age 43-44 in 2014. The oldest cohort was age 43-44 in 1996 and 61-62 in 2014. Here is a stunning pair of tables that shows the median real (inflation-adjusted) incomes for the high-school grads (aka working class) versus the college grads for the ten age cohorts along with the totals (which we've taken the liberty of highlighting).

Why Americans Feel Poor, in One Chart - Kocherlakota - Why do so many Americans feel dissatisfied about the economic state of their nation? One simple chart offers a lot of insight. Economists measure standards of living in many ways. Among the most common is to look at the change in the value of goods and services produced by a country, adjusted for inflation and for population growth. This measure, known as per capita real gross domestic product, essentially shows how much income the average person is generating. The chart below shows the cumulative growth in per capita real GDP in the U.S. over the preceding 10 years, for each year from 1957 to 2015. It does a great job of depicting the country’s post-World War II macroeconomic experience. I see four important points.

  1. Growth was unusually strong in the 1960s and early 1970s. In every year from 1966 through 1973, per-capita income was up between 30 percent and 40 percent from a decade earlier. Thus, it’s not surprising that many Americans recall this as a great period for the nation’s economy.
  2. In every year from 1984 to 2007 -- a period that economists call the Great Moderation, because of the way both growth and interest rates stabilized -- per-person income was up between 20 percent and 30 percent from a decade earlier. That’s ample reason for Americans to view this as a good period for the economy.
  3. Cumulative per-person growth from 2005 to 2015 was lower than in any prior decade in the sample. That certainly helps explain why many Americans are unhappy with the nation’s recent economic performance.
  4. Although the experience of the last few years may make it seems as though the U.S. will be stuck with low growth forever, the good news is that the country has recovered from such slumps in the past. Cumulative growth per person was just a bit above 10 percent from 1951 to 1961 and again from 1973 to 1983.

Facing up to income inequality - Jeff Sachs - The Census Bureau recently announced a heartening 5 percent gain in the median household income between 2014 and 2015, the largest one-year gain on record. Yet a look at the longer-term trends offers a sobering perspective. The jump in household income merely helps to make up for lost ground; the median earnings in 2015 were actually lower than back in 1999 — 16 years ago. While household median incomes have stagnated since the late 1990s, the inflation-adjusted earnings of poorer households have stagnated for even longer, roughly 40 years. Meanwhile, households at or near the top of the income distribution have enjoyed sizeable increases of living standards. The result is a stark widening of the gap between rich and poor households. There is perhaps no issue in America more contentious than income inequality. Everybody has a theory as to why the gap between rich and poor has widened and what should be done — if anything — to close it. A full explanation should help us understand why the United States stands out for having an especially high and rising inequality of income. Thank you for signing up! Sign up for more newsletters here There are three main factors at play: technology, trade, and politics. Technological innovations have raised the demand for highly trained workers, thereby pushing up the incomes of college-educated workers relative to high-school-educated workers. Global trade has exposed the wages of industrial workers to tough international competition from workers at much lower pay scales. And our federal politics has tended, during the past 35 years, to weaken the political role of the working class, diminish union bargaining power, and cap or cut the government benefits received by working-class families.

 Delivery Drivers Sue Amazon, Alleging Violation of Labor Laws - WSJ: Inc. is being sued by three drivers, making the online retail giant the latest company to face legal action over the use of independent contractors in its delivery operation. The proposed class-action lawsuit, filed Tuesday in federal court in Seattle by drivers for and Amazon Logistics Inc., alleges the company violated federal labor law by classifying them as contractors rather than employees. The drivers are seeking back wages, overtime pay and compensation for fuel, car maintenance and other expenses. The lawsuit comes as Amazon is laying the groundwork for its own shipping business, which its executives have said will add delivery capacity, particularly during the peak holiday season. Amazon currently delivers its own packages from roughly 70 facilities, mostly built in the past two years, in 21 states. The drivers named in the lawsuit have all driven for a program called Amazon Flex, a smartphone app launched last year, through which drivers choose the shifts they want to work and schedule their own pickups. The program has expanded to nearly 30 metropolitan areas. The question of how to classify so-called “gig economy” workers has been roiling many of Silicon Valley’s on-demand services firms such as Uber Technologies Inc. and Postmates Inc., which say their workers tend to prefer to be independent contractors, because it allows for a more flexible schedule. Earlier this year, a judge rejected a $100 million settlement between Uber and its drivers. In a separate misclassification case, FedEx Corp. FDX -0.67 % settled with drivers for $240 million earlier this year.

Campaign to give workers paid sick leave gains momentum: — The campaign to give workers paid time off when they're sick is picking up momentum. A bill that would give workers for the Illinois county that includes Chicago one hour of paid sick time for each 40 hours they work was approved Wednesday. Sick leave referendums are on the November ballot in Arizona and Washington state. Proposals are also expected to be voted on next year in Duluth, Minnesota, and Albuquerque, New Mexico, says Ellen Bravo, executive director of Family Values @ Work, an organization that advocates for paid sick leave. Most companies do give their employees paid time off when they're sick. The Labor Department estimates that last year, 61 percent of workers in private companies got sick time averaging six to 10 days a year. But there's no federal law mandating that all companies give staffers paid leave, and those businesses that don't tend to be very small, often with blue-collar workers. The move toward paid sick leave has accelerated in the last three years as 31 states, counties and cities approved laws, according to Bravo's group. All told, 38 jurisdictions have such laws, starting with San Francisco in 2006 and now other places like New York, Chicago, Washington, D.C., Philadelphia, Pittsburgh, Seattle, Los Angeles, San Diego and Minneapolis-St. Paul. Connecticut, California, Massachusetts, Oregon and Vermont also have laws. These measures tend to have an impact at smaller companies that are less likely than mid-size or large enterprises to offer sick leave. They generally allow workers to accrue sick time according to the number of hours they work each week. Many grant workers five days off a year.

Is America Becoming A Vast Debtor's Prison? - The staggering amount of debt held by the American empire ensures the public will be working it off for generations to come. The government has already begun its campaign to make it more difficult to leave the country, and it has also begun to crack down on the finances of the eight million Americans living abroad. Regardless of whether you’re a millionaire with multiple foreign bank accounts or a recent college graduate with a boatload of debt, the status of being a United States citizen brings with it a burden that will only grow heavier over time.  Since 2008, the number of individuals giving up their citizenship has increased by almost 560%, setting new records each of the past three years. Some of these expats are motivated by the extra tax load paid when working abroad, while others are trying to avoidstudent loan debt. Others have just had enough of the encroaching police state.  Every taxpayer left in the country now owes more than $149,000 of the national debt, so it’s no surprise the tide is beginning to turn. By hook or by crook, in the coming years, citizens will be fleeced of that money through higher taxes, savings that are inflated away, and an overall drop in their standard of living. Many can see the writing on the wall and have become determined to protect themselves from the years of economic repression coming down the pipe.

Immigration Does More Good Than Harm to Economy, Study Finds - WSJ: Waves of immigrants coming into the U.S. in recent decades have helped the economy over the long haul and had little lasting impact on the wages or employment levels of native-born Americans, according to one of the most comprehensive studies yet on the topic. The National Academies of Sciences, Engineering and Medicine report on immigration assesses the economic and fiscal impacts of immigration, offering a broad look at a phenomenon that has moved to the forefront of the presidential race, with both candidates debating the downsides and merits of immigration. The conclusion runs counter to a popular narrative suggesting that immigrants take the jobs of U.S. citizens, though it does acknowledge some costs for segments of the population. It highlights research showing an influx of lower-skilled workers can lead to lower wages for earlier waves of immigrants and native-born high-school dropouts. And the study found that immigration can burden government finances, especially education budgets at the state and local levels. The report, citing a lack of data, doesn’t distinguish between the impacts of documented and undocumented immigrants. The distillation of research and previously unavailable data offer a big-picture view that highlights the overarching benefits of immigration without discounting the dislocation and the fiscal costs associated with illegal and legal arrivals into the U.S.“Immigration enlarges the economy while leaving the native population slightly better off on average, but the greatest beneficiaries of immigration are the immigrants themselves as they avail themselves of opportunities not available to them in their home countries,” the report said. Immigration also can lead to more innovation, entrepreneurship and technological change across the economy, the report found. About 53% of immigrants had at least some college, including 16% with a graduate education, as of 2012. While often left out of the debate on immigration, such workers can help lift overall living standards. “The prospects for long run economic growth in the United States would be considerably dimmed without the contributions of high-skilled immigrants,” the report said. The study also found that “over a long time horizon (75 years in our estimates),” the fiscal impacts of immigrants “are generally positive at the federal level and negative at the state and local levels.”

When a Worker Freezes to Death in a Walk-In Freezer at the Westin Peachtree Plaza Hotel in Downtown Atlanta - Last March, Carolyn Mangham, a worker at the Westin Peachtree Plaza Hotel in downtown Atlanta, froze to death after being trapped 13 hours in the hotel’s walk-in freezer with a temperature of below minus 10 degrees Fahrenheit. The autopsy report read: “Found in freezer; malfunctioning exit release button.” Just a couple of notes on this ghastly story, straight out of The Shining.

  1. Hotel workers and their union would like hotels to install emergency devices in large freezers that, much like an alarm that could be pulled, would notify security if they are trapped inside. They’d also like to carry panic-button devices in case they should need help, wherever they are.
  2. Hotels routinely install unwanted surveillance devices throughout the workplace and on workers—like the notorious “Rex” robotic dog that would follow maids throughout the hotel, tracking their every move, monitoring how long they spend cleaning each room—but they can’t provide workers with desired devices that would prevent them from freezing to death?
  3. OSHA wants to fine the Westin Peachtree Plaza Hotel a whopping $12,500. That’s how much the life of Carolyn Mangham is worth. $12,500. It may be that the union’s proposed safety measures would cost more. In which case the fine is a bargain for the hotel.
  4. After Mangham was killed, the hotel claimed they ran a series of tests on the door to the freezer, and claimed everything worked fine. But when an OSHA inspector came the following month to test the doors, the inspector and an employee found themselves trapped in the freezer and had to pound on the door to alert other employees and get out.

Out of Prison, Out of Work:   --About 7 million American men of prime working age (25 through 54) are not in the labor force, according to the Bureau of Labor Statistics. That means they dont have a paid job and havent been actively looking for one. This figure does not include those in jail or prison. It does include students and men staying home to take care of children or other family members -- but, as Nicholas Eberstadt estimates in his important new book, "Men Without Work," these two categories seem to account for less than 15 percent of what he calls the NILFs (for not in labor force). And the NILF share of the U.S. prime-age male population has been growing and growing. A single variable -- having a criminal record -- is a key missing piece in explaining why work rates and LFPRs [labor-force participation rates] have collapsed much more dramatically in America than other affluent Western societies over the past two generations. This single variable also helps explain why the collapse has been so much greater for American men than women and why it has been so much more dramatic for African American men and men with low educational attainment... The great incarceration wave that began in the 1970s has produced millions of ex-convicts who are ill-prepared for jobs or are discriminated against by employers even when they are prepared. ...This is on the one hand tragic: millions of American men who were imprisoned in the 1970s through 1990s have been thrust into a labor market that really doesn't want them. On the other hand, it is at least potentially fixable. Job displacement by technology is probably unstoppable, but how we punish crime is a public-policy choice. Incarceration rates have already been falling with the big declines in crime since the early 1990s, and the past few years have seen the growth of a bipartisan consensus (interrupted by the current presidential campaign, to be sure) that the U.S. throws too many people in prison for too long and doesn't do nearly enough to rehabilitate them. Prison and sentencing reform might actually be the country's best shot at thwarting that "linear trend" that would put a quarter of prime-age men out of work by 2050.

 The Widening Racial Wealth Divide - The New Yorker: It would take black Americans two hundred and twenty-eight years to have as much wealth as white Americans have today.Our racial wealth divide, as it’s often called, is enormous, and, fifty years after the civil-rights movement, the gap is growing. Everyone knows that wealth is unequally distributed. The work of Thomas Piketty has made this a mainstream concern. But the magnitude of the gap between white and black Americans is on a different scale. According to a recent report from two progressive think tanks, CFED and the Institute for Policy Studies, white households own, on average, seven times as much wealth as African-American households (and six times as much as Latino ones). The Forbes 100 billionaires are collectively as rich as all black Americans combined. At current growth rates, it would take black Americans two hundred and twenty-eight years to have as much wealth as white Americans have today. Some of the reasons are clear: the unemployment rate among black Americans is roughly twice that of whites, and black people earn, on average, between twelve and twenty-two per cent less than white people with similar education and experience. But the wealth gap between black and white Americans is much bigger than the income gap, thanks to a toxic combination of institutionalized discrimination, persistent racism, and policies that amplify inequality. As Thomas Shapiro, a sociologist at Brandeis and the co-author of the seminal book “Black Wealth/White Wealth,” told me, “History and legacy created the racial gap. Policies have maintained it.” Together, they contribute to what he’s called “the hidden cost of being African-American.” Start with history. Beginning in the New Deal and on into the postwar years, the federal government invested heavily to help ordinary Americans buy homes and go to school, via programs like the Federal Housing Administration and the G.I. Bill. That fuelled an economic boom and fostered the growth of a prosperous middle class. But black Americans received little of this assistance. Redlining by banks and by government agencies prevented black families from buying homes in white neighborhoods; in a thirty-year period, just two per cent of F.H.A. loans went to families of color. G.I. Bill benefits went disproportionately to white veterans. Black agricultural and domestic workers were excluded from Social Security until the fifties. As Dedrick Asante-Muhammad, the co-author

Black Lives Matter Co-Founder Alicia Garza on the Global Movement for Black Lives (Originally published at Bill Moyers’ website) As part of our election series focusing on the 2016 political issues that have been underreported by the mainstream media, we asked Alicia Garza, co-founder of Black Lives Matter, to weigh in with her thoughts on issues related to race and racism in America today. Black Lives Matter started as a hashtag in 2013 in response to the acquittal of George Zimmerman in the shooting death of African-American teen Trayvon Martin. It has since grown into a global organization with dozens of chapters and other affiliations. In August, the Movement for Black Lives, a collective of 50 racial justice groups and individuals working under the Black Lives Matter umbrella, revealed its in-depth policy platform, “A Vision for Blacks Lives.” In this email exchange, Garza talks about the challenges facing the movement, Donald Trump’s recent outreach to black voters and how people of all races can best support the goals of Black Lives Matter. But first, she responds to the latest deadly police shootings of black men.

Feds To Create Yet Another Ethnic Category? -- The Obama administration would like to create a new racial category, presumably for the Census and other federal forms. USA Today reportsThe White House is putting forward a proposal to add a new racial category for people from the Middle East and North Africa under what would be the biggest realignment of federal racial definitions in decades. Under current law, people from the Middle East are considered white, the legacy of century-old court rulings in which Syrian Americans argued that they should not be considered Asian — because that designation would deny them citizenship under the 1882 Chinese Exclusion Act. But scholars and community leaders say more and more people with their roots in the Middle East find themselves caught between white, black and Asian classifications that don't fully reflect their identities. It's unclear if the new category would be an ethnic category like "Hispanic," or if it would be a racial category like "white." (Ethnicity does not denote race, and a Hispanic, for example, can be of any race.)  In either case, it's true that this would be a big realignment. The last time the federal government put through such a large change to demographic tracking was during the 1970s when the federal government invented the concept of "Hispanics" which lumped together every household which claimed a cultural heritage from the Spanish-speaking world. Later, this category was expanded to "Latino" to include households from the Portuguese-speaking world as well. The effects of this sort of ethnic and racial categorization can be far-reaching, indeed. It is largely thanks to the federal invention of Hispanics that we now consider many Hispanics to be "non-white" even though a majority of Hispanics self-identify as white.  Nevertheless, by categorizing so many people of European descent (i.e., most Hispanics and Latinos) as "non-white," this allows demographers and government officials to redefine and reshape the population on paper to suit their needs.

Sacramento police tried to run over man before shooting him, recordings reveal  - Two Sacramento police officers attempted to run over a mentally ill homeless man with their car less than 35 seconds before they shot and killed him, according to recordings released by police this month.  One of the officers says “f--- this guy” in the frantic final minute before they shot Joseph Mann on Del Paso Boulevard. Moments later, the driver says, “I’m going to hit him.”“OK. Go for it. Go for it,” his partner responds. During that sequence, the officers gunned their vehicle toward Mann, backed up, turned and then drove toward him again, based on dashcam video released by police. They stopped the car, ran toward Mann on foot and shot him 14 times.The July 11 incident has sparked protest from local religious and black leaders, who say Sacramento Police Department officers escalated the situation and unnecessarily resorted to lethal force. The content of the dashcam audio was first reported by the Sacramento News and Review. The Bee reviewed the clip of Officers Randy Lozoya and John Tennis after enhancing the audio to highlight their voices.  The dashcam video was released Sept. 20 after The Sacramento Bee obtained surveillance footage from a private citizen that showed the officers shooting Mann. Within an hour of The Bee posting the footage online, Sacramento police called a news conference to release video from three dashboard cameras as well as audio from two 911 calls and other information.

‘Do Not Resist’: A chilling look at the normalization of warrior cops -- The haunting thing about the new policing documentary “Do Not Resist” is what it doesn’t show. There are no images of cops beating people. No viral videos of horrifying shootings. Sure, there are scenes from the Ferguson protests in which riot cops deploy tear gas. But there’s no blood, no Tasings, no death. Yet when it was over, I had to force myself to exhale.What makes this movie so powerful is its terrifying portrayal of the mundanities of modern policing. I watched the movie weeks ago, but there are scenes that still flicker in my head.  It’s one thing to show an MRAP — a vehicle built for war, and for a very specific purpose in a very specific type of war — being misused after a small-town police agency obtained it from the Defense Department. “Do Not Resist” takes you to the base where those vehicles are stored. A camera trained on the window captures hundreds of MRAPs — rows and rows and rows of them — scrolling by, all destined for a police agency somewhere in America. Meanwhile, an Army specialist explains how the troops who use the vehicles get hours and hours of training before they’re entrusted to drive the trucks on a battlefield. The Pentagon then gives the trucks to police agencies to use on U.S. streets with no accompanying training at all. Sometimes, the specialist says, a police agency will find a body part in one of the trucks. They try to avoid that. But after all, these are machines of war. Fittingly, the most chilling scene in the movie doesn’t take place on a city street, or at a protest, or during a drug raid. It takes place in a conference room. It’s from a police training conference with Dave Grossman, one of the most prolific police trainers in the country. Grossman’s classes teach officers to be less hesitant to use lethal force, urge them to be willing to do it more quickly and teach them how to adopt the mentality of a warrior. Jeronimo Yanez, the Minnesota police officer who shot and killed Philando Castille in July, had attended one of Grossman’s classes called “The Bulletproof Warrior”.  In the class recorded for “Do Not Resist,” Grossman at one point tells his students that the sex they have after they kill another human being will be the best sex of their lives. The room chuckles. But he’s clearly serious. “Both partners are very invested in some very intense sex,” he says. “There’s not a whole lot of perks that come with this job. You find one, relax and enjoy it.”

When the Cops Take Your Urine by Force - In the United States, there is a wealth of case law pertaining to the Fourth Amendment, with the US Supreme Court and the rest of the judiciary fashioning jurisprudence on what constitutes an unreasonable search or seizure. But the courts have yet to reach any kind of consensus about one particularly cringe-worthy practice, as exemplified by what happened to Jamie Lockard in a small town in southeastern Indiana, close to the Ohio border. In March 2009, police in Lawrenceburg, Indiana, pulled Lockard over for not stopping at a stop sign. Suspecting he was drunk, the police had him take a breathalyzer test. He blew a .07 percent, just under the legal limit. The police then obtained a search warrant for blood and urine samples and took Lockard to a local hospital. The blood draw—nurse and needle, with no resistance from Lockard—was no problem. The urine was another matter. Unable to get a sample from Lockard the conventional way—hospital personnel said he wouldn't go, Lockard said he couldn't go—the police took Lockard to the emergency room and handcuffed him to a bed. A police sergeant held one of Lockard's ankles while an officer held the other. A nurse inserted a catheter tube, typically 16 inches long—up the urethra, through the prostate and into the bladder. Ultimately, Lockard pleaded guilty to reckless driving and got a suspended sentence. (His blood sample produced a blood-alcohol content of .05 percent.) But he sued the police officers and the city of Lawrenceburg, alleging the forced catheterization had violated his civil rights. In a deposition, Lockard described pain both physical—"felt like something twisting where it ain't supposed to be twisting"—and emotional: "Like it could happen again. Just makes you think, what's this world coming to. It was bad, bad." In 2011, a federal judge in Indiana threw out the lawsuit, ruling that the police were entitled to qualified immunity. Under the law, police cannot be held liable for "bad guesses in gray areas," according to the courts. And this case, the federal judge wrote, fell into "nebulous territory."

Civil Forfeiture: Legalized Government Robbery -- California governor Jerry Brown signed a bill into law last week that would prohibit the police from seizing property – and money – from individuals without due process. Politicians, bloggers, and others on both the left and the right called the move “historic” and “one of the most important reforms for civil forfeiture in years.” Even The New York Times, in its October 2 print edition, called it a rare example of the left and right uniting to “rein in government abuse of civil forfeiture.”  The previous California law required a criminal conviction for forfeitures under $25,000. But local police in the state circumvented that by using a much weaker federal law to seize assets. As The New York Times reported, “California police would file state charges against a target, but then outsource the forfeiture to the federal government.” The problem there is that the feds don’t need any criminal conviction whatsoever to seize anybody’s assets. Indeed, federal law enforcement can take any property for themselves if they “suspect it is being used for a crime.” The entire civil forfeiture system, state and federal, is ripe for abuse. And, as you might expect, is it abused all the time: (examples)

Where Local Governments Are Paying the Bills With Police Fines: The dependence of thousands of American cities and towns on judicial fines and forfeiture to fund public services is unhealthy for democracy. Public awareness of the depth of the problem has been growing since the Department of Justice's 2014 investigation into the Ferguson, Mo., police, following the shooting of Michael Brown. According to a Sunlight examination of 2013 Census data, Louisiana, Arkansas, Georgia, Illinois and Mississippi topped the list of states where city governments relied heavily on fines and forfeits for funding. We concluded this by examining the ratio of local fines and forfeits to local tax in order to see where local governments rely particularly heavily on fines and forfeits to pay for basic services. Using this metric, the government of Henderson, Louisiana relied most on these types of fines and forfeits. Henderson collected $3.73 in fines and forfeits for every $1 it collected in taxes. Out of the five municipal governments which reported collecting more money from fines than from taxes in 2013, three (Henderson, Pollack, and Olla) were from Louisiana. All five were towns with populations under 1,500. This suggests that most of those fines were probably paid by people who did not live in those towns, but who nonetheless had to drive through them. The Louisiana towns were unusual relative to the rest of the local governments sampled by the Census. The median ratio of fines and forfeit revenue to tax revenue for city and county governments was 0.02 -- that is, the median city or county collected two cents in fines and forfeits for every dollar it collected in taxes. Averaging local governments by state revealed that high relative collection of fines and forfeits is more common in some states than others. The following table displays the ten states with local governments demonstrating the highest fines-to-tax ratio.

US takes over Puerto Rico’s finances: a nudge toward statehood? -- Puerto Rico turned over control of its finances on Friday to a seven-person board appointed by the US federal government, inaugurating a period of historic US control over a territory foundering under the burden of nearly $70 billion in public debt. The board, created by legislation passed by Congress in June, held its first live-streamed meeting in New York on Friday, electing a president and deciding on which of Puerto Rico’s government agencies and institutions would fall under the board’s fiscal direction. The list is long, including the central government, its biggest university, the energy and sewage authorities, a government development bank, and the public pension system, according to the Associated Press. Four Republicans and three Democrats make up the board. Only four of them are Puerto Rican, and nearly all have experience as financial executives, with some also serving stints in local government, the judiciary, and academia. In New York on Friday, pro-independence demonstrators gathered in front of the Alexander Hamilton building in protest of what they described as colonialist policies enacted by a “dictatorship”. And on the island, many saw little reason for optimism.  “If this Board acts the way it looks like it will, what’s waiting for us over the next five years is going to be fiscal austerity and, as such, restrictions that will translate into a continual exhausting of Puerto Rico’s economy,” said economist Francisco Catalá in an interview with Metro PR.  Others pointed to the inability of the island’s government to resolve the problems.

Illinois Renegotiates Derivative Deals as Rating Approaches Junk - Illinois renegotiated interest-rate derivative contracts with banks to avoid having to pay about $150 million of fees if its credit rating gets cut closer to junk. The step comes after S&P Global Ratings and Moody’s Investors Service lowered Illinois to the second-lowest investment grade, below any other U.S. state. Without the agreement, another downgrade could have allowed Barclays Bank Plc, Bank of America Corp., JPMorgan Chase & Co. and Deutsche Bank AG to demand multi-million fees to break the $600 million worth of contracts, which the state entered into more than a decade ago to protect against rising interest bills on variable-rate bonds. The changes, which were finalized on Sept. 28 after months of negotiation, will allow Illinois to avoid the fees as long as it’s not dropped below investment grade, according to bond documents. Chicago, the state’s biggest city, was forced to refinance derivative-laden debt deals after its rating was downgraded to junk by Moody’s last year. “It’s a good thing that they were able to do that without getting hit with a termination event, which can put strain on liquidity and cash,” said Adam Buchanan, senior vice president of sales and trading at Ziegler, a broker-dealer in Chicago. “It’s a positive thing.”

Illinois, Chicago should declare bankruptcy to fix fiscal woes, ex-FDIC chief says -  The state of Illinois and the city of Chicago should seek bankruptcy protection to stop the fiscal bleeding and get back untracked, William Isaac, former chairman of the Federal Deposit Insurance Corp., said in a recently published opinion piece. "Both the state of Illinois and the city of Chicago are in dire fiscal straits," Isaac, now senior managing director and global head of financial institutions at FTI Consulting, said in the op-ed piece, posted at "Taxes keep rising, while staggering amounts of red ink are projected as far as the eye can see," Isaac said. "The city and the state should act now to restructure their liabilities and put the fiscal mess behind them. This can be accomplished by utilizing Chapter 9 and other tools Congress just gave Puerto Rico." Thanks to action taken by Washington lawmakers this past summer, Puerto Rico may access so-called "Super Chapter 9" bankruptcy protection. Now, debate is growing about whether to make that protection available for all territories and states. In any case, Isaac said bankruptcy protection for Illinois would be controversial but would be the right thing to do."The process would entail about two years of unpleasant headlines, but the city and the state will rebound far sooner and less painfully than if they stay on their current paths," Isaac said.

Wall Street made over $110 million from Chicago schools, report says | WGN-TV: The Wall Street Journal reports Wall Street made millions from Chicago’s struggling schools. The report says J.P. Morgan Chase & Co. and Chicago-based Nuveen Asset Management have made and realized paper profits exceeding $110 million on purchases this year of $763 million in Chicago Public School bonds. The school system has said it needed the money to replenish its dwindling coffers before the new school year and to build and repair facilities. The terms of the bond sales highlight the choices the school district faces after years of pension shortfalls and relying heavily on borrowing. A J.P. Morgan spokeswoman says the bank views the school board as a high-priority client that it understands well and is willing to support its short- and long-term capital needs.

Teen accused of stealing 65-cent carton of milk at middle school to face trial: All Ryan Turk wanted was his carton of milk. The teenager says he had forgotten to grab the drink the first time through the line at the Graham Park Middle School cafeteria, so he headed back. A recipient of free lunches at the Virginia school, Ryan felt he was just doing what he did every day. But a school resource officer said he spotted the teen cutting in line and accused him of stealing the 65-cent milk. When Ryan didn’t cooperate with a trip to see the principal, authorities say, he was arrested and charged with disorderly conduct and petit larceny. Ryan turned down an offer of non-judicial punishment and, this week, a Prince William County judge set a trial date in November for the Dumfries teen, who is now a freshman in high school. He will face the criminal charges just days after his 15th birthday. Ryan and his mother, Shamise Turk, acknowledge that he did take a carton of milk on that day last school year, but they say he was entitled to it and did nothing wrong. They, and their lawyer, allege that Ryan was discriminated against, targeted because he is a black teenager who didn’t want to go along with a police officer who they believe was being unfair.“No one needs to be punished for stealing a 65-cent carton of milk,” said Emmett Robinson, a lawyer who is representing the family and said Ryan’s arrest was related to institutional racism. “This officer treats kids like they’re criminals, and guess what happens — they’re going to become criminals.”

Soft Skills Give Workers a Big Edge. It's Time to Start Focusing on Them in School, Report Says -- Teaching and improving soft skills—such as conscientiousness, adaptability and perseverance—can provide huge economic gains for young people, and should receive more attention from education policy makers, according to a new report from the Hamilton Project. Soft skills, also known as noncognitive skills or foundational skills, are increasingly in demand in today’s economy. More Americans work in service-sector jobs that require human interaction, and automation and technology are replacing jobs involving routine tasks.That’s given workers with strong soft skills a big advantage in the labor market, the group said in the paper, released Tuesday, that compiled existing research on various aspects of soft skills in the labor market. (The Hamilton Project is an economic policy arm of the Brookings Institution.)But employers and hiring managers across the country complain of a growing deficit of workers with adequate soft skills, including the ability to communicate, work in teams, take the initiative and pay attention to detail.Education policy in recent years has focused on closing test-score gaps and improving cognitive skills, but less attention has been paid to the importance of soft skills, authors Diane Whitmore Schanzenbach, Ryan Nunn, Lauren Bauer, Megan Mumford and Audrey Breitwieser wrote. ‘As we learn more about cognitive and noncognitive skills, it is critical that we adjust our educational policies to make the best possible use of new evidence,” they said.

The remarkable academic superiority of high school girls vs. high school boys -- Mark Perry, AEI - Above is a table summarizing new data just released by The College Board on the academic records of the 1.64 million US high school students who took the SAT in 2016 (see my recent CD post on gender differences on the SAT math test here). As you can clearly see, these data provide convincing evidence of the academic superiority of female high school students compared to their male peers based on a variety of measures of academic performance:

  • More girls than boys graduate in the top 10% and the second 10% of their classes
  • Far more girls than boys have GPAs of A+, A and A- while far more boys than girls have GPAs of C or below
  • Girls have a higher overall average GPA than boys
  • More girls than boys have completed more than four years of study in every one of six subjects reported
  • More girls than boys have taken high school AP courses and/or Honors courses in the six subjects reported

After posting the table on Twitter yesterday afternoon, I received the following interesting responses:

  • Where’s your academic sexism now?
  • Look how successful the feminization of education has been. Go girls!
  • Is this encouraging or discouraging? Do teachers need training in the unique learning needs of boys? Are there unique learning needs of boys?
  • Prima facie evidence of discrimination, am I right?
  • Public schooling is obviously geared towards female traits
  • Except the SAT. Curious, when you test them objectively, the “academically inferior” win
  • When will America face the crisis of bias against males in academia?
  • Obvious sexism, the patriarchy at work
  • The system is absolutely failing an entire generation of boys
  • Maybe we stop talking so much about anti-girl culture?
  • A few years ago, such a thing, reversed, would be hard evidence of institutional sexism against girls. Now, as then, this must be reversed
  • If these numbers were reversed and girls were lagging so far behind–imagine the reaction

And shouldn’t this clear academic superiority of female high school students also challenge the need for hundreds of women’s centers and women’s commissions on college campuses across the country? Here’s a portion of an email (with the table above) that I sent today to the 100% female commissioners of the University of Michigan-Flint’s Women Commission, whose mission is to “report on the status and needs of women [only] on campus” and “build a truly welcoming and inclusive community”:

 Actually, SAT results don’t confirm boys are better at math than girls by Wendy Morrison (AEI) - Mark Perry recently wrote a blog post about the average performance of high school girls and boys on the math section of the SAT, accompanied by a colorful tweet with the caption, “SAT results confirm pattern that’s persisted for 45 years — boys are better at math than girls.” Dr. Perry’s conclusion — “high school boys are better at math than girls” – may not reflect the nuances that drive, at least in part, the summary statistics he cites.In this hypothetical world, four boys and four girls take the SAT, and the girls earn scores of 500, 500, 451, and 525, while the boys earn a 410, a 436, a 450, and an 800. Just as in the 2016 real world data, the female average is a 494, lower than the male average of 524. In this scenario, even though boys do better on average than girls, of the top five performers on the SAT, four are girls, and of the bottom three performers (there are eight people in this world, remember) all three are boys. It would be easy to argue that girls are “better” than boys at math in this world, even though on average boys score better than girls.  Now, let’s add four additional boys and four additional girls. Imagine that the four additional girls take the SAT and each scores a 494. Now imagine that the four additional boys don’t take the SAT because they do not plan on pursuing a college education. The male average remains a 524, and the female average remains a 494. However, if in our hypothetical world it was possible to force each boy and girl to take the exam, we would likely see the male average drop, as the decision to not take the exam is almost certainly related to one’s expected outcome. For example, if when forced to take the exam, the four boys received scores of 350, 350, 450, and 450. This would bring the male average down to 462, well below the female average.

Actually, 50 years of test scores DO confirm that boys outperform girls on the SAT math test -- In response to my recent CD post about the gender differences on the math SAT scores over the last half century “2016 SAT test results confirm pattern that’s persisted for 50 years — high school boys are better at math than girls,” AEI research assistants Wendy Morrison and Grace Finley responded today on the AEIdeas blog with the post “Actually, SAT results don’t confirm boys are better at math than girls.” Here’s a slice that summarizes their position: Put simply…..the only reason boys scored higher than girls is because the boys who are the worst at math didn’t take the SAT — not because “boys are better at math than girls.” This is consistent with data Dr. Perry himself cites, that far more girls take the SAT each year than boys.…..Here’s an edited version of an email that I sent this evening to Wendy and Grace:I am familiar with the argument you present, it has been described here as a “sampling artifact” by University of Wisconsin Professor Janet Hyde and her co-authors: “In 2007 the SAT was taken by 798,030 females but only 690,500 males, a gap of more than 100,000 people. Assuming that SAT takers represent the top portion of the performance distribution, this surplus of females taking the SAT means that the female group dips farther down into the performance distribution than does the male group. It is therefore not surprising that females, on average, score somewhat lower than males. The gender gap is likely in large part a sampling artifact.”Although that is a seemingly plausible argument, I don’t think the math test data over a 50-year period support the “sampling artifact” explanation for the following reasons:

Parental Resources and College Attendance: Evidence from Lottery Wins – Abstract: We examine more than one million children whose parents won a state lottery to trace out the effect of additional household resources on college outcomes. The analysis draws on the universe of federal tax records linked to federal financial aid records and leverages substantial variation in the size and timing of wins. The results reveal modest, increasing, and only weakly concave effects of resources: wins less than $100,000 have little influence on college-going (i.e., effects greater than 0.3 percentage point can be ruled out) while very large wins that exceed the cost of college imply a high upper bound (e.g., wins over $1,000,000 increase attendance by 10 percentage points). The effects are smaller among low-SES households. Further, while lottery wins reduce financial aid, attendance patterns are not moderated by this crowd-out. Overall, the results suggest that households derive consumption value from college and, in the current policy environment, do not generally face binding borrowing constraints.

University Distributes Seven-Page Speech Guide - Student leaders of this year’s freshman orientation at James Madison University were given a list of 35 things they should avoid saying, including phrases such as “you have such a pretty face,” “love the sinner, hate the sin,” “we’re all part of the human race,” “I treat all people the same,” “it was only a joke,” “I never owned slaves,” and “people just need to pick themselves up by their bootstraps,” among other expressions. Those phrases and others on the list “widen the diversity gap” and do not “create a safe and inclusive environment,” according to the seven-page handout, a copy of which was provided to The College Fix by a campus spokesman. Adapted from Dr. Maura Cullen’s book “35 Dumb Things Well-Intended People Say: Surprising Things We Say that Widen the Diversity Gap,” the list also classifies some compliments and encouraging words, such as calling someone “cute” or saying “I know exactly how you feel,” as a no-no. Many of the “dumb” statements also pertained to race. “I don’t see color,” “I’m colorblind” and “I don’t see difference. We’re all part of the same race, the human race” were all advised against. “If you are going to live in this country, learn to speak the language” also made the list. After each phrase, an explanation as to why it should be avoided was given. Expressions on race allegedly make people of color feel invisible and diminish their life experiences, the handout states. Statements of empathy supposedly “shuts the other person down,” it adds. Saying to LBGTQ people “what you do in the privacy of your own bedroom is your business” is “hurtful and annoying” because it does not acknowledge the quality and depth of their relationship outside the bedroom, the handout states.

Harvard Borrows Big to Cut Cost of Crisis-Era Derivative Losses - Bloomberg: The wealthiest U.S. college is selling $2.5 billion of bonds to refinance debt amassed after the 2008 credit crisis, which led it to pay more than $1.25 billion to banks to back out of derivative trades upended by the financial market turmoil. With interest rates holding near record lows in the U.S. debt market, the school is seizing on the chance to reduce its costs. "Whenever you unwind the swap, you’ve lost, you’ve made a mistake,” said Andrew Kalotay, chief executive officer of a New York-based advisory firm to municipal and corporate borrowers. The interest-rate swap debacle underscored just how broadly little-foreseen risks were cascading through U.S. markets after the housing crash, roiling even the financings of a top-ranked university that’s a proving ground for Wall Street’s elite. Some of the derivative trades were arranged when Harvard’s president was Lawrence Summers, a prize-winning economist and former U.S. Treasury Secretary, who stepped down before the onset of the crisis. The Cambridge, Massachusetts-based university used the derivatives to lock in borrowing costs for a planned campus expansion. When central banks worldwide slashed interest rates because of the crisis, the rates the university agreed to pay made the contracts increasingly valuable to the banks. To avoid posting millions in required collateral, Harvard canceled the deals instead. The decision put Harvard among the dozens of schools, states and local governments that paid billions to back out of such contracts, which provided lucrative fees to banks and were sold as a way to hold down costs. The college has also been reducing the risk in its endowment. For an in-depth story on what happened to Harvard, click here.

Manufacturing or Degree-Intensive Labor Markets: Where Do the Children of Non-College Graduates Earn More Degrees? - Cleveland Fed - The recent national discussion of income inequality has raised awareness of the millions of Americans who have not been able to achieve upward mobility. For most young people, matching or exceeding their parent’s standard of living requires that they complete high school or college. The environment in which young people grow up and pursue their educations has been radically reshaped by the change in the mix of industries in our economy since 1970. Specifically, the percent of adults employed in manufacturing has been declining while the shares of industries that employ more college graduates have been increasing. This raises the question whether children whose parents do not have college degrees are more or less likely to attain degrees if they grow up in a labor market that has lower shares of manufacturing employment. Likewise, when the children of nondegreed parents grow up surrounded by degree-intensive industries, do those children climb to the next rung of the educational ladder, or are they left behind? Using the National Longitudinal Surveys of Youth (NLSY), this analysis documents the relationship between industrial composition and the educational attainment of children whose parents have only a high school education or less. The results show that the educational attainment of a region’s youth is correlated with the region’s industrial mix. Contrary to popular belief, students who grow up in regions where manufacturing employs a larger share of the workforce are more likely to finish high school and college than those who grow up in regions without a high manufacturing share. If we compare regions that specialize in college-degree-intensive industries, such as health care, with regions that do not specialize in these industries, we see a pattern that suggests continued inequality. In degree-intensive regions, cohorts of children born to non-college-graduate parents have higher shares of both high school dropouts and college graduates.

Recent College Grads, Student Loans And Unemployment - St Louis Fed - Recent college graduates have a higher chance of unemployment than their more experienced counterparts. How could student loans be designed to mitigate this risk? Unemployment is an important risk for recent college graduates, who typically have little labor market experience, especially related to their field of specialization. Although unemployment insurance exists, workers need to be experienced to qualify. Furthermore, student loan programs do not account for the fact that finding a good-paying job may take a while; repayment is expected to start soon after graduation, although some loans do provide a grace period. Hence, these two programs do not offer much help to fresh college graduates who don't find a job right away. My recent research looks at ways to mitigate the burden for those who are in this situation. In an article in the Federal Reserve Bank of St. Louis' Review, I showed how the design of student loans could mitigate the unemployment risk for recent graduates.[1] I found that unemployment compensation would be a key element of the optimal student loan program, whereby the student would receive financing not only for the time in college but also for the time until the student finds a job. An important feature of the optimal program is that the unemployment benefits received and the debt balance would depend on the length of the unemployment spell. In particular, to keep the recent graduate motivated to seek a job, the unemployment benefits should decline as the person remains unemployed, and also the amount of debt the person should pay must be increasing with the length of the unemployment. If well-designed, such a scheme would provide the optimal balance between insurance against the risk of unemployment and providing the right incentives to look for a job. Such schemes can be made revenue-neutral (on average), so taxpayers would not need to finance any deficits from the programs.

Two Thirds Of Young American Adults Live With Their Parents --As part of its periodic report on "Society at a Glance" which looks at how youth across member states are faring in terms of several social indicators, such as employment, poverty, marriage and health, the OECD also provided a unique glimpse into modern household composition, namely the percentage of young adults, those aged 15-29, living at home. What it found is that since the Great Recession, there have been significant shifts worldwide in the number of young adults living at home. From 2007 to 2014, the number of youth living at home in countries belonging to the Organization for Economic Cooperation and Development increased by 0.7%, rising to 59.4%.  As expected, the nations hit hardest by the global economic slowdown such as Italy, Slovenia and Greece had the highest percentage of youth living at home with their parents, at 80.6%, 76.4% and 76.3%, respectively. In itself, that is hardly surprising, since countries like Greece and Italy were not only among the harfest hit by the recession, and have a culture of young adults living longer at home, but also have some of the highest unemployment rates for young people. In fact, as the chart below shows, some 15% of young adults in OECD countries, or a whopping 40 million, were what the report classifies as NEET: not in employment, education or training, with both Italy and Greece at the very top, just behind Turkey. On the other end of the spectrum, Canada had the lowest percentage of youth living with parents, with just 30% of the country's youth still living at home. The Nordic countries, including Denmark, Sweden, Finland and Norway, also had low numbers of young adults living at home.In terms of deterioration, France was by far the leader, with the number of young people cohabitating with their parents rising 12.5% to 53.5% from 2007 to 2014. Report authors attribute the increase in part to the high numbers of young adults in France who are not in the workforce or in education. In France, some 16.6% of young adults were not in a job or education institution in 2015, also a notable an increase over the previous few years. Cited by US News, Claire Keane, an economist with the OECD's social policy division said that "we really think this is a crisis story," In France, she says, many benefits flow through families to reach young people. "They are relying on parents for financial support." As for the US, there has been a 3.9% increase in the proportion of youth living with their parents from 2007 to 2014, significantly higher than the OECD average. As a result, today, about 66.6% of American 15- to 29 year-olds with their parents as opposed to on their own or with a roommate, compared to around 62.8% before the crisis.

The Quiet Desperation of Millennials -  Yves Smith - A survey of 1200 Millennials by Ernst & Young and Economic Innovation Group shows how precarious their economic condition is. Admittedly, that is a long-standing feature of young adult life that is seldom discussed in polite, as in posturing-as-successful company. I recall two successful professionals in their 40s recounting how they lived paycheck to paycheck, on pasta, in their early-post college years, fearful that a personal emergency would leave them destitute (neither had relatives in the wings to bail them out; one was from a desperately poor family whose escape depended in part from someone making sure she got elocution lessons so as to eradicate her class markers; the other was estranged from his family by virtue of having come out). But for most college educated young adults in the post-World-War-II era, prior to the crisis, lean years in their 20s were a transition period, not a permanent status. By contrast, this study shows that quiet desperation is a state of life for most Millennials. While the shock of the financial crisis did enormous damage to many people in all age groups, as anyone who lost their home to foreclosure will attest, Millennials faced a job market that left even normally-always employable new college grads out of work or employed at well below their potential as baristas, temps, or in low-level retail jobs. This has a huge impact on their lifetime earnings, not only by depressing income in their early years, but even when they find better-paid work, even then putting them on a lower income track than those that landed higher-quality roles straight out of school. Read this short but important survey in full; it gives a grim picture. I’ve highlighted a few findings below (emphasis original).

  • 30 percent of respondents live with their parents, which rises to 40 percent for single respondents.
  • Nearly one­-third believe their local community is still in a recession.
  • 78 percent of Millennials are worried about having good-­paying job opportunities.
  • 74 percent are worried they won’t be able to pay their healthcare bills if they get sick.
  • 79 percent are worried they will not have enough money to live on when they retire.
  • Only 6 percent of Millennials feel they are making a lot more than required to cover basic needs. For Millennial women, the figure is only 3 percent.
  • 63 percent would have difficulty covering an unexpected $500 expense.
  • 44 percent would dedicate $5,000 in lottery winnings to paying off bills and loans, signaling a struggle to launch, save, and invest.

 After 30 Years of Investing in Private Equity, Washington Decides That It Might Help if Its Board Knew What It Was Doing -- Yves Smith - A gobsmacked reader sent me a story from PEHub titled, Pension boards could use a tutor. Here’s one that hired. The headline presupposes that pension funds are clueless when it comes to investing in private equity. While based on our extensive commentary of CalPERS, widely considered to be the best managed public pension fund, that happens to be true, it’s nevertheless revealing to see a major industry publication treat this as normal, as opposed to proof of a wide-spread pathology. First, pension funds trustees are fiduciaries. They are obligated to understand the risks that the funds they oversee are taking. If they do not understand an entire asset class, and one widely acknowledged to be one of the riskiest in these portfolios, they have no business investing in until they’ve become competent.Instead, this obviously planted sales pitch for one of the providers of this sort of remedial education, Harvard Business School Professor Josh Lerner, makes clear how far behind the eight ball these boards are. The example served up is the State of Washington, which currently is the biggest public pension fund investor in private equity. But even more important from the perspective of gross dereliction of duty is that Washington is the longest-standing investor in private equity of all public pension funds. It not only invested in KKR’s funds in the 1980s, but then proselytized on behalf of KKR to other public pension funds. Yet the article, while trying to preserve appearances and make the training sound as if the board members are being given advanced coaching, reveals that it’s material they should already know cold: Institutions looking to narrow that gap should take a cue from Lerner and Washington State Investment Board. Earlier this summer, the $106.9 billion retirement system brought in Lerner to give a presentation covering the nuances of private equity, including fee and fund structures. He also put board members through the paces of manager selection and return considerations, pairing his instructional programming with interactive scenarios.

US state public pension unfunded liabilities to hit $1.75 trillion: Moody's: Weak investment performance and insufficient contributions will cause total unfunded liabilities for U.S. state public pensions to balloon by 40 percent to $1.75 trillion through fiscal 2017, Moody's Investors Service said in a report on Thursday. The report comes amid increasing concern over America's ability to pay promised retirement benefits to public employees without draining state budgets. It has been a tough year for the funds, which earned a median 0.52 percent on investments in fiscal 2016 versus their average assumed return rate of 7.5 percent, Moody's said. In fiscal 2015, aggregate adjusted net pension liabilities stood at $1.25 trillion. Half of U.S. states did not put enough money into their retirement systems in 2015 to curb the growth of unfunded liabilities. That held true even when states met the contribution levels their actuaries told them were necessary, Moody's found. The nation's 100 largest public pensions were funded just below 70 percent as of June 30, according to a separate study on Thursday by consulting firm Milliman. That study found investment returns to be 1.31 percent and a funding deficit of $1.38 trillion.

Slowly Killing Social Security: Death By A Thousand Cuts - A surreptitious but deadly attack against your Social Security is underway. Congress just left town, but not without plunging the knife in one more time.From the beginning, a small but powerful group of ideologues -- a "small splinter group" in the words of President Dwight Eisenhower -- has sought to get rid of Social Security. At the start, the plan was to repeal it and replace it with means-tested welfare. In recent decades, the plan has been to "save" Social Security by destroying it -- again, replacing it with means-tested welfare, but now also with inadequate 401k-type savings plans layered on top, as sugar-coating.The American people have never let it happen, and the Democratic Party is now solidly with them, pushing to expand, not cut, Social Security. Stymied in their efforts to destroy Social Security legislatively, the system's opponents are relying on another tactic, involving small cuts, largely imperceptible to the American people and ultimately lethal. To recognize the stealth war on Social Security, it is essential to understand that the funds deducted for Social Security from workers' paychecks do not just pay for monthly benefits. Those funds also pay every penny of Social Security's administrative costs. These include the local offices around the country, the 1-800 number, the workers who administer the disability claims system, and other personnel and services that are necessary to ensure that Americans receive their earned benefits in an accurate, timely, and efficient manner.Congress does not appropriate a penny for those administrative costs. What it does is limit how much of that huge surplus and incoming revenue can be used by the Social Security Administration ("SSA") for administration of the program in any given year. For years, Congress has been limiting drastically how much SSA can spend of Social Security's surplus on administration.True to form, before leaving town, Congress just told SSA it has to spend less, starting October 1, than it spent last year. Less, even though the latest figures project that Social Security will run a $15.7 billion surplus in 2016 and an even larger $31.1 billion surplus in 2017. And even though it continues to have trillions more dollars in reserve.

Rising cost of Medicaid expansion is unnerving some states -- The cost of expanding Medicaid under President Barack Obama's health care overhaul is rising faster than expected in many states, causing budget anxieties and political misgivings. Far more people than projected are signing up under the new, more relaxed eligibility requirements, and their health care costs are running higher than anticipated, in part because the new enrollees are apparently sicker than expected. Rising drug prices may also be a factor. As a result, at least three expansion states, Arkansas, Kentucky and Ohio, have been pushing to require Medicaid recipients to pay more toward their health insurance — a step that some experts say could lead tens of thousands of poor people who can't afford the extra cost to drop off the Medicaid rolls and go without coverage. Contrary to common perceptions, Medicaid coverage isn't always free — many states require modest copayments. The soaring tab for the state-federal program could also harden opposition to expansion in the 19 states that have yet to sign up. The situation will be one of the thorny issues the next president will have to address, with the health care of millions of Americans hanging in the balance. Thirty-one states and the District of Columbia have opted to expand the program for poor and lower-income Americans as part of the Affordable Care Act, helping to greatly reduce the number of people without coverage. The federal government has been picking up the entire tab for the new enrollees, but states will begin paying a 5 percent share in January, and that will rise to 10 percent by 2020. While that may not sound like a lot, it can add up to tens of millions of dollars per state. Health care is already the second-biggest state expense, behind public schools, and a number of states have yet to see their tax revenue fully rebound from the Great Recession.

Rising Out-of-Pocket Health Care Costs -  The health care costs that Americans pay out-of-pocket are rising--both in total amount, which is perhaps not a surprise, but also as a share of incomes, which is perhaps more disturbing. Ann Foster discusses the pattern in "Household healthcare spending in 2014," written as a "Beyond the Numbers" short essay for the US Bureau of Labor Statistics (August 2016, vol. 5, no. 13). She has lots of details of spending in particular areas, but here's an overall figure showing out-of-pocket spending by households as a total amount (left axis) and as share of total expenditures (right-hand axis). Part of the reason for this rise is that more Americans have health care insurance with high deductibles: that is, the amount you pay out of pocket before the insurance kicks in. Here's some information from the most recent Kaiser Family Foundation 2016 Employer Health Benefits Survey.  The report notes:"[T]he share of covered workers in plans with a general annual deductible has increased significantly over time: from 55% in 2006, to 74% in 2011, to 83% in 2016, as have the average deductible amounts for covered workers in plans with deductibles: from $584 in 2006, to $991 in 2011, to $1,478 in 2016."  Another simpler way to describe this information is just to look at what share of workers now have a deductible above a certain amount, like $1,000.  This share has been rising for firms of all sizes, but especially for smaller firms. One way of holding down the rise in  health care costs is for patients and health care providers to be more sensitive to the cost implications of their choices. Most kinds of insurance against certain costs or damages--auto insurance, homeowner's insurance, and so on--have some form of out-of-pocket cost sharing for this reason. In the big picture, being protected against the risk of health care costs in the tens of thousands of dollars, or more, is quite important, even if it means you aren't protected against annual health care costs in the range of a few hundred or even several thousand dollars. But it's also wise to remember that the relatively modest rise in out-of-pocket health care costs above is a mixture of households with relatively little in such costs in most years, and other families that are consistently paying the full deductible--an amount which is rising fast--every year. High and rising deductibles will make a lot of people feel as if their health care doesn't offer them much benefit in a typical year

California petitions to become first state to offer ObamaCare to illegal immigrants | Fox News: California’s health care exchange is requesting that it be allowed a waiver from ObamaCare regulations in order to allow illegal immigrants to buy insurance on the exchange – which would make California the first state to extend ObamaCare to illegal immigrants. In a Sept. 30 letter to Health and Human Services Secretary Sylvia Burwell, Covered California’s Executive Director Peter Lee said that the Affordable Care Act has been “tremendously successful” in the state and has cut the rate of uninsured in half. “While millions of Californians have benefitted from coverage purchased through the Covered California marketplace, certain individuals are prohibited from buying insurance through our state marketplace due to their immigration status,” Lee wrote, before requesting the waiver. The Affordable Care Act technically bars illegal immigrants from insurance exchanges, but in June Gov. Jerry Brown signed a bill that allowed the state to apply for a federal waiver to open Covered California to illegal immigrants living in California. The bill’s sponsor said such a waiver would allow 390,000 illegal immigrants to receive health insurance. However, even if the Obama administration green-lights the waiver, the insurance plans that would be offered – California Qualified Health Plans – would not be subsidized. The Department for Health and Human Services did not respond to a request for comment from

Experimental Obamacare health plan exits Chicago and Atlanta exchanges: This Obamacare experiment is a flop. Harken Health — billed as an "innovative" health insurer and started by America's biggest insurance company to appeal to Obamacare customers — will exit the only two government-run exchange markets where it was selling coverage after reportedly booking losses of about $70 million in the first half of this year.The UnitedHealth Group unit — which offers unlimited primary care visits at no out-of-pocket cost to customers who use Harken Health clinics — continue selling plans outside of Obamacare exchanges in the individual and employer markets of both Chicago and Atlanta next year. But its departure in 2017 from the Obamacare exchanges that serve those cities represents another setback for advocates of the Affordable Care Act and their efforts to offer individual health plan customers a broad range of affordable coverage options. Harken in August said it was abandoning plans to sell Obamacare exchange coverage in Miami and Fort Lauderdale, Florida, next year.And Harken's parent, UnitedHealth, earlier this year said it would itself exit most Obamacare exchanges, including the federal marketplace that services Illinois, in 2017.

ObamaCare’s Meltdown Has Arrived - WSJ: Tennessee is ground zero for ObamaCare’s nationwide implosion. Late last month the state insurance commissioner, Julie Mix McPeak, approved premium increases of up to 62% in a bid to save the exchange set up under the Affordable Care Act. “I would characterize the exchange market in Tennessee as very near collapse,” she said. Then last week BlueCross BlueShield of Tennessee announced it would leave three of the state’s largest exchange markets—Nashville, Memphis and Knoxville. “We have experienced losses approaching $500 million over the course of three years on ACA plans,” the company said, “which is unsustainable.” As a result, more than 100,000 Tennesseans will be forced to seek out new coverage for 2017. BlueCross is only the latest insurer to head for the exits. Community Health Alliance, the insurance co-op established under ObamaCare, is winding down due to financial failure, leaving 30,000 people without coverage. UnitedHealthcare said in April it is departing Tennessee’s exchange after significant losses. That’s another 41,000 people needing new plans. Photo: Associated Press All told, more than 60% of our state’s ObamaCare consumers will lose their coverage heading into 2017. When they go in search of a replacement plan, they will confront two unfortunate realities: a dearth of options and skyrocketing costs. Seventy-three out of Tennessee’s 95 counties will have only one insurer on the exchange, meaning no meaningful competition whatsoever. In regions where BlueCross BlueShield is pulling out, there will be two remaining major carriers, Cigna CI -0.15 % and Humana. HUM -0.32 % The only large metro area with more options will be Chattanooga.

Ailing Obama Health Care Act May Have to Change to Survive - — The fierce struggle to enact and carry out the Affordable Care Act was supposed to put an end to 75 years of fighting for a health care system to insure all Americans. Instead, the law’s troubles could make it just a way station on the road to another, more stable health care system, the shape of which could be determined on Election Day. Seeing a lack of competition in many of the health law’s online insurance marketplaces, Hillary Clinton, President Obama and much of the Democratic Party are calling for more government, not less. The departing president, the woman who seeks to replace him and nearly one-third of the Senate have endorsed a new government-sponsored health plan, the so-called public option, to give consumers an additional choice. A significant number of Democrats, for whom Senator Bernie Sanders spoke in the primaries, favor a single-payer arrangement, which could take the form of Medicare for all. Donald J. Trump and Republicans in Congress would go in the direction of less government, reducing federal regulation and requirements so insurance would cost less and no-frills options could proliferate. Mr. Trump would, for example, encourage greater use of health savings accounts, allow insurance policies to be purchased across state lines and let people take tax deductions for insurance premium payments. In such divergent proposals lies an emerging truth: Mr. Obama’s signature domestic achievement will almost certainly have to change to survive. The two parties agree that for too many people, health plans in the individual insurance market are still too expensive and inaccessible.

Healthcare Will be Screwed Until We Stop Accepting Excuses - Kid Dynamite – Regular readers will know that writing about my interactions with our healthcare system has been an obsession of mine. I do not profess to be an expert on the legal machinations of the system – of the details of the regulations that end up screwing things up for the consumer.   What I am, however, is an expert *user* of the system, as someone who has purchased his own healthcare plan (ie: “individual” plan – even though it’s for my wife and me – as opposed to “employer” plan) for the past 7 years.   I have watched both deductibles and premiums skyrocket, and it’s starting to come to a head as consumers finally start to actually bear the costs of medical care: they see how screwed up the system is.  My current obsession is “balance billing.”  Balance billing is a national story that’s being addressed by legislation in individual states.   The cliff notes are:  when you go to an IN NETWORK provider, as designated by your insurance company, you can be hit with OUT OF NETWORK provider bills which – and this is the key part – you have no control over.  For example, I had a radiology procedure done at an in-network facility.   They then sent it to an out-of-network radiologist to do the reading, and I got an out-of-network bill.  Nope.  Not happening.  Until you give me the ability to choose my radiologist (which is one solution, although perhaps a terrible solution, as it puts a ridiculous burden on the consumer) there is absolutely no way I am paying this bill.  I called the facility, they denied responsibility, I called Anthem, and Anthem took care of it, telling me they’d make a one time adjustment.  I, of course, replied, by telling them that I would not accept their one-time  limitation, and that I would fight it every time I got screwed by such bills beyond my control. I have a friend who is a member of the NH House of Representatives.  With the help of the NH Insurance Department, who I have spoken with at length, my Representative friend put forth a bill proposing to end “balance billing” – the bill would prevent providers who contract with a given facility from billing the patient for amounts beyond what insurance would cover for in-network care.  Now, at the initial bill hearing (6 months ago), the members of the NH Insurance Department clearly enunciated the issue, and I testified with personal stories which emphasized the problem:  the consumer cannot be held responsible for bills which he has no control over.   I went into the hearing thinking that the problem was somewhere with the insurance companies – they’re easy targets for our consumer hatered.   After the hearing, however, and after talking at length with both Harvard Pilgrim and Anthem’s lobbyists, it’s clear to me that the problem lies with the hospitals.  Let me explain.

Bill Clinton Bashes Obamacare As The "Craziest Thing In The World" (video) In a staggering moment of honesty caught on tape, former President Bill Clinton admits to a group of voters in Michigan that Obamacare is a complete disaster and is wreaking havoc on the middle-class and "small-business people."  Per the video published by the NY Post, Clinton says that Obamacare is fine for those who are eligible for subsidies but admits that that hardworking "people who are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half and it’s the craziest thing in the world."“You’ve got this crazy system where all of a sudden 25 million more people have health care, and then the people who are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half and it’s the craziest thing in the world.On the other hand, the current system works fine if you’re eligible for Medicaid, if you’re a lower-income working person. If you’re already on Medicare or if you get enough subsidies on a modest income that you can afford your health care.But the people getting killed in this deal are the small-business people and individuals who make just a little bit too much to get any of these subsidies."

Busted: GAO Finds Payments To Insurers Under Affordable Care Act Are Illegal - The Government Accountability Office, the government’s non-partisan watchdog agency, issued a ruling today holding that the Obama administration’s diversion of billions of dollars from the United States Treasury to insurers selling individual policies on the ACA Exchanges was illegal. The GAO joins the Congressional Research Service, another non-partisan agency, in finding that these payments, which the Obama administration has insisted are lawful, are in fact completely unauthorized and inappropriate. For what it is worth, the GAO opinion is also largely consistent with views I have expressed on several occasions (here and here). Here’s what GAO concluded after 12 pages of careful legal analysis about section 1341 of the Affordable Care Act and the behavior of Health and Human Services (HHS):  In light of the foregoing analysis, we conclude that HHS lacks authority to ignore the statute’s directive to deposit amounts from collections under the transitional reinsurance program to the Treasury and instead make deposits in the Treasury only if its collections reach the amounts for reinsurance payments specified in section 1341. The agency is not authorized to prioritize collections in this manner. The agency must give effect to the extent possible to all of section 1341, and, to do so, is required to collect and deposit amounts for the Treasury, regardless of whether its collections fall short of the amounts specified in statute for reinsurance payments. HHS may not use amounts collected for the Treasury to make reinsurance payments.  The GAO ruling could result in yet more trouble for insurer’s selling policies on the Exchange and criminal investigations of those who authorized the illegal payments. The Obama administration has already spent $16.2 billion on the program for 2014 and 2015 and another $5 billion is scheduled to be spent in 2016, at which point the program is supposed to expire. Of the money spent thus far, only $500 million (3.1%) has been sent to the Treasury; 96.9% has been sent to insurers. Under the GAO’s interpretation of the law (section 1341 of the Affordable Care Act), no matter what amount the government collected for this program, 20% of the total belongs to the Treasury. To the extent insurers have to give money back, three things can be said.  First, a reimbursement requirement (which could be met partly by withholding any 2016 reinsurance obligations until the repayment obligation was met) will genuinely hurt insurers already struggling with the ACA. Insurers collected  roughly $92 billion in premiums in 2014 and 2015 for policies sold in the individual market on the Exchanges. Most lost a good deal of money even without any reimbursement obligation.

Excerpts from Healing Health Care –  If twenty-first century progressives had been leading the nineteenth century abolition movement, we would still have slavery, but we would have limited slavery to a 40-hour work week, and we would be congratulating each other on the progress we had made. In earlier eras of U.S. history, progressives believed they could fight injustice and move society forward, and they did so—in the abolition movement, in women’s suffrage, in social security for the elderly. Today, however, many progressive-minded people seem to have lost faith in our ability to bring about significant change. Many believe we must be content simply to tinker with problems. Nobody goes without police and fire protection—nobody has to apply for new “police and fire coverage” each year, nobody has to worry that they may no longer be qualified, nobody has to worry about a $3,000 deductible before the fire department will come. Nobody has to worry that the local sheriff won’t accept their “police insurance” plan. And nobody gets a letter informing them that their police or fire coverage is being terminated at the end of the month, for any reason. A civilized, humane society that takes care of its people with universal police and fire coverage needs to do the same with health and dental care.

Red And Blue Doctors: Politics Can Seep Into Primary Care, Study Finds -- Does it matter if your doctor is a Democrat or a Republican? A new study finds that on certain, politicized health issues — abortion, marijuana use, gun safety — the answer may be yes. You may get different counsel and treatment recommendations depending on your doctor's political leanings. The study, just out in the journal PNAS, surveyed primary care doctors about how they would treat various patients, without revealing the political focus of the study. It also checked voter registration records for their party affiliations.  Related audio Study Finds Doctors May Allow Politics To Seep Into Practice.  The upshot, says Eitan Hersh, an assistant professor of political science at Yale University and lead author of the study: On politicized health issues, "Republican and Democratic doctors treat the patients very differently. They recommend different treatment plans and take the issue more or less seriously, depending on their party affiliation."  One very interesting example on guns: We said to doctors, 'Here’s a scenario. There’s a patient who has young children in their home, and they store guns in their home. How concerning is this on a 10-point scale?' And the Democratic physicians say they’re much more concerned about the scenario than Republicans are.  On the other hand, when we start asking what they would do in this scenario, the Republicans are more likely to discuss safe storage practices. So there’s an interesting situation where the Democrats are concerned about it, they’re urging the patient not to store firearms in the home, but, maybe because they’re less familiar with the issues, they’re not saying they would discuss safe storage.

Cotard's Syndrome: The rare medical condition in which people believe they're dead or don't exist could provide clues to self-awareness for AI experts building robots — Quartz -- Cotard’s Syndrome—in which a person can believe that they’re dead, that their organs are rotting, or that they don’t exist—was first identified by the French neurologist Jules Cotard more than a century ago, in 1882. But the condition is so rare that it’s still far from fully understood. Though it’s undeniably horrific for those experiencing it, Cotard’s Syndrome presents a fascinating conundrum for those studying the disorder. The condition’s central contradiction—how can someone articulate the thought that they don’t exist?—raises questions and potential answers about how human self-awareness works. A 2013 case study of a Cotard’s sufferer showed low activity in the brain network associated with awareness of the body. It’s only one example (as with much of Cotard’s Syndrome research, because the condition is so rare), but unpacking how the brains of those with the syndrome offers hints as to how normally-functioning brains develop a sense of existence. But Cotard’s Syndrome isn’t simply interesting from a neuroscience or psychological perspective. In the world of artificial intelligence, roboticists are working to build ever-more complex machines that replicate human behavior. One of the central questions is whether machines can truly become self-aware. Could understanding Cotard’s Syndrome provide the answer?

The pill is linked to depression – and doctors can no longer ignore it --A newly published study from the University of Copenhagen has confirmed a link between hormonal contraceptives and depression. The largest of its kind, with one million Danish women between the ages of 15 and 34 tracked for a total of 13 years, it’s the kind of study that women such as me, who have experienced the side-effects of birth control-induced depression first hand, have been waiting for.Researchers found that women taking the combined oral contraceptive were 23% more likely to be diagnosed with depression and those using progestin-only pills (also known as “the mini-pill”) were 34% more likely. Teens were at the greatest risk of depression, with an 80% increase when taking the combined pill, and that risk is two-fold with the progestin-only pill. In addition, other hormone-based methods commonly offered to women seeking an alternative to the pill – such as the hormonal IUS/coil, the patch and the ring – were shown to increase depression at a rate much higher than either kind of oral contraceptives. In recent years we’ve seen efforts from the NHS and family planning organisations to encourage teens to use these so-called LARCs (long-acting reversible contraceptives), primarily because they eliminate the need to remember to take a pill every day, but also due to the fact they’re commonly believed to have less severe potential side-effects than the pill. The new research suggests this practice is misguided. We already know that those with pre-existing depression may find the pill worsens their symptoms, and if teens were at greater risk of depression, then continuing this practice would be negligent.

Is a Leading Suicide Prevention Organization a Front for Big Pharma?  - If you think you have been hearing a lot about suicide recently, it is not your imagination. The week of September 5-11 was declared National Suicide Prevention Week by the American Foundation for Suicide Prevention (AFSP). According to its website, AFSP is the “leading national not-for-profit organization dedicated to understanding and preventing suicide.” Yet due to its Pharma relationships and continued Pharma funding, it could be argued that it is dedicated to profiting from suicide. How does the group allegedly profit from suicides? Its emphasis on “screenings” and “interventions” to get possibly suicidal people into “treatment” greatly enlarges the patient pool for expensive psychiatric drugs.  Like other groups accused of being Pharma fronts, it literally sells the fear of depression, mental illness and suicide to people who may be fine and asserts that “stigma” and “barriers” to treatment (e.g., drugs) are causing suicides. As with Pharma campaigns to convince people they are “depressed” and need pills, many emotional states have external causes like relationship, job and money problems and are not “mental illness.”  Stopping suicide seems like such a worthy cause that few dissect AFSP’s actual messaging. Yet it is illogical and insulting. First, with as much as a quarter of some US demographics (for example, women) on antidepressants and ads for them ubiquitous, there is hardly lack of “awareness” of depression and suicide, or “stigmas” or “barriers” to treatment. There is arguably more of a stigma fornot taking antidepressants if you are depressed.

How Big Pharma’s Shadow Regulation Censors the Internet -- Americans pay by far the highest prices in the world for most prescription drugs, and of course big pharma would like to keep it that way. Key measures that the industry relies upon in this regard are the Prescription Drug Marketing Act [PDF] and Ryan Haight Online Pharmacy Consumer Protection Act [PDF], which make it unlawful for most Americans to access lower-priced drugs from overseas, coupled with the powers of U.S. Customs and Border Protection (CBP) to seize such drugs at the border on their own initiative.  In practice however, discretionary guidelines developed by the Food and Drug Administration (FDA) and enforced by the CBP allow American consumers to import a 90-day supply of some prescription medications for personal use, including by bringing them across border checkpoints in personal luggage, or by mailing them from overseas. In the latter case, a large market exists for pharmacies registered in other countries such as Canada, Australia and Turkey, that will accept online orders and mail genuine pharmaceuticals to American consumers at cheaper than local prices. Big pharma doesn't like this [PDF], and that's where they get creative. As we described last week, where industry can't get government to regulate the Internet in the way they want, they frequently turn to private deals with Internet intermediaries that we've termed Shadow Regulation. Big pharma is a major proponent of this practice, having spearheaded a range of such private deals that they use in an attempt to quell the supply of prescription drugs to Americans through overseas online pharmacies. This particular Shadow Regulation network contains a confusing web of similar-sounding organizations with overlapping memberships, such as the Alliance for Safe Online Pharmacies (ASOP) and the Center for Safe Internet Pharmacies (CSIP). In simple terms the former is comprised mostly of the pharmaceutical industry, whereas the latter pulls in its partners such as Internet platforms (Facebook, Google, Microsoft and Yahoo!), payment processors (PayPal, Mastercard, and American Express), delivery providers (UPS), and domain name companies (GoDaddy and Rightside). A third key player is LegitScript, which was instrumental in the formation of both ASOP and CSIP, and carries out most of the operational level arrangements that are agreed at a level of principle by those organizations. Internet users are not represented at board level in either ASOP, CSIP, or LegitScript.

Where You Live Shapes Your Immune System More than Your Genes - Like fingerprints, immune systems vary from person to person. And although we all inherit a unique set of genes that help us respond to infections, recent studies have found that our history and environment—like where and with whom we live—are responsible for 60% to 80% of the differences between individual immune systems, while genetics account for the rest. In a Review published September 29 in Trends in Immunology, three immunologists discuss the emerging science of what shapes our immune systems and how it might be applied.“Just like it took a while to crack the genetic code, we’re finally starting to crack the immune code, and we’re shifting away from the simplistic idea that there is only one type of immune system,” says lead author Adrian Liston, head of the VIB-KU Leuven Translational Immunology Laboratory in Belgium. “Diversity isn’t just programmed into our genes-- it emerges from how our genes respond to the environment.” Long-term infections are responsible for most of the differences between individual immune systems. For example, when a person has herpes or shingles, the virus has more opportunities to interact with the immune system. These interactions slowly change the cellular makeup of their immune system and make it more sensitive to that specific virus but also easier for other infections to slip past its defenses. People without these infections don’t experience these cellular changes, and even with the occasional cold or fever, their immune systems stay relatively stable over time.  The exception is when a person is elderly. . As we get older, an organ called the thymus gradually stops producing T cells, which are made to help to fight off infection. Without new T cells, older people are more likely to get sick and less likely to respond to vaccines.

A Quarter of Millennials Avoid the Flu Vaccine Because of the Cost -- A survey conducted in September by Harris Poll on behalf of CityMD, an urgent-care-center network, found that 52 percent of millennials don't plan on getting the flu shot during this year's influenza season1. Of those, 49 percent said they don't trust that the vaccine will prevent them from getting the flu. An additional 29 percent worried that getting the shot will actually make them catch the virus. (That's a common misconception.)  Medical professionals, it turns out, know more about preventative medicine than millennials do. The Centers for Disease Control says that getting the vaccine is the best way to ensure you won't get the flu. Citing recent studies, the CDC says the vaccine "reduces the risk of flu illness by about 50 percent to 60 percent." Last season, 43.6 percent of Americans got the vaccine, according to CDC data.  For a quarter of millennials polled, it was cost, not conspiracy, that prevented them from getting the vaccine. Penny pinching makes sense when dealing with crippling student debt, but a flu shot is reasonably priced, even for those without insurance. Costco charges $14.99 for a flu shot, Walgreens starts at $31.99, and CVS charges $39.99 but offers a 20 percent-off coupon on non-pharmacy purchases with the vaccine.  For those who choose to skip the shot, a pack of over the counter flu symptom relief runs about $24. Add a couple of bucks for some tissues and the cost of treating the flu is roughly the same, if not slightly higher, than paying out of pocket for the vaccine.  Missing work due to illness also takes a financial toll on hourly employees, especially the 38 percent of working Americans who don't have paid sick leave. Employers lose out too: Last year, the CDC estimated that worker injuries and illness cost businesses $225.8 billion.

Here’s why an economist thinks we should consider paying people to give up their body parts - Imagine your kid is sick.  Without a kidney transplant, they'll have to make regular trips to the hospital for dialysis and face all kinds of secondary medical problems. Your child ends up on a waiting list thousands and thousands of names long. You wait for weeks or months without good news.  Of course, there are thousands of healthy people in your city, millions more in your country. Some of them must be eligible matches. You scrounge up your life savings, pull funds out of your retirement account, put an ad online offering $20,000 to anyone who donates a healthy kidney to your kid. Responses flood in, crowds of people willing to get tested to save your kid and earn some cash.  But the doctor tells you that none of those people can donate. In the United States, as in most of the rest of the world, it's illegal to buy and sell body parts like kidneys.  In a new paper published by the National Bureau of Economic Research, Nicola Lacetera lays out the key reasons for this rule:

  • If people got to buy organs, it would lead to an unequal system where wealthy people got access to body parts at the expense of people who couldn't pay for life-saving transplants.
  • Poor people might choose to sell body parts to meet pressing economic needs, leading to a situation where people are functionally coerced by the inequalities of capitalism into giving up organs.
  • Sick people might hide their sicknesses in order to profit from donating infected tissue.
  • Broadly speaking, we have a social aversion to morally "repugnant" transactions, often involving buying and selling bodily services. There is a deeply-ingrained intuition that transactions (like prostitution, or even slavery) that involve trade in human flesh degrade the moral character of a society.

But it's also unquestionably true that a properly-orchestrated organ market could save lives.   In the US, 119,000 people are on the waiting list for a donation, and an average of 22 people die every day waiting for an organ. It's pretty clear that creating a financial incentive to donate would have an impact on those numbers. And there exist solutions to at least some of the moral problems. For example: A third party, like the government or insurance companies, could ensure that the list of people who need transplants remains ranked in order of need. Patients who need organs most would be first in line, and no one could pay to go to the front of the line. Paying someone who wants to sell a kidney to someone in need wouldn't throw all that off — the fresh kidney would just have to go to the highest-need person who is a match, not the highest bidder. That could increase supply without unequally pushing lifesaving organs (or bone marrow or other body parts) toward wealthy patients.

Human age limit claim sparks debate : Nature News & Comment: Jeanne Calment outlived her daughter and grandson by decades, finally succumbing to natural causes at the ripe old age of 122. Calment, who was French and died almost two decades ago, is thought to be world's longest living person. But if subsequent advances in medicine have lulled you into thinking that you might exceed this record, think again. An analysis of global demographic data published in Nature1 suggests that humans have a fixed shelf life, and that the odds of someone beating Calment’s record are low — although some scientists question this interpretation. They say that the data used in the analysis are not unequivocal, and that the paper doesn’t account for future advances in medicine.Human life expectancy has steadily increased since the nineteenth century. Reports of supercentenarians — people such as Calment who live to older than 110 — together with observations of model animals whose lifespans can be extended through genetic or dietary modifications, have prompted some to suggest that there is no upper limit on human lifespan. Others say that the steady increase in life expectancy and maximum human lifespan seen during the last century will eventually stop. To investigate, Jan Vijg, a geneticist at Albert Einstein College of Medicine in New York City and his colleagues turned to the Human Mortality Database, which spans 38 countries and is jointly run by US and German demographers. They reasoned that if there’s no upper limit on lifespan, then the biggest increase in survival should be experienced by ever-older age groups as the years pass and medicine improves. Instead, they found that the age with the greatest improvement in survival got steadily higher since the early twentieth century, but then started to plateau at about 99 in 1980. (The age has since increased by a very small amount).

J&J warns diabetic patients: Insulin pump vulnerable to hacking | Reuters: Johnson & Johnson is telling patients that it has learned of a security vulnerability in one of its insulin pumps that a hacker could exploit to overdose diabetic patients with insulin, though it describes the risk as low. Medical device experts said they believe it was the first time a manufacturer had issued such a warning to patients about a cyber vulnerability, a hot topic in the industry following revelations last month about possible bugs in pacemakers and defibrillators. J&J executives told Reuters they knew of no examples of attempted hacking attacks on the device, the J&J Animas OneTouch Ping insulin pump. The company is nonetheless warning customers and providing advice on how to fix the problem. "The probability of unauthorized access to the OneTouch Ping system is extremely low," the company said in letters sent on Monday to doctors and about 114,000 patients who use the device in the United States and Canada. "It would require technical expertise, sophisticated equipment and proximity to the pump, as the OneTouch Ping system is not connected to the internet or to any external network." A copy of the text of the letter was made available to Reuters.’

World’s first baby born with controversial new ‘three-parent’ technique -- The world’s first child created using a controversial “three-parent” baby technique has been born in Mexico, it has been announced. Limited details about the birth were revealed ahead of the American Society of Reproductive Medicine's scientific congress in Salt Lake City next month, where it will be discussed more fully.  According to critics, the procedure is tantamount to genetic modification of humans or even “playing God”. But supporters say it allows women with a particular type of genetic disease to have healthy children who are related to them. A report in the New Scientist magazine said the baby was now five months told. His parents are Jordanians and the work was carried out by a team of experts from the US. The child’s mother has Leigh syndrome, a fatal disorder that affects the developing nervous system and would have been passed on in her mitochondrial DNA. Although she is healthy, two of her children have died as a result of inheriting the disease: a girl who lived until she was six and an eight-month-old baby.   There are different ways of creating a so-called three-parent baby. The technique used by Dr John Zhang, of the New Hope Fertility Clinic in New York, and his team involved taking the nucleus from one of the mother's eggs – containing her DNA – and implanting it into a donor egg that had its nucleus removed but retained the donor’s healthy mitochondrial DNA.

FDA Tests Confirm Baby Foods Contain Residues of Glyphosate - The U.S. Food and Drug Administration (FDA), which is quietly starting to test U.S. foods for traces ofglyphosate , has found residues of the cancer-linked pesticide in a variety of oat products, including plain and flavored oat cereals for babies.  Data compiled by an FDA chemist and presented to other chemists at a meeting in July in Florida showed residues of glyphosate in several types of infant oat cereal, including banana strawberry- and banana-flavored varieties. Glyphosate was also detected in "cinnamon spice" instant oatmeal, "maple brown sugar" instant oatmeal and "peach and cream" instant oatmeal products. In the sample results shared in the presentation, levels ranged from nothing detected in several organic oat products to 1.67 parts per million in non-organic varieties.  Glyphosate is the active ingredient in Monsanto's Roundup, the most heavily used weed killer in the world . Concerns about glyphosate residues in food spiked after the World Health Organization in 2015 said a team of international cancer experts determined glyphosate is a probable human carcinogen . Other scientists have raised concerns about how heavy use of glyphosate is impacting human health and the environment.

Moonshine Eugenics --Well, looks like we’re going to have lots of Homer Simpsons whipping themselves up some bathtub Frankenstein monsters – plants, animals, their own children, even the sky’s no limit, as the scientism cult chants. According to the hype for these Do-It-Yourself Eugenics kits, random scumbags will be able to take a break from their meth labs to tinker with genetic engineering and environmental release right from their basements. (Not that corporate deployment is any less sloppy or reckless.) In discussing a lukewarm UK “bioethics” report, GMWatch gives as one of the reasons for the lameness of the recommendations: “tighten[ing] regulation in this field….would increase public alarm about the risks of gene editing at a time when the UK government wants to reassure people of the safety of the technology…”  It’s probably true the British government, media, and science establishment are concerned about this possibility. But it seems to me that we could turn that around on them, saying to the people, “You were already worried about the corporate system’s GMOs. Now look at what a chaotic, deranged free-for-all genetic engineering is becoming. It’s like you feared all along – it’s complete recklessness and chaos, there’s zero controls, and literally no one has the slightest idea what they’re doing, how extremely dangerous this all is, or how horrific the effects are going to be.” The most vile thing is that the kits are designed to generate antibiotic resistant E. coli, just for the fun of it. If you weren’t already convinced by systematic antibiotic abuse in CAFOs and regular genetic engineering, are you now convinced that governments, corporations, and scientists are systematically working to eradicate antibiotics as an effective medical treatment, because they want this type of medicine to cease to exist.  I say each and every person involved in any aspect of any of these campaigns to eradicate antibiotics is guilty of first degree murder in each and every case where someone’s death is related to antibiotic resistant bacteria, and of assault or attempted murder in each and every non-lethal case. I also apply full civil liability to each and every individual involved. These criminal and civil liabilities follow from strict application of conspiracy law. Certainly each and every one of them knows exactly what he or she is doing.  Where it comes to all these crimes, we are far, far past the point of ignorance or honest confusion.

Monsanto's Toxic PCBs Lurking in 26,000 U.S. Public Schools, Report Says -- Monsanto's history with a controversial and dangerous class of chemicals known as PCBs, or polychlorinated biphenyls, has once again reared its ugly head.  On the same day that the agribusiness giant announced plans to set aside a whopping $280 million in PCB personal injury settlements, a study from scientists at the Harvard T.H. Chan School of Public Health found that up to 14 million students in 26,000 schools in the U.S. could be exposed to unsafe levels of the highly toxic chemicals even though they were banned several decades ago. Before switching its operations to agriculture, Monsanto was the sole manufacturer of PCBs from 1935 until 1977. The U.S. Environmental Protection Agency (EPA) banned PCBs in 1979 due to its link to birth defects and cancer in laboratory animals. PCBs can have adverse skin and liver effects in humans and can also linger in the environment for many decades. The report states: "Decades after the PCB ban, people are still being exposed to these toxic chemicals from various sources, such as caulk, some oil-based paints, and floor finish in buildings constructed between 1950 and 1979; leaking fluorescent light ballast; old electrical equipment; and PCB-containing landfills. Most worrisome are PCB exposures for children in schools built or retrofitted during the period that PCB-containing materials were widely used. Up to 14 million students nationwide, representing nearly 30 percent of the school-aged population, may be exposed to PCBs in their schools, based on the estimated number of schools built during that time and how much PCB-containing material was used in these schools. A 2016 Harvard School of Public Health study estimates that between 12,960 and 25,920 schools have PCB-containing caulk" The report— The ABCs of PCBs— was released on Wednesday by U.S. Senator Edward Markey of Massachusetts, the Environmental Working Group (EWG) and America Unites for Kids.

Nitrates in the water may be more harmful than we thought - Elevated nitrates in drinking water — a persistent problem in Iowa — have been be linked to health concerns that include birth defects, cancers and thyroid problems, according to a state environmental group's review of dozens of health studies.The studies reinforce the need for Iowa to work harder to reduce nitrates and other pollution in the state's rivers and streams, the Iowa Environmental Council said. Iowans “are particularly vulnerable to the potential health impacts from nitrate pollution," according to the group's report, released Thursday.“Concentrations of nitrate in Iowa’s streams and groundwater have been found to rank among the highest in the U.S., even higher than elsewhere in the Corn Belt and Northern Great Plains,” said the group, which emphasized the need to learn more about nitrates' health impacts.The Des Moines Register reported last year that state environmental data showed more than 60 Iowa cities and towns had battled high nitrate levels in their drinking water the past five years.The state said the water supplies of about 260 cities and towns were highly susceptible of becoming contaminated by nitrates and pollutants — about 30 percent of Iowa's 880 municipal water systems. The state data provide a snapshot of the cities reporting nitrate levels of 5 milligrams per liter or higher, a warning sign that nitrates are approaching harmful levels.  The Iowa Environmental Council said most health concerns associated with high nitrate levels in drinking water have centered on blue baby syndrome, a condition that can be fatal to infants 6 months and younger if not treated.  "While most of the associations have been found when nitrate levels are higher than the drinking water standard," the Iowa Environmental Council said, "some research suggests that nitrate concentrations even lower than the drinking water standard may be harmful."

Flint Hit With Bacterial Illness as Residents Shun City Water  -- Residents of Flint, Mich., affected by the contaminated-water crisis have added a new complication to their lives: an outbreak of shigellosis, a bacterial illness that is easily transmitted when people do not wash their hands.  Health department officials in Genesee County, where Flint is the largest city, said there has been an increase in the gastrointestinal illness, which can lead to severe diarrhea, fever, nausea, vomiting, cramps and stools containing blood and mucus, according to a statement issued last month.  From the beginning of the year through the week ending Oct. 1, that county had 85 cases, the highest number in the state, according to the latest data from the Michigan Department of Health and Human Services. Neighboring Saginaw County was next, with 49 cases.  According to the Centers for Disease Control and Prevention, shigellosis affects 500,000 people in the United States every year. It is transmitted through the accidental ingestion of fecal matter containing the bacteria, such as when food handlers do not wash their hands.Trust in Flint’s water has been severely low since a lead-contamination crisis after residents raised the alarm over the foul odor and rusty appearance of their water. A decision by officials in 2014 to switch the city’s water source to the Flint River from Lake Huron was suspected in health problems like rashes and hair loss, and symptoms in children including weight loss and problems with coordination.

 Leaders Pledge Action to Control Superbugs » This year’s UN summit will be remembered most for its high-level event on anti-microbial resistance (AMR), held on Sept 22, with many heads of government and ministers speaking on the need to fight this crisis. The leaders adopted a landmark Political Declaration on AMR that recognised that antibiotic resistance is the “greatest and most urgent global risk” and that “due to AMR many 20th century achievements are being gravely challenged, particularly the reduction in illness and death from infectious diseases…” This is the first ever statement by the heads of all the countries that recognises the AMR crisis and in which they pledge to take action. Ban said that AMR has become one of the biggest threats to global health. “All around the world, many common infections are becoming resistant to the antimicrobial medicines used to treat them, resulting in longer illnesses and more deaths. At the same time, not enough new antimicrobial drugs, especially antibiotics, are being developed to replace older and increasingly ineffective ones.”World Health Organisation Director-General Margaret Chan warned that “AMR poses a fundamental threat to human health, development, and security. Common and life-threatening infections like pneumonia, gonorrhoea, and post-operative infections, as well as HIV, tuberculosis and malaria are increasingly becoming untreatable because of AMR.” Referring to the declaration, she said, “the commitments made today must now be translated into swift, effective actions … We are running out of time.”

Russia Plans to Kill 250,000 Reindeer Amid Anthrax Fears -- Officials in the Yamalo-Nenets region in Siberia are proposing the culling of a quarter-million reindeer by Christmas in order to minimize the possible spread of anthrax, the Siberian Times reported.  The deadly problem began over the summer , as record-high temperatures as warm as 95 degrees Fahrenheit thawed out an anthrax-infected reindeer buried in permafrost about 70 years ago. The outbreak killed a 12-year-old boy, claimed the lives of about 2,300 reindeer and four dogs and sickened about 100 people. It was the first time anthrax struck the region since 1941.   According to the Siberian Times, the proposal to kill 250,000 reindeer is dramatically higher than the number of animals that are annually culled in November and December.  To incentivize the nomadic herders to give up their herds , officials suggested a reward of an affordable mortgage to buy an apartment instead of a cash compensation.  An estimated 730,000 reindeer currently live in the Yamalo-Nenets region, an amount that Nikolai Vlasov, deputy head of Russia's Federal Veterinary and Phytosanitary Surveillance Service, said was already "too high."

Tick bites that trigger severe meat allergy on rise around the world - People living in tick-endemic areas around the world are being warned of an increasingly prevalent, potentially life-threatening side effect to being bitten: developing a severe allergy to meat. The link between tick bites and meat allergies was first described in 2007, and has since been confirmed around the world. Sufferers of “tick-induced mammalian meat allergy” will experience a delayed reaction of between two and 10 hours after eating red meat. Almost invariably, they are found to have been bitten by a tick – sometimes as much as six months before.Although most cases of tick bites of humans are uneventful, some immune systems are sensitive to proteins in the parasite’s saliva and become intolerant of red meat and, in some cases, derivatives such as dairy and gelatine. Poultry and seafood can be tolerated, but many sufferers choose to avoid meat entirely. Cases of the emergent allergy have been reported in Europe, Asia, Central America and Africa, but it is most prevalent – and on the rise – in parts of Australia and the United States where ticks are endemic and host populations are booming. Bandicoots and other small native mammals are flourishing along the east coast where the Australian paralytic tick is endemic. The Lone Star tick is widespread throughout the US, but meat allergies have been reported in the south-eastern states, home to growing herds of white-tailed deer. But tick bite-induced anaphylaxis – the most acute allergic reaction, which can result in death – is rare in countries other than Australia.

 A Look Inside Key West's Battle To Prevent Release Of GMO Mosquitos -- We’ve all heard of the Zika virus. What you probably haven’t heard of is British biotechnology company Oxitec, purchased last year by billionaire Randal Kirk. A company that has released A. aegypti killing GMO mosquitos in at least Brazil, Malaysia, Panama and the Grand Cayman islands. The company also planned a release in the Florida Keys, but has thus far been stopped by a group of determined activists. Bloomberg covered the story in a fascinating article published earlier today titled, Florida’s Feud Over Zika-Fighting GMO Mosquitoes. What follows are excerpts from that piece: It takes over two and half hours, emptying container after container, to release all the mosquitoes into West Bay. They’ve been doing this three times a week since July; residents used to grimace when they drove by, but now they barely glance over. The procedure seems more disruptive to those of us in the van. Each time Evangelou opens a container, a fair number of mosquitoes escape the wind tunnel and start buzzing around our heads. “There will be a few fliers, yeah,” Lacroix says with a smirk.  Male mosquitoes, he reminds me, aren’t the ones that bite. Just about the only thing male mosquitoes do, he says, is seek out females, which do the biting. Oxitec is trying to leverage this mating instinct to help wipe out one particular species of mosquito: Aedes aegypti, carrier and spreader of some of the worst insect-borne diseases known to medicine—dengue, malaria, and Zika. The A. aegypti mosquito has evolved to survive even the most effective pesticides. It can lay 500 eggs in just a bottle cap’s worth of water, and it prefers to bite humans over animals, so it lives in places where no one thinks to spray, like under the couch. The idea behind Oxitec’s experiment is that if enough genetically modified male A. aegypti mosquitoes are released into the wild, they’ll track down large numbers of females in those hard-to-find places and mate with them. The eggs that result from any union with an Oxitec mosquito will carry a fatal genetic trait engineered into the father—a “kill switch,” geneticists call it. The next generation of A. aegypti mosquitoes will never survive past the larval stage, never fly, never bite, and never spread disease. No mosquitoes, no Zika.

Feds List 7 Hawaii Bee Species as Endangered, a First in US - ABC News: Federal authorities on Friday added seven yellow-faced bee species, Hawaii's only native bees, for protection under the Endangered Species Act, a first for any bees in the United States. The U.S. Fish and Wildlife Service announced the listing after years of study by the conservation group Xerces Society, state government officials and independent researchers. The Xerces Society says its goal is to protect nature's pollinators and invertebrates, which play a vital role in the health of the overall ecosystem. The nonprofit organization was involved in the initial petitions to protect the bee species, said Sarina Jepson, director of endangered species and aquatic programs for the Portland, Oregon-based group. Jepson said yellow-faced bees can be found elsewhere in the world, but these particular species are native only to Hawaii and pollinate plant species indigenous to the islands. The bees face a variety of threats including "feral pigs, invasive ants, loss of native habitat due to invasive plants, fire, as well as development, especially in some for the coastal areas," Jepson told The Associated Press. The bees can be found in a wide variety of habitats in Hawaii, from coastal environments to high-elevation shrub lands, she said. The yellow-faced bees pollinate some of Hawaii's endangered native plant species. While other bees could potentially pollinate those species, many could become extinct if these bees were to die off entirely.

7 Bees Facing Extinction Added to Endangered Species List for First Time - EcoWatch - The U.S. Fish & Wildlife Service (USFWS) has added seven bee species to the endangered species list, a first for bees. Native to Hawaii, these yellow-faced bees are facing extinction due to habitat loss, wildfires and invasive species. The tiny, solitary bees were once abundant in Hawaii, but surveys in the late 1990s found that many of its traditional sites had been urbanized or colonized by non-native plants. In March 2009, the Xerces Society for Invertebrate Conservation petitioned the USFWS to list these bee species as endangered under the U.S. Endangered Species Act.  "The USFWS decision is excellent news for these bees, but there is much work that needs to be done to ensure that Hawaii's bees thrive," wrote Matthew Shepherd, communications director for Xerces, in a blog post responding to the announcement.  Yellow-faced bees are the most important pollinators for many key trees and shrubs in Hawaii. They once populated the island from the coast up to 10,000 feet on Mauna Kea and Haleakalā. They get their name from yellow-to-white facial markings, and they are often mistaken for wasps.  According to Karl Magnacca, an entomologist with the O'ahu Army Natural Resources Program, the bees evolved in an isolated environment and were unprepared for the changes brought by humans. These included new plants, domestic animals such as cattle and goats, as well as ants and other bees that compete with the native Hawaiian bees.  One of the seven species, Hylaeus anthracites, is now found in just 15 locations on Hawaii, Maui, Kahoolawe, Molokai and Oahu. Protection of these areas could be a start to aid the bees.

Watch A Bumblebee Tug A String To Get Lunch  -- Bumblebees can be taught to yank a string to collect a sweet treat, scientists reported today in the journal PLOS Biology. Bees also picked up this “highly unnatural” way of foraging from watching each other. Bees have cognitive abilities necessary for culture--they can learn and spread behaviors through a group. Studying how bugs learn from each other may offer insights about our own culture, the researchers suspect. “More sophisticated forms of social learning…specific to human culture may well have evolved from simpler forms of learning and cognition as described here,” they wrote. The string-tugging puzzle the team used is often used to test cognitive abilities in vertebrates, partly because it’s not the type of behavior most animals would do on their own. Though bees drag debris and corpses from their nest, they don’t pull objects with the expectation of getting a snack. Like other animals, though, the insects could be trained in this task. A few even figured it out on their own. You can watch one of the “experienced” bees earn her lunch in the video above. The blue disk is designed to mimic a flower, with a well of sugar water in the center. To slide the flower out from under a Plexiglas table, the worker bee must use her forelegs to grasp and yank the string. Bumblebees could also learn the trick by observing their peers. Fifteen of 25 uninformed bees picked the skill up after watching another bee in action. And a single bee could introduce the string-pulling technique to a colony, with the skill continuing to spread even after that bee had died. “Once one bee knew how to string pull, over time, most of the foraging bees learned,” wrote the researchers. “Learning a non-natural task in bumblebees can spread culturally through populations.”

US Says Climate Change Threatens National Park's Insects - ABC News:US wildlife officials proposed greater protections for two rare insects in Glacier National Park on Monday, saying warmer temperatures caused by climate change are drying up the mountain streams where they live. The western glacier stonefly and the meltwater lednian stonefly live primarily in streams fed by cold water from glaciers and snowfields. In Glacier National Park, those glaciers are predicted to largely disappear by 2030. Researchers say the stoneflies could follow suit, in a case that underscores the vulnerability to warmer temperatures of animals and plants in mountainous areas of North America. "They're indicative of the health of the alpine community," said Jonathan "Joe" Giersch, a scientist with the U.S. Geological Survey tracking the stoneflies' decline. "The glaciers really are the water towers for the continent. That affects not just the fish but other aquatic species in river and steams, and not just in high alpine areas but down in drainages." A final decision on whether to add the insects to the government's list of threatened species is expected within about a year, the U.S. Fish and Wildlife Service said. New populations of what are believed to be the western glacier stonefly were recently discovered in the Beartooth Mountains of Montana and Wyoming's Grand Teton National Park. Despite that news, wildlife officials said the threat posed by climate change and periodic drought could drive both kinds of stonefly toward extinction.

Toxic algae blooms linked to over-fertilization and climate change - Recent blooms of toxic algae in southern Florida, which have provoked Governor Rick Scott to announce a state of emergency, may be tied to fertilizer chemicals from agricultural and residential origins. Waterways and beaches along Florida’s Treasure Coast, Lake Okeechobee, and the Everglades have been experiencing massive blooms of toxic algae since May. The cyanobacteria algae—described as thick, pea-green, and foul-smelling—is intensely toxic and poses health risks to people and wildlife in the area. At its peak, the bloom in Lake Okeechobee covered 33 square miles—or about one-third of the lake's surface. One source estimates the total area of the algae to be roughly the size of Miami.The impact of these algae blooms has already proven disastrous. Tourism, a main source of income for residents around Lake Okeechobee and along the coast, is down. Contact with toxic algae blooms “can affect the gastrointestinal system, liver, nervous system, and skin.” Fish are dying, and many have raised concerns about manatees and other large wildlife in the area.So what caused this massive outbreak? The blooms spread, in part, due to flood-control measures taken by the U.S. Army Corps of Engineers; to prevent Lake Okeechobee from overflowing earlier this year, the Corps released large amounts of water from the lake into nearby estuaries. According to a statement, these actions “upset the freshwater-saltwater mix in the estuaries” and contributed to the spread of the toxic blooms. But the key factor seems to be high levels of nutrients (like nitrogen and phosphorous) in the water. According to a spokeswoman for Earthjustice, speaking to CNN:  "The algae outbreaks are triggered by fertilizer sewage and manure pollution that the state has failed to properly regulate. It's like adding miracle grow to the water and it triggers massive algae outbreaks."  Essentially, the water in Lake Okeechobee is contaminated by nutrient-rich manure and waste-filled runoff from nearby farms and houses. Exacerbated by hot summer weather, these conditions create an ideal habitat for toxic algae. Some fear that, once the algae die off, large swaths of affected water could turn into oxygen-deficient “dead zones.” Over-fertilization and poor land management, coupled with various manifestations of climate change, mean that algae blooms are becoming much more than a seasonal annoyance: these blooms are threatening ecosystems and biodiversity in the region.

Twilight For The Sawfish - When French oceanographer Anita Conti first journeyed to Senegal in the 1940s, she found ocean waters teeming with giant animals. “The sea,” she later wrote, “is a river of beasts.” Large sharks with heads like hammers or with faded stripes like tigers glided through the water. Giant sawfish, close relatives of sharks, hunted in the shallows. One male sawfish reached seven meters long and likely weighed some three-quarters of a tonne. Another had a face, Conti recalled, like “a pallid nightmare.” Each tooth on the animal’s sawlike snout, or rostrum, she observed, “is a weapon that can penetrate flesh and even wood.” Before I moved to Senegal five years ago, I knew nothing about these marine giants. But almost as soon as I set foot in Dakar, the country’s capital, I made the acquaintance of the sawfish. The creature is part of every cash transaction in Senegal, every act of commerce that takes place in the country’s flourishing markets.   The real sawfish, however, has all but vanished from the country’s coastal waters, though populations can be found elsewhere in the world. Today, fewer than 80 years after Conti’s initial study, overfishing and habitat loss have taken a heavy toll on Africa’s sawfish, reducing populations by more than 80 percent, according to an estimate from the International Union for Conservation of Nature. When Irish researcher Ruth Leeney recently interviewed West African fishers, showing them a picture of a real sawfish, young men were unable to identify it. “They’d turn it around and they’d try to get their heads around what this thing was,” “But if you’ve never seen something like that, then you don’t have any clue what you’re looking at.”

Prominent Latin American Scientists Say Bill Gates’ Golden Rice Is a Total Failure - Nobel Laureates who have been pushing the genetically modified organism agenda deep into scientific circles are being lambasted by a group called the Union of Latin American Scientists Committed to Society and Nature (UCCSN-AL). A whopping third of Nobel laureates recently slammed Greenpeace for its anti-GM campaign, claiming that the issues which Greenpeace has highlighted“misrepresent the risks, benefits, and impacts” of genetically altered plants. The UCCSN-AL thinks we should be aware of the true aims of companies like Bayer, Monsanto, Syngenta, and Dow Agrochemical, and others, even with glowing reviews from signatories who make GM-promoting claims without data to back them up. Whether the public at large will take any anti-GM advice based simply on theNobel pedigree remains to be seen, especially considering that email trails recently revealed that many high-level professors at universities and scientific journals were either bribed or funded by Dow, Syngenta, Monsanto, Bayer AG, and other chemical-ag champions.  The public reprimand against these laureates concerns transgenic crops, and ‘Golden Rice,’ a highly touted Gates Foundation experiment which has been proven to be deceptive in its claims to help feed the world and stop Vitamin A deficits in poor populations. Truly, if the aim of the Gates Foundation and other corporations was to stop hunger and end vitamin deficiency, why would they continue to patent crops which have been shown to have lower levels of the vitamins and essential minerals that humans need for better health? Many transgenic crops are known as chelators of important minerals from the soil itself.

Global harvest prospects improve for maize, wheat and rice crops -- Global food markets will likely remain "generally well balanced" in the year ahead, as prices for most internationally-traded agricultural commodities are relatively low and stable, FAO said today. The benign outlook, especially for staple grains, is poised to lower the world food import bill to a six-year low, according to the Food Outlook. Record global production forecasts for this year's wheat and rice harvests, along with rebounding maize output, are helping keep inventories ample and prices low. Worldwide cereal production in 2016 should rise 2 569 million tonnes, up 1.5 percent from the previous year and enough to further boost existing inventories.  The value of total food imports is expected to fall 11 percent in U.S. dollar terms in 2016 to 1.168 trillion, as lower bills for livestock products and cereal-based foodstuffs more than offset higher bills for fish, fruit and vegetables, oils and particularly sugar. However, the decline is expected to be slower for economically more vulnerable nations, many of which have depreciating local currencies.  FAO raised its forecast for global wheat production to 742.4 million tonnes, led by increases in India, the U.S. and the Russian Federation - which is poised to overtake the European Union as the grain's largest exporter. Total wheat utilization is projected to reach 730.5 million tonnes, including a big jump in use of lower-quality wheat for animal rations.

 The Environmental Destruction in the Corn Belt During the Obama-Vilsack Tenure - Big Picture Agriculture by k.m. -- Michael Pollan is the father of waking up America to the inconvenient truths about our modern food system. His latest writing, a New York Times Magazine feature story, is out today, "Why Did the Obamas Fail to Take On Corporate Agriculture?” In this lengthy article Pollan first covers the politics surrounding attempted reform of GIPSA (Grain Inspection, Packers & Stockyards Administration) and the meat giants, and then he especially focuses upon Big Food and the Grocery Manufacturer’s Association. A more apt title might have been "Why Did the Obamas Fail to Take on Corporate Food?" The overall premise is that Obama’s good intentions were overridden by corporate power during his eight years in office. Michelle became the real hero and was the real food reform powerhouse, not her husband. The gigantic subject of food and agriculture is rife with complexities, and as usual, Pollan navigates the complexities well with research and in depth reporting. He placed blame on the EPA for lack of regulatory action over CAFOs and antibiotics for livestock. But he failed to mention that the EPA also sold out to the ethanol industry when corn prices began to fall, first by stalling the process, then by tweaking the mandates rather than scaling them back, disregarding evidence that corn ethanol policy is environmentally disastrous.  Pollan decries Obama's lack of including the category of agriculture with his other reform targets of energy and transportation. I'd add that agriculture wasn't the only thing left out in this administration's climate goals as it would have been more serious and right if he'd have advocated for counting and reducing our outsourced emissions, our concrete emissions, and our construction emissions, too, but then all of those things would hurt the economy and stimulus efforts. I had a big quibble with Pollan's article, however, and that was this... He never criticized Obama for his choice of Secretary of Agriculture. That should have offered a clue very early on for how serious Obama was (or wasn't) about reforming the U.S. food system.   We've lost 29 percent of our CRP/idled farmland under Vilsack's watch. I never heard him advocate for more CRP acres until very recently, in response to today's low corn, soybean, and wheat prices. I'd expect that citizens would rather subsidize idled farmland for the sake of soil health and wildlife habitat than subsidize GMO seed corn and chemicals if they were given a choice. Wendell Berry, in his Kansas talk last month said,"The only solution to a limitless free market economy is to have a fair share to all by limiting production."Certainly, all-out production is not rewarding farmers financially during this era. We currently have a subsidy system that ensures buying inputs. This month 7 billion dollars will be doled out our commodity farmers as a safety net even as vast amounts of the corn they produced sits uselessly in storage. Instead, we need farm policy that offers subsidies which protect both the farmers and the land at the same time — especially in this day of rural depopulation, ever larger farms, REIT owned farms, land transfers, and off-site landowners.

Water Year 2016 ends, California suffered ‘snow drought’: California’s 2016 Water Year drew to a close Friday, ending a fifth consecutive year marked by meager precipitation that fell more often as rain than snow. Record warm temperatures created an early and below-average runoff that was in large part absorbed by parched soil before ever reaching the State’s reservoirs. The water content of the California Sierra snowpack, often referred to as “the state’s largest reservoir,” flows each spring into a series of above ground storage reservoirs that essentially serve as California’s water savings accounts in order to meet the growing demands of an uncertain climate future. These all-too-familiar dry, warming conditions have led state water officials to describe the situation as a California “snow drought.” The California Department of Water Resources, or DWR, explains the term in its recently released Drought and Water Year 2016: Hot and Dry Conditions Continue, a water year wrap-up delivered with detailed historical context. A “water year,” a 12-month time period during which precipitation totals are measured, runs from Oct. 1 to Sept. 30 of the following year. The year is designated by the calendar year in which it ends. Water Year 2016 is officially listed in the record books as “dry” statewide, even though parts of Northern California experienced average to slightly above average precipitation. The forecast for Water Year 2017 is uncertain. The National Oceanic and Atmospheric Administration’s Climate Prediction Center currently sees slightly better than even odds that weak La Niña conditions will develop this fall and winter.

‘Drill, baby, drill’ is not the answer to California’s water woes - By the Editorial Board - This summer, as temperatures soared and groundwater depletion created more San Joaquin Valley sinkholes, Sen. Lois Wolk, D-Davis, put forth legislation to fast-track conservation of underground water supplies. The proposal was modest: Delay drilling in overdrafted basins until the state’s new groundwater law takes hold in earnest. The bill squeaked through the Senate. Then the agricultural lobbies and the California Chamber of Commerce put it out of its misery. “Drill, baby, drill” has since been the unofficial motto of California’s ag counties, in a trend that makes Wolk’s worries look quaint now. As The Sacramento Bee’s Ryan Sabalow, Dale Kasler and Phillip Reese reported this week, San Joaquin Valley farmers are digging wells in record numbers, some 2,500 last year, five times the average for the past 30 years. It’s literally a race to the bottom. In places like Tulare, Fresno and Merced counties, where row crops have increasingly given way to more profitable – and more permanent – water users like almonds, the wells are going in faster and deeper than ever, leaving aquifers so depleted that drinking water in nearby towns is impacted. What’s needed are tough, meaningful pumping restrictions, now, not years down the line when the groundwater law gets around to it.  “It’s a business,” an unrepentant Firebaugh wine grape grower told the reporters. “I’ll make no apologies for trying to stay in business and being successful.” His farm, he said, had been relying almost exclusively on well water for the past three years.This attitude is understandable, unsustainable – and alarming. No one can be given a pass as drought and climate change constrict California’s water supplies. Homeowners are making do with browner lawns and shorter showers, and being fined for over-usage. Farmers must conserve, too. Imagine the irony in places like Woodville, in Tulare County, where for nearly a month recently, farm-depleted water tables so contaminated municipal wells that children couldn’t drink from the fountains at school. What’s needed are tough, meaningful pumping restrictions now – not years down the line when the groundwater law gets around to it. State lawmakers need to summon the backbone to revisit Wolk’s proposal, and stop this agricultural water grab.

NASA: Megadrought Lasting Decades Is 99% Certain in American Southwest -- A study released in Science Advances Wednesday finds strong evidence for severe, long-term droughtsafflicting 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.

Hurricane Matthew death toll passes 800 in Haiti, cholera takes lives: Hurricane Matthew's trail of destruction in Haiti stunned those emerging from the aftermath on Friday, with the number of dead soaring to 842, tens of thousands homeless and outbreaks of cholera already claiming more lives. Information trickled in from remote areas that were cut off by the storm, and it became clear that at least 175 people died in villages clustered among the hills and on the coast of Haiti's fertile western tip. With cellphone networks down and roads flooded by sea and river water, aid has been slow to reach towns and villages. Instead, locals have been helping each other. "My house wasn't destroyed, so I am receiving people, like it's a temporary shelter," said Bellony Amazan in the town of Cavaillon, where around a dozen people died. Amazan said she had no food to give people. Outside Chantal, stall holders at a makeshift market were selling vegetables and soft drinks, brought in from Port-Au-Prince as roads were cleared to the capital. "All our houses have been destroyed. This is our existence," said one stall holder, who declined to give her name.

Terns follow record warm temperatures in 'shock' migration to north of Alaska - Eyebrows would be raised if American crocodiles, found on the southern tip of Florida, decided to relocate to New York’s Fifth Avenue or Moroccan camels suddenly joined the tourist throng outside Buckingham Palace in London. Yet this is the scale of species shift that appears to be under way in Alaska. In July, researchers in Cape Krusenstern national monument on the north-west coast of Alaska were startled to discover a nest containing Caspian terns on the gravelly beach of a lagoon. The birds were an incredible 1,000 miles further north than the species had been previously recorded. “There was plenty of shock, it is a very unusual situation,” said Dr Martin Robards, Arctic program director at the Wildlife Conservation Society, which found the nest. “We checked with Caspian tern experts and they were all very surprised they were this far north. We get Arctic terns here but these terns are much bigger, they really stand out.” The terns, usually found in Washington state, successfully bred and chicks have now flown the nest. While it remains to be seen whether Caspian terns will become ensconced long-term within the Arctic circle, the epic relocation is emblematic of how warming temperatures are causing a huge upheaval in the basic rhythms of Alaska’s environment. “I’ve been up here 25 years and the amount of change that has occurred in Alaska is shocking,” said Robards. “We’ve been focusing on things such as the temperature and sea ice here but now we are thinking ‘oh my God what is going on with the wildlife?’” Alaska is warming at twice the rate of the rest of the US, with the winter temperature 6F (3.3C) warmer than it was 60 years ago. Snow and ice has retreated, spring is coming earlier. The landscape is changing and so are its residents.

‘Great Pacific garbage patch’ far bigger than imagined, aerial survey shows - The vast patch of garbage floating in the Pacific Ocean is far worse than previously thought, with an aerial survey finding a much larger mass of fishing nets, plastic containers and other discarded items than imagined.  A reconnaissance flight taken in a modified C-130 Hercules aircraft found a vast clump of mainly plastic waste at the northern edge of what is known as the “great Pacific garbage patch”, located between Hawaii and California.  The density of rubbish was several times higher than the Ocean Cleanup, a foundation part-funded by the Dutch government to rid the oceans of plastics, expected to find even at the heart of the patch, where most of the waste is concentrated.   “Normally when you do an aerial survey of dolphins or whales, you make a sighting and record it,” said Boyan Slat, the founder of the Ocean Cleanup.  “That was the plan for this survey. But then we opened the door and we saw the debris everywhere. Every half second you see something. So we had to take snapshots – it was impossible to record everything. It was bizarre to see that much garbage in what should be pristine ocean.”

 Arctic methane gas emission 'significantly increased since 2014' - major new research  (Siberian Times) The findings come from an expedition now underway led by Professor Igor Semiletov, of Tomsk Polytechnic University, on the research vessel 'Academic M.A. Lavrentyev' which left Tiksi on 24 September on a 40 day mission. The seeping of methane from the sea floor is greater than in previous research in the same area, notably carried out between 2011 and 2014. 'The area of spread of methane mega-emissions has significantly increased in comparison with the data obtained in the period from 2011 to 2014,' he said. 'These observations may indicate that the rate of degradation of underwater permafrost has increased.' Detailed findings will be presented at an international conference in Tomsk on 21 to 24 November. The research enables comparison with previously obtained data on methane emissions. Dr Semiletov and his team are paying special attention to clarify the role of the submarine permafrost degradation as a factor in emissions of the main greenhouse gases - carbon dioxide and methane - in the atmosphere. The team are examining how the ice plug that has hitherto prevented the exit of huge reserves of gas hydrates has today 'sprung a leak'. This shows in taliks - unfrozen surface surrounded by permafrost - through which powerful emissions of methane reach the atmosphere. Scientists are eager to determine the quantity of methane buried in those vast areas of the Siberian Arctic shelf and the impact it can have on the sensitive polar climate system.

Methane Emissions Blow Past Current Estimates -- Methane emissions from the global fossil fuel industry are up to 60 percent greater than existing estimates, according to a new comprehensive analysis of global methane emissions. Map showing global methane concentrations in January 2016 at a pressure of 400 hectopascals, or roughly 6km above the surface. Concentrations are higher in the northern hemisphere because both natural- and human-caused sources of methane are more abundant there. AIRS/Aqua/Nasa  The unaccounted-for emissions are 300 times more than California's Aliso Canyon leak . According to current estimates, the fossil fuel industry contributes about 22 percent of global methane emissions and about 30 percent of total U.S. methane emissions . Methane has a higher warming potential than carbon dioxide in the short term. Listen here to the NPR report:

A Pocket Handbook of Soft Climate Denial -- In a recent piece, I introduced the concept of “soft climate denial”.  In soft climate denial, people acknowledge that climate change is real and threatening and may even be panicked about it.  However, in this cultural-political constellation with attendant states of mind, the solutions for climate change that are embraced are in no way commensurate to the acknowledged threats to human existence posed by anthropogenic global warming.   Consequently, soft climate denial leads often to hand-wringing or other ineffectual actions but no decisive steps taken towards meeting the challenge of human-caused and human-accelerated global warming. I contrasted soft climate denial with conventional “hard” climate denial, which is, now well recognized as a phenomenon: the social, political and psychological process of denying that climate change is even a serious problem and/or that human beings have any role in what is supposedly some harmless natural variation in temperature.  In this terminology, “hard” climate denial is the conventional climate denial that is associated with think tanks like the Competitive Enterprise Institute and the Heartland Institute or the work of the fossil fuel lobby and the Koch Brothers to delay climate action of any meaningful kind.   I suggested that all well-intentioned people with regard to the climate are more or less tied up in soft climate denial and we, the well-intentioned, can only free ourselves via decisive collective action on every level of social and political organization. Soft climate denial is the standard state of mind of individuals and standard political orientation of “concerned” governments regarding climate change for the past 20 years, with the exception of pockets of “hard” denial as well as those who have been simply unaware of climate change.  I ventured the hypothesis that soft climate denial and the thin gruel of climate action policies that accompany it may be functioning as a “face-saving” device to mask fundamental inertia or a deep manifest preference for inaction while continuing fossil-fueled business as usual.

As Trump denies climate change, scientists fear we’re about to blow past the 2-degree red line -- A new scientific statement released Thursday — underscoring the urgency of grappling with global warming — presented a sharp contrast with the state of public discussion of the subject in the United States.On Thursday, a group of seven distinguished climate scientists led by Robert Watson, a former chairman of the United Nations’ Intergovernmental Panel on Climate Change, asserted that the chance of holding warming to below 1.5 degrees Celsius above pre-industrial levels “has almost certainly already been missed.” And we could very soon be on an irrevocable path to 2 degrees of warming, they continue, unless countries dramatically up their pledges to cut emissions under the Paris climate agreement — an agreement Trump has said he would “cancel.” “When you read the Paris agreement, it is absolutely inadequate, with the current pledges, to get on a pathway to 2 degrees Celsius, let alone a pathway to 1.5,” said Watson in an interview with the Post. To be clear: The researchers are happy with the agreement itself, but not with the steps that countries are currently committing to take under it. Watson said that as of now, on our current emissions trajectory, the world could be at 1.5 degrees above pre-industrial levels in 2030 — less than 15 years — and at 2 degrees by 2050. But because of time lags in the climate system, the actual emissions that would result in those outcomes, and that would have to be averted in order to avoid them, would occur sooner than that. “I really think the world is definitely on a pathway, as we’re suggesting in that paper, past the 2 degree world,” Watson said. “If you want any hope of getting even close to that 2 degree world, we need to redouble our efforts.” The statement was signed by Watson and six other researchers, most of whom have previously held prominent positions with the Intergovernmental Panel on Climate Change, which is considered the leading consensus body of international climate science.

Recalculating The Climate Math - The future of humanity depends on math. And the numbers in a new study released Thursday are the most ominous yet. Those numbers spell out, in simple arithmetic, how much of the fossil fuel in the world’s existing coal mines and oil wells we can burn if we want to prevent global warming from cooking the planet. In other words, if our goal is to keep the Earth’s temperature from rising more than two degrees Celsius—the upper limit identified by the nations of the world—how much more new digging and drilling can we do?  Here’s the answer: zero.  That’s right: If we’re serious about preventing catastrophic warming, the new study shows, we can’t dig any new coal mines, drill any new fields, build any more pipelines. Not a single one. We’re done expanding the fossil fuel frontier. Our only hope is a swift, managed decline in the production of all carbon-based energy from the fields we’ve already put in production.  The new numbers are startling. Only four years ago, I wrote an essay called “Global Warming’s Terrifying New Math.” that showed that the untapped reserves of coal, oil, and gas identified by the world’s fossil fuel industry contained five times more carbon than we can burn if we want to keep from raising the planet’s temperature by more than two degrees Celsius.   But the new new math is even more explosive. It draws on a report by Oil Change International, a Washington-based think tank, using data from the Norwegian energy consultants Rystad. For a fee—$54,000 in this case—Rystad will sell anyone its numbers on the world’s existing fossil fuel sources. Most of the customers are oil companies, investment banks, and government agencies. But OCI wanted the numbers for a different reason: to figure out how close to the edge of catastrophe we’ve already come.  Scientists say that to have even a two-thirds chance of staying below a global increase of two degrees Celsius, we can release 800 gigatons more CO2 into the atmosphere. But the Rystad data shows coal mines and oil and gas wells currently in operation worldwide contain 942 gigatons worth of CO2. So the math problem is simple, and it goes like this:  942 > 800   “What we found is that if you burn up all the carbon that’s in the currently operating fields and mines, you’re already above two degrees,” says Stephen Kretzmann, OCI’s executive director. It’s not that if we keep eating like this for a few more decades we’ll be morbidly obese. It’s that if we eat what’s already in the refrigerator we’ll be morbidly obese

We’re Past the Point of No Return for Climate Change --naked capitalism Yves here. Readers will no doubt perceive the disconnect in the article. It argues that the world has passed an event horizon as far as climate change is concerned, yet posits that there are still things that can be done to prevent the inevitable. I am not arguing for complacency, in that we all should be taking steps to slow and ideally halt the rate of increase in the levels of atmospheric greenhouse gases. But this article places undue faith in technology magic bullets. Not only do they take time we don’t have to deploy on a large scale basis, they take energy, and often the use of scarce or environmentally costly natural resources, to implement.  The biggest near-term priority needs to be radical reduction in the use of energy. And there is a lot that could be done that does not involve great changes in lifestyle; in fact, as far as businesses are concerned, the big barrier is inertia (compounded by the “don’t tell me what to do” reflex). As the Guardian described in 2007, BP in 1997 decided to lower its carbon emissions below the 1990 level by 2010. It achieved the goal in 3 years rather than 13 at a cost of $20 million. Oh, and it happened to save $650 million. With that sort of calculus, you’d think that every big corporation would be on the emissions-reduction bandwagon. One of my new pet issues is private jets, which have become a pervasively-used, unjustified perk for private equity fund managers. As we discussed in How Pension Funds, Universities and Endowments Pay for Private Equity Private Jet:One of the class markers of the private equity industry is that its members routinely fly on private jets. That’s often because the larger and even some of the smaller firms charge their private jet travel to private equity portfolio companies. That means that the cost is borne first and foremost by investors in private equity like public pension funds, private pension funds, universities like Harvard and Yale, and other foundations and endowments. The enormous costs of private jets, while they are borne by the investors, are almost entirely hidden from them. PE firms keep investors in the dark by having the portfolio companies they’ve bought on behalf of their investors pay these jet bills. Amazingly, investors have been fooled by this simple ruse for decades – it’s as if your stockbroker deducts his fee from your account, and you regard his services as free because you never see a bill.

Climate scientist James Hansen: We aren’t doing nearly enough to slow climate change -- James Hansen, former NASA director and well-known climate scientist, is out with another dire climate warning: The last time that the Earth was this hot, the oceans were about 20 feet higher than they are right now. And while that doesn’t necessarily mean that we’re in for an unstoppable, 20-foot rise in sea level (although it ostensibly could get that bad), it does mean that the world is leaving a dangerous, and expensive, climate change problem for future generations.  “There’s a misconception that we’ve begun to address the climate problem,” Hansen told reporters on a press call Monday. “The misapprehension is based on the Paris climate summit where all the government leaders clapped each other on the back as if some great progress has been made, but you look at the science and it doesn’t compute. We are not doing what is needed.” Hansen’s warning is based off a new, yet-to-be-peer-reviewed paper — submitted Tuesday to the Earth Systems Dynamics Journal — that he authored with 11 other climate scientists. In the paper, the authors argue that the Earth has warmed by about 1.3°C relative to pre-industrial levels, and that the atmospheric concentration of the most potent greenhouse gases — carbon dioxide, methane, and nitrous oxide — has been accelerating in recent years. The last time the Earth was this hot was during the last inter-glacial period, known as the Eemian, when sea level was about 20 to 30 feet higher than it is today.

No fracking, drilling or digging: it’s the only way to save life on Earth - George Monbiot - The Paris climate change agreement is worthless. Politicians can’t possibly honour it unless we stop developing all new fossil fuel reserves. Do they understand what they have signed? Plainly they do not. Governments such as ours, now ratifying the Paris agreement on climate change, haven’t the faintest idea what it means – either that or they have no intention of honouring it. For the first time we can see the numbers on which the agreement depends, and their logic is inescapable. Governments can either meet their international commitments or allow the prospecting and development of new fossil fuel reserves. They cannot do both. The Paris agreement, struck by 200 nations in December, pledged to hold “the increase in the global average temperature to well below 2C above pre-industrial levels”, and aspired to limit it to 1.5C. So what does this mean? Thanks to a report by Oil Change International, we can now answer this question with a degree of precision. Using the industry’s own figures, it shows that burning the oil, gas and coal in the fields and mines that is already either in production or being developed, is likely to take the global temperature rise beyond 2C. And even if all coal mining were to be shut down today, the oil and gas lined up so far would take it past 1.5C. The notion that we can open any new reserves, whether by fracking for gas, drilling for oil or digging for coal, without scuppering the Paris commitments is simply untenable. The only means of reconciling governments’ climate change commitments with the opening of new coal mines, oilfields and fracking sites is carbon capture and storage: extracting carbon dioxide from the exhaust gases of power stations and burying it in geological strata. But despite vast efforts to demonstrate the technology, it has not been proved at scale, and appears to be going nowhere. Our energy policies rely on vapourware.

World needs $90tn infrastructure overhaul to avoid climate disaster, study finds - A gigantic overhaul of the world’s buildings, public transport and energy infrastructure costing trillions of dollars is required if dangerous climate change is to be avoided, according to a major new report. The study by the Global Commission on the Economy and Climate, which is co-chaired by prominent climate economist Lord Nicholas Stern, found that the world is expected to invest about $90tn in infrastructure over the next 15 years, requiring an “urgent” shift to ensure that this money is spent on low-carbon, energy-efficient projects. Such smart investment over the next two or three years could help ameliorate the climate crisis, but “the window for making the right choices is narrow and closing fast”. The report states that more than 60% of the world’s greenhouse gases are associated with ageing power plants, roads, buildings, sanitation and other structures. Around 1,500 coal plants are estimated to already be in construction worldwide, which would send the world spiraling towards disastrous environmental changes. Carbon-heavy infrastructure “literally kills people by causing deadly respiratory illnesses, exacerbating road accidents and spreading unclean drinking water, among other hazards”, the report reads. “It also puts pressure on land and natural resources, creating unsustainable burdens for future generations such as unproductive soils and runaway climate change.” Stern said the next few years will be “critical” to the future of sustainable development and the battle to ensure civilization isn’t ravaged by heatwaves, extreme weather, sea level rise and other risks. “We cannot continue with business as usual, which will lock in high-carbon infrastructure and create further congestion and pollution while choking off development opportunities, particularly for poor people,” he said. “We can and should invest in and build cities where we can move and breathe and be productive, while protecting the natural world that underpins our livelihoods.”

‘We’d have to finish one new facility every working day for the next 70 years’—Why carbon capture is no panacea - The Bulletin - A recent experiment in Iceland garnered a lot of press lately, including The New York Times and the “Latest News” section of Science. It’s easy to see why: Scientists showed that carbon dioxide injected more than 1,000 feet underground into formations of basalt rock—which much of Iceland is made of—reacted very quickly with the minerals present in the rock to form new minerals that remain stable essentially forever. Chemically speaking, they turned carbon dioxide (CO2) into calcite (CaCO3), the principle constituent of marble and limestone. Or, at the risk of oversimplifying, the researchers converted gas into stone, using what is essentially soda water. At first glance, this approach promises to achieve a long-sought goal: to remove carbon dioxide emissions—one of the chief greenhouse gases behind global warming—from the atmosphere, and lock them away deep underground in a carbon “sink,” where they can do no more harm. Known as carbon capture and sequestration, or CCS, the work in Iceland with basalts marks an important technical advance in a line of attack that scientists have long pursued.   The timing couldn’t be better. For years, many scenarios used in the computerized simulations of carbon emissions mitigation have called for a big contribution from CCS. Indeed, the models used by the Intergovernmental Panel on Climate Change (IPCC) require the large-scale deployment of this technology, while the Paris Agreement specifically calls for “removals by sinks of greenhouse gases in the second half of this century.” This language stems from the growing recognition that the world is likely to overshoot the carbon budget required to hold the increase in global average surface temperatures to “well below 2 degrees Celsius above pre-industrial levels” and avoid the problems of rising sea levels, droughts, extinction events, mass migrations, and other disastrous consequences of climate change. As a matter of fact, of the 400 IPCC scenarios that keep warming below the Paris agreement target, 344 involve the deployment of negative emissions technologies, wrote Kevin Anderson in Nature Geoscience.

In-depth: How can fossil fuel supplies be constrained? --Academics gathered in Oxford this week to discuss how to constrain fossil fuel supply as part of efforts to tackle climate change. Carbon Brief attended the two days of talks at the “Fossil Fuel Supply and Climate Policy” conference, organised by the Stockholm Environment Institute (SEI), to speak to delegates about what kind of future lay in the pipeline for fossil fuels. Climate change policy to date has focused heavily on reducing emissions through reducing demand. This includes familiar approaches, such as pricing carbon, increasing renewable energy and boosting energy efficiency. Discussion on constraining fossil fuel supply has been more subdued. While the Paris Agreement adopted in December 2015 invited countries to say how they would reduce their emissions, it did not broach the subject of how to tackle the central cause of emissions: fossil fuels. Tactics to constrain fossil fuel supply include removing subsidies, placing moratoria on new coal mines, placing a fee on fossil fuel production, creating funds to prevent fossil fuel development in developing countries, and persuading countries to hold back on approving fossil fuel infrastructure. A working paper by SEI, released in 2015, outlined three reasons why curtailing fossil fuel supply has been slow to catch on. First, it is less politically attractive. While politicians are able to sell the idea of demand reduction as enabling new industries to develop, attempts to shrink fossil fuel supplies can be expected to meet resistance from the coal, oil and gas industries. Second, countries who cut their exports as a result of constraining supply cannot count the emissions reductions as their own. Since emissions are counted on a territorial basis, these reductions will be assigned to the nation that actually cuts their use of fossil fuels. Third, there is the assumption that the market rules supreme and that only demand can be reduced. As long as there is a large appetite for fossil fuels, someone somewhere will produce the fossil fuels to feed it.

Ethanol in U.S. Gas Tanks is Backfiring for Climate Change | Climate Central: It may have seemed apparent to members of Congress a decade ago that if a motorist pumped a gallon of fuel made from corn into their gas tank, a gallon of fossil fuel would be left in the ground — hopefully on a foreign shore. But real life is not so simple. A team of researchers has concluded that for every three gallons of corn ethanol that’s being burned under America’s flagship renewable fuel rules, Americans will avoid burning just one gallon of gasoline made from crude. Their findings add to evidence that the mandated use of biofuels under the Renewable Fuel Standard, which was approved by Congress and is overseen by the EPA, is making the problem of global warming worse — while doing little to ease fuel imports. The researchers, from the University of Minnesota, St. Paul, focused their analysis on the “fuel rebound effect.” That’s economist jargon describing an unintended market consequence of rules requiring America’s gasoline industry to blend biofuels into its products. “The fuel rebound effect is so strong, and the climate benefits of the biofuels are so small, especially for corn ethanol, that emissions increase,” said Jason Hill, an energy and sustainability researcher who led the work, published in the journal Energy Policy. “That’s a big problem.” When lawmakers approved the Renewable Fuel Standard in 2005 and tweaked it in 2007, it was assumed that biofuels by now would be coming from agricultural waste and other woody material. But the technology needed to do that remains unviable. About 10 percent of gasoline sold in the U.S. this year will come from growing corn and other crops — 15 billion gallons of ethanol overall.

Next ‘Renewable Energy’: Burning Forests, if Senators Get Their Way - President Obama’s Clean Power Plan — the central plank in his strategy to combat climate change — is in danger. It’s not just that it is under attack in court, where its legality was challenged last week by a coalition of 28 states and scores of companies and industry groups. Or that fossil fuel interests and Republicans in Congress will keep trying to block it, whatever the courts decide. The president’s plan to reduce emissions of heat-trapping carbon dioxide from the nation’s power sector could be undone within a matter of weeks by an unlikely bipartisan collection of senators that includes staunch Republican climate change deniers as well as Democrats who support the administration’s strategy.   What’s the problem? They want to force the government to assume that burning forests to generate electricity does not add carbon dioxide to the air but is instead “carbon neutral.” As long as forests that have been cleared are regrown rather than turned into, say, subdivisions, language proposed by the senators argues that the Environmental Protection Agency and the Agriculture Department should recognize the wood and other organic matter pulled from a forest “as a renewable energy source.” If they succeed, from next year to 2030 they will have added a cumulative total of at least 830 million metric tons of carbon dioxide into the air, according to calculations by the Partnership for Public Integrity, an energy policy analysis group, based on a model used by the government’s Energy Information Administration to assess the impact of the Clean Power Plan. That amounts to 64 million additional tons of carbon dioxide a year, on average, about the same amount that was produced by forest fires in the lower 48 states in 2013. It makes for a big hole in a plan that is supposed to cut annual emissions from the power sector by some 250 million tons between now and 2030.

Canada sets minimum carbon price to be met by 2018: (Reuters) - Canada will have a minimum price on carbon emissions by 2018, Prime Minister Justin Trudeau said on Monday, with provinces given the option between implementing a carbon tax or a cap-and-trade market by then. Under the national plan, which was quickly rejected by the oil-rich province of Alberta, carbon pollution will cost C$10 a tonne in 2018, rising C$10 a year until it reaches C$50 a tonne in 2022, when the approach will be reviewed. "We're not going to shun science and we're not going to put off the inevitable," Trudeau told parliament. "The government will set a floor price for carbon pollution, Trudeau said. "The price will be set at a level that will assist Canada in achieving its goal for greenhouse gas emissions reductions, while allowing companies better stability and predictability." Trudeau said revenues collected in each province will remain in that jurisdiction. He added that separate provincial efforts must be at least as tough as the national scheme. Ontario, Quebec, British Columbia and Alberta, Canada's four most populous provinces, either already have a price on carbon or are in the process of implementing one. But Alberta said its support for the plan would be linked to federal support for pending pipeline projects that have yet to be approved. "Alberta will not be supporting this proposal absent serious concurrent progress on energy infrastructure, to ensure we have the economic means to fund these policies," Premier Rachel Notley said in a statement. Trudeau laid out the plans as federal legislators prepared to vote this week on ratification of the Paris climate agreement, a vote his majority Liberal government is certain to win. Under the previous Conservative government, Canada committed to reducing 2030 carbon emissions by 30 percent from 2005 levels. The Liberals have kept those targets.

Ontario government scraps plan for $3.8 billion in renewable energy projects --  Ontario is blowing off plans for more wind and solar power as it feels the heat over high electricity bills less than two years before a provincial election. In its latest effort to curb prices, Premier Kathleen Wynne’s government is axing plans to sign another $3.8 billion in renewable energy contracts, Energy Minister Glenn Thibeault said Tuesday. The move — which the Progressive Conservatives have demanded for years — will prevent $2.45 from being added to the average homeowner’s monthly hydro bill in the coming years. Thibeault called it a “common sense” decision after the province’s electricity planning agency recently advised there is no “urgent need” for additional supply given Ontario’s surplus of generating capacity. “I’ve been tasked to find ways to bring bills down,” said Thibeault, who was appointed minister last June. “When our experts said we didn’t need it, that’s when I acted.” The projects scrapped Tuesday would have created up to 1,000 megawatts of power, just under one-third of the 3,500 megawatts the four-unit Darlington nuclear power station produces near Oshawa.

Aviation industry aims to cheat the climate with offsets --- Today, in Montreal, the 39th meeting of the International Civil Aviation Organisation starts. One of the agenda items is ICAO’s response to climate change. The industry’s preferred option is to continue expanding, to continue polluting, and to offset its emissions.ICAO is proposing a massive new carbon trading mechanism that will leave us no chance of meeting the Paris Agreement’s target of 2°C. FERN has put out a short video highlighting what’s wrong with ICAO’s proposals:In 2013, according to a June 2016 report from the Stockholm Environment Institute, the aviation industry emitted 490.4 million tonnes of carbon dioxide. By 2020, the figure is likely to be between 682 and 755 million tonnes. But, also in June 2016, the International Air Transport Association, announced that emissions from aviation in 2015 had already reached 781 million tonnes of CO2. By 2035, SEI predicts that flying will be responsible for somewhere between 1.2 and 1.4 billion tonnes of carbon dioxide emissions. ICAO’s proposed carbon trading mechanism is called CORSIA – the Carbon Offsetting and Reduction Scheme for International Aviation. The proposal, going into the ICAO meeting, is available here. If ICAO signs off on the carbon trading mechanism, the details will be thrashed out before 2021, when the pilot phase starts. SEI estimates that the aviation industry will need somewhere between 3.3 and 4.5 billion carbon credits in the fifteen years after 2020. That’s an awful lot of carbon credits.

With ratification of more than 62 countries, Paris climate pact to enter into force on November 4 - The Hindu: The Paris Agreement on climate change will enter into force on November 4, as enough countries have signed onto the landmark accord to bring it to the emissions threshold that will trigger its implementation, UN chief Ban Ki-moon has said. “This is a momentous occasion,” Secretary-General said after the deal was ratified by 72 countries accounting for more than 56 per cent of global greenhouse gas emissions. “Global momentum for the Paris Agreement to enter into force in 2016 has been remarkable. What once seemed unthinkable is now unstoppable. Strong international support for the Paris Agreement entering into force is a testament to the urgency for action, and reflects the consensus of governments that robust global cooperation, grounded in national action, is essential to meet the climate challenge,” he added. India, the world’s third largest emitter of greenhouse gases, had ratified the Paris climate agreement on Mahatma Gandhi’s birth anniversary on October 2, becoming the 62nd country to deposit its legal instrument of ratification for the climate pact and bringing the global pact “tantalizingly” close to entering into force. Mr. Ban had “warmly” congratulated India for ratifying and formally joining the Paris Agreement, and had said India’s leadership moves the world an important step closer toward the 55 per cent threshold needed for the historic agreement’s entry into force this year.The requirements for entry into force were satisfied yesterday when Austria, Bolivia, Canada, France, Germany, Hungary, Malta, Nepal, Portugal and Slovakia, as well as the European Union, deposited their instruments of ratification with the Secretary-General.

President Obama To Explain How He Just Thwarted The World's Greatest Threat - Live Feed - The world will sleep better tonight as President Obama has achieved the impossible - thwarted the world's greatest threat. With today's ratification of The Paris Climate Accord - passing a threshold among European nations - the scourge of global warming has met its match. As Reuters reports, a global agreement to combat climate change by shifting the world economy away from fossil fuels will take force next month after passing a threshold for ratification on Wednesday with support from European nations. Support for the Paris Agreement has widened to nations representing 56.75 percent of world greenhouse gas emissions, above the 55 percent needed for implementation, a U.N. website showed. The deal will formally start in 30 days. European Union countries including Germany, France and Slovakia, which have completed domestic ratification, helped trigger the formal entry into force after a green light from the European Parliament on Tuesday. The agreement, reached in December 2015, already has support from other major emitters led by China, the United States and India. In total, 72 countries out of 195 have ratified the agreement, according to the U.N. website.

There is a new form of climate denialism to look out for – so don't celebrate yet -- After the signing of a historic climate pact in Paris, we might now hope that the merchants of doubt – who for two decades have denied the science and dismissed the threat – are officially irrelevant. But not so fast. There is also a new, strange form of denial that has appeared on the landscape of late, one that says that renewable sources can’t meet our energy needs.  Oddly, some of these voices include climate scientists, who insist that we must now turn to wholesale expansion of nuclear power. Just this past week, as negotiators were closing in on the Paris agreement, four climate scientists held an off-site session insisting that the only way we can solve the coupled climate/energy problem is with a massive and immediate expansion of nuclear power. More than that, they are blaming environmentalists, suggesting that the opposition to nuclear power stands between all of us and a two-degree world.  That would have troubling consequences for climate change if it were true, but it is not. Numerous high quality studies, including one recently published by Mark Jacobson of Stanford University, show that this isn’t so. We can transition to a decarbonized economy without expanded nuclear power, by focusing on wind, water and solar, coupled with grid integration, energy efficiency and demand management. In fact, our best studies show that we can do it faster, and more cheaply.The reason is simple: experience shows that nuclear power is slow to build, expensive to run and carries the spectre of catastrophic risk. It requires technical expertise and organization that is lacking in many parts of the developing world (and in some part of the developed world as well). As one of my scientific colleagues once put it, nuclear power is an extraordinarily elaborate and expensive way to boil water.  The only country in the world that has ever produced the lion’s share of its electricity from nuclear is France, and they’ve done it in a fully nationalized industry – a model that is unlikely to be transferable to the US, particularly in our current political climate. Even in the US, where nuclear power is generated in the private sector, it has been hugely subsidized by the federal government, which invested billions in its development in order to prove that the destructive power unleashed at Hiroshima and Nagasaki could be put to good use. The government also indemnified the industry from accidents, and took on the task of waste disposal – a task it has yet to complete.

7 Signs That China Is Serious About Combating Climate Change --Two years after President Obama and Chinese President Xi Jinping announced that their countries would work together to combat climate change, Republicans and conservatives in the U.S. continue to cite China’s rising carbon emissions as a reason not to bother cutting our own. Earlier this month, Donald Trump’s economic advisor Stephen Moore claimed that limiting our carbon pollution is pointless because of China’s supposedly growing coal dependency. “Every time we shut down a coal plant in the U.S., China builds 10,” Moore told E&E News. Not only is Moore’s statement simply untrue, but the broader conservative theory behind it is badly outdated. China’s coal use and carbon emissions have dropped for the last two years. In 2015, China cut its coal use 3.7 percent and its emissions declined an estimated 1–2 percent, following similar decreases in 2014. Here are seven things China is doing to curb its climate-warming emissions:

  • — Limiting coal use. Just a week after that 2014 announcement with Obama, China released an energy strategy that called for capping coal consumption by 2020. China also put a three-year moratorium on new coal mines, starting this year, and it’s been shutting down existing coal mines.
  • — Carbon trading. Next year, China will launch a nationwide carbon market, the world’s largest. It will cover six of the biggest carbon-emitting sectors, starting with coal-fired electricity generation. This cap-and-trade program will build on programs China has already created in two provinces and five cities.
  • — Cleaning up cars and trucks.  China is pulling old, inefficient cars off the road, providing incentives for buying hybrids and electric cars, and enforcing stricter fuel-efficiency standards for new cars.
  • — Making buildings more energy efficient. Two years ago, China started issuing requirements for buildings to be given energy-efficiency upgrades. The energy savings are just beginning to be felt, but given that buildings can last for decades or even centuries, there could be a long payoff period.
  • — Building renewable capacity. China knows it needs alternative sources of energy to replace coal, so the government is investing heavily in developing wind and solar energy. “China has emerged as a leader in renewable energy,” reported Song and one of his colleagues in a blog post in April. “Investment soared from $39 billion to $111 billion in just five years, while electric capacity for solar power grew 168-fold and wind power quadrupled.”
  • — Building nuclear reactors. Whatever you think of nuclear energy, it is one of the lowest-carbon forms of electricity out there. Earlier this month, China announced it will build at least 60 new nuclear power plants within a decade.
  • — Building high-speed rail. A wealthier citizenry in a more industrialized country will be traveling a lot more. To limit transportation emissions, China is rapidly building high-speed rail. It already has more than 11,800 miles of high-speed rail that carry 2.7 million riders daily, and expansion plans are on the drawing board.

India already has a problem with wasting renewable energy on the grid - India ratified the Paris climate agreement this week, officially underscoring its commitment to reduce greenhouse gas emissions. Yet just two years after embarking on an ambitious campaign to scale up renewable energy, India is facing a curious problem: too much solar and wind power in some parts of the country. In July, for the first time, the southern Indian state of Tamil Nadu was unable to use all the solar power it generated. Later in the month, Jayaram Jayalalitha, the chief minister of Tamil Nadu, wrote a letter to Prime Minister Narendra Modi urging him to speed up the construction of an inter-state green energy corridor that would allow renewable power to be transmitted and used in other states instead of being wasted. And in August, Tarun Kapoor, India’s joint secretary of the Ministry of New and Renewable Energy, wrote a letter asking electricity regulators to fully utilize solar power following complaints that grid operators were letting renewable energy go to waste. As developing countries lead the world in renewable energy investment, India’s experience highlights a larger question: Will the grid be a major roadblock for renewable energy development across the developing world? From India to China to Chile, a significant portion of future renewable energy could go to waste without careful planning. Solar and wind only accounted for 3.5 percent of the power generated in India in 2015. But if the government achieves its ambitious targets for renewable energy deployment, the amount of solar and wind power on the grid could quadruple by 2022. Yet there are already signs that the grid’s ability to absorb these new power sources could be a major bottleneck for renewable energy growth in India, jeopardizing the country’s energy and climate goals.

Oil Rig Builders Tap Into Offshore Wind Market -- With the recent completion of the first wind turbine field off the coast of Block Island, many oil rig developers are shifting their attention to this popular new industry. Deepwater Wind LLC installed five turbines three miles southeast of Block Island this past August and they will hopefully be online in November. These turbines will produce 30-megawatts of energy, enough to power over 16,000 homes.  The capital required for these projects can be quite expensive; the Block Island project was a $300 million investment. Several other companies are involved in the production and transportation of the parts. Gulf Island Fabrication Inc. traditionally builds platforms for oil rigs, a service that is shrinking with oil production moving to land. The company has shifted its services over to the renewable industry, providing Deepwater with the means to tether their turbines to the ocean floor. Keystone Engineering Inc. was responsible for designing the platforms and Montco Offshore Inc. allocated the boats used for transportation and construction. Fred. Olsen Windcarrier used a 15-story boat to raise Deepwater’s turbines into place as well.  The U.S. government is setting goals for the future and they include offshore turbines. Governor Andrew Cuomo’s wants New York to have 50% of the state powered by renewables by 2030. The Department of Energy has distributed 11 leases to developers with plans in the Atlantic for renewables and their goal is to install 86,000 megawatts worth of turbines by 2050. This has the potential to add 160,000 jobs; highly notable considering low oil prices can lead to fossil fuel companies shutting down rigs and job cuts. If the U.S. were able to achieve this feat there would be more renewable energy in New England and jobs for engineers and builders. This would be highly beneficial to companies manufacturing the rigs and the economy as a whole. Traditional oil rig companies will be able to diversify away from the volatile oil market that they currently rely so heavily on.

Another Statewide Blackout: South Australia’s Wind Power Disaster Continues -- Thanks to its ludicrous attempt to run on sunshine and breezes, South Australia has just experienced yet another Statewide blackout. STT’s SA operatives tell us the blackout occurred during a blustery spring storm (heavy rain, lightning and surging, gusty wind). The power supply went down across the entire State at precisely the same time (a little after 3:30pm). It took more than 5 hours to restore power to a few parts of the State, and many regions remained powerless for much longer than that.On 28 September (aka ‘Black Wednesday’), as the wind picked up, output surges by around 900MW, from a trifling 300MW (or 19% of installed capacity) to around 1,200MW. As we explain below, electricity grids were never designed to tolerate that kind of chaos, but it’s what occurs in the hour before the collapse that matters. From a peak near 1,200MW, there are drops and surges in output of around 250-300MW (equivalent to having the Pelican Point Combined Cycle Gas plant switched on and off in an instant). At about 2:30pm there is an almost instantaneous drop of 150MW (1,050 to 900MW), followed by a rapid surge of around 250MW, to hit a momentary peak of about 1,150MW. Then, in the instant before the blackout, wind power output plummets to around 890MW: a grid killing collapse of 260MW, that occurs in a matter of minutes (it’s all happened before, as we detail below). That 260MW collapse was the deliberate result of an automatic shutdown of the wind farms based in SA’s mid-North, located in the path of the storm front: the final and total collapse in SA’s power supply follows immediately thereafter. In a repeat of what occurred on 1 November last year, that sudden, unpredictable drop in wind power output placed an exponentially increasing load on the interconnectors that supply SA with meaningful base-load power from Victoria’s coal-fired plant in the Latrobe Valley. The interconnectors, faced with rapidly increasing loads, that fast exceeded their thermal limits, shut down as a means of self-protection (for detail on the 1 November event – see our post here). There followed a complete collapse of the grid in SA.

Cobalt mining for lithium ion batteries has a high human cost -  The world’s soaring demand for cobalt is at times met by workers, including children, who labor in harsh and dangerous conditions. An estimated 100,000 cobalt miners in Congo use hand tools to dig hundreds of feet underground with little oversight and few safety measures, according to workers, government officials and evidence found by The Washington Post during visits to remote mines. Deaths and injuries are common. And the mining activity exposes local communities to levels of toxic metals that appear to be linked to ailments that include breathing problems and birth defects, health officials say.The Post traced this cobalt pipeline and, for the first time, showed how cobalt mined in these harsh conditions ends up in popular consumer products. It moves from small-scale Congolese mines to a single Chinese company — Congo DongFang International Mining, part of one of the world’s biggest cobalt producers, Zhejiang Huayou Cobalt — that for years has supplied some of the world’s largest battery makers. They, in turn, have produced the batteries found inside products such as Apple’s iPhones — a finding that calls into question corporate assertions that they are capable of monitoring their supply chains for human rights abuses or child labor.   Apple, in response to questions from The Post, acknowledged that this cobalt has made its way into its batteries. The Cupertino, Calif.-based tech giant said that an estimated 20 percent of the cobalt it uses comes from Huayou Cobalt. Paula Pyers, a senior director at Apple in charge of supply-chain social responsibility, said the company plans to increase scrutiny of how all its cobalt is obtained. Pyers also said Apple is committed to working with Huayou Cobalt to clean up the supply chain and to addressing the underlying issues, such as extreme poverty, that result in harsh work conditions and child labor.

 Power Plant Emissions Down, But Still 30% of Total GHGs --Power plant emissions declined last year, but they are still one of the largest sources of US carbon pollution, according to EPA data released yesterday. While power plant emissions dropped by 6.2 percent in 2015, compared to 2014 levels, nearly 1,500 of these facilities emitted about 2 billion metric tons of carbon dioxide last year. This represents about 30 percent of total US greenhouse gas pollution in 2015. The agency’s Greenhouse Gas Reporting Program data, released annually, details emissions broken down by industrial sector, geographic region and individual facilities. More than 8,000 large facilities reported their direct GHG emissions from 2015 to EPA. As with power plants, the data suggests overall industrial emissions are dropping. In 2015, reported emissions from large industrial sources, representing about half of all US GHG emissions, were 4.9 percent lower than 2014, and 8.2 percent lower than 2011. The data also shows that petroleum and natural gas systems were the second largest stationary source of emissions, reporting 231 million metric tons of GHG emissions. Reported emissions for 2015 were 1.6 percent lower than 2014, but 4.1 percent higher than 2011. Additionally, reported emissions from other large sources in the industrial and waste sectors were a combined 852 million metric tons of GHG emissions in 2015, down 1.6 percent from 2014. Most sectors reported emissions reductions, with large declines in reported emissions from the iron and steel sector and the production of fluorinated chemicals. The emissions data comes as the US Court of Appeals for the DC Circuit considers the legality of the Clean Power Plan, which would require existing coal-burning power plants to cut carbon emissions by 32 percent by 2030, compared to 2005 levels.

Duke Energy to Remove Coal Ash From North Carolina Plant - ABC News: Duke Energy has agreed to remove millions of tons of coal ash containing toxic heavy metals from a power plant in North Carolina. The nation’s largest electricity company announced Wednesday, Oct. 5, 2016 that it would dig up three huge pits of water-logged ash at the Buck Steam Station near Salisbury. The ash will be dried and either offered for use in making concrete or moved to lined landfills elsewhere. The nation's largest electricity company announced Wednesday that it would dig up three huge pits of water-logged ash at the Buck Steam Station near Salisbury. The ash will be dried and either offered for use in making concrete or moved to lined landfills elsewhere. Duke agreed to remove the dumps to settle a federal lawsuit filed two years ago by the Southern Environmental Law Center. The ash — left behind when coal is burned to generate electricity — contains such toxic chemicals as lead and mercury, which over time can seep into the groundwater. Duke's handling of coal ash and the company's sometimes cozy relationship with state regulators has been under scrutiny since a dump at a different Duke plant ruptured in 2014, coating miles of the Dan River in gray sludge The Associated Press soon reported that concerning levels of chemicals contained in coal ash were found in drinking-water wells in Dukeville, a rural hamlet adjacent to the Buck plant. Among them, hexavalent chromium is known to cause lung cancer when inhaled, and the U.S. Environmental Protection Agency says it is likely to be carcinogenic when ingested

In jail, ex-coal CEO says he's 'American political prisoner' (AP) — A defiant Don Blankenship declared himself an “American political prisoner” on his blog, blaming others for the 2010 mine explosion that killed 29 men and led the former West Virginia coal operator to be imprisoned. The ex-Massey Energy CEO said this week that he plans to distribute 250,000 copies of the 67-page diatribe in booklet form. Blankenship reported to a California federal prison May 12 for a maximum one-year sentence for conspiring to willfully violate mine safety standards at West Virginia’s Upper Big Branch mine, site of the explosion. He also paid a $250,000 fine. A jury convicted him of the misdemeanor last December. Oral arguments in his appeal will be Oct. 26 before the 4th U.S. Circuit Court of Appeals in Richmond, Virginia. Blankenship, 66, wrote that politicians imprisoned him for political, self-serving reasons. He claims misconduct by prosecutors, judges, law clerks, the FBI, President Barack Obama, Sen. Joe Manchin and the Mine Safety and Health Administration. In a statement to The Associated Press on Wednesday, former U.S. attorney Booth Goodwin calls the booklet “more Blankenship propaganda.” “Blankenship was convicted by a jury of his peers of willfully violating mine safety laws-laws designed to keep miners safe,” said Goodwin, who brought the case against Blankenship. “They are the same laws that if broken, cause deadly mine explosions like the one that tragically killed 29 miners at UBB. Blankenship is in prison because of his greed, his arrogance, and his criminal behavior. This most recent stunt shows that he still has not learned this lesson: if you gamble with miners lives, you deserve to go to prison.”

A Curious Plan to Fight Climate Change: Buy Mines, Sell Coal - When Patriot Coal filed for bankruptcy in 2015 — its second time in three years — environmentalists and regulators were prepared for the company to figure out ways to shunt liabilities and maximize returns. But no one could have envisioned what happened next. Patriot handed over millions of dollars of environmental obligations to a nonprofit company run by a man named Tom Clarke, who owned a chain of nursing homes and a tourist attraction that had fallen behind on its bills. Until that day in April, Mr. Clarke, 61, had never been in a coal mine. Patriot sold not only the troubled Federal mine to Mr. Clarke, but also several other mines that were no longer in operation, including a sprawling surface mine carved from the top of a mountain in southern West Virginia. Mr. Clarke’s new company agreed to clean up the shuttered mines and reclaim the land that had been ravaged. Why then, would someone like Mr. Clarke want to take over a troubled mine and the environmental obligations that Patriot Coal was seeking to get rid of? As improbable as it may seem, Mr. Clarke said the Patriot deal had played to his advantage — helping start his grand plan to remake coal mining into a greener industry. He is not only reclaiming Patriot’s mines that are no longer in use. He has come up with a model, he said, for how the industry can keep producing coal, while reducing its impact on the climate.The plan involves creating pollution credits by planting or preserving trees around the world to offset the carbon emitted from burning coal. For every ton of coal he sells, Mr. Clarke attaches some of the credits. Mr. Clarke has had trouble, however, persuading buyers of his coal, like utilities and steel companies, to pay extra for the credits. Mr. Clarke hoped electric utilities would be able to count his green-coal credits toward the carbon-emissions goals that the Obama administration has set for states in its Clean Power Plan, now before a federal court. But administration officials have effectively ruled that out. ... Ultimately, Mr. Clarke hopes to offset all of the expected emissions from the coal he is producing with pollution credits. But right now, he is offsetting only 10 percent. That worries environmentalists. “It’s all I can afford,” he said.

 China Rushes to Boost Coal as Rally Warns: Winter Is Coming - China’s efforts to shrink its bloated coal industry may have worked too well, too fast. Prices have surged more than 50 percent this year after the government ordered miners to cut output to ease a glut and help lift the industry out of crisis. Now, as winter looms and fuel demand peaks, the consumer and producer of about half the world’s coal is having to relax some of those controls, or face even higher fuel costs, according to analysts at Citigroup Inc. “The extent of the production cuts earlier this year has been too severe,” David Fang, a director with the CCTD, said by phone. “Now the government is trying to fix the problem by relaxing some controls on output, but there is only limited time now before the winter arrives.” The government earlier this year unveiled efforts to revitalize the coal industry and throw a lifeline to miners, many of them government-controlled, who struggled to repay debts as prices of the fuel used in power stations fell to the lowest in about a decade amid excess supply. President Xi Jinping’s administration ordered miners to lower output to the equivalent of 276 days of production, from the standard 330 days. And as part of the country’s broader “supply side structural reform,” regulators went after the industry’s massive overcapacity, cutting about 150 million tons of unneeded capacity as of August, out of a target of 500 million tons by 2020. The reforms may be a victim of their own success. Output fell more than 10 percent in the first eight months of this year, pushing up domestic prices and helping imports, including coking coal used to make steel, rise to the highest since December 2014.

94 percent of India’s planned coal capacity will be lying idle - Despite having just ratified the Paris climate agreement, India is nevertheless pushing on with plans to build over 300 GW of new coal capacity by 2030 in a misguided attempt to meet the electricity needs of approximately 300 million people currently with no access to electricity in the country. To be clear, the “misguided attempt” is not to suggest the millions of Indians currently without electricity don’t need said electricity, but rather that recent analysis has suggested that the current plans for mass-coal generation capacity expansion are unnecessary, and that in fact, might not be needed until 2022 — if at all. According to new research from Greenpeace’s Energy Desk, India’s Government is currently intending to increase its coal generating capacity by 300 GW by 2030, with approximately 65 GW of new coal capacity already under construction, and another 178 GW of coal projects already in the permitting pipeline. However, recent assessment made by the country’s Power Ministry for reviewing the National Electricity Policy revealed that India does not need to build any new power plants for at least the next three years. This was followed up by an independent analysis by Greenpeace’s Energy Desk, which concluded that 94% of the planned new coal capacity will be laying idle in 2022 due to an unplanned overcapacity. In fact, this would suggest that this state of affairs might last long past 2022. Further, India’s coal plant capacity factors are running at 64%, which means that India’s existing fleet of coal plants are sitting idle around a third of the time.

U.N. atomic agency chief says Iran sticking to nuclear deal - Iran has kept to a nuclear deal it agreed with six world powers last year limiting its stockpiles of substances that could be used to make atomic weapons, the head of the International Atomic Energy Agency (IAEA) told French daily Le Monde. Confirming the findings of a confidential report by the U.N. agency seen by Reuters last month, IAEA Director-General Yukiya Amano said Tehran had observed the deal which was opposed by hardliners inside Iran and by skeptics in the West. "The deal is being implemented since January without any particular problem," he told Le Monde in an interview published on Saturday. "There was a small incident in February: the stock of heavy water very slightly exceeded the limit set - 130 tonnes. But we immediately signaled that to Iran which took all the necessary measures," he said. Under its July deal with the United States, Russia, China, France, Britain and Germany, Iran is allowed to have 130 tonnes of heavy water, a moderator in reactors like the one it has disabled at Arak and a chemical it produces itself. The stock briefly reached 130.9 tonnes, the agency reported in February. "Apart from that, I can certify that Tehran respects its commitments to the letter. The Iranians are doing what they promised the international community," Amano said.

Fukushima Radiation Has Contaminated The Entire Pacific Ocean (And It's Going To Get Worse) - The nuclear disaster has contaminated the world's largest ocean in only five years and it's still leaking 300 tons of radioactive waste every day. In 2011, an earthquake, believed to be an aftershock of the 2010 earthquake in Chile, created a tsunami that caused a meltdown at the TEPCO nuclear power plant in Fukushima, Japan. Three nuclear reactors melted down and what happened next was the largest release of radiation into the water in the history of the world. Over the next three months, radioactive chemicals, some in even greater quantities than Chernobyl, leaked into the Pacific Ocean. However, the numbers may actually be much higher as Japanese official estimates have been proven by several scientists to be flawed in recent years. If that weren’t bad enough, Fukushima continues to leak an astounding 300 tons of radioactive waste into the Pacific Ocean every day. It will continue do so indefinitely as the source of the leak cannot be sealed as it is inaccessible to both humans and robots due to extremely high temperatures. It should come as no surprise, then, that Fukushima has contaminated the entire Pacific Ocean in just five years. This could easily be the worst environmental disaster in human history and it is almost never talked about by politicians, establishment scientists, or the news. It is interesting to note that TEPCO is a subsidiary partner with General Electric (also known as GE), one of the largest companies in the world, which has considerable control over numerous news corporations and politicians alike. Could this possibly explain the lack of news coverage Fukushima has received in the last five years? There is also evidence that GE knew about the poor condition of the Fukushima reactors for decades and did nothing. This led 1,400 Japanese citizens to sue GE for their role in the Fukushima nuclear disaster.

 Putin Orders Suspension of Plutonium Cleanup Program with US: Russian President Vladimir Putin signed a decree Monday suspending an agreement with the United States on disposing of weapons-grade plutonium. The decree states the move was taken due to what Moscow calls “a drastic change in circumstances, the emergence of a threat to strategic stability as a result of unfriendly actions by the United States of America with respect to the Russian Federation." It also cites what it says is Washington's failure to fulfill the obligations for the disposal of surplus weapon-grade plutonium. The deal, initially signed in 2000 and renewed in 2010, called for both nuclear powers to dispose of weapons-grade plutonium from their defense programs. In a bill submitted Monday to the State Duma, the lower house of Russia’s parliament, the Russian president asked the country's legislators to support the suspension of the plutonium deal. The bill enumerates steps Washington could take to reverse the agreement's suspension. These include “a reduction of the military infrastructure and the size of the contingent” of U.S. troops stationed in NATO member-states in Eastern Europe, and rescinding the Magnitsky Act, which imposed sanctions on Russian officials deemed responsible for the death of Russian lawyer Sergei Magnitsky in a Moscow prison in 2009.

US at the Crossroads: Start a New Nuclear Arms Race? Or Address Climate Change and Human Needs? - According to the National Oceanic and Atmospheric Administration (NOAA), August was the 16th consecutive month of record temperatures for the planet. July was the hottest month on record worldwide, until it was tied by August. Persistent drought conditions already threaten water supplies and agricultural breadbaskets in the U.S. and elsewhere Arctic and Antarctic ice are melting at unprecedented rates, as are glaciers in many countries, promising global sea level rise that will threaten cities and countries everywhere. Glacier National Park in Montana may have to change its name before too long, as the glaciers are melting rapidly. The U.K.-based Global Challenges Foundation calculates Americans are five times more likely to die in a “human extinction event” such as nuclear war, climate change-driven catastrophe or pandemic, than to die in a car crash. One prominent climate scientist, Guy McPherson of the University of Arizona, thinks humanity may not survive past 2030, fourteen years from now, from climate change and the resulting breakdown in our food and water supply, and in the social order. Nobody can know with any certainty at this point how much time humanity has left on Earth. However, the question of whether we have 14 years left, or 50 or 250, or much longer, doesn’t matter all that much. The amount of money we’re about to squander on a New Nuclear Arms Race, projected at $1 trillion over thirty years, is indefensible. Our tax dollars and focus need to be on protecting life on Earth, not threatening its extinction. Under the benign or even positive heading of “nuclear modernization,” the United States plans to spend an estimated $1 trillion (it will surely be more than that – when was the last time an exorbitant military project came in under budget?) to overhaul every part of our nuclear weapons enterprise over the next three decades. Weapons laboratories, warheads, missiles, planes and submarines are all slated to be upgraded. Predictably, every other nuclear weapons state (Russia, China, France, the United Kingdom, Israel, India, Pakistan and North Korea) is following suit and planning similar Dr. Strangelovian upgrades to their arsenals. So our folly not only makes the world more dangerous in terms of nuclear proliferation, it provides “leadership” down the dark path of fear and destruction for countries that can afford this investment even less than we can.

How Trump and Clinton Gave Bad Answers on US Nuclear Policy….And Why You Should Be Worried  --You may have missed it.  During the latter part of the much hyped but excruciating-to-watch first presidential debate, NBC Nightly News anchor Lester Holt posed a seemingly straightforward but cunningly devised question. His purpose was to test whether the candidates understood the essentials of nuclear strategy. A moderator given to plain speaking might have said this: “Explain why the United States keeps such a large arsenal of nuclear weapons and when you might consider using those weapons.” What Holt actually said was: “On nuclear weapons, President Obama reportedly considered changing the nation’s longstanding policy on first use.  Do you support the current policy?”  The framing of the question posited no small amount of knowledge on the part of the two candidates. Specifically, it assumed that Donald Trump and Hillary Clinton each possess some familiarity with the longstanding policy to which Holt referred and with the modifications that Obama had contemplated making to it.   According to press reports, President Obama had toyed with but then rejected the idea of committing the United States to a “no first use” posture.  Holt wanted to know where the two candidates aspiring to succeed Obama stood on the matter. Cruelly, the moderator invited Trump to respond first.  The look in the Republican nominee’s eyes made it instantly clear that Holt could have been speaking Farsi for all he understood. Trump turned first to Russia, expressing concern that it might be gaining an edge in doomsday weaponry. “They have a much newer capability than we do,” he said.  “We have not been updating from the new standpoint.”  The American bomber fleet in particular, he added, needs modernization.  Trump then professed an appreciation for the awfulness of nuclear weaponry.  “I would like everybody to end it, just get rid of it.  But I would certainly not do first strike.  I think that once the nuclear alternative happens, it’s over.” Hillary Clinton chose a different course: she changed the subject. She would moderate her own debate.  Perhaps Trump thought Holt was in charge of the proceedings; Clinton knew better. What followed was vintage Clinton: vapid sentiments, smoothly delivered in the knowing tone of a seasoned Washington operative.  During her two minutes, she never came within a country mile of discussing the question Holt had asked or the thoughts she evidently actually has about nuclear issues.  “[L]et me start by saying, words matter,” she began.  “Words matter when you run for president.  And they really matter when you are president.  And I want to reassure our allies in Japan and South Korea and elsewhere that we have mutual defense treaties and we will honor them.”

What If There's India-Pakistan Nuclear Confrontation? -- Did India really carry out what it claims were “surgical Strikes” across the line of control in Azad Kashmir? Is this just another cooked-up story like the “successful” fake Indian Army Ops in Myanmar and Longewala?  What was accomplished? Wouldn’t Pakistan have retaliated forcefully if indeed there were incursions by Indian troops in Pakistan? Wouldn’t that escalate the conflict in South Asia? Could such escalation spiral into a major nuclear confrontation in the region?
What would be its consequences in terms of loss of life and property in the wider region that is home to more than two billion people? Has India succeeded in deflecting world's attention away from the Indian military's atrocities in Kashmir?   Viewpoint From Overseas host Misbah Azam discusses these questions with Panelists Ali Hasan Cemendtaur and Riaz Haq (www.riazhaq.com

  Podcast: Why nuclear war looks inevitable | Reuters: Several developments have the potential to move the hands of the nuclear doom clock closer to midnight. A new U.S. nuclear policy has a chance of destabilizing the balance of terror by creating a larger arsenal of smaller weapons. Why? Smaller weapons are more tempting to use. The argument for so-called "tactical" nukes is that they would destroy a smaller area and create less fallout, making them more "safe" to use than traditional many-megaton bombs. And that could lead to temptation to use them. Just as importantly, that could give other nuclear-armed powers the impression that the U.S. would be more likely to use the weapons - a dangerous spiral that could culminate with...the end of the world, literally. The United States is hardly the only nation adding stress to a system that is always a hands-breadth from tragedy. Russia's President Vladimir Putin has rattled the nuclear sabre, even threatening to station missiles in annexed Crimea. Pakistan, another nuclear-armed country, is a divided nation with government agencies linked to Islamic extremism and a beef with India. India has a beef with Pakistan and territorial disputes with China. North Korea is a wildcard with an accelerating nuclear program that may still be getting help from Pakistan - which denies it. Recent tests by North Korea and China's lack of overt response has set U.S. teeth on edge.

 Fifth oil-field waste dumping defendant gets three years' probation - Youngstown Vindicator - A federal judge has sentenced the fifth defendant in the dumping of oil-field waste into a Mahoning River tributary in Youngstown to three years’ of probation and ordered him to complete 150 hours of community service. David N. Jenkins, 34, of Warren, who pleaded guilty in July to violating the Clean Water Act, drew the sentence Tuesday from U.S. District Court Judge Christopher A. Boyko in Cleveland, who imposed no fine on him.  Jenkins was sentenced a week before the scheduled release next Tuesday of his boss, Ben Lupo, 66, from the Federal Medical Center, Devens, in Ayer, Mass. Lupo is completing the 28-month prison term he received after pleading guilty to violating the act. He was fined $25,000.In a sentencing memorandum, Jenkins’ lawyers – Attys. John McCaffrey and Adrienne B. Kirshner of Cleveland – asked Judge Boyko to consider Jenkins’ acceptance of responsibility for his crime, and the probation sentences two co-defendants received for the same crime.The memorandum says Jenkins was unaware the storm drain into which the waste was emptied flowed into an unnamed Mahoning River tributary.It also says Jenkins feared losing his job if he didn’t follow Lupo’s orders concerning waste dumping. Jenkins admitted violating the act by directing Michael P. Guesman, another employee of Hardrock Excavating LLC, 2761 Salt Springs Road, to dump fracking waste into a storm drain flowing into that unnamed tributary without a permit.

Utica’s 2nd Biggest Driller, Gulfport Energy, Floats $650M in IOUs - Marcellus Drilling News - Gulfport Energy is an Oklahoma City-based independent oil and natural gas exploration and production company (“driller”) with its main operations in the Utica Shale of eastern Ohio and along the Louisiana Gulf Coast. In August MDN ran an article looking at the top 5 drillers in the Utica Shale (see Which 5 Drillers Dominate in the Utica Shale?). Gulfport was #2 in that list, only behind Chesapeake Energy. Gulfport owns 223,000 net acres in the Utica, produced 2/3rds of a Bcf (billion cubic feet) of natural gas and equivalents per day in 2015, and drilled 165 wells in 2015. Yesterday Gulfport announced a program to swap out old debt for new debt–offering $650 million in “senior notes” (we call them IOUs) in a program to repurchase other notes coming due in 2020. Yes, it’s all financial mumbo jumbo as far as we’re concerned. What it points out is the extraordinary lengths drillers will go to stay afloat during this time of low natgas prices..

Workshop held to educate public on injection wells – Sharonherald – The leaders of Grant Township in Indiana County continue to fight a proposed injection well, despite setbacks including lawsuits.  If the town of 700 people can stand up to the gas and oil industry, so can everyone else, said Stacy Wanchisn Long, vice chairwoman of the board of supervisors. She was one of six panelists who spoke Thursday at Westminster College, New Wilmington, to a crowd of about 40 on “Shale Waste Disposal Workshop: Community Concerns on Injection Wells.” The workshop focused on safety, health, environmental and other issues surrounding liquid waste created by the extraction of gas and oil through hydraulic fracturing, or “fracking.” The event was presented by the Lawrence and Mercer Alliance for Aquatic Resource Monitoring (ALLARM) program, which is based at Westminster; and and the League of Women Voters of Pennsylvania’s “Straight Scoop on Shale” initiative, supported by a Colcom Foundation grant. Dr. Helen Boylan, a Westminster chemistry professor who oversees ALLARM, showed a short video produced by the gas and oil industry, which said that fracking fluid is safe and contains mostly water and sand. The message they’re trying to send is that there is no concern about the chemical additives, said Boylan, who is also the coordinator of Westminster’s environmental science program. Those chemicals still make up a significant amount of fracking fluids and include known carcinogens and hazardous air pollutants, she said, encouraging folks to do their own research and examine fracking from all angles. “You need to get the whole story and not just one side,” she said.

Utica And Marcellus Natural Gas Production Defying The Skeptics --The Utica and Marcellus are the basis of some 800 Tcf that can be produced at a break-even price of $3/MMBtu or less. These plays are the primary reason why EIA projects that total U.S. natural gas production will boom nearly 25% by 2025 alone to 96 Bcf/day – a colossal 85% surge since 2005 when Exxon CEO Lee Raymond infamously declared that our gas production had peaked. U.S. gas production has INCREASED EVERY SINGLE YEAR since 2006. The Utica and Marcellus are why we are talking about a U.S. manufacturing renaissance built on a huge supply of affordable natural gas, are why we are talking about lowering CO2 emissions by using more natural gas, are why we are talking about a wind and solar buildout with gas as the integral backup, and why we are talking about exporting U.S. energy to a mostly energy-deprived world that could surely use it. Given the importance of shale gas and fracking in the critical battleground voting states of Ohio and Pennsylvania, I was shocked and disappointed to not even hear the natural gas subject mentioned during the first presidential debate. Mr. Trump and Secretary Clinton must talk about whether they plan to advance or hinder the industry – and how. Ohioans and Pennsylvanians should know that fracking for oil and gas will be a crucial economic growth engine for them for decades. The surge in natural gas production in the Northeast shows how quickly states can lower prices by producing more energy. California and New York, for instance, have refused to develop their shale and not coincidentally have the two highest electricity prices in the continental U.S. In contrast, gas producing giants Ohio and Pennsylvania have reversed a previous trend that had them with higher gas for power prices than the U.S. average.  As the U.S. continues to move toward using more gas, development of low cost shale is essential because it cuts costs for our businesses and gives them a competitive advantage globally. This is why the incessant talk on more and more regulations is so problematic from an energy security, environmental, and economic perspective, especially since methane emissions from fracked oil and natural gas wells have fallen 80%, even as production has surged (here).

 NGSA winter outlook sees colder temperatures, demand pushing US natural gas prices higher - Colder temperatures this winter are likely to drive up residential and commercial demand for natural gas and provide support for wholesale prices, compared with 16-year lows seen last winter, the Natural Gas Supply Association said in its winter outlook released Wednesday. NGSA projects overall demand will rise 3.2 Bcf/d, or 3.6%, to a record average of 92.3 Bcf/d in the coming season as a winter that is forecast to be 12% colder than the year-ago period boosts demand from the residential and commercial sectors by a combined 4 Bcf/d, the group said in its winter 2016-17 outlook. The trade association's outlook evaluates impact of weather, economic growth, customer demand, storage inventories and supply on prices. It expects support from weather and overall demand, while seeing a "neutral" impact from the economy, storage and winter supply. The projection is based on published data from independent and government sources including the US Energy Information Administration and National Oceanic and Atmospheric Administration. NGSA used to Energy Ventures Analysis and EIA data for its demand and supply projections, and IHS Economics data for its economic projections.The projected demand increase in the outlook is tempered by a decline in power sector consumption, as the expected rise in gas prices will lead to reduced coal-to-gas switching. "NGSA anticipates temporary fuel switching to natural gas to continue this winter, but at about half the volumes that took place during last winter's record-setting fuel switching," said Bill Green, chairman of NGSA and vice president, downstream marketing for Devon Energy, in a statement. EVA projected the decline in the power sector demand to be 3.3 Bcf/d, or 13%.

U.S. Natural Gas Futures Reach 21-Month Peak | Natural gas futures in the United States (US) on 7 October rose to its highest point since June 2015 as investors anticipate a boost in demand for the commodity. Gas futures for November delivery spiked by 14.4 cents to $3.193 per million British thermal units on the New York Mercantile Exchange. The climb in price of natural gas of 4.7 percent allowed futures to increase for the fifth straight day. As a result, the week of 3 October posted the biggest weekly gain since last August. Traders were reportedly buoyed on predictions from meteorologists of unseasonably warm weather in the forty-eight contiguous states from 12 October to 21 October, which is expected to increase demand and trim the fat off the supply glut, which stand at 3.68 trillion cubic feet—74 billion cubic feet above that of a year ago.  Hurricane Matthew’s northward journey through the Caribbean caused extensive damage, as well as a death toll in the hundreds. Yet analysts like Phil Flynn of the Price Futures Group do not believe that the storm will significantly hurt natural gas demand due to outages in the southeastern US. “The latest forecasts seem to suggest the amount of power outages are not as big as feared from Hurricane Matthew, Flynn said in an interview with Bloomberg.“The warmer temperatures are adding cooling demand,” he added. Another possible factor behind the rise in futures might come from the growth of the US natural gas market, which was discussed on on 7 October. Data from the Energy Information Administration’s 2015 Natural Gas Annual show an increase of natural gas production and consumption, though prices have generally been on a downward slide since 2014.

Colonial leak's impact minimized by imports, use of line 2. -- The increase in waterborne flows to the East Coast in response to the recent Colonial Pipeline outage illustrated the flexibility of supply in the U.S. motor gasoline market. At the same time, the lack of a lasting impact from the loss of 8.3 million barrels of gasoline to a key U.S. demand region highlighted the degree of oversupply in the market. Today we look at how waterborne flows helped to mitigate the effects of the Colonial Pipeline outage, and how flexibility in the East Coast motor gasoline market enabled it to handle unexpected supply constraints with minimal disruption.  Colonial Pipeline is the largest source of refined product supply for the U.S. East Coast. As we said in Move It On Over, Colonial’s primary route (from Houston to Linden, NJ) consists of four distinct segments, which, like the “arms” and “legs” of an X, meet at Greensboro, NC. One of the two Houston-to-Greensboro lines is dedicated to moving motor gasoline (Line 1 on the map in Figure 1; capacity, 1.37 MMb/d), and the other line (Line 2; capacity, 1.16 MMb/d) can be used to ship either distillate (diesel and heating oil) or gasoline, each of which can be move sequentially through Line 2 in “batches”. (See Refined, Piped, Delivered–They’re Yours for a primer on batching.) At Greensboro, these products go into breakout tanks; from there, gasoline and distillates are sent further north (again in batches) on two mainline pipes. Line 3 (capacity, 885 Mb/d) runs from Greensboro to Linden––where it connects with the Intra Harbor Transfer (IHT) system, which facilitates deliveries to terminals across the New York and New Jersey area. Line 4 is a 32-inch-diameter pipe (capacity, ~700 Mb/d) that runs from Greensboro to Colonial’s Dorsey Junction terminal near Baltimore, MD.

You Can't Always Get The Term Charter Rate You Want - The Jones Act Rate Crash - Term charter rates for medium-range Jones Act tankers have fallen by two-thirds since they peaked at $120,000/day in mid-2014, to only $38,000/day done in September 2016, which is good news for producers but a punch in the stomach for ship owners. A sharp rise in the number of vessels being added to the Jones Act fleet has surely contributed to the charter-rate collapse. Less obvious are the degrees to which the rate drop may have been influenced by the decline in superlight Eagle Ford crude oil production, or by the lifting of the ban on U.S. crude oil exports. Today, we examine the evidence. The Jones Act (see The Sea and Mr. Jones) is a federal statute requiring that all goods transported by water between U.S. ports be carried in U.S.-flagged ships, constructed in the U.S,, owned by U.S. citizens, and crewed by U.S. citizens and/or U.S. permanent residents. The Jones Act fleet used by the petroleum industry consists of three main categories of vessels: smaller barges that typically carry either 10 MBbl or 30 MBbl of crude or refined products and operate on inland waterways as well as coastal canals; coastal barges, including larger articulated tug barges (ATBs); and self-propelled tankers that operate in both coastal and international waters and generally carry over 300 MBbl of crude oil or refined product.  We’ve discussed developments in the Jones Act fleet a number of times here in the RBN blogosphere, including Flirtin' With Disaster, Old and In The Way, and Rock the Boat.  Our focus today is on large ATBs and a subset of the self-propelled tanker category, namely medium-range (MR) or “Handy” size tankers that carry about 330 Mbbl and that are largely engaged on term charters by oil companies to move crude or refined products between U.S. ports.

US' Permian oil rig count keeps climbing as analysts await activity pickup -  US oil rigs rose by three to 204 in the Permian Basin last week, as analysts watched all corners of industry for signs of an activity pickup next year. The 204 rigs now working in the West Texas/New Mexico basin represents the highest number since last December, Baker Hughes said in its weekly rig count Friday. Total US oil rigs increased by seven to 425. The 72 rigs added to the Permian by industry since late April has largely occurred at oil prices below $50/b. But it could take higher oil prices to push on to the next major sustained activity increase in that region as larger operators accelerate the momentum begun by their smaller counterparts, Paul Horsnell, head of commodities research for Standard Chartered Bank, said. "The pace of the upwards move looks a bit more sluggish than it was six or so weeks back, so the question is what gets [the Permian rig count] to 250 or 300?" Horsnell said. "I think that we might be getting pretty close to as far as it can rise at $45" oil prices, he added, since larger operators are insistent about not wanting to grow output at current price levels.

Oklahoma Governor Wants You to Pray for the Oil Industry (No Joke) - This is not us trying to be The Onion . Oklahoma Gov. Mary Fallin has officially proclaimed Oct. 13 "Oilfield Prayer Day" to raise awareness for the state's declining oil industry . Here's her official signed proclamation . The document states: "Whereas Oklahoma is blessed with an abundance of oil and natural gas; and ... Christians acknowledge such natural resources are created by God ... Christians are invited to thank God for the blessings created by the oil and natural gas industry and to seek His wisdom and ask for protection."  A series of "Praying for the Patch" breakfasts will take place in other cities before culminating at the sixth annual Oilfield Prayer Breakfast on Oct. 13 in downtown Oklahoma City, an event that Fallin has made preliminary plans to attend .

US Justice Department subpoenas Chesapeake over acquisition accounting - The US Department of Justice is investigating Chesapeake Energy's methodology for acquiring and classifying oil and gas properties, the Oklahoma City-based producer has said in a filing with the Securities and Exchange Commission. "We have received a DOJ subpoena seeking information on our accounting methodology for the acquisition and classification of oil and gas properties and related matters," Chesapeake said in the Thursday filing. A Chesapeake spokesman Friday declined comment beyond the filing, while a DOJ spokesman declined to discuss the subpoena. "As a matter of policy, the Justice Department generally neither confirms nor denies whether a matter is under investigation," spokesman Peter Carr said in an email.The DOJ subpoena marks the latest investigation into the company's financial affairs by federal and state agencies. In its SEC filing, Chesapeake notes that it has previously disclosed "subpoenas and demands for documents, information and testimony in connection with investigations into possible violations of federal and state antitrust laws," from the DOJ and "state governmental agencies and authorities" relating to its purchase and lease of oil and gas rights in various states. The company said it had "received DOJ, US Postal Service and state subpoenas seeking information on our royalty payment practices."

Murphy Energy Corp. Files for Chapter 11 - WSJ: Murphy Energy Corp., an oil and natural gas transporter with terminals in Texas and Oklahoma, filed for chapter 11 protection, with a plan to look for buyers. Lawyers who put Tulsa, Okla.-based Murphy Energy’s operations into bankruptcy proceedings on Tuesday said the company ran low on cash after completing its Port Hudson natural gas terminal in Louisiana. The chapter 11 filing makes Murphy the latest energy company to file for bankruptcy since fuel prices plummeted. Founded in 1993, Murphy Energy owns 10 truck-to-pipeline crude oil terminals in north Texas and Oklahoma that buy crude oil from producers and transport it to customers, according to documents filed with the U.S. Bankruptcy Court in Dallas. Its Louisiana operations include the Port Hudson terminal as well as Port Allen, which is under construction. Through an affiliate, the company also operates a fleet of more than 140 trucks and 200 crude or natural gas trailers. In court papers, the 210-worker company said it owes more than $75 million in debt, including roughly $57 million to lenders led by Bank of America BAC 0.68 % N.A. Murphy Energy officials said they had a purchase offer in late 2015 that would have paid all of its debts and pay out its owners, but the unidentified buyer backed out at the last minute. “Even in the weeks leading up to the bankruptcy, various parties continued to express interest in the [company’s] businesses at a level that would have produced meaningful, if not complete, recovery for creditors,” Chief Restructuring Officer Steven List said in court papers. The purchase offer’s sudden termination last year left the company with little time to negotiate extensions to forbearance agreements with Bank of America and other lenders, Mr. List said in court papers. It also owes about $7 million to Mabrey Bank, which it borrowed in 2014 to build the Port Hudson project.

 Different Strokes By Different Folks - Investment In Unconventional Plays Rises Among Diversified U.S. E&Ps - A group of 15 diversified exploration and production companies we have been tracking collectively has slashed capital expenditures by 70% since 2014, but so far the cumulative effect of these spending cuts has been only a 5% decline in production. Now, several of these E&Ps––especially those targeting the Permian Basin and the SCOOP/STACK plays––are planning capex increases and/or expecting production gains. Today we discuss 2016 capital spending and production for a representative group of E&Ps whose operations are roughly balanced between oil and natural gas. RBN has been analyzing U.S. upstream capital spending and production trends for the past two years. In August, we reviewed the second quarter 2016 capex and production guidance for 46 of the top U.S. E&Ps (our “universe”, seeBeen Down So Long). We segregated these companies into three peer groups––Oil-Weighted E&Ps, Diversified E&Ps, and Gas-Weighted E&Ps––and showed that for the three groups as a whole, capital spending in 2016 was expected to be 50% lower than in 2015 after a 40% reduction from 2014 to 2015. We also noted that second quarter 2016 capex guidance for the 46 companies was only 2.5% lower than original 2016 estimates, indicating that the rate of capital spending cuts was slowing, and that second quarter 2016 production guidance was stronger than original 2016 estimates because of an increase in oil prices from the lows in early 2016. Next, we took a deep dive into the Oil-Weighted E&Ps (see You Go Your Way, I'll Go Mine). In that analysis, we noted that while capital spending for the group was expected to be down 51% in 2016, there was a new feeling of optimism driven by the reduction in drilling and completion costs and lease operating expenses and a slightly more bullish price outlook. This positive attitude resulted in a 20% increase in the U.S. rig count in late May 2016 and, in particular a 43% gain in the Permian. The Permian Basin-focused E&Ps were the most aggressive, cutting capex only 19% in 2016 compared to a roughly 50% decline for our entire universe of companies.

How A Former Reporter Is Helping Big Oil And Gas Frack The News - -- Oil and gas industry officials and regulators looking to influence media coverage of fracking, a controversial method for extracting natural gas, have received advice from someone who really knows how newsrooms work: a former Denver Post investigative reporter. Karen Crummy, the onetime reporter, moved on to a new role as spokeswoman for two pro-fracking groups in Colorado. This past May, when industry insiders gathered in a Denver Marriott ballroom for a meeting of the Interstate Oil and Gas Compact Commission, she offered suggestions on how to discredit her former colleagues: Dig into their pasts, call them out on social media and complain to their editors. An attendee provided a recording of the talk to The Huffington Post as well as a partial list of those at the meeting, which included state regulators and lawyers who work for the oil and gas industry. Crummy suggested that her listeners should comb the web for any evidence of potential “bias” that could be used to undermine a journalist’s reporting. “If you are really having a problem with a certain reporter or something, go do some oppo[sition] research on them,” she said. “Are they contributing to campaigns? Are they a member of, you know, a business group or environmental group?” A year and a half earlier, Crummy bragged, she had found something she felt was incriminating on a reporter’s Facebook page, which she printed it out and took to the Denver Post’s editor-in-chief. She wanted attendees to feel similarly empowered.

Just An Observation -- Some Great Whiting Wells Being Taken Off-Line -- October 3, 2016 --Tonight I was in the process of updating some production numbers for wells drilled back in 2010 and 2011. First I noticed one well, and then another, and before I knew it, I had several great Whiting wells that were on-line "every day" (with the usual trivial exceptions) through July, 2016, and then abruptly taken off-line in August, 2016 -- not one day on-line in August, not one barrel of oil produced in August, 2016. I was updating wells with good production numbers. I probably updated 30 wells, and the following popped up:

  • October 3, 2016: a great well taken off line in August, 2016:  18988, 1,835, Whiting/KOG, Two Shields Butte 14-21-33-15H, Heart Butte, Bakken, t12/10; cum 425K 7/16; taken off line 8/16; 
  • October 3, 2016: a great well taken off line in August, 2016:  18990, 1,054,WLL, Knife River State 21-16H, Sanish, Bakken, t9/10; cum 270K 7/16; taken off line 8/16;
  • October 3, 2016: a great well taken off line in August, 2016: 18724, 1,251, WLL, Foreman 11-4TFH, Sanish, Bakken, t6/10; cum 247K 7/16; taken off-line 8/16;
  • October 3, 2016: a great well taken off line in August, 2016: 18639, 2,309, WLL, Iverson 21-14H, Sanish, Bakken, t6/10; cum 419K 7/16; taken off-line 8/16; 
  • October 3, 2016: a great well taken off line in August, 2016: 18295, 1,260, Whiting/KOG, Moccasin Creek 16-3-11H, Moccasin Creek, 1 sec, t2/10; cum 435K 7/16; taken off-line all of 8/16;

Just an observation. I will follow up on them in a few months.

Look At These Fracks; High-Proppant Fracks -- October 7, 2016 --Coming off today's confidential list, look at the amount of proppant Oasis used in this 36-stage frack:

  • 31121, 1,374, Oasis, Hysted 5200 12-30 10B, Camp, 36 stages, 20 million lbs, t4/16; cum 67K 8/16;
And then look at the number of stages EOG used in this frack:
  • 32320, 583, EOG, EN-Freda-154-94-2635H-8, Alkali Creek, 50 stages, 3.5 million lbs, t9/16;cum 4K over first 5 days;
The number of frack stages has increased several-fold over the past couple of years, and the "standard" frack in the Bakken now seems to be between 24 and 36 stages, but there is more talk of more 50-stage fracks (Filloon has several articles on this; see "Filloon" tag at bottom of blog.)
When the boom began, most fracks were well below one million lbs proppant total (sand, ceramic, or some combination) but began to increase over time. BEXP (now Statoil) seemed to jump to much larger amounts of proppant early in the game, routinely going to 4 million pounds to frack a single well.
Then EOG pushed the envelope with testing new fracks using between 10 million and 20 million lbs of sand. And remember: EOG wells were generally one mile long (short laterals, one section) vs the more common two-mile laterals (long laterals, two section horizontals) being drilled by most other operators.
I think this is the first time I've seen Oasis using this much proppant. I check very few file reports so I assume there are several other examples.

Report shows Bakken production increases for July recently reported Bakken oil production was up 3,046 barrels per day in July, despite an overall down trend. The report shows a preliminary total of 13,255 producing wells and a current (September) rig count of 33. This compares to an all-time high of 218 in May 2012. The rig count continues to slowly increase. Oilprice noted that over 98 percent of drilling now targets the Bakken and Three Forks formations, with little activity in other areas of North Dakota. The price of WTI benchmark crude oil today sits at $48.94, inching back up towards that magic $50 mark when some companies say they can begin to increase drilling. Low prices, as we know, have forced producers to cut back. The low price environment can be attributed to a number of factors, including lifting Iran sanctions, a weak Chinese economy, Brexit and production both domestically and by OPEC producers. United States production has nearly doubled in the last few years, and OPEC producers have been slow to cut production, too, leaving the market flooded with oil. OPEC came to a tentative agreement to slowly cut back on production later in the year, although the terms of the agreement are somewhat vague.

The Next Story To Come Out Of The Bakken -- DUCs Won't Be Completed -- October 6, 2016 Wells coming off confidential list Friday:  31121, see below, Oasis, Hysted 5200 12-30 10B, Camp, producing,  32320, conf, EOG, EN-Freda-154-94-2635H-8, Alkali Creek, producing,  Four new permits: Operator: XTO  Field: Lost Bridge (Dunn)   Comments: permits for a 4-well pad in SESE 5-148-96; unless I'm reading this wrong, the four wells will be in almost exactly the same location as the five wells permitted yesterday by XTO;  these will be Deep Creek Federal 44 wells;  No DUCs reported as completed; I don't see how the 900+ DUCs can be completed within two years; granted, they are not all coming due at the same time, or even the same year, but DUCs started appearing in 4Q14, and we are now in the 4Q16, and I just haven't seen that many DUCs completed; I don't track actually numbers (I tried, but just too difficult/time consuming) but there area days and days when no DUCs are repeated as being completed, and when DUCs do get reported, it is generally less than a handful (less than three or four); meanwhile, they keep drilling as fast as ever. It is interesting that both wells coming off confidential list tomorrow do seem that they will be completed, and not go to DUC status.

Caught On Tape: Militarized Police Turn Peaceful Native American Protest Into War Zone -- Following the activation of the North Dakota National Guard on September 8, peaceful Dakota Access Pipeline protests quickly became flooded with militarized law enforcement. Native American activists, or “water protectors,” have been standing in the way of the pipeline’s construction for months, successfully blocking it at the Sacred Stone campnear the Missouri River. When the situation initially took a turn for the worse earlier this month, journalists on the ground who were broadcasting live video complained Facebook was blocking their streams. Now, videos and images from Wednesday are emerging that show an overwhelmingly militarized response to the peaceful prayer and protest.   (video) Water Protectors Prayed at #DakotaAccessPipeline site Police arrived with Armored Vehicles & Assault Rifles   This is what it looks like when corporations' interests are at stake. #NoDAPLprotestors are being accosted by ND police, & "sprayed by air"  This is outrageous!! Police in #NoDAPL using loaded guns on Protectors. There are Elders and children there!  The protests are rooted in the Standing Rock Sioux tribe’s concerns that the Dakota Access Pipeline would pollute the area’s water supply and violate tribal treaties. Hundreds of Native American tribes have joined the blockade in solidarity. Landowners also joined the ongoing demonstrations after their land was seized through eminent domain to build the pipeline. The protests received mainstream news coverage after the Department of Justice ordered a halt to construction on land owned by the Army Corps of Engineers. However, construction continues outside that area, and protests are growing more frequent and direct.

North Dakota taps Wisconsin deputies for Dakota Access help (AP) — North Dakota officials say Wisconsin is lending law enforcement resources to authorities responding to the Dakota Access pipeline protests. Officials said Friday that Wisconsin will provide up to 40 sworn sheriffs’ deputies from Dane County and the surrounding area to support the Morton County Sheriff’s Office in North Dakota. Officers will assist for up to 21-day rotations. The deputies come through an interstate mutual aid compact. Morton County Sheriff Kyle Kirchmeier says the deputies will provide the manpower necessary to respond to multiple protest locations. Thousands of people have joined the Standing Rock Sioux Tribe encampment in what’s been called the largest gathering of Native American tribes in a century. Some of the protests have expanded to other construction sites along the pipeline route, which crosses through the Dakotas, Iowa and Illinois.

 Judges ask tough questions in Dakota Access pipeline appeal (AP) — A federal appeals court panel had tough questions Wednesday for opponents of the $3.8 billion, four-state Dakota Access oil pipeline who are arguing to keep a temporary stop of construction in place for a small stretch in North Dakota. A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit already had stopped work for 20 miles on either side of the Missouri River at Lake Oahe while The Standing Rock Sioux Tribe appeals a lower-court ruling from September that let work on the entire pipeline go forward. Both the U.S. government and the pipeline’s backers oppose the tribe’s request for a continuation of the work stoppage; the pipeline is otherwise nearly complete. However, government agencies said last month they won’t allow construction on government land bordering or under Lake Oahe until they re-evaluates their own decision-making surrounding the pipeline, which is expected to take weeks. The tribe says the pipeline impacts sites of historic, religious and cultural significance and threatens the water supply for its reservation and millions of people downstream. Its fight has spurred scores of people to join a protest encampment in southern North Dakota that’s on government land, which has been called the largest gathering of Native American tribes in a century. Protesters have said they won’t leave until the pipeline is defeated and plan to stay into the winter. The panel had a range of questions Wednesday for government, pipeline and tribal lawyers. Judge Cornelia T.L. Pillard wanted clearer answers about the required consultation the government did with the tribe as well as the boundaries of where the tribe wants work stopped. “If we’re going to issue an injunction we need to say where it stops,” said Pillard, who told the tribe’s lawyer she was “flummoxed” trying to understand his argument.Judge Thomas B. Griffith questioned why the pipeline company wouldn’t halt work near the lake before seeing whether they get the government’s permission to continue construction on government land bordering and under the lake.

Major work planned on leaky Wyoming gas pipeline  (AP) — A pipeline company plans to replace sections of a Wyoming natural gas pipeline that has had two leaks since August. The 16-inch-wide pipeline sprung a major leak 14 miles north of Douglas on Sept. 6. Authorities closed Wyoming Highway 59 for more than two hours while workers shut off the flow. The leaking gas didn’t ignite. DCP Midstream spokeswoman Rosslyn Elliott says the pipeline was carrying 40 million cubic feet of gas a day to a gas-processing plant near Douglas. Elliott says an inspection in late August revealed a pinhole leak in the same pipeline but about 40 miles north of the leak in September. She says the company is still investigating the leaks and has been planning to replace sections along a 60-mile stretch of the pipeline.

Shell halts proposed oil-by-rail project at its Anacortes refinery | The Spokesman-Review: – Shell Puget Sound Refinery has terminated plans for a proposed oil-by-rail project at its refinery near Anacortes. Under the plan, trains would have brought crude oil from the Bakken fields of North Dakota to replace some of the supply Shell currently gets from Alaska’s North Slope. Refinery general manager Shirley Yap told the Skagit Valley Herald on Thursday that recent low oil prices and abundant production elsewhere have slowed Midwest production, making it less of a good investment. State and local officials had been in the midst of a full environmental review of the project. Yap said she was confident the facility could have been built following their guidelines. Kristen Boyles, an attorney at Earthjustice who represented conservation groups in their legal challenge of the project, called the decision an extraordinary victory for the people of Skagit County and Washington state.

Cancer-Causing Chemicals Found in Oilfields Supplying Wastewater to Irrigate Food Crops -- People in California's Central Valley could be drinking water tainted by cancer-causing chemicals used in oilfields, and current water-testing procedures would not detect these substances, according to a scientific report released Tuesday by researchers at PSE Healthy Energy, Lawrence Berkeley National Laboratory, the University of California and the University of the Pacific. The report identified dozens of hazardous chemicals used in oilfields that supply waste fluid used to irrigate food crops and recharge underground water supplies in California. Researchers note that produced fluid from these oilfields is recharging regional aquifers used for agriculture that "can also be used for domestic water supply (including drinking water)." "Many of the chemicals used on oil fields do not have standard analytical protocols for their detection in water, so current water quality monitoring programs are mainly focused on naturally occurring contaminants," the report noted. "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 and member of the Protect California Food coalition and Californians Against Fracking. "It's absolutely unacceptable that people in the Central Valley could be drinking dangerous oil-industry chemicals right now without even knowing it."Oilfield wastewater has been used to irrigate food crops in the Cawelo Water District since the mid-1990s, the report noted. The practice recently spread to the North Kern Water Storage District, and state officials have said they hope to further expand it. But there has been little evaluation of risks posed by the threat of chemicals in such fluid.  Researchers noted that many chemicals used in these oilfields cannot be evaluated for hazards because oil companies have withheld key information. But more than 40 percent of those substances that can be identified can be classified as potential threats to human health or the environment.

Report: Fracking took 5.3 million gallons of water per well last year - Hydraulic fracturing is a water-intensive business: Bursting open just one shale gas well can require pumping millions of gallons of water underground. Yet much of the United States' fracking activity takes place in areas that are suffering from high or extremely high water stress, according to Ceres, an advocacy group for sustainable investment.About 57 percent of the nearly 110,000 wells that were hydraulically fractured in the last five years are in these highly stressed regions, including basins in Texas, Colorado, Oklahoma and California, Ceres found in an interactive map and report published Thursday. Companies used 358 billion gallons of water from Jan. 1, 2011, to Jan. 31, 2016, to frack shale oil and gas wells — an amount equal to the annual water needs of 200 mid-sized cities, the report said.As prolonged droughts and population growth continue to strain U.S. water supplies, oil and gas companies could soon find themselves competing with local communities, farmers and other water-guzzling industries. "This remains a very high-risk area for investors [in energy companies]," Monika Freyman, the report's author and director of Ceres' water program, told Mashable. Oil and gas companies aren't just operating in water-stressed areas. They're also using substantially more water in fracking operations. The average water use in each fracked well more than doubled in recent years, from 2.6 million gallons per well in 2011 to 5.3 million gallons per well in 2015, according to Thursday's report. The research is based on national shale well data from, via the consulting firm IHS, and water-stress data provided by the World Resources Institute's Aqueduct Water Risk Atlas. Freyman said it was not entirely clear why the water-per-well rate was rising, but she said it could be because companies are drilling longer horizontal wells to tap oil and gas deposits in shale formations, and thus need more water to travel longer distances.

DUC, DUC, Produce - The New EIA DUC Estimates and U.S. Oil & Gas Production, Part 2 -- The inventory of drilled-and-uncompleted wells (DUCs) in the U.S. Lower 48 grew by nearly 1,900 between the months just before oil prices and rig counts collapsed and early 2016—a 50% increase in a roughly two-year period, according to new DUCs data in the Energy Information Administration’s (EIA) September Drilling Productivity Report (DPR—See the DPR DUC report here.). Since January’s peak of nearly 5,600 DUCs, producers have been working down the national inventory of DUCs, with the DPR showing the overall count closer to 5,000 as of August (2016) ––but that is still up more than 1,300 from the December EIA’s 2013 baseline. This incremental growth in the number of “dormant” wells is key to understanding and predicting how long production can remain supported or grow in a low-rig count environment. Moreover, there are regional differences in the DUCs inventory counts and trends that provide critical insights on how various market factors are impacting drilling activity. Today, we walk through the EIA DUCs data for each of the producing regions. This is Part 2 of our “DUC, DUC, Produce” blog series. In Part 1, we defined DUCs, explained why DUCs are important, and discussed the various reasons they can accumulate, in addition to explaining the EIA’s methodology for measuring them.

Operators add DUCs as Service Companies Adapt Changes in capital budgets from 2014 to 2016 were staggering with an average decline of 57 percent across public E&P (exploration and production) companies. Seven E&Ps have CAPEX spending over $1 billion year-to-date with many spending below $1 billion, as of 2Q 2016 earnings releases. These changes caused a dramatic reduction in the scope of operations for many E&Ps, including:

  • Rig contracts terminated or expired
  • Frac crew contracts cancelled
  • Materials were bid, but not sold
  • Employees and contractor layoffs

With WTI remaining in the $40s, expect very few operators to increase budgets in 2017. Limited budgets will continue to restrict the drilling and completions activity for key shale operators. The Permian, Bakken, Mid-Con, DJ-Niobrara and Eagle Ford hold the majority of uncompleted wells. The uncompleted well count ramped up into 2014 and 2015 hitting almost 6,500 wells within five of the major oil plays alone.   From the perspective of the pressure pumper who is vying to complete the inventory of DUC wells, there will be impacts to pricing. As noted by the ND Industrial Commission (March 2016), there are about 20 frac crews in the state. Based on Energent Group data and conversations with Bakken operators, the active number of frac crews is likely around eight currently. The equipment in some cases is still available; however, the crews have been laid off. Trican, for example, sold the U.S. pressure pumping business to Keane. Sanjel, once a top pressure pumper in the Bakken, is now bankrupt and sold off their assets to Liberty Oilfield Services. Liberty, like other pressure pumpers, is advancing technology during this downturn to frac wells with reduced budgets and halted drilling programs. Liberty Oilfield Services, the top pressure pumper in the Bakken in 2016, introduced a new “Quiet Fleet” that reduces noise by three times compared to other frac fleets. With fewer frac crews available, pressure pumpers will likely continue to consolidate and find new ways to pump more stages in less time.

Signs Of Recovery Emerge In The U.S. Oil Market -- from the Dallas Fed - Signs of recovery have appeared in the U.S. energy sector over the past quarter, most notably in the Permian Basin, where drilling activity picked up modestly and oil production appears to have bottomed out. A significant rebound in U.S. drilling activity requires more time, however, as oversupply persists in the oil market and prices remain below $50 per barrel. The recent Organization of the Petroleum Exporting Countries (OPEC) announcement of its agreement to cut production increased uncertainty about when the global oil market will rebalance. Drilling Activity Resuscitated After experiencing a nearly 20 percent plunge in July, oil prices recovered in mid-August and hovered in the mid to upper $40s per barrel through September. West Texas Intermediate crude averaged about $46 per barrel in the third quarter, very close to the second-quarter average. Although volatile, prices have remained high enough to convince some companies to return to the oil patch. The number of rigs drilling for oil in the U.S. has increased by 95 since late June to 425 rigs at the end of September. Much of the increase has been in the Permian Basin, where the rig count has risen since the end of May, approaching where it began the year (Chart 1). In addition to more rigs operating in the area, a flurry of mergers and acquisitions during the summer suggests a nascent recovery. Increased activity in the Permian Basin and elsewhere has affected employment in the Texas mining sector, which rose slightly in August - its first increase since late 2014(Chart 2). While drilling activity has edged up, industry participants believe it will be awhile before activity significantly increases. When queried in the third quarter 2016 Dallas Fed Energy Survey, most respondents said prices need to exceed $55 per barrel for solid gains to occur, with a ramp-up unlikely until at least second quarter 2017.

US shale oil recovery underway - From Deutsche: As a response to a both (i) a stronger oil-price environment and just as importantly (ii) a more reliably stronger oil-price environment, we believe a steeper increase is likely in US onshore rig activity in 2017 than we previously assumed. While our previous assumption (+5 rigs per week) have proven too aggressive relative to the recent slow-down, a resumption of this rate of increase now appears likely at some point. In our revised base-case scenario, we assume that additions currently running at +10 per month double to +20 per month from December 2016 through June 2017 and then level out. We also assume that rig productivity growth slows almost to a plateau instead of rising along the current trajectory as the effect of high-grading reverses. The cumulative contribution of maintaining a larger number of active rigs over a longer period of time turns into a much larger effect in 2018 than 2017. The result is that while we would see only a 60 kb/d increase in 2017 average production (from US tight oil decline of -357 kb/d to -297 kb/d) we would expect a much more significant 459 kb/d increase in 2018 average production (from US tight oil growth of +200 kb/d to +659 kb/d). Capture After including our assumptions for other US production After adding growth in NGLs (+240 kb/d) and the Gulf of Mexico (+90 kb/d) this still leaves headline US liquids production roughly flat in 2017 (-30 kb/d), and up +750 kb/d in 2018. The summarized inputs and resulting production forecasts are seen in Figure 6 to Figure 9.

How Actual Nuts and Bolts Are Bringing Down Oil Prices -  Last spring, Statoil ASA announced it had used the same oil well design and components to drill three reservoirs for the price of one. While the specs for Norwegian Sea drilling might provoke reactions akin to the oil field’s name—the Snorre—such standardized pipes and casings could hold the key to a pervasive mystery about today’s energy market: Why is everyone still drilling when prices are in the basement? Even as oil producers have planned $1 trillion worth of spending reductions between 2015-to-2020—cutting staff, delaying projects, and squeezing contractors—they’ve continued to green-light new wells from the Norwegian Sea to Brazil, and from Uganda to the Gulf of Mexico. Those initiatives mean oil production will continue to grow, adding to the supply glut and putting downward pressure on prices. It’s a development that has both baffled and frustrated the world’s biggest producers of crude, who have been waiting for lower prices to force a rollback of global production. They have largely blamed the resilience of the world’s oil drilling on U.S. shale producers, as well as efforts to maintain market share, but the Snorre and other projects like it suggest there may be another–much more boring–culprit at fault. That's because oil majors' urgent mission to slash costs includes standardizing the components used in drilling for oil–a development that has helped turn unprofitable wells into moneymakers, protected bottom lines, and allowed companies to keep pumping even in the face of crude prices that have more than halved over the past three years.

Clinton's plan to reduce US oil consumption probably won't work: Hillary Clinton has vowed to slash U.S. oil consumption in the next decade as part of an overall plan to shift the country to clean, renewable energy, but experts say her goal is probably impossible. The target — to cut U.S. oil consumption by a third by 2027 — is an example of Clinton's hard line on fossil fuels during the Democratic primary and the general election. But some of her tough talk leaves her considerable wiggle room and contrasts with her record while serving as America's top diplomat. That record includes a program to promote natural gas development overseas through the use of hydraulic fracturing, a method of unlocking oil and gas from rock formations by pummeling them with water, minerals and chemicals. "Fracking" is widely opposed by environmentalists. CNBC asked experts to assess Clinton's energy proposals after carrying out a similar evaluation of Donald Trump's claims that he would boost economic growth by rolling back regulations and expanding drilling.   Clinton says she would extend standards for vehicle fuel efficiency, methane emissions, building codes and appliance standards that President Barack Obama implemented or supported, according to a campaign spokesperson. Clinton supports Obama initiatives like the Clean Power Plan and new Environmental Protection Agency regulations on oil and gas drilling, which have drawn the ire of the energy industry and legal challenges. She also backs raising the royalty rates for drilling on federal land and cutting tax breaks for oil and gas firms, and she opposes offshore fossil fuel development in the Arctic and Atlantic oceans.

Caelus claims offshore Arctic oil discovery that could rank among Alaska's biggest ever -Caelus Energy Alaska said Tuesday it has made a "world-class" oil discovery that, if estimates prove true, could be one of the largest finds ever in Alaska. The Smith Bay site, in shallow waters about 50 miles southeast of Barrow, could "provide 200,000 barrels per day of light, highly mobile oil," the company said in a press release Tuesday. If correct, that production level would make the field more prolific than ConocoPhillips' Alpine unit, which began production in 2000 and reached a production peak of 139,000 barrels in 2007. The statement from Caelus does not indicate analysis by a third-party engineering firm. The estimates are the company's internal numbers, a spokesperson said Tuesday morning. The statement also notes that flow-tests, a step in verifying a well's capabilities, were not conducted "due to seasonal time constraints." It said, however, "extensive sidewall coring and subsequent lab analyses confirm the presence of reservoir-quality sandstones containing light oil." If the project is developed, it could take five to 10 years before oil flows, with permitting requirements, limited work seasons and other challenges, he said.The company said its discovery comes after two wells were drilled early this year, and after it conducted 3-D seismic exploration across 126 square miles."Caelus estimates the oil in place under the current leasehold to be 6 billion barrels," the statement said. "Furthermore, the Smith Bay fan complex may contain upwards of 10 billion barrels of oil in place when the adjoining acreage is included."Light oil can flow like water or corn oil, and is easier to extract than viscous or heavy oil."Caelus expects to achieve recovery factors in the range of 30-40 percent," the statement said. "Additional drilling and seismic should improve estimates of oil in place via delineation of undrilled fan lobes and channel complexes imaged on the original 3D seismic."

Oil Explorer Claims Major Alaskan Find – WSJ --A little-known energy exploration company said on Tuesday that it has made a world-class oil discovery in remote Alaska, potentially breathing new life into the state’s declining North Slope. Caelus Energy LLC, a closely-held firm backed by private-equity fund Apollo Global Management APO -0.27 % LLC, said it made the oil find in the shallow waters of Smith Bay, about 300 miles north of the Arctic Circle. The company says it expects to be able to extract between 1.8 billion and 2.4 billion barrels from the discovery, probably using barges built along the Gulf Coast, then towed to Alaska and permanently sunk in the bay to create man-made drilling islands. If those initial estimates prove to be correct, the discovery would be substantial—larger than Exxon Mobil Corp’s 2015 discovery off the coast of Guyana in South America. “It is not going to be easy, but we’ve had projects like this around the world,” said Caelus Energy Chief Executive James Musselman. He previously led Kosmos Energy Ltd. and the former Triton Energy, exploration firms that made giant finds off the west African coast. Caelus said it planned to build an $800 million, 125-mile pipeline that will carry the oil underneath state-owned waters to connect with existing pipelines. That idea likely will generate strong support from a state grappling with plummeting oil revenue. If Alaska can’t find a way to reverse steep declines in its oil production, which are putting the Trans Alaska Pipeline in jeopardy of freezing up, it could face a near-total collapse of the oil industry and its entire economy. Adding new barrels from Smith Bay could extend the pipeline’s life.

 Alaska Oil Known Reserves May Have Just Grown 80% on Discovery -- Alaska’s oil reserves may have just gotten 80 percent bigger after Dallas-based Caelus Energy LLC announced the discovery of 6 billion barrels under Arctic waters. The light-oil reserves were found in the company’s Smith Bay leases between Prudhoe Bay and Barrow along the Arctic shore, according to a statement from Caelus on Tuesday. As much as 40 percent of the find, or 2.4 billion barrels, is estimated as recoverable, the company said. That compares with the state’s proved reserves of 2.86 billion barrels in 2014, almost 8 percent of the U.S. total, Energy Department data show. Alaska’s oil output has been gradually declining, to 483,000 barrels a day last year from a peak of more than 2 million barrels a day in 1988, Energy Department data show. The last major field brought online was Alpine in 2000, which averaged 62,000 barrels a day in September, Alaska Department of Revenue data show. Musselman, the man who engineered the $3.2 billion sale of Triton Energy Ltd. to Hess Corp. in 2001, founded Caelus in 2011 to explore and develop petroleum resources on the North Slope. In 2014, the company formed a partnership with affiliates of Apollo Global Management LLC to invest in oil and gas properties in Alaska. The development will cost between $8 billion and $10 billion over the life of the project, which could be brought into operation by the fall of 2022, Musselman said. Located about 125 miles from any other facilities, the company will need to build pipelines and roads. An oil price of about $65 a barrel and greater certainty on state tax policy and incentives is needed to develop the field, he said. “A lot of the investment decision is going to revolve around what happens within the state from a regulatory standpoint,” he said.

New Mega Oil Discovery In Alaska Could Reverse 3 Decades Of Decline | A small company just announced that it has made a “world-class” oil discovery in Alaska, which could be the largest find in the state in years. Caelus Energy LLC, a small company backed by private equity, says that it has discovered oil on Alaska’s northern coast. The field could hold as much as 6 billion barrels of oil, with about 1.8 to 2.4 billion barrels considered to be recoverable. If that is the case, the discovery would instantly raise Alaska’s statewide recoverable oil reserve base by about 80 percent. But producing the oil will not be easy. Drilling must take place in the winter. To drill the field, the tentative plan would be to build manmade islands to drill through. Oil produced in the shallow water of Smith Bay will need to be moved somehow. Caelus will have to build an $800 million pipeline that travels 125 miles, connecting to an existing pipeline system in Prudhoe Bay. “It is not going to be easy, but we’ve had projects like this around the world,” Musselman told The Wall Street Journal. He formerly led Kosmos Energy when it recorded a massive oil discovery of the coast of Ghana about a decade ago. The one thing that Caelus has in its favor is strong support from the state of Alaska. Desperate to halt declining output and cratering state revenues, the Alaskan government has been frantically searching for ways to increase oil production. Output has been falling from Alaska’s aging North Slope, with production down below 500,000 barrels per day from a peak in the late 1980s at over 2 million barrels per day.

Oil Glut? Here Comes Some More! - The New York Times: — Global oil markets are flooded with cheap crude, and concerns about climate change are growing louder. The last thing the world seems to be craving is the discovery of new large oil and natural gas fields.But such fields have been found in the last month. And two of them are in the United States — one in Texas and the other off Alaska.The new finds, while still preliminary and in need of more testing, could further cement two realities of the energy business: oil prices could stay low for a long time, and oil companies will keep seeking to increase their reserves for future production.The discoveries have been hailed by the oil industry, even though companies have largely cut back on exploration over the last two years in an effort to reduce costs as oil prices fell from over $100 a barrel to roughly $50 a barrel. Along with that enthusiasm is the view that prices will recover by the end of the decade.Ad Yet that view contradicts the opinions of many environmentalists and independent energy experts. They say that the world needs to keep most of the remaining hydrocarbons in the ground to meet the broad targets of the Paris climate conference last December, unless extraordinary technical breakthroughs are made to capture carbon emissions from fossil fuels. In addition, some of those experts say demand for oil will never fully recover because of the emergence of electric cars and conservation measures.Together, the discoveries are relatively modest compared with the new-field production earlier in the decade from shale fields opened up by hydraulic fracturing — the high-pressure mix of water, sand and chemicals that blasts hard oil-bearing rocks. But some analysts say they could well be precursors to more discoveries in West Texas and Arctic Alaska.

In Canada, oil sands cost cutting 'close to bone' as crude recovery stalls --Canadian oil-sands producers are running out of tricks to buoy their share prices as crude prices keep bumping up against a $50 ceiling. After two years of slashing costs to cope with plunging oil prices, shares began rebounding as the market appeared to hit a bottom earlier this year. Now, with the commodity recovery taking longer than expected -- even with this week's agreement by OPEC to limit supply -- and the pace of reductions slowing, a correction could be in store for oil-sands shares."We're getting close to the bone" with cost-cutting, said Martin Pelletier, a fund manager at TriVest Wealth Counsel in Calgary, in an interview. He pointed to a "huge gap" between companies' valuations and the price of oil. Without a solid recovery kicking in soon, companies are "going to go lower." It's a lot harder for oil-sands producers to cut costs than it is for their shale-rock drilling brethren. Shale producers can just stop drilling wells, idling rigs and dispensing with all the equipment and labor that goes along with them. Canadian oil-sands companies such as Suncor Energy Inc. and Cenovus Energy Inc., with the massive facilities required to mine and process tar-like bitumen, can't scale down so easily.Shale drillers also deploy new technology more regularly, boosting efficiency with each new well. Oil-sands developments take years to plan and build and cost billions of dollars. With the low commodity prices, new projects have been canceled or delayed, hampering companies' ability to introduce the latest, cost-saving equipment. That's left oil-sands producers to rely mainly on slashing operating costs such as labor, non-essential maintenance and spending on garbage trucks and road repairs, to cope with low oil prices in the near term, according to consulting firm Wood Mackenzie Ltd. In the future, new projects will take advantage of technology advances to help reduce capital costs, but that's an unlikely scenario for the next few years, Pelletier said.

 Big Oil Abandons $2.5 Billion in U.S. Arctic Drilling Rights - After plunking down more than $2.5 billion for drilling rights in U.S. Arctic waters, Royal Dutch Shell Plc, ConocoPhillips and other companies have quietly relinquished claims they once hoped would net the next big oil discovery. The pullout comes as crude oil prices have plummeted to less than half their June 2014 levels, forcing oil companies to cut spending. For Shell and ConocoPhillips, the decision to abandon Arctic acreage was formalized just before a May 1 due date to pay the U.S. government millions of dollars in rent to keep holdings in the Chukchi Sea north of Alaska. The U.S. Arctic is estimated to hold 27 billion barrels of oil and 132 trillion cubic feet of natural gas, but energy companies have struggled to tap resources buried below icy waters at the top of the globe. Shell last year ended a nearly $8 billion, mishap-marred quest for Arctic crude after disappointing results from a test well in the Chukchi Sea. Shell decided the risk is not worth it for now, and other companies have likely come to the same conclusion, said Peter Kiernan, the lead energy analyst at The Economist Intelligence Unit. "Arctic exploration has been put back several years, given the low oil price environment, the significant cost involved in exploration and the environmental risks that it entails," he said.All told, companies have relinquished 2.2 million acres of drilling rights in the Chukchi Sea -- nearly 80 percent of the leases they bought from the U.S. government in a 2008 auction. Oil companies spent more than $2.6 billion snapping up 2.8 million acres in the Chukchi Sea during that sale, on top of previous purchases in the Beaufort Sea. Shell relinquished 274 Chukchi leases and others in the neighboring Beaufort Sea. In doing so, the company forfeits what it paid the U.S government for the rights to drill in those tracts -- and the millions of dollars it spent on annual rent since then.

Oil Leak Forces BP To Shut Platform In North Sea - BP has shut down its Clair platform in the North Sea after a still unknown quantity of oil leaked into the sea as a result of a “technical issue” on Sunday morning UK time. “The Clair platform, which is located 75km (46 miles) west of Shetland, has been shut down and the release has been stopped. All personnel have been accounted for and there are no injuries. We are investigating the cause of the technical issue and monitoring the situation. All relevant authorities have been informed,” the BBC quoted a BP spokesman as saying. Lang Banks, director of environmental charity at WWF Scotland, said that it’s important to know how much crude oil has leaked in the interest of protecting marine environment. “The total oil in water volume that was released has yet to be accurately assessed and work to determine this is ongoing,” BP has said and added: “At present, we believe the most appropriate response is to allow the oil to disperse naturally at sea, but contingencies for other action are being prepared.” According to Scotland’s Environment Secretary Roseanna Cunningham, as quoted by the BBC: “Marine Scotland have advised that allowing the oil to weather naturally is the least harmful option for this internationally important marine habitat.” Industry, government and BP officials, as well as and environmentalists, will be keeping a close eye to the oil spill off Shetland, given the notoriety BP has gained with the Deepwater Horizon disaster in 2010.

BP Platform Leaks Oil Into North Sea With No Plans to Clean It Up -- About 95 metric tons of oil leaked into the North Sea on Sunday from BP 's Clair platform, and it will be left in the ocean. BP says the oil is moving away from land and dispersing naturally, but the spill is a reminder that accidents happen as more oil development is eyed for the Arctic. In what BP called a "technical issue," oil was released into the North Sea, located about 46 miles, west of the Shetland Islands. BP shut down the oil rig and said it is investigating the accident.  The oil company said it had conducted five aerial surveys with three more planned for Tuesday to monitor the oil slick.  "It is considered that the most appropriate response remains to allow the oil to disperse naturally at sea, but contingencies for other action have been prepared and are available, if required," BP said.  From 2000 to 2011, there were 4,123 separate oil spills in the North Sea, according to an investigation by The Guardian. Oil companies were fined for just seven of them. No single fine was greater than about $25,000.  There have been a number of major oil spills in the North Sea—the largest of which was the 1977 Bravo blowout that released an estimated 80,000 to 126,000 barrels of oil. The well spewed oil for seven days. In 2011, Shell spilled more than 200 metric tons from the Gannet Alpha platform, and a 2007 mishap while a tanker was loading oil resulted in a spill of 4,000 metric tons, or about 25,000 barrels of oil. None of these spills were alleged to have any ecological impact, and all but the Bravo blowout were allowed to disperse, unchecked, by the sea. As the Arctic Ocean warms , oil giants are eyeing the northern seas for more oil exploration and development. It is a dangerous environment in which to drill. As Greenpeace stated, "The long history of oil spills around the world has made one thing clear: the only way to prevent an oil spill is to keep oil in the ground."

UK Shocks All, Allows Fracking For The First Time In 5 Years - In a landmark decision, the UK Department of Communities and Local Government upheld on Thursday an appeal by gas exploration company Cuadrilla Resources, allowing it to plan for exploratory horizontal fracking at a site in Lancashire in northwestern England. Cuadrilla had said in July of last year that it would appeal the Lancashire County Council’s decision to refuse it planning permission to drill, hydraulically fracture, and test the flow of gas from up to four exploration wells on each of two sites, Preston New Road and Roseacre Wood. On Thursday, the department overturned the Lancashire County Council decision to refuse Cuadrilla applications for planning permission to frack at the Preston New Road site. The department also deferred a decision on the Roseacre Wood site to give more time to the company to provide further analyses and to allow other parties to express their opinion. “It is clear that 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,” County Councilor Marcus Johnstone, Lancashire County Council cabinet member for environment, planning and cultural services, said in a statement. Local community organizations said they were ‘disgusted’ at the decision, according to a statement by Residents Action on Fylde Fracking.

It's not just environmentalists who think fracking is wrong: Just hours after a speech in which Theresa May expounded the values of “good” government and “ordinary working-class” voters, her government has jumped straight back into the pockets of big business. This morning, the communities secretary Sajid Javid announced that the shale company Cuadrilla had won its appeal to frack for gas at Preston New Road – overturning an earlier ruling by Lancashire county council. Howls of hypocrisy have risen from opposition parties, who accuse the government of being democratic only when it suits. “Today’s decision shows the yawning gap between the Government’s rhetoric and the reality of their policies”, said Green MP and co-leader Caroline Lucas. So, is this a brave rejection of Nimbyism by the government, in favour of providing cheaper, cleaner energy to the masses? Or is May stumbling down an expensive and dirty path that could leave the wider public – and perhaps even her own government - out in the cold? Cuadrilla’s planning application was rejected by the council back in June, on the grounds of noise and visual impact. Complaints of local disruption echo many of the concerns raised about windfarms. But in the case of fracking, local communities have been backed up by the wider environmental movement. Just this week, the Paris Agreement on Climate Change reached the requisite level of international support to enter into force. May’s promise to sign the UK up to its targets “by the end of the year” will entail levels of carbon emissions reduction that are currently incompatible with full-scale fracking. This will be especially true, according to the independent Committee on Climate Change, if we continue to import gas and fail to reduce the amount of methane currently released during the fracking process.

Venezuela makes new attempt to arrest oil production fall with new ventures - Oil | Platts News Article & Story: In a fresh attempt to contain a fall in oil production, Venezuela's state-owned PDVSA announced two alliances with Chinese and Bulgarian companies to reactivate 931 wells in Lake Maracaibo, with the objective of adding 50,600 b/d and 43 MMcf/d of natural gas to output in the short term. "China-based Shandong Kerui Group Holding Co. will repair 624 wells, with financing of $30 million provided by the Chinese company," PDVSA said Thursday. "Also, PDVSA and the Bulgarian-Venezuelan Consortium Aleco are discussing reactivating 307 wells in Lake Maracaibo, with financing of $100 million that would come from the Bulgarians," PDVSA added. In September, PDVSA President Eulogio Del Pino, who also is oil and mining minister, said the company will drill 480 wells in the Orinoco Belt in the next 30 months, with the participation of international companies such Schlumberger and Horizontal Well Drillers, as well as Venezuela's Y&V, Halliburton and Baker Hughes."The goal is to increase production by 250,000 b/d with an investment amounting to $3.2 billion," Del Pino said in September. On Monday during an interview broadcast by state television, Del Pino said that the 'well drilling and rehabilitation projects in Lake Maracaibo as well as in the Orinoco Belt are structured with a contract scheme so that financing is paid with future crude output." PDVSA's growing debts with its oil field service providers is paralyzing upstream development. Of the 373 wells drilled last year, 51% were contracted to international service companies, which have gradually been halting work due to non-payment.

Russian pipeline gas exports back above 10 Bcm in September -  Combined natural gas exports from Russia via the Nord Stream, Yamal, and Brotherhood pipelines rose back above the 10 Bcm mark last month, climbing to a six-month high, data from Platts Analytics' Eclipse Energy showed. Total pipeline gas exports through Nord Stream, Yamal, and Brotherhood rose 13% month on month and 7% year on year to 10.108 Bcm in September, the highest monthly flows seen since March and the fifth-highest total recorded for a calendar month. Flows breached the 350 million cu m/d mark on several occasions last month, with gas throughput via the Brotherhood pipeline -- transiting Russian gas to Slovakia via Ukraine -- rising to their highest in over two years early last month due to Nord Stream maintenance. Brotherhood flows in September were steady month on month at 4.260 Bcm, but were well up on September 2015 levels of 3.498 Bcm.Flows via the Nord Stream pipeline -- transiting Russian gas direct to Germany via the Baltic Sea -- rose to 3.368 Bcm last month, higher than the 2.488 Bcm seen during August due to a lighter maintenance schedule in September compared to the previous month. Flows via the Yamal pipeline -- transiting Russian gas to Germany via Poland and Belarus -- were again steady at 2.480 Bcm in September, with the pipeline typically used at the full 84 million cu m/d full capacity. Total Russian flows via these pipelines for the first nine months of the year stood at 85.603 Bcm, 13% higher when compared to the January-September, 2015, period and over 12 Bcm up on the same time in 2014. Moreover, after Norwegian pipeline gas exports fell to their lowest in over five years in September, Russian gas supplies stand nearly 9 Bcm higher than Norwegian gas supplies during the first nine months of 2016.

LNG exports from Australia's Gladstone port to rise 30% on year in fiscal 2017: GPC -  Exports of LNG from Gladstone port in the Australian state of Queensland are expected to rise by 30% year on year in fiscal 2016-17 (July-June) to 15.80 million mt, the Gladstone Ports Corporation said on Tuesday. The port -- which is home to the Santos-led Gladstone LNG, the Origin and ConocoPhillips Australia Pacific LNG joint venture, and BG Group's Queensland Curtis LNG -- saw LNG exports of 12.20 million mt in fiscal 2015-16, up from 1.60 million mt the year prior, GPC said.The 12.20 million mt of LNG exported from Gladstone in fiscal 2016 was made up of 7.97 million mt from QCLNG, 1.77 million mt from APLNG, and 2.41 million mt from GLNG, GPC said. The lion's share of LNG exported from the Port of Gladstone has been sent to China. From January to August, 4.65 million mt of LNG was sent to China from Gladstone, with South Korea and Japan the second and third largest recipients of the fuel with 1.84 million mt and 1.33 million mt during the period, respectively, data collected from GPC showed. India, Malaysia, Singapore, Kuwait, Argentina, Egypt, Jordan, Mexico, Pakistan and the UAE, have also been sent LNG from Gladstone, according to the data. QCLNG began exporting in January 2015, and GLNG and APLNG commenced exports in September 2015 and January 2016, respectively. "The LNG trade is forecast to grow significantly in 2016-17 with all LNG proponents ramping up their exports as additional trains come on line," GPC said.

Indonesia's refinery buildup to hit Asia's oil product exporters --  Backed by top oil producers Saudi Arabia and Russia, Indonesia’s refining sector development has finally picked up pace and this does not bode well for Asia’s oil product exporters. Indonesia is the region’s largest gasoline and gasoil importer. The country has been notorious for planning a spate of refining projects over the last two decades with no result. Indonesia last built a new refinery in 1994. But momentum has picked up since late 2015 when President Joko Widodo signed a decree declaring the upgrade and expansion of the refining industry a top national priority. The decree ensures refining projects enjoy benefits such as preferential tax rates and easy access to land. The decree has given Indonesia’s state-owned energy company Pertamina the ammunition it needs to go all out and get partners for refining projects. Pertamina and Saudi Aramco in May this year awarded the engineering and project management services contract for the upgrade of the Cilacap refinery, Indonesia’s largest. The Cilacap upgrade will hike its total nameplate processing capacity to 370,000 b/d from 348,000 b/d by late 2022. The two companies are also in talks to upgrade and expand the 170,000 b/d Dumai refinery and 125,000 b/d Balongan refinery but details are still to be finalized. Pertamina is, meanwhile, pursuing a revamp and expansion of the 260,000 b/d Balikpapan refinery and plans to boost its capacity by 100,000 b/d by late 2019. The state-owned company has also joined hands with Russian state oil giant Rosneft to build a 300,000 b/d greenfield refinery in Tuban, East Java. This refinery is expected to be ready by end-2021.

 How Hillary Clinton’s state department fought for Ghana’s oil -- During her campaign for president in 2008, Hillary Clinton bashed Big Oil and its hefty profits. But in her new position as America’s top diplomat, she found herself in a very different role: defender of those same US oil companies abroad. Thanks to messages released during the investigation of Clinton’s work email, as well as diplomatic cables published by WikiLeaks, BuzzFeed News has learned how her State Department advocated behind the scenes on behalf of Kosmos and other US oil firms in Ghana. This sort of maneuvering in West Africa and elsewhere followed the lead of previous administrations, and shows an overlooked side of American diplomacy: pushing for US commercial interests in the developing world.  By 2010, for example, Clinton’s State Department was encouraging the governments of Bulgaria, Poland, Romania, and Ukraine to open their doors to US energy giants like Chevron and ExxonMobil to chip away at the long-standing influence of Russia in Eastern Europe. And in Ghana, the arrival of US oil companies in the last decade undercut the growing economic clout of China.  “Helping American businesses interact with foreign governments and advocating for the American economy is an important responsibility of the State Department,” Josh Schwerin, Clinton campaign spokesperson, told BuzzFeed News.  Now on the campaign trail again, Clinton does not tout this work on behalf of US oil companies. Instead, she talks about her role in negotiating the Paris climate agreement, and has called for the US Department of Justice to open an investigation into ExxonMobil for misleading investors about climate change. And she wants the US to reduce oil consumption by one-third.  But executives from ExxonMobil and the Blackstone Group, a Wall Street private-equity firm that backed Kosmos Energy and stood to profit from the sale, have bundled donations and hosted fundraisers for her campaign in 2016.

For OPEC, a Production Cut Aims to Head off Further Price Cuts - OPEC has finally reached a tentative deal to cut crude oil production, but it does not mean much yet. OPEC members settled on the outline of an agreement Sept. 28 on the sidelines of the International Energy Forum in Algiers. Terms include cutting crude oil production from roughly 33.24 million barrels per day to between 32.5 million and 33 million bpd. The cut is marginal, but if enacted, it would be the first for the group since the height of the global financial crisis in 2008. It would also mark the cartel's first coordinated response since oil prices began tumbling in June 2014 from their peak of more than $110 per barrel, bottoming out just above $25 per barrel in January 2016. Negotiations over how to enact the production cut lie ahead, leaving a chance that the deal could fall apart between now and the next OPEC summit Nov. 30 in Vienna, where the group hopes to finalize the agreement. For the deal to go through, OPEC members must agree on answers to many of the questions that have scuttled previous coordinated responses. Those include who will shoulder the brunt of the cuts, how to handle rising production from Iran and how to navigate political spats among oil producers. The deal does not necessarily represent a concerted effort by OPEC to push up crude oil prices — the Gulf Cooperation Council (GCC) countries, OPEC's heart, have not fundamentally changed their position to let the markets solve the oversupply problems. Instead, the group is reacting to market conditions that point to even more oil production coming online in a short amount of time despite oil prices' remaining below $50 per barrel. So while OPEC may have finally come to an agreement on policy, that policy might ultimately not even matter.

Is The Oil Price War Finally Over?-- Let’s just hope it sticks. You see, chaps, the devil’s in the detail and the detail isn’t going to be agreed on until November 30th. As The Guardian put it, “OPEC seems to have been taking lessons from EU summits. It has agreed that something needs to be done but has put off until another day the rather more difficult task of getting its fractious membership to decide what they should be.” But until it’s un-done, it’s done and the markets are a much happier place to be. Oil prices settled up nearly 6 percent when the announcement was made. The infectious good spirit was enjoyed in Wall Street too where its index of U.S. energy stocks rose 4 percent – the best one-day gain since the start of the year. Brent crude rose 5.9 percent per barrel and WTI leapt about the same to $47.05 following the two-day meeting. It’s an important deal as the Telegraph says, particularly for the energy companies left reeling after prices collapsed from a June 2014 high of $115 per barrel to $27.88 in January. The agreement in principle is that output would be limited to between 32.5m bpd and 33 million bpd. Current output is 33.24 million bpd. “This is the end of the production war – OPEC claims victory!” cheered Phil Flynn, an analyst at Price Futures Group in Chicago. He told Reuters, “The cartel proved that it still matters, even in the age of shale.”It’s more likely, however, a reluctant acknowledgement of a very simple truth – Saudi Arabia’s oil policy isn’t working. The Wall Street Journal says people ‘familiar with this matter’ (sounds deliciously creepy doesn’t it?) reported that the Kingdom’s energy minster Khalid al-Falih’s attention was drawn to an OPEC prediction that a global glut was likely to remain throughout 2017. Faced with the consequences of its policy to date – introducing unpopular domestic austerity measures and a decision by the U.S. Senate to allow 9/11 victims to sue the Kingdom for its potential involvement which saw Saudi’s currency plunge to its lowest level in four months – perhaps it decided to lick its wounds and live to fight another day.

Smoke And Mirrors: What Did OPEC Really Agree On? --Oil prices shot up more than 6 percent this week on the news that OPEC reached a deal to cut oil production, but by Friday the rally seemed to be already running out of steam as the markets grew skeptical of the group’s ability to implement the deal.  Previously, I noted how there were reasons to question how serious the production cut actually might be. This was due to the difficulty in actually agreeing on the details of the reduction, rising oil production within OPEC that could offset the cut, and the small size of the planned cut itself (200,000 to 700,000 barrels per day).But in the days that followed Wednesday’s deal, a few more wrinkles emerged that could complicate OPEC’s chances of having a meaningful impact on the global oil supply surplus. First, even as the ink was drying on OPEC’s announcement, Iraq’s oil minister disputed the data used to calculate his country’s total oil production. In OPEC’s monthly reports, the group lists production totals using both direct and secondary sources. The discrepancy matters because if Iraq’s production is actually higher than OPEC says it is, then Iraq should be allowed to produce more under any hypothetical allotment apportioned to it after November’s meeting.  Indeed, Russia remains a big question mark as well. Heading into the Algiers meeting, it was thought that Russia would participate in an OPEC/non-OPEC freeze. Positive comments from top Russian officials suggested that they would go along with market intervention, if only because freezing Russian oil production at record levels would not involve much sacrifice.But Russia, the world’s largest oil producer (though not an OPEC member), was not part of the closed-door negotiations in Algeria. And Russia’s Energy Minister Alexander Novak said that there were no plans to change output, which currently exceeds 11 million barrels per day, the highest volume in the world and a post-Soviet high. When asked about OPEC’s announced deal, Russia’s Finance Minister said that his ministry was maintaining its assumptions that oil prices would average $40 per barrel over the next three years. “You think it’s stabilized?” Russian Finance Minister Anton Siluanov said to reporters, referring to the oil markets. “We need to see how realistically the decisions will be implemented.” That all sounds like Russia is not all that interested in coordinated with OPEC. With so many crucial oil producers not asked to actually cut production, the question remains how significant the OPEC cuts can possibly be? Given the fact that Iran, Nigeria and Libya are already exempt from any cuts, and Iraq is angling for a higher allotment ahead November’s meeting, the efficacy of any deal will have to come down to what Saudi Arabia alone is willing to cut.  If a deal is actually agreed to in November, it will be because Saudi Arabia has chosen to do the heavy lifting all by itself.

OilPrice Intelligence Report: Can Oil Hold Onto OPEC Deal Gains? - There are plenty of reasons OPEC won’t reach a deal. The group did not allocated production limits to each of its members, so it is still unclear who will be cutting. Also, some of the members could cheat, even if they do seal the deal in Vienna in November. Moreover, if the cap is placed at the high end of the range – 33.0 mb/d – it would amount to a very unimpressive cut of just 200,000 barrels per day. On top of that, Nigeria, Iran, and Libya are exempt from the limits. They are allowed to produce at “maximum” levels, and combined they are hoping to bring back 1.5 mb/d. The psychological effect on the oil market has been enormous, with oil prices up big on the week. But with oil traders starting to question the viability and the significance of the deal, the rally came to a temporary halt on Friday.   Another unexpected sticking point could be Iraq, which is no longer exempt from OPEC limits after years of special treatment as it recovered from war. Iraq’s oil minister questioned the data that OPEC was using – the minister argued that Iraq was producing much more than OPEC was giving it credit for. The discrepancy would potentially limit Iraq’s production more than it should, Iraqi officials say. The conflict poses another stumbling block for the November meeting. The OPEC production cut only came because Saudi officials did an about-face, a 180-degree turn from its position over the past two years of letting the market sort out the surplus. The Wall Street Journal reports that Saudi officials, including energy minister Khalid al-Falih, grew concerned about the economic toll on the kingdom from persistently low oil prices. The minister reportedly became alarmed from the latest forecast for oil prices remaining low through 2017, and the revelation was enough to lead the Saudis to reverse course. “I’m not convinced they have changed from the market-share policy but I have to think they have erased the ‘We don’t care if it goes to 20 $/bbl’ policy,” Olivier Jakob of Petromatrix told the WSJ. “They seem less idealistic, a little more realistic.”  The surge in oil prices will be welcome by producers, but not by refiners. The BI North America Refining & Marketing index, an index of refiners, dropped by 4.6 percent on Thursday. Higher oil prices is bad news for refiners, which need to purchase crude in order to process it into refined products. Gasoline inventories are still high, and margins are low, Moody’s said, a problem that could persist for some time.

Analysis: Higher US crude stocks could hold rallying prices at bay -- The oil complex faces a wave of hurdles that will likely keep prices in check this week, even after last week’s decision by OPEC members to cap production, a Platts analysis showed Monday. Prompt NYMEX WTI jumped around $3/b last Wednesday in the wake of the OPEC deal, and even though the rally was short-lived, prices have largely held up since, trading around $48.58/b early Monday afternoon. But run cuts at many US refineries in addition to strong imports likely kept US crude stocks well-supplied last week, and gasoline stocks are expected to rise as well, despite issues plaguing multiple US Gulf Coast fluid catalytic crackers. These fundamentals — if borne out by US Energy Information Administration data set to be released Wednesday — should help keep exuberant traders at bay. Analysts surveyed Monday by Platts expect US crude stocks to have risen 2 million barrels last week, in line with the five-year average of EIA data. Gasoline stocks are expected to have risen 500,000 barrels, while distillate stocks are likely to have fallen 1.7 million barrels. Imports will likely play a big role, with weekly figures besting year-ago levels by more than 700,000 b/d over the past six weeks. Last week the US imported 7.84 million b/d. While down from a massive 8.31 million b/d the week prior, it is up from just 7.55 million b/d for the same week a year ago. Refining margins can also been seen as favoring imports, particularly on the US Atlantic Coast.

Despite OPEC Cut, U.S. Oil May Not Top $50 Ceiling Until Next Year  -  IBD --  Oil prices are likely to remain volatile for the rest of the year, but some analysts believe U.S. crude will finally rise above $50 per barrel in 2017. Since the spring, West Texas Intermediate has topped the $50 mark repeatedly only to drop back below that level soon after. The price surged last week after the Organization of the Petroleum Exporting Countries agreed to curb production, raising hopes for a more sustained price rally. Despite some doubts about whether the OPEC deal will hold, oil prices crept higher Monday, with WTI settling up 1.2% to $48.81, the highest in three months, and Brent up 1.4% to $50.89. Brian Youngberg, an energy analyst at Edward Jones, said via email that his company expects to see oil prices staying in the mid-to-high 40s before rising above the $50 ceiling next year. But he doesn't see shale companies increasing spending until oil is solidly in the mid-50s, and even then the ramp-up will be modest as firms remain conservative.

Oil Holds Gains After OPEC Deal | Oil prices rose to a three-month high as the markets took a more optimistic view of the OPEC deal announced last week. Hedge funds and money managers made highly bullish bets on oil in the lead up to the meeting in Algiers, and while the rally has slowed, oil prices are holding onto their gains. Brent closed above $50 per barrel for the first time in weeks.   Category 4 Hurricane Matthew is threatening small islands in the Caribbean, with Haiti expected to bear the brunt of the storm’s carnage. In addition to the pending humanitarian disaster in the region, the storm could also disrupt petroleum trade. The hurricane could shut in about 33 million barrels of oil in storage in the Bahamas, and could disrupt gasoline shipments along the Atlantic seaboard, potentially delaying cargoes into New York Harbor, for example. A few weeks ago, a major storm in the Gulf of Mexico interrupted shipments, leading to huge drawdowns in oil inventories in the weekly EIA data, which led to higher prices. Hurricane Matthew could also have unpredictable effects on short-term prices for crude and refined products. The Canadian government unveiled a plan to implement a carbon price beginning in 2018. The carbon tax plan from Prime Minister Justin Trudeau calls for a C$10 per tonne charge beginning in 2018, rising C$10 each year until it tops off at C$50 per tonne in 2022. The government in Alberta, home to the vast majority of Canada’s oil production, demanded that in exchange for its support, it demanded the federal approval of a major pipeline, which would help open up new markets for Canada’s oil sands.. After years of outages, Libya is finally poised to breathe new life into its oil sector. The war-torn North African country has succeeded in bringing some key oil ports back online, and production has jumped to 500,000 barrels per day (bpd), up from 260,000 bpd as recently as this August. The National Oil Company says that is just the beginning. It expects to see output rise to 600,000 bpd by the end of October, and is ultimately targeting 950,000 bpd by the end of the year. Libya is exempt from the recently announced OPEC production cut, and if it succeeds in ramping up production, it could potentially overwhelm the cartel’s planned cutbacks.

Interview: EIA's Sieminski calls US shale response key to OPEC freeze deal's sucess - Oil | Platts News Article & Story: The response of US shale production over the next two months may well impact how OPEC decides to finalize the tentative production freeze it announced last week in Algiers, the head of the US Energy Information Administration says. "Shale has dramatically changed the kind of strategy that OPEC was employing," Adam Sieminski told S&P Global Platts on Wednesday. "OPEC will be looking at our production statistics and if they saw US production beginning to recover, would make difference to what they were doing," Sieminski said an energy seminar at Japan's Institute of Energy Economics.Amid recovering oil prices, Sieminski said "there is still financing available in the US oil drilling activities and upstream investments." Sieminski's comments came after OPEC agreed on a blueprint for its first production cut in eight years at an extraordinary meeting in Algiers on September 28. OPEC ministers agreed to cut production to between 32.5 million b/d and 33 million b/d. The deal would mean a total cut of 200,000-700,000 b/d, when compared with OPEC's 33.2 million b/d August production, based on OPEC secondary sources. Final details of the freeze -- including individual country allocations and which production estimates are used to verify compliance--are to be decided by OPEC's next formal meeting, November 30 in Vienna. OPEC has also said it will seek support for the cut from non-OPEC producers.

OPEC targeting $55/b oil, to meet non-OPEC exporters in Istanbul: Algerian minister - Oil | Platts News Article & Story: OPEC is aiming for an oil price of $55/b, Algerian energy minister Noureddine Boutarfa said Thursday, adding that the producer group could set its output ceiling lower than the tentative deal reached last week, if needed. OPEC ministers agreed in Algiers last Wednesday to freeze their crude production between 32.5 million to 33 million b/d, which would be a cut of between 240,000 to 740,000 b/d from current production levels, according to OPEC estimates.He said OPEC would meet informally with key non-OPEC producers on the sidelines of the World Energy Congress in Istanbul next week. In particular, Russia has indicated it is keen to cooperate with OPEC on a production freeze. Russian energy minister Alexander Novak is scheduled to speak on a panel with Saudi energy minister Khalid al-Falih and OPEC Secretary General Mohammed Barkindo at the World Energy Congress. Boutarfa said that the Algiers meeting proved that OPEC is unified in its mission to stabilize oil markets. Final details of the plan, including individual country allocations, will be decided at OPEC's next formal meeting on November 30. "During the next meeting in Vienna at the end of November we will study the market," Boutarfa told local television station Ennahar. "If 700,000 barrels are not enough, it will be possible to raise the level of reduction." "The first goal of OPEC is a barrel at $55," he added.

WTI Spikes Above $49 After Shockingly Large Crude Inventory Drawdown --After four weeks of draws, expectations were for a 1.5mm inventory build this week but API reported yet another shockingly large draw of 7.6mm barrels. A surprisingly large build in Gasoline last week briefly confused traders but was confirmed by API with a 2mm barrel build (against exp of +500k). WTI crude spike back above $49 on the news... API:

  • Crude -7.6mm (+1.5mm exp)
  • Cushing +400k (+100k exp)
  • Gasoline +2mm (+500k exp)
  • Distillates -1.3mm

5 Weeks of Crude draws at a seasonally 'building' time of year...

 Oil ends down, then jumps on chance of another U.S. crude draw | Reuters: Oil settled down on Tuesday after a surging dollar offset optimism over planned OPEC output cuts, before a report suggesting another weekly drop in U.S. crude stocks took prices up again post-settlement toward four-month highs. The American Petroleum Institute (API), a trade group, reported that domestic crude inventories likely fell for a fifth straight week, declining by 7.6 million barrels. [API/S] The U.S. government's Energy Information Administration (EIA) will report official stockpile numbers on Wednesday. Analysts polled by Reuters expect the EIA to report a stock build of 2.6 million barrels for the week ended Sept. 30. [EIA]. If the EIA reports another drawdown, "it means we can't take for granted that we're going to be seeing builds for this time of year, even though it's traditionally what we see", said Matt Smith, analyst at Clipperdata, a New York-based firm that tracks oil shipments into the United States. "Refinery runs are higher than they were this time last year and so, we are still seeing more crude being consumed on a relative basis," Smith added. Brent crude settled down 2 cents at $50.87 a barrel, after rising to $51.37 during the session, its highest since June 10. U.S. West Texas Intermediate (WTI) crude closed down 12 cents at $48.69, after hitting $49.13 earlier, a peak since July 5. The two benchmarks rose about 40 cents each on the API data, with Brent at $51.25 and WTI at $49.19 by 5:00 p.m. (2100 GMT)Oil has risen more than 10 percent over the past five sessions since the Organization of the Petroleum Exporting Countries revived expectations that it would limit output at its policy meeting in Vienna on Nov. 30.

Oil Climbs Near $50 After U.S. Stockpiles Decline for Fifth Week - Bloomberg: Oil climbed, approaching $50 a barrel in New York, after government data showed that U.S. crude stockpiles dropped last week. Inventories slipped 2.98 million barrels in the week ended Sept. 30, according to the Energy Information Administration. That contrasts with the 1.5 million barrel increase forecast by analysts surveyed by Bloomberg and a 7.6 million decrease reported Tuesday by the industry-funded American Petroleum Institute. Production and imports slipped for a second week as refineries idled units for seasonal maintenance."This is the fifth-straight weekly decline in crude supplies, which is very supportive," said Chip Hodge, who oversees a $12 billion natural-resource bond portfolio as senior managing director at John Hancock in Boston. "It’s good to see crude supplies come off, especially given how high they’ve been recently." Oil has advanced more than 10 percent since the Organization of Petroleum Exporting Countries agreed last week to cut production for the first time in eight years. OPEC, which pumped at a record in September, will decide on quotas for the group’s members at an official meeting in Vienna on Nov. 30. Hurricane Matthew is heading for the U.S. and may disrupt East Coast fuel shipments. West Texas Intermediate for November delivery rose $1.14, or 2.3 percent, to $49.83 a barrel on the New York Mercantile Exchange. It was the highest close since June 29. Prices reached $49.97 earlier. Total volume traded was 13 percent above the 100-day average at 2:38 p.m. Ample Stockpiles Brent for December settlement increased 99 cents, or 1.9 percent, to $51.86 a barrel on the London-based ICE Futures Europe exchange. It’s the lowest close since June 9. The global benchmark ended the session at a $1.48 premium to WTI for December delivery. "We closed just short of $50 and are still on track for a retest of the June peak,"

WTI Tests $50 On Another Surprise Inventory Draw, Production Cut --Following last night's surprisingly large draw from API (-7.6mm vs +1.5mm exp), DOE reported a smaller 2.976mm draw (but still a draw). Cushing saw a bigger than expected (and API) build but Gasoline stocks rose less than expected (and API). Crude production fell modestly week-over-week, but hoveres around 8.5mm b/d. Crude prices dropped, then ramped towards $50...DOE:

  • Crude -2.976mm (+1.5mm exp)
  • Cushing +569k (+100k exp)
  • Gasoline +222k (+500k exp)
  • Distillates -1.915mm

This is the 5th weekly draw in a row for Crude... at a time seasonally when inventories build... And on a week in which OPEC claimed to have agreed to a deal to cap production at some point in the future, US production slipped 0.35% on the week but remains stuck at around 8.5mm b/d...

 U.S. Crude Closes Above $50 a Barrel for the First Time Since June - WSJ: U.S. oil prices closed above the $50 level for the first time since June, as declining U.S. inventories have helped boost a rally that began when OPEC reached a preliminary agreement to cut output last week.Light, sweet crude for November delivery settled up 61 cents, or 1.2%, at $50.44 a barrel on the New York Mercantile Exchange. Its sixth gain in seven sessions put U.S. oil at its third highest settlement this year. Brent, the global benchmark, gained 65 cents, or 1.3%, to $52.51 a barrel, its second-highest settlement this year. The oil market has been largely focused on the Organization of the Petroleum Exporting Countries’ tentative plan to cut production, a deal that could help reduce the global supply glut and bring the market more into balance. But even as analysts have expressed skepticism that OPEC members could reach a final agreement—or be able to enforce it after their November meeting—some traders are pointing to the surprising drawdown in U.S. inventory as another reason why crude prices could continue to climb. Oil stockpiles in the U.S. are falling at their fastest rate since the oil market began its big descent two year ago that took prices from more than $100 in 2014 to less than $30 earlier this year. U.S. inventories fell by 14.5 million barrels at the start of September, more than any other week since 1999. Some traders dismissed that initial decline as anomalous, blaming the big falloff on a tropical storm that had interrupted shipping routes. But that began a five-week run of declines, and crude stocks are down 5% over that span, government data show.

  Distillates Need a Cold Winter given the Supply Overhang (Video) - Year over year the Distillate numbers from production, demand and supply appear the weakest in the Petroleum complex. A mild winter will be a headwind for Distillate prices in 2017 given current supply levels.

OPEC says its Aug crude oil output 33.24 mil b/d as market balance improves - Oil | Platts News Article & Story: OPEC crude oil production in August fell from its record July levels, with the producer group reporting Monday that secondary sources had pegged its output for the month at 33.24 million b/d. Meanwhile, non-OPEC production will be far more robust in both 2016 and 2017 than had been expected, OPEC said in its closely watched monthly oil market report, due to increases in output from Kazakhstan, Norway, the UK and Canada. For 2016, non-OPEC supply has been revised upward by 190,000 b/d from the organization's August forecast to 56.32 million b/d, and 2017 supply revised upward by 540,000 b/d to 56.52 million b/d.The projection indicates that the market's lingering oversupply is likely to extend into next year, as OPEC said it expects the call on its crude for 2016 to average 31.7 million b/d, more than 1.5 million b/d below what it produced in August. For 2017, if OPEC crude output remains at August levels, that gap would remain about 740,000 b/d, as the producer group expects the call on its crude next year at 32.5 million b/d. The organization slightly revised upward its expectations of world oil demand for 2016, which it pegged at 94.27 million b/d. In 2017, world oil demand will grow a further 1.15 million b/d to hit a new record of 95.42 million b/d, OPEC said in its report. Still, OPEC sounded an optimistic tone about supply and demand balances, as it said it expects growing demand to draw down global inventories. "Despite moderate global economic growth, recent data shows better-than-expected oil demand in some of the main consuming countries," OPEC said. "This, along with a potentially improving oil supply picture, would contribute to a reduction in the imbalance of market fundamentals in the coming months."

OilPrice Intelligence Report: Can Oil Stay Above $50 Per Barrel?  -- Oil prices held onto their gains this week, adding a bit of momentum to the rally that started in late September following the OPEC deal. On Thursday, WTI broke through the $50 per barrel threshold for the first time since June on a fragile, but growing sense of optimism that oil markets are heading closer to balance. U.S. crude oil stocks fell again this week, adding to the bullish sentiment.  Another bit of positive news came at the end of the week when OPEC’s Secretary-General said he will meet Russia’s energy minister in Istanbul for talks. The “consultations” will take place on the sidelines of an energy conference this weekend, and while there is no guarantee that Russia will coordinate or cooperate with OPEC’s planned production cuts, Russia has been more open to cooperation with OPEC this year than at any point in recent memory. . The Wall Street Journal reports that Saudi’s powerful Deputy Crown Prince Mohammed bin Salman gave the greenlight to negotiators to come to a deal with OPEC countries on production cuts in Algiers last month. However, according to WSJ sources, it does not mark an about-face for the country’s oil strategy of fighting for market share. The Prince gave the space to negotiate a production cut, but only for volumes that the Kingdom had been planning to cut anyway. Production in Saudi Arabia tends to fall after peak summer demand, so the announced cuts for the OPEC deal did not involve much of a sacrifice. The distinction is important because it could offer clues into how far Saudi Arabia will be willing to go to prop up oil prices, which is to say, perhaps not that far.  The world’s largest oil producer plans on publishing details of its finances for the first time ahead of a planned partial IPO in 2018, the FT reports. Aramco’s finances have long been shrouded in mystery, but in order to list shares, the company will need to provide more transparency to investors. It will release data next year, for the years 2015-2017. Saudi Arabia plans on listing about 5 percent of the company, and Saudi officials believe the company will be valued at as much as $2 trillion.   Bloomberg reports that at least 10 oil tankers are waiting in the North Sea, a sign that the oil market for Brent crude is still oversupplied. It is unusual for more than one or two tankers to be anchoring waiting to transfer their cargo. The uptick in what is essentially oil sitting in floating storage, in spite of oil field maintenance in the North Sea, suggests oil markets are still weak.

US rig count up 2 this week to 524 (AP) — The number of rigs exploring for oil and natural gas in the U.S. increased by two this week to 524. A year ago, 795 rigs were active. Depressed energy prices have sharply curtailed oil and gas exploration. Houston oilfield services company Baker Hughes Inc. said Friday that 428 rigs sought oil and 94 explored for natural gas this week. Two were listed as miscellaneous. Among major oil- and gas-producing states, Oklahoma and Texas gained two rigs each while Alaska, Louisiana and Pennsylvania were up one apiece. Colorado, New Mexico, Utah and West Virginia each declined by one. Arkansas, California, Kansas, North Dakota, Ohio and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404.

U.S. Oil-Rig Count Climbs by Three - WSJ: The number of rigs drilling for oil in the U.S. climbed three in the past week to 428, continuing a trend of increases, according to oil-field services company Baker Hughes Inc. BHI 1.05 % The U.S. oil-rig count is typically viewed as a proxy for activity in the sector. After peaking at 1,609 in October 2014, low oil prices put downward pressure on production and the rig count fell sharply. The oil rig count has generally been rising since the beginning of the summer. The nation’s gas-rig count fell by 2 to 94 in the past week. The U.S. offshore-rig count rose by 1 rigs at 23, which is 9 fewer than a year ago. On Friday, crude oil prices fell following comments from the Russian energy minister that dampened hopes for a broader agreement on production cuts. Oil traders have been focusing on the Organization of the Petroleum Exporting Countries and its tentative plan to cut production. Despite doubts about the deal, oil has rallied to its highest prices since June.

U.S. oil rig count extends recovery amid crude rally: Baker Hughes | Reuters: The number of rigs drilling for oil in the United States rose this week, extending one of its best recoveries with no cuts for 15 straight weeks, with analysts expecting more additions after crude prices climbed back over $50 a barrel. Drillers added three oil rigs in the week to Oct. 7, bringing the total count up to 428, the most since February, but still below the 605 rigs seen a year ago, according to energy services firm Baker Hughes Inc on Friday. That 15-week streak of not cutting rigs was the third longest since 1987, following 19 weeks in 2011 and 17 weeks in ended in 2010. The oil rig count plunged from a record high of 1,609 in October 2014 to a six-year low of 316 in May after crude collapsed from over $107 a barrel in June 2014 to near $26 in Feb. 2016 in the biggest price rout in a generation due to a global oil glut. But after crude briefly climbed over $50 a barrel in June, drillers have added 112 oil rigs. Analysts said prices over $50 would prompt energy firms to return to the well pad. U.S. crude futures this week climbed over $50 a barrel to four-month highs, spurred by ongoing talks of an OPEC production cut. Prices on Friday eased to just below $50 on profit-taking from the nearly 15-percent rally since the group announced plans to reduce output on Sept. 28. [O/R] Looking ahead, analysts forecast the rig count would jump higher in 2017 and 2018 when prices were expected to rise with publicly-traded energy firms planning to spend more on drilling to increase production.Futures for calendar 2017 were trading at about $53 a barrel, while calendar 2018 was around $54. Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, this week forecast total oil and natural gas rig count would average 498 in 2016, 656 in 2017 and 866 in 2018.

 Saudi Arabia's Post-Oil Plan Off to a Rough Start in Year One -- The first year of Saudi Arabia’s drive to reduce its oil dependence may end with the opposite result. A flurry of cost-cutting measures will likely push the non-oil economy into recession, analysts say. That means that any overall growth in 2016 will be largely due to record crude output. Efforts to manage the fallout from cheap oil gathered steam over the past two weeks. Policy makers have suspended bonuses and trimmed allowances for government employees. Ministers’ salaries were cut by 20 percent. The central bank also said it’s injecting about 20 billion riyals ($5.3 billion) into the banking system to ease a cash crunch. Austerity will help Saudis reduce a budget deficit that reached 16 percent of gross domestic product last year. But it will also likely exacerbate the economic slowdown as consumption falls. A Bloomberg survey shows overall growth at 1.1 percent this year, with Capital Economics and BNP Paribas both predicting the first contraction since 2009. “The hits to households are getting bigger and bigger,” The growing pessimism about Saudi Arabia’s short-term outlook highlights the challenge facing Deputy Crown Prince Mohammed bin Salman, the architect of economic policy, as he seeks to prepare the kingdom for the post-oil era without provoking a backlash from a population accustomed to state largesse. Even before announcing his so-called Vision 2030 in April, the government had raised the prices of fuel and utilities. It’s also weighing plans to cancel more than $20 billion of projects, people familiar with the matter have said. The International Monetary Fund expects the budget shortfall to drop below 10 percent of GDP in 2017.

Meanwhile, Saudi Stocks Crash Near 7 Year Lows --Following demands from officials for banks to reschedule loans to clients affected by last week's decision to cut salaries and bonuses for state employees, Middle-East bank stocks are collapsing and Saudi's Tadawul Index is back near its 2009 lows...  The weakness - despite crude strength - was driven by Saudi Arabia’s central bank decision to direct local lenders to reschedule the consumer loans of clients affected by last week’s decision to scrap the bonuses and allowances of many state employees. As Bloomberg reports,  The Saudi Arabian Monetary Agency, as the central bank is known, said in a statement on its website on Sunday that the step was part of efforts to “reduce pressure on borrowers” whose income was cut by the government’s Sept. 26 package of measures to further trim spending.The agency said local banks must obtain the client’s approval before rescheduling a loan. Borrowers should present proof that their income has been affected by the recent cuts to the nearest bank branch, the regulator said. Loans taken after the cabinet decision to end the payments won’t be rescheduled.Under Deputy Crown Prince Mohammed bin Salman, the world’s biggest oil exporter has already delayed payments owed to contractors and started cutting fuel subsidies as it tries to manage lower oil prices. The measures may help narrow the budget deficit to 13 percent of gross domestic product this year and below 10 percent in 2017, according to International Monetary Fund estimates.The cancellation of bonuses and allowances -- and a simultaneous decision to lower ministers’ salaries by 20 percent -- further spread the burden of shoring up public finances to a population accustomed to years of government largesse. Yet analysts have warned the cuts risk deepening the kingdom’s economic slowdown by damaging consumer confidence. Which collapsed Saudi banking stocks to record lows...

Sept 11 Widow Is First American To Sue Saudi Arabia For Terrorism: Her Full Lawsuit --Two days ago, after the stunning Congressional override of Obama's veto of the Justice Against Sponsors of Terrorism (JASTA), aka the "Sept.11" bill, we wondered how long until the first lawsuit by a Sept 11 victim naming Saudi Arabia as a defendant would emerge. We didn't have long to wait.  On Friday, September 30, a woman widowed when her husband was killed at the Pentagon on Sept. 11, 2001 became the first American to sue the Kingdom of Saudi Arabia in Washington DC District Court, just two days after Congress slammed Obama for siding with Saudi Arabia, overriding his presidential veto only for the first time in his administration, and enacting legislation allowing Americans to sue foreign governments for allegedly playing a role in terrorist attacks on U.S. soil. Stephanie Ross DeSimone alleged the kingdom provided material support to al-Qaeda and its leader, Osama bin Laden. Her suit is also filed on behalf of the couple’s daughter. DeSimone was two months pregnant when her husband, Navy Commander Patrick Dunn was killed. She is suing for wrongful death and intentional infliction of emotional distress, and is seeking unspecified compensatory and punitive damages. In the lawsuit she alleges that "at all material times, Saudi Arabia, through its officials, officers, agents and employees, provided material support and resources to Osama bin Laden (“bin Laden”) and Al Qaeda. The support provided by Saudi Arabia to bin Laden and Al Qaeda assisted in or contributed to the preparation and execution of the September 11th attacks and the extrajudicial killing of Patrick Dunn." She adds that "Al Qaeda was funded, to the tune of approximately $30 million per year, by diversions of money from Islamic charities" and explains"

Iraqis Use 9/11 Bill to Demand Compensation from US for 2003 Invasion -- In light of a bill passed by the US Congress allowing families of 9/11 victims to sue Saudi Arabia, Iraqis have asked their parliament to demand compensation for the US invasion of Iraq.After the US Congress passed the Justice Against Sponsors of Terrorism Act (JASTA), which overrides the principle of sovereign immunity to allow families of 9/11 victims to sue Saudi Arabia, an Iraqi group has requested parliament to prepare a lawsuit seeking compensation from the US for the invasion of Iraq. The "Arab Project in Iraq" lobby group "sees their opportunity to ask for compensation from the United States over violations by the US forces following the US invasion that saw the toppling of late President Saddam Hussein in 2003," the Al-Arabiya news channel reported on Saturday. "It urged for a full-fledged investigation over the killing of civilians targets, loss of properties and individuals who suffered torture and other mistreatment on the hand of US forces." The Iraqi group is the first to take advantage of the precedent set by JASTA in overturning the principle of sovereign immunity.

Iraq Will Use Sept 11 Bill To Sue US Government For 2003 Invasion, Demand Compensation -- As reported on Saturday, a September 11 widow was the first American to take advantage of the recently passed Justice Against Sponsors of Terrorism (JASTA), aka the "Sept.11" bill courtesy of Congress which for the first time in Obama's tenure overrode his veto, by suing the Kingdom of Saudi Arabia. Stephanie Ross DeSimone alleged the kingdom provided material support to al-Qaeda and its leader, Osama bin Laden leading to the death of her husband, Navy Commander Patrick Dunn, who was killed at the Pentagon on Sept. 11, 2009, when Stephanie was two months pregnant at the time with the couple's daughter. Her suit is also filed on behalf of the couple’s daughter. She sued for wrongful death and intentional infliction of emotional distress, and is seeking unspecified compensatory and punitive damages. However, in an unexpected twist, over the weekend following the passage of JASTA, it was citizens of Iraq who asked their parliament to demand compensation for the 2003 US invasion of Iraq.  As Al-Arabiya news channel reported on Saturday, an Iraqi group has requested parliament to prepare a lawsuit seeking compensation from the US for the invasion of Iraq.The "Arab Project in Iraq" lobby group "sees their opportunity to ask for compensation from the United States over violations by the US forces following the US invasion that saw the toppling of late President Saddam Hussein in 2003." While hardly intended to have this effect - where the US itself is sued for alleged terrorist acticity - the Iraqi group is the first foreign entity to take advantage of the precedent set by JASTA in overturning the principle of sovereign immunity. By passing JASTA and allowing 9/11 families to sue Saudi Arabia, the Senate has also made the US vulnerable to legal action seeking compensation for its foreign policy activities across the world. The day after the Senate vote, former Republican Senator Larry Pressler expressed fear that as a veteran of the Vietnam War, he could now face legal action. "As a Vietnam combat veteran, I could almost certainly be sued by the Vietnamese government or by a Vietnamese citizen," Pressler wrote in The Hill.

Fake News and False Flags -- The Pentagon gave a controversial UK PR firm over half a billion dollars to run a top secret propaganda programme in Iraq, the Bureau of Investigative Journalism can reveal. Bell Pottinger’s output included short TV segments made in the style of Arabic news networks and fake insurgent videos which could be used to track the people who watched them, according to a former employee. The agency’s staff worked alongside high-ranking US military officers in their Baghdad Camp Victory headquarters as the insurgency raged outside. Bell Pottinger's former chairman Lord Tim Bell confirmed to the Sunday Times, which worked with the Bureau on this story, that his firm had worked on a “covert” military operation “covered by various secrecy agreements.” Bell Pottinger reported to the Pentagon, the CIA and the National Security Council on its work in Iraq, he said. Bell, one of Britain’s most successful public relations executives, is credited with honing Margaret Thatcher’s steely image and helping the Conservative party win three elections. The agency he co-founded has had a roster of clients including repressive regimes and Asma al-Assad, the wife of the Syrian president.

Pentagon Paid British PR Firm $500mm To Create Fake Al Qaeda Propaganda Videos --Per new discoveries revealed by the The Bureau of Investigative Journalism, the United States government paid over $500mm to a British public relations firm, Bell Pottinger, between May 2007 and December 2011 to create fake Al Qaeda propaganda films aimed at tracking terrorist viewing locations.  According to a Bell Pottinger insider, propaganda films were categorized into three categories with “White" being accurately attributed, “Grey" being unattributed, and "Black" being falsely attributed material.  The media firm created various types of content ranging from TV commercials to news items and "fake Al Qaeda propaganda films." The work consisted of three types of products. The first was television commercials portraying al Qaeda in a negative light. The second was news items which were made to look as if they had been “created by Arabic TV,” Wells said. Bell Pottinger would send teams out to film low-definition video of al Qaeda bombings and then edit it like a piece of news footage. It would be voiced in Arabic and distributed to TV stations across the region, according to Wells. The third and most sensitive program described by Wells was the production of fake al Qaeda propaganda films. He told the Bureau how the videos were made. He was given precise instructions: “We need to make this style of video and we’ve got to use al Qaeda’s footage,” he was told. “We need it to be 10 minutes long, and it needs to be in this file format, and we need to encode it in this manner.”

 Iraq Warns Of "Regional War" If Turkey Does Not Withdraw Troops --With much of the public's attention in recent weeks focused on the escalation between the US and Russia over the nearly 6-year-old proxy war in Syria, a reminder that middle-east tensions include virtually all other neighboring countries, came from Iraq's prime minister who on Wednesday warned Turkey that it risked triggering a regional war by keeping troops in his territory, as the neighboring states summoned each other's ambassadors in a mounting diplomatic stand-off.Turkey's parliament voted last week to extend its military operation in Iraq and take on "terrorist organizations", a reference to Kurdish militants and Islamic State. Responding to the Turkish decision, Iraq's parliament condemned the Turkish vote and called for Turkey's 2,000 troops to leave, Reuters reported. An adamant Turkey has refused to comply and insists that its military is in Iraq at the invitation of Masoud Barzani, president of the Kurdish regional government, with which Ankara maintains solid ties. Most of the troops are at a base in Bashiqa, north of Mosul, where they are helping to train Iraqi Kurdish peshmerga and Sunni fighters. Turkey's deputy prime minister, Numan Kurtulmus, said the deployment had become necessary after Islamic State's seizure of Iraq's second city, captured in 2014. "Neither Turkey's presence in Bashiqa nor its operation right now in Syrian territory are aimed at occupying or interfering with the domestic affairs of these countries."

U.S. drone strike kills 15 civilians in Afghanistan, United Nations says | Reuters: At least 15 civilians were killed and 13 wounded in a U.S. unmanned aircraft strike in eastern Afghanistan, the United Nations said, calling for an independent investigation into the incident. The airstrike early on Wednesday morning hit what U.S. officials said was an Islamic State target in the Achin district of Nangarhar province. Government officials said the strike killed some militants, but the U.N. Assistance Mission in Afghanistan (UNAMA) reported the victims were civilians, including students, a teacher, and members of families considered to be "pro-government". "UNAMA reiterates the need for all parties to the conflict to adhere to their obligations under international humanitarian law," the United Nations said in a statement late on Thursday. "UNAMA calls on the government and international military forces to launch a prompt, independent, impartial, transparent, and effective investigation into this incident." All the civilians reported killed were men, it added. The men had gathered in a village to welcome a local elder on his return from completing the Hajj pilgrimage to Mecca and were sleeping when the strike happened, witnesses said.

Russia-US Relations Deteriorate Sharply: Moscow Halts Plutonium Cleanup Accord, Says Syria Contact Suspended -- Following last week's sharp escalation in diplomacy between the US and Russia, when John Kerry warned of not only breaking off diplomatic relations over Syria with Russia, and threatening to use "military force" including potentially US-based ground forces in Syria for the first time, but also slamming Russian strikes over Aleppo as "barbaric", Russia responded Monday when Russian President Vladimir Putin suspended an agreement with the United States for disposal of weapons-grade plutonium because of "unfriendly" acts by Washington, the Kremlin said. A Kremlin spokesman cited by Reuters said Putin had signed a decree suspending the 2010 agreement under which each side committed to destroy tonnes of weapons-grade material because Washington had not been implementing it and because of current tensions in relations. The deal, signed in 2000 but which did not come into force until 2010, was being suspended due to "the emergence of a threat to strategic stability and as a result of unfriendly actions by the United States of America towards the Russian Federation", the preamble to the decree said. It also said that Washington had failed "to ensure the implementation of its obligations to utilize surplus weapons-grade plutonium". The 2010 agreement, signed by Russian Foreign Minister Sergei Lavrov and then-U.S. Secretary of State Hillary Clinton, called on each side to dispose of 34 tonnes of plutonium by burning in nuclear reactors.

US Suspends Diplomatic Relations With Russia On Syria -- What last week was just a not-so-thinly-veiled-threat lobbed by John Kerry to the Kremlin has, now that Russia suspended its participation in a Plutonium cleanup accord with the US, become official, and as the State Department announced moments ago, the US has now suspended bilateral discussions, i.e. diplomatic relations, with Russia over Syria, escalating the conflict in the war-torn nation to a level last seen in late 2015. As Reuters adds, the United States said on Monday it was suspending talks with Russia on trying to end the violence in Syria and accused Moscow of not living up to its commitments under a ceasefire agreement. "The United States is suspending its participation in bilateral channels with Russia that were established to sustain the cessation of hostilities," U.S. State Department spokesman John Kirby said in a statement. "This is not a decision that was taken lightly." While we await more, we can't help but note that the drums of (global, non-proxy) war in Syria are beating ever louder. The next escalatory step from the US at this point would be to send US troops in Syria, which would be promptly met with a matched retaliatory response by Russia, and perhaps China too, which as reported several weeks ago, informally joined the conflict on the side of Syria's president Assad when it said it would provide "aid and military training" to Syria's current president.

The Obama Administration’s Suspension of Syria Talks With Russia Is the Most Dangerous Development in a New Cold War -- This afternoon the State Department announced that the Obama administration is suspending bilateral talks with Russia regarding the war in Syria. The statement by State Department spokesman John Kirby read, in part, that the decision to suspend “bilateral channels with Russia that were established to sustain the Cessation of Hostilities” was “not a decision that was taken lightly.” The statement said that the United States “spared no effort in negotiating,” yet “Russia failed to live up to its own commitments.” White House spokesman Josh Earnest told reporters on Monday, “Everybody’s patience with Russia has run out.” Meanwhile, the pressure on the administration to “do something” in Syria is growing. Former general and CIA director David Petraeus, no doubt echoing the establishment consensus on these issues, told Charlie Rose last week that establishing these zones would be “very, very straightforward” and could be achieved “very, very quickly.” The general’s assurances aside, the administration might do well to recall the consequences of a similar operation over Kosovo (which resulted in a bombing campaign that lasted 78 days) or of the more recent imposition of a no-fly zone over Libya.   Unlike in those cases, both the Russians and Iranians have personnel on the ground in Syria, while the Russian and the Syrian Arab Air Forces are executing an air campaign over rebel-held (or more accurately, jihadi-held) east Aleppo. The mainstream media continue to gloss over the rather salient fact that civilians who are trying to flee the Russian-Syrian bombardment are often blocked from doing so by US- and Gulf State–funded “rebels.”   The decision by the Obama administration to suspend talks with Russia, therefore, while alarming in the extreme, is perhaps not so surprising, given a CNN report over the weekend that showed that Secretary of State John Kerry—whom many observers (including this author) wrongly saw as a dove on matters relating to Syria and Russia—has been pushing for a military solution in Syria all along.   Is there any relevant history to which administration officials might turn to guide them, now that it seems we are eyeball-to-eyeball with Russia in Syria?

US Considering Air Strikes On Assad Regime After Top General Warns It Could Lead To War With Russia --Now that the gloves have come off in the faux diplomacy between Russia and the US, which yesterday culminated with Putin halting a Plutonium cleanup effort with the US, shortly before the US State Department announced it would end negotiations with Russia over Syria, the next step may be one which John Kerry warned last week is "back on the table", namely the launch of military strikes on the Assad regime. As WaPo reports, meetings have been going on within US national security agencies for weeks to consider new options to recommend to the president to address the ongoing crisis in Aleppo. A meeting of the Principals Committee, which includes Cabinet-level officials, is scheduled for Wednesday while a meeting of the National Security Council, which could include the president, could come as early as this weekend. As Reuters hinted last week, at a Deputies Committee meeting at the White House, officials from the State Department, the CIA and the Joint Chiefs of Staff discussed limited military strikes against the regime as a "means of forcing Syrian dictator Bashar al-Assad to pay a cost for his violations of the cease-fire, disrupt his ability to continue committing war crimes against civilians in Aleppo, and raise the pressure on the regime to come back to the negotiating table in a serious way." Or, in other words, to cut to the chase and go right back to what the US was hoping to achieve in Syria in the first place: another regime change.

Kerry said he lost argument to back Syria diplomacy with force: NYT | Reuters: U.S. Secretary of State John Kerry, in a meeting last week with a small number of Syrian civilians and others, said he had lost an argument within the Obama administration to back up diplomatic efforts to end the bloodshed in Syria with the threat of using military force, the New York Times reported on Friday. The newspaper said it had obtained an audio recording of the 40-minute discussion that took place at the Dutch Mission to the United Nations on Sept. 22. The approximately 20 participants included representatives of four Syrian groups that provide education, rescue and medical services in rebel-held areas and diplomats from three or four countries, the Times said. The meeting took place days after a ceasefire Kerry had negotiated with Russia had collapsed and rebel-held areas of the Syrian city of Aleppo were coming under heavy air strikes as Moscow and Syrian President Bashar al-Assad's government rejected a U.S. plea to halt flights. The Times said Kerry repeatedly complained that his diplomacy had not been backed by a serious threat of military force. "I think you're looking at three people, four people in the administration who have all argued for use of force, and I lost the argument," Kerry said in an audio clip posted on the Times website./p> ;

Aleppo's largest hospital in rebel-held area is 'destroyed': Russian and Syrian warplanes are accused of bombing two hospitals in Syria as a man blows himself up near Assi Square in Hama.The largest hospital in rebel-held parts of Aleppo has been "completely destroyed" in airstrikes, medics say. Today's bombings on the M10 hospital come two days after barrel bombs and cluster bombs reportedly put the hospital out of action. Adham Sahloul of the Syrian American Medical Society said is has been "completely destroyed... It is gone". It had been hit so badly earlier last week that UN chief Ban Ki Moon described the assault as a war crime. The targeting of the M10 facility came hours before a suicide bomber targeted a Kurdish wedding on the outskirts of Hasaka and a day after another hospital in Syria, which had been dug into a mountain just outside the Hama province, was reportedly taken out of action by airstrikes. The International Union of Medical Care and Relief Organisations said there were minor injuries when the Dr Hasan al Araj hospital, also known as the Cave Hospital, was struck twice on Sunday. The UK-based Syrian Observatory for Human Rights has claimed Russian warplanes carried out the attacks. Meanwhile, a suicide bomber has blown himself up near Assi Square in Hama, causing injuries, according to Syrian state TV.

Covert strikes on Assad back on US table to prevent ‘fall of Aleppo’ – report - Top Washington officials are set to discuss striking positions of the Syrian military without a UN Security Council resolution. Bombing air force runways with missiles fired from coalition planes and ships is being considered, according to a report.  “One proposed way to get around the White House’s objection to striking the Assad regime without a UN Security Council resolution would be to carry out the strikes covertly and without public acknowledgment,” one administration official who is to take part in the discussions told the Washington Post.  A meeting of the Obama administration’s Principals Committee is scheduled for Wednesday, the newspaper reported, adding that a meeting of the National Security Council could follow this weekend.The CIA and the Joint Chiefs of Staff expressed support for “limited military strikes against the Syrian government,” last Wednesday, when the US discussed such “kinetic” options, the official told the Washington Post.“There’s an increased mood in support of kinetic actions against the regime,” one senior administration official was quoted as saying.“The CIA and the Joint Staff have said that the fall of Aleppo would undermine America’s counterterrorism goals in Syria,” he added.

Is Fighting Al-Qaeda In Aleppo Good Or Bad? – U.S. Unable To Decide - There is currently a barrage of propaganda in the "western" media in support of "rebels" in east-Aleppo. It is all about "hospitals" and "children" but the aim is to stop a Syrian army assault on the "rebel" held quarters of the city. U.S. officials are again talking about "intervention", meaning open war, to prevent the Syrian army and its allies from storming the "rebel" held eastern parts. It would not work but that is not the only reason why it is a strange idea.  "It is primarily al-Qaeda that holds Aleppo," said (vid) the spokesperson of the U.S. led 'Operation Inherent Resolve', Colonel Warren. That was back in April and al-Qaeda (aka Jabat al-Nusra) has since strengthen its capacities in the city. The French Syria expert Fabrice Balanche tells Le Monde Le Figaro (translate from French):  [Al-Qaeda's] grip on Aleppo's east has only increased since the spring of 2016, when it sent 700 reinforcement fighters while moderate brigades fighters began to leave the area before the final exit was closed. The provisional opening of a breach of the siege of Aleppo in August 2016 (Battle of Ramousseh) has further increased its prestige and influence on the rebels. So why does the U.S. want to stop the Syrian government forces in their attempt to free the parts of the city which are undoubtedly held by al-Qaeda? The U.S. voted "Yes" on several UN Security Council resolutions that demand to fight al-Qaeda and "to eradicate the safe haven they have established over significant parts of Syria."

The media are misleading the public on Syria - Boston Globe - Coverage of the Syrian war will be remembered as one of the most shameful episodes in the history of the American press. Reporting about carnage in the ancient city of Aleppo is the latest reason why. For three years, violent militants have run Aleppo. Their rule began with a wave of repression. They posted notices warning residents: “Don’t send your children to school. If you do, we will get the backpack and you will get the coffin.” Then they destroyed factories, hoping that unemployed workers would have no recourse other than to become fighters. They trucked looted machinery to Turkey and sold it. Advertisement This month, people in Aleppo have finally seen glimmers of hope. The Syrian army and its allies have been pushing militants out of the city. Last week they reclaimed the main power plant. Regular electricity may soon be restored. The militants’ hold on the city could be ending. Militants, true to form, are wreaking havoc as they are pushed out of the city by Russian and Syrian Army forces. “Turkish-Saudi backed ‘moderate rebels’ showered the residential neighborhoods of Aleppo with unguided rockets and gas jars,” one Aleppo resident wrote on social media. The Beirut-based analyst Marwa Osma asked, “The Syrian Arab Army, which is led by President Bashar Assad, is the only force on the ground, along with their allies, who are fighting ISIS — so you want to weaken the only system that is fighting ISIS?” This does not fit with Washington’s narrative. As a result, much of the American press is reporting the opposite of what is actually happening. Many news reports suggest that Aleppo has been a “liberated zone” for three years but is now being pulled back into misery.

BREAKING: Russia Will Take Down Any American Airplane or Rocket Targeting Syrian Army (Video): Russia’s Defense Ministry has cautioned the US-led coalition of carrying out airstrikes on Syrian army positions, adding in Syria there are numerous S-300 and S-400 air defense systems up and running. Russia currently has S-400 and S-300 air-defense systems deployed to protect its troops stationed at the Tartus naval supply base and the Khmeimim airbase. The radius of the weapons reach may be “a surprise” to all unidentified flying objects, Russian Defense Ministry spokesperson General Igor Konashenkov said. According to the Russian Defense Ministry, any airstrike or missile hitting targets in territory controlled by the Syrian government would put Russian personnel in danger. The defense official said that members of the Russian Reconciliation Center in Syria are working “on the ground” delivering aid and communicating with a large number of communities in Syria. “Therefore, any missile or air strikes on the territory controlled by the Syrian government will create a clear threat to Russian servicemen.” “Russian air defense system crews are unlikely to have time to determine in a ‘straight line’ the exact flight paths of missiles and then who the warheads belong to. And all the illusions of amateurs about the existence of ‘invisible’ jets will face a disappointing reality,” Konashenkov added.

Wikileaks Confirms Hillary Sold Weapons To ISIS: Although Hillary Clinton has repeatedly denied that she sold weapons to the Islamic Stats while serving as Secretary of State, Wikileaks founder Julian Assange claims he has proof to the contrary. reported: In Obama’s second term, Secretary of State Hillary Clinton authorized the shipment of American-made arms to Qatar, a country beholden to the Muslim Brotherhood, and friendly to the Libyan rebels, in an effort to topple the Libyan/Gaddafi government, and then ship those arms to Syria in order to fund Al Qaeda, and topple Assad in Syria. Clinton took the lead role in organizing the so-called “Friends of Syria” (aka Al Qaeda/ISIS) to back the CIA-led insurgency for regime change in Syria. Under oath Hillary Clinton denied she knew about the weapons shipments during public testimony in early 2013 after the Benghazi terrorist attack. In an interview with Democracy Now, Wikileaks’ Julian Assange is now stating that 1,700 emails contained in the Clinton cache directly connect Hillary to Libya to Syria, and directly to Al Qaeda and ISIS.

Inside the Shadowy PR Firm That’s Lobbying for Regime Change in Syria - On September 30, demonstrators gathered in city squares across the West for a "weekend of action” to “stop the bombs” raining down from Syrian government and Russian warplanes on rebel-held eastern Aleppo. Thousands joined the protests, holding signs that read "Topple Assad" and declaring, "Enough With Assad." Few participants likely knew that the actions were organized under the auspices of an opposition-funded public relations company called the Syria Campaign.  By partnering with local groups like the Syrian civil defense workers popularly known as the White Helmets, and through a vast network of connections in media and centers of political influence, The Syria Campaign has played a crucial role in disseminating images and stories of the horrors visited this month on eastern Aleppo. The group is able to operate within the halls of power in Washington and has the power to mobilize thousands of demonstrators into the streets. Despite its outsized role in shaping how the West sees Syria’s civil war, which is now in its sixth year and entering one of its grisliest phases, this outfit remains virtually unknown to the general public. The Syria Campaign presents itself as an impartial, non-political voice for ordinary Syrian citizens that is dedicated to civilian protection. “We see ourselves as a solidarity organization,” The Syria Campaign strategy director James Sadri told me. “We’re not being paid by anybody to pursue a particular line. We feel like we’ve done a really good job about finding out who the frontline activists, doctors, humanitarians are and trying to get their word out to the international community.” Yet behind the lofty rhetoric about solidarity and the images of heroic rescuers rushing in to save lives is an agenda that aligns closely with the forces from Riyadh to Washington clamoring for regime change. Indeed, The Syria Campaign has been pushing for a no-fly zone in Syria that would require at least “70,000 American servicemen” to enforce, according to a Pentagon assessment, along with the destruction of government infrastructure and military installations. There is no record of a no-fly zone being imposed without regime change following —which seems to be exactly what The Syria Campaign and its partners want.

New famine fears loom in Yemen | Reuters: Intensive care wards in Yemen's hospitals are filled with emaciated children hooked up to monitors and drips - victims of food shortages that could get even worse due to a reorganization of the central bank that is worrying importers. With food ships finding it hard to get into Yemen's ports due to a virtual blockade by the Saudi-led coalition that has backed the government during an 18-month civil war, over half the country's 28 million people already do not have enough to eat, according to the United Nations. Yemen's exiled president, Abd Rabbuh Mansur Hadi, last month ordered the central bank's headquarters to be moved from the capital Sanaa, controlled by Houthi rebels in the north, to the southern port of Aden, which is held by the government. Trade sources involved in importing food to the Arab peninsula's poorest country say this decision will leave them financially exposed and make it harder to bring in supplies. "Everything is stacked against the people on the brink of starvation in Yemen."The effects of food shortages can already be seen. At the children's emergency unit at the Thawra hospital in the port of Hodaida, tiny patients with skin sagging over their bones writhe in beds. Hallways and waiting rooms are crowded with parents seeking help for their hungry and dying children. Salem Issa, 6, rests his stick-thin limbs on a hospital bed as his mother watches over him. "I have a sick child, I used to feed him biscuits, but he's sick, he won't eat," she said.

Yemen famine feared as starving children fight for lives in hospital -- Dozens of emaciated children are fighting for their lives in Yemen’s hospital wards, as fears grow that civil war and a sea blockade that has lasted for months are creating famine conditions in the Arabian peninsula’s poorest country. The UN’s humanitarian aid chief, Stephen O’Brien, described a visit to meet “very small children affected by malnutrition” in the Red Sea city of Hodeida. “It is of course absolutely devastating when you see such terrible malnutrition,” he said on Tuesday, warning of “very severe needs”. More than half of Yemen’s 28 million people are already short of food, the UN has said, and children are particularly badly hit, with hundreds of thousands at risk of starvation. There are 370,000 children enduring severe malnutrition that weakens their immune system, according to Unicef, and 1.5 million are going hungry. Food shortages are a long-term problem, but they have got worse in recent months. Half of children under five are stunted because of chronic malnutrition. A sea blockade on rebel-held areas enforced by the Saudi-coalition supporting the president, Abd Rabbuh Mansur Hadi, stops shipments reaching most ports. Its effects can be seen in centres such as the Thawra hospital, where parents cram waiting rooms seeking help for hungry and dying children. In April, between 10 and 20 children were brought for treatment, but the centre is now struggling with 120 a month, Reuters reported.

U.S. Admits Israel Is Building Permanent Apartheid Regime — Weeks After Giving It $38 Billion - In 2010, Israel’s then-defense minister, Ehud Barak, explicitly warned that Israel would become a permanent “apartheid” state if it failed to reach a peace agreement with Palestinians that creates their own sovereign nation and vests them with full political rights. “As long as in this territory west of the Jordan River there is only one political entity called Israel, it is going to be either non-Jewish, or non-democratic,” Barak said. “If this bloc of millions of ­Palestinians cannot vote, that will be an apartheid state.” Honest observers on both sides of the conflict have long acknowledged that the prospects for a two-state solution are virtually non-existent: another way of saying that Israel’s status as a permanent apartheid regime is inevitable. Indeed, U.S. intelligence agencies as early as 45 years ago explicitly warned that Israeli occupation would become permanent if it did not end quickly. All relevant evidence makes clear this is what has happened. There has been no progress toward a two-state solution for many years. The composition of Israel’s Jewish population — which has become far more belligerent and right-wing than previous generations — has increasingly moved the country further away from that goal. There are key ministers in Israel’s government, including its genuinely extremist justice minister, who are openly and expressly opposed to a two-state solution. Israel’s Prime Minister Benjamin Netanyahu has himself repeatedly made clear he opposes such an agreement, both in words and in deeds. In sum, Israel intends to continue to rule over and occupy Palestinians and deny them self-governance, political liberties, and voting rights indefinitely.

Indonesia's air force held a show of force over a gas-rich area in the South China Sea - Business Insider: (Reuters) - Indonesia's air force is holding its largest military exercise this week, near some of its islands in the South China Sea, in a show of sovereignty over the gas-rich area on the fringe of territory claimed by China, officials said on Tuesday. President Joko Widodo in June launched an unprecedented campaign to bolster fishing, oil exploration and defense facilities around the Natuna island chain after a series of face-offs between the Indonesian navy and Chinese fishing boats. China, while not disputing Indonesia's clams to the Natuna islands, has raised Indonesian anger by saying the two countries had "over-lapping claims" to waters near them, an area Indonesia calls the Natuna Sea. "We want to show our existence in the area. We have a good enough air force to act as a deterrent," said Jemi Trisonjaya, spokesman for Indonesia's air force. More than 2,000 air force personnel were taking part in the two-week long exercise, which includes the deployment of Indonesia's fleet of Russian Sukhoi and F-16 fighter jets, he said.China claims almost the entire South China Sea, where about $5 trillion worth of trade passes every year. Brunei, Malaysia, the Philippines, Taiwan and Vietnam also have claims.

Analysis: As dark clouds fade, China's oil demand outlook seems brighter -- China's oil demand recovered about 2% in August from 10-month lows in the previous month as favorable weather after the rainy season helped industrial activity to gather pace, which also prompted the top Asian oil consumer to boost its net oil product imports. Market players and analysts expect the upward trend to continue at least until the middle of October, after which industrial and consumer activity will start to slow because of the approaching winter season. "Demand in September and October will be better as harvest activity and the fishing season will increase demand for gasoil. The week-long National Day holiday in October will also stimulate gasoline demand as more traveling is expected," a refiner from Shandong said. Total apparent oil demand rebounded to 10.76 million b/d in August from 10.56 million b/d in July, up 1.9% month on month, S&P Global Platts calculations showed.Meanwhile, the year-on-year decline also narrowed to 4.3% in August, from 7.1% in July. The sharp month-on-month rise of 728.3% in net oil product imports to 286,000 b/d also suggested that the country needed more barrels to meet the higher demand in August as throughput fell to a three-month low of 10.47 million b/d because of heavy maintenance. The National Bureau of Statistics said the recent destocking signaled higher demand.

China's State-Owned Car Manufacturing Machine: Since overtaking Japan in 2009, China has been the undisputed leader in terms of car production volume. In 2015, the country manufactured a total of 21 million on its soil. While a large amount of these vehicles are produced in conjunction with big global players such as VW, a significant share of production comes from Chinese companies - most of which those in the west have never actually heard of. The infographic below takes a look at the largest of these manufacturers and sheds light on which are state-owned. This infographic shows the Chinese manufacturers that produce the most cars.

The great leap upward: China’s Pearl River Delta, then and now -- The region where the Pearl River flows into the South China Sea has seen some of the most rapid urban expansion in human history over the past few decades – transforming what was mostly agricultural land in 1979 into what is the manufacturing heartland of a global economic superpower today.  In 2008, China announced plans to mesh Guangzhou, Shenzhen, Dongguan, Zhaoqing, Foshan, Huizhou, Jiangmen, Zhongshan and Zhuhai into a single megacity. A series of massive infrastructure projects are under way to merge transport, energy, water and telecoms networks across the nine cities. Development has been relentless, and the World Bank recently named the Pearl River Delta as the biggest urban area in the world in terms of population and geographical size.  A 30-mile-long bridge and tunnel is under construction to join the Pearl River Delta metropolis of Zhuhai to the special administrative regions of Macau and Hong Kong. Satellite image of Pearl River Delta. Before: 19 October 1979, After: 14 September 2000. Credits: Landsat/NASA/UIG/Getty Images The first satellite image above shows the Pearl River Delta in 1979. Click or tap on the image (or drag the blue button) to see the second (taken in 2000), which shows that vast swathes of farmland have turned from green to grey, and huge new areas of land reclaimed from the sea.

What Most Chinese Fear: the U.S. - WSJ - From a Chinese perspective, the main threat to their country isn’t global economic instability, climate change or the Islamic State terror group. Instead, more people worry about the U.S., according to a survey by the Pew Research Center released Wednesday. Some 45% of Chinese said they see U.S. power and influence as posing a major threat to their country, up from 39% in 2013, according to Pew’s 2016 China survey. That puts the Chinese between the Japanese (52%) and Europeans (25%) in similar surveys, it said. Among Chinese, 35% said instability in the global economy posed a major threat and 34% expressed such anxieties about climate change—well below the U.S. and Europe. Only 15% of Chinese cited Islamic State, which Pew said was the lowest by far of any of the countries it surveys, including Japan and India. While younger and better-educated respondents were generally more favorable in their views of the U.S., more than half of all respondents said they believe the U.S. is trying to prevent China from becoming an equal power.

Here's the Smoking Gun That China Has a Huge Housing Bubble - Speculative buyers have eschewed Chinese stocks in favor of property, prompting even the chief economist at the central bank of the world's second largest economy to declare that housing was in a "bubble."But when strategists at UBS AG recently compiled a list of bubblicious housing markets, there weren't any selections from mainland China due to the lack of reliable data on the subject, underscoring the continued difficulty in declaring Chinese real estate to be in overheated territory.But Deutsche Bank AG Chief China Economist Zhiwei Zhang thinks he's pinpointed "a clear sign of a bubble" in the market — one that will end in a major correction in two years' time.After analyzing how much developers were willing to spend to win land auctions in 10 major Chinese cities in which values are already up 23 percent year-over-year, the economist found that the business case for these bids evaporates unless property prices continue to increase.One traditional sign of a bubble, across different asset classes, has been the willingness of people to buy something because they assume they'll soon be able to sell it at a higher price to some 'greater fool.' In fact, University of Chicago Professor Greg Kaplan argues that the chief cause of the U.S. housing boom, which ultimately ushered in the financial crisis, was that people bought homes "simply because people thought they would increase" in value. If property prices simply tread water from here, the Deutsche Bank economist reckons that buyers accounting for more than half of land sales values in these auctions would lose money.

IMF warns over China's 'dangerous' debt load - China's dependence on debt is growing at a "dangerous pace" and it must act to head off a brewing crisis in the world's second largest economy, the IMF warned Tuesday. The International Monetary Fund also said the country's leaders should kick on with vital reforms or risk a painful correction, adding that Beijing's "unsustainably high" growth goals were adding to the problem. While the country has made progress in its attempts to recalibrate the driver of growth, the Fund said failure to address structural issues could destroy that work. The IMF's warning comes weeks after a global central bank watchdog said China's banking sector could be facing an imminent debt crisis, fuelling worries a blowout could send tremors through the world economy. In an update to its World Economic Outlook, the IMF said: "China continues to make progress with the complex tasks of rebalancing its economy toward consumption and services and permitting market forces a greater role. "But the economy's dependence on credit is increasing at a dangerous pace, intermediated through an increasingly opaque and complex financial sector." The IMF said China should rein in the credit growth and cut off support to "unviable" state-owned enterprises, "accepting the associated slower GDP growth". "By maintaining high near-term growth momentum in this manner, the economy faces a growing misallocation of resources and risks an eventual disruptive adjustment," it said.

China's bad-debt ticking time bomb - Nikkei Asian Review: -- The Chinese economy may appear to be benefiting from a second wind, but a host of problems remain not far from the surface, ranging from a swelling real estate bubble to excess capacity at state-run enterprises. Many local governments are saddled with a pyramid of debt. The administration of President Xi Jinping is acutely aware of the need for radical structural reforms, but is weary of sparking an economic downturn. China's once thriving economy now finds itself at a major turning point. The real estate market is showing growing signs of a boom. Annualized prices for new homes rose in 62 out of 70 large and mid-size cities surveyed in August, up from 58 in July, China's National Bureau of Statistics reported on Sept. 19.Especially in some "second-tier" cities like Nanjing in Jiangsu Province and Hefei in Anfui Province, new house prices surged by as much as 30-40%. "Speculators who see prices in Beijing and Shanghai as too high have flooded into properties in surrounding cities," said Yan Yuejin, a Shanghai-based real estate analyst. Propping up the real estate market are banks which cannot afford any more bad debt, despite a massive glut of liquidity. Generally in China, banks offer mortgages worth up to around 70% of the value of the property. Banks tend to think that such loans are less likely to sour because they are secured with collateral.

China’s yuan joins elite club of IMF reserve currencies - China's yuan joins the International Monetary Fund's basket of reserve currencies on Saturday in a milestone for the government's campaign for recognition as a global economic power. The yuan joins the U.S. dollar, the euro, the yen and British pound in the IMF's special drawing rights (SDR) basket, which determines currencies that countries can receive as part of IMF loans. It marks the first time a new currency has been added since the euro was launched in 1999.The IMF is adding the yuan, also known as the renminbi, or "people's money", on the same day that the Communist Party celebrates the founding of the People's Republic of China in 1949. "The inclusion into the SDR is a milestone in the internationalization of the renminbi, and is an affirmation of the success of China's economic development and results of the reform and opening up of the financial sector," the People's Bank of China said in a statement. China will use this opportunity to further deepen economic reforms and open up the sector to promote global growth, the central bank added. The IMF announced last year that it would add the yuan to the basket, so actual inclusion is not expected to impact financial markets. But it puts Beijing's often opaque economic and foreign exchange policy in the international spotlight as some central banks add yuan assets to their official reserves.

The Eurasian Century is Now Unstoppable | New Eastern Outlook: I recently returned from a fascinating two week speaking tour in China. The occasion was the international premier of my newest book, One Belt, One Road–China and the New Eurasian Century. In the course of my visit I was invited by China’s Northwest University in Xi’an to give a lecture and seminar on the present global political and economic situation in the context of China’s New Economic Silk Road as the One Belt, One Road project is often called. What I’ve seen in my many visits to China, and have studied about the entirety of this enormously impressive international infrastructure project convinces me that a Eurasian Century at this point is unstoppable. The Eurasian Century is the name I give to the economic emergence of the countries contiguous from China across Central Asia, Russia, Belarus, Iran and potentially Turkey. They are being integrally linked through the largest public infrastructure projects in modern history, in fact the most ambitious ever, largely concentrated on the 2013 initiative by Chinese President Xi Jinping called the One Belt, One Road initiative or OBOR. The project and its implications for Europe and the rest of the world economy have been so far greeted in the west with a stone silence that defies explanation. It’s been now three years that have transpired since then-new Chinese President Xi Jinping made one of his first foreign visits to Kazakhstan where he discussed the idea of building a vast, modern network of high-speed train lines crossing the vast Eurasian land space from the Pacific coast of China and Russia through Central Asia into Iran, into the states of the Eurasian Economic Union, principally Russia and potentially on to the select states of the European Union. That initial proposal was unveiled in detail last year by the National Development and Reform Commission (NDRC), China’s economic planning organization, and the ministries of Foreign Affairs and Commerce.

S. Korea's bad corporate loans rise to new high: (Yonhap) -- Soured loans to South Korea's conglomerates held by major banks rose to the highest level yet seen, as major shipyards and shipping companies undergo restructuring amid falling demand, data showed Monday. Nonperforming loans by major enterprises reached 19.72 trillion won (US$17.87 billion) in the January-June period, growing 1.37 trillion won from the end of 2015, the Financial Supervisory Service (FSS) said. It is the first time that bad corporate loans surpassed 19 trillion won since the data were first compiled in March 2008. The combined corporate debt at local banks was 427.85 trillion won as of the end of June, 8.92 trillion won less than six months earlier, the FSS said. While major commercial banks cut corporate debts in the first half, the ratio of bad loans rose from 4.05 percent in December to 4.46 percent in June. Among them, soured loans to large enterprises accounted for 63.2 percent of the total, the financial watchdog said. The worsening quality of debt was mostly attributable to the corporate overhaul in the shipyard and shipping industry grappling with slumping global demand. The nation's big three shipyards -- Daewoo Shipbuilding & Marine Engineering Co., Hyundai Heavy Industries Co. and Samsung Heavy Industries Co. -- suffered a combined operating loss of 8.5 trillion won last year due largely to increased costs stemming from a delay in the construction of offshore facilities and an industrywide slump. Hanjin Shipping Co. and Hyundai Merchant Marine Co. also added to banking woes as the cash-strapped shipping companies failed to repay their snowballing debts due to sluggish business.

 Asian universities are crumbling, despite high rankings - Business Insider: It’s the annual university rankings season, and if you are a student or alumnus of one of Asia’s big-name universities, you may be struggling to contain that smug look. National school systems in Japan, South Korea, Singapore and Hong Kong have for years held an iron grip on the top rungs of global performance charts, but now the leading tertiary institutions from these East Asian societies are joining the fray and giving prestigious Western counterparts a run for their money. Separate league tables released in September by the closely-followed varsity ranking rivals Times Higher Education (THE) and Quacquarelli Symonds (QS) showed the region’s best universities consolidating their positions near the top of the global pile. The National University of Singapore (NUS) rose to 24th in the THE ranking – its highest ever – and making it Asia’s top university for the second year running. It bested the likes of the London School of Economics and New York University in the list topped by Oxford University. The University of Hong Kong (HKU), the Hong Kong University of Science and Technology (HKUST), Singapore’s Nanyang Technological University (NTU), Peking University, Seoul National University and the University of Tokyo also featured as among the best in the world in both rankings. Their students may be cheering, but for some academics, the growing fixation with rankings among university administrators is a matter of serious concern. Most university rankings put a heavy emphasis on research rather than teaching. Academics say this puts undue pressure on them to churn out journal articles in order to increase their citation count, while neglecting interactions with students and the wider community.“The wholesale adoption of university rankings raises important challenges for how we go about conducting our work as academics, how we evaluate this work, and the impact of this work in communities,” said Mohan J. Dutta, the head of the communications and new media department at Singapore’s NUS.

Bank of Japan's new policy framework is not tapering: Kuroda | Reuters: Bank of Japan Governor Haruhiko Kuroda said on Monday the central bank's new policy framework would not result in a tapering of its massive asset-buying program. "We will continue with our ultra-loose monetary policy to achieve 2 percent inflation at the earliest date possible," Kuroda told parliament. "It is possible to ease policy further" by deepening negative interest rates, cutting the BOJ's 10-year government bond yield target or expanding asset purchases, he said.

 Japan's monetary base hits record high for 10th straight month in September (Xinhua) -- Japan's monetary base stood at a fresh record high in September for the 10th consecutive month, owing to the Bank of Japan (BOJ) continuing to pump markets with liquidity under its multi-pronged easing measures to combat deflation, the central bank said Tuesday. According to the latest BOJ data, the monetary base at the end of last month, comprising cash in circulation and the balance of current account deposits held by financial institutions at the bank, stood at 412.84 trillion yen (4.04 trillion U.S. dollars), up 22 percent compared to the same time a year earlier. The largest component of the monetary base, meanwhile, the balance of financial institutions' current account deposits at the BOJ, stood at 311.83 trillion yen with an increase of 28.7 percent on year, the central bank said. The BOJ in September opted to hold its key rates steady but unrolled some fresh measures regarding its short and longer term approaches to its policy framework including the addition of a new interest rate target and a provision that would allow inflation to overshoot its target. Following a two-day policy board meeting, the central bank announced in a statement that following an extensive assessment of the effects of its monetary policy on the economy, including its decision to plunge its interest rate into negative territory to spur lending from financial institutions, it would introduce a "QQE with Yield Curve Control" as the nucleus of its new policy framework.

Japan ex-economy minister Takenaka says BOJ to cut negative rates further | Reuters: Former Japanese Economy Minister Heizo Takenaka said on Wednesday the Bank of Japan will lower its minus 0.1 percent interest rate further to achieve its 2 percent inflation target. Takenaka, professor emeritus of Keio University and a member of a government panel on investment, told Reuters in an interview that the BOJ's new policy framework is "orthodox" and it was not necessarily a big change. As for pushing the rate it sets on some excess deposits that commercial banks park with the BOJ further into negative territory, he said: "The BOJ will do so without doubt." The prominent economist added, "The important issue is that people need to acknowledge that the BOJ's policy has yielded significant effects." The negative rate, introduced in February, hurts banks because they have avoided passing it along as a charge on deposits. The BOJ last month changed policy, shifting its target from the amount of money it pumps into the economy to trying to control the bond yield curve to keep longer-term rates above short-term rates. Takenaka stressed that "core-core inflation", which excludes food and energy prices, rose around 1 percent last year, reversing the 1 percent decline seen before BOJ Governor Haruhiko Kuroda took the post early 2013. "I think BOJ Governor Kuroda has been doing well, although there is strong criticism."

Japan needs 'double dose' of monetary, fiscal stimulus: Abe adviser Honda | The Japan Times: Japan needs a double dose of monetary and fiscal stimulus, including further easing by the central bank next month, says Etsuro Honda, one of Prime Minister Shinzo Abe’s economic advisers. Honda, one of the architects of Abenomics, Abe’s economic policy based on “three arrows,” said fiscal restraint limited the effectiveness of the Bank of Japan’s radical monetary easing, and is the biggest reason inflation has not risen to the central bank’s 2 percent target despite more than three years of aggressive easing under Gov. Haruhiko Kuroda. He said he told Abe during a meeting in Tokyo on Sept. 28 that monetary and fiscal policy should be managed in a unified manner. “Japan has tightened its fiscal grip, so the primary effectiveness of monetary policy could not be exerted,” Honda, 61, said during a telephone interview Thursday from Switzerland, where he serves as Japan’s ambassador. “I want the government to make aggressive use of fiscal spending in order to strengthen the effectiveness of monetary policy.”Honda said the BOJ needs to ease further at its next policy meeting ending Nov. 1. He said the BOJ could still increase its purchases of Japanese government bonds and deepen the negative interest rate on some bank reserves, though it would be better to wait until the yield curve steepens to cut the rate further.

Can the United States and Japan Ratify TPP? - For Japan, the Diet began its extraordinary session on September 26 with ratification of TPP as one of the key items on the legislative agenda. Prime Minister Shinzo Abe’s ruling coalition has enough votes in both chambers to ensure passage but ratification is not completely guaranteed. For one, the opposition may not have the votes to block TPP, but it still has cards to play. It’s sometimes assumed that the opposition Democratic Party (DP) is in an awkward position with TPP given that its predecessor, the Democratic Party of Japan, initiated Japan’s participation. However, like former U.S. Secretary of State Hillary Clinton’s argument against TPP, their secretary general, Yoshihiko Noda, argued that his party was unsatisfied with the outcome. The DP also has a new leader, Renho, who may be eager to use the TPP debate as an opportunity to display her credibility as a viable challenger to Abe. She is attacking 18 mistranslations uncovered in the text as “serious mistakes” requiring the bills be resubmitted to the Diet and restarting the process from the beginning. There are also other tools available to slow debate, such as walking out of the committee sessions to freeze the clock on official debate. Then there could be more unpredictable obstacles, like a tabloid uncovering a scandal that derails the debate, similar to the scandal that led Koya Nishikawa, chair of the Diet’s special committee on TPP, to resign, or a natural disaster such as the Kumamoto earthquakes in April and May, which ended the Diet’s consideration of TPP as they shifted their attention to disaster recovery. Events like these are unpredictable but always looming in the background. Still, the Abe administration is determined to complete ratification in the current session and it would take something significant to prevent that.As for the United States, TPP’s ratification is, to say the least, highly variable. The Obama administration is publicly committed to TPP’s passage but likely to wait until after the November election to begin the formal legislative process in order to reduce TPP’s visibility as a possible campaign issue. This timing gives TPP an extremely small window of opportunity during the lame duck session.

IMF Warns of Profit Slump at Indian Banks Amid Surging Bad Loans - India’s banking system is among those most vulnerable to profit declines as loan growth slows and soured debt rises, the International Monetary Fund said. The ability of Indian companies to service debt is the lowest among 19 emerging-market nations tracked by the IMF, according to figures in its semiannual report on financial stability. The study showed that the South Asian country had the highest proportion of debt owed by companies that failed to make enough money to cover interest payments, which would leave its banks the most exposed to any economic or profit slowdown. Weakness in the Indian banking system would be a blow to Prime Minister Narendra Modi, who is seeking to revive credit growth at a 22-year low in order to maintain the fastest pace of expansion among the world’s major economies. The surge in banks’ stressed assets to a 16-year high as of June 30 has made lenders wary of extending more credit. While India is taking steps to reduce nonperforming loans, “additional and more timely action is needed,” according to the IMF report. The Reserve Bank of India completed an audit of assets at the nation’s 50 banks on March 31 to force the lenders to recognize and provide for credit with a high default risk. Reserves at Indian lenders were insufficient to cover the expected loss on soured loans under the current levels of debt-at-risk in the country, the IMF said. “Additional nonperforming loans from debt-at-risk could overwhelm bank buffers in some emerging market economies,” the organization said.

RBI Unexpectedly Cuts Its Benchmark Rate By 25bps To 6.25%: 102nd Central Bank Cut Of 2016 -- The Reserve Bank of India unexpectedly cut interest rates Tuesday, lowering its benchmark repurchase rate by 25bps from 6.50% to 6.25% the lowest in more than 5 years, with just 16 of 39 economists surveyed by Bloomberg predicting a rate cut, and all 11 economists polled by the WSJ predicting rates would remain unchanged. The central bank cited a marked slowdown in global growth and a benign inflation outlook, in the first decision made by the recently-appointed committee headed by the new governor, Urjit Patel. The RBI's decision to cut its rate brings the number of central bank rate cuts in 2016 to a total of 102, surpassing by 1 the central bank rate cuts announced in all of 2015, which according to Reuters amounts to 101. For the first time in the bank’s history, a six-member monetary policy committee was responsible for Tuesday’s decision. The RBI has used advisory committees in the past, but the final decision was always the governor’s. Now, Mr. Patel only casts a deciding vote if there is a deadlock. The six members of the panel include Indian Statistical Institute Professor Chetan Ghate, Indian Institute of Management Professor Ravindra Dholakia and Delhi School Economics Director Pami Dua, all appointed by the government. On the central bank’s side, Deputy Governor R. Gandhi and Executive Director Michael Patra sit on the MPC alongside Mr. Patel, the chief architect of the bank’s inflation-focused monetary policy.

 Your new RBI, not quite like the old RBI? -- Raghuram Rajan is out. Pushed (perhaps) by some in the Indian political establishment who were unhappy with his outspoken views on matters non-monpol — “in the land of the blind, the one-eyed man is king” being a prime example — and by some who thought he wasn’t putting enough emphasis on growth when making interest rate decisions. Urjit Patel is in. He was supposed to signal policy continuity, more policy continuityand some more policy continuity on top of that. The kind of policy continuity only available if Rajan had *cough* just stayed on *cough*. After all, Patel was a deputy governor at the RBI under Rajan and the architect of the RBI’s inflation targeting framework. But is that prophesied continuity actually showing up? Patel’s first monpol decision — which was also the debut for a brand new six-man monetary policy committee, half of which are government appointed academics — has raised some interesting questions.In a not wholly unexpected decision — 16 out of 39 of the economists polled by Bloomberg saw one coming — the MPC, chaired by Patel, voted 6-0 to cut the repo rate by 25bp to 6.25 per cent. Charts from BofAML: But it’s the detail that matters, not least the unanimity of the MPC versus the split amongst surveyed economists. But with more systemic queries here’s Nomura’s Sonal Varma and team (our emphasis):  The main takeaway from today’s policy is that the new RBI (under Dr. Patel) has diluted the old RBI (Dr. Rajan) framework. First, under the old regime, the RBI was clear about lowering inflation to 4% by March 2018 and keeping it there. Now, the interpretation of the inflation mandate appears to be to keep inflation within a range of 4% (+/-2%) over the next five years, which is too wide a range without a specific time commitment to the midpoint. Second, the real rate (1-year T-bill rate minus expected inflation) target has been lowered from 1.5-2.0% to 1.25% based on the argument that globally neutral real rates have moderated. This is indeed true, but it is not clear why this argument was not made earlier. Also, with global neutral real rates closer to zero, we are not sure about the sanctity of the new number (1.25%), and think it could very well be lowered even further. We also find the RBI’s rate cut very inconsistent with its macro-economic projections. Growth is seen picking up from 7.2% y-o-y in FY16 to 7.6% in FY17 and further to 7.9% in FY18. Yet, inflation is seen falling from 5% in March 2017 to 4.5% in Q1 2018.

Thane: 500 call centre employees detained for duping US citizens | The Indian Express: In a major raid, over 500 employees of some call centres were detained for allegedly threatening the US citizens and siphoning off their money in Mira Road area of Thane, police said on Wednesday. The raid was carried out by over 200 police personnel, mostly from the Crime Branch, late Tuesday night and continued in the wee hours on Wednesday, they said. The persons operated from call centres in Mira Road locality, which comes under the jurisdiction of Thane Rural Police, and posed as officials of US Tax Department, which is equivalent to the Income Tax Department in India, police said. They would call up the US citizens and demand their financial and bank details, failing which they would allegedly threaten them with dire consequences, including legal action. After obtaining the requisite details from the American citizens, these call centre employees would siphon off money from their accounts, police said, adding daily turnover of such dealings was estimated to be over Rs 1 crore. Based on complaints received of these activities , police kept a tab on the call centre employees and subsequently raided their premises late Tuesday night. The process of registering offence in the matter was on, police said. Further details of the racket were awaited.

China-Pakistan Corridor to Add over 2 Million New Jobs in Pakistan  - China-Pakistan Economic Corridor (CPEC) is expected to add over 2 million direct and indirect jobs to Pakistan's economy and boost the country's GDP growth rate to 7.5%.  US-based consulting firm Deloitte and Touche estimates that China-Pakistan Economic Corridor (CPEC) projects will create some 700,000 direct jobs during the period 2015–2030 and raise its GDP growth rate to 7.5%,  adding 2.5 percentage points to the country's current GDP growth rate of 5%. An additional 1.4 million indirect jobs will be added in supply-chain and service sectors to support the projects.  An example of indirect jobs is the massive expansion in Pakistan's cement production that will increase annual production capacity from 45 million tons to 65 million tons, according to a tweet by Bloomberg's Faseeh Mangi. Other indirect jobs will be in sectors ranging from personal services to housing and transportation.  The CPEC will open doors to immense economic opportunities not only to Pakistan but will physically connect China to its markets in Asia, Europe and beyond, according to the Deloitte report. Almost 80% of the China’s oil is currently transported from the Middle East through the Strait of Malacca to Shanghai, (distance is almost 16,000 km and takes 2-3 months). With Gwadar port in Pakistan becoming operational, the distance would reduce to less than 5,000 km. If all goes well and on schedule, of the 21 agreements on energy– including gas, coal and solar energy– 14 will be able to provide up to 10,400 megawatts (MW) of energy by March 2018. According to China Daily, these projects would provide up to 16,400 MW of energy altogether.

Pakistan adopts new law to tackle 'honour killings' - Pakistan's parliament has unanimously passed legislation against "honour killings" - mandating life imprisonment, 25 years in prison, for convicted murderers even if the victim's relatives forgive them.The legislation was approved on Thursday in a joint session of the lower and upper houses of parliament, three months after an outspoken social media celebrity, Qandeel Baloch, was strangled by her brother. "This is a step in the right direction," women's activist and columnist Aisha Sarwari told AFP news agency. "We should take our little wins where we get them and proceed forward and not retreat." About 500 women are killed each year in Pakistan at the hands of family members over perceived damage to "honour", which can involve eloping, fraternising with men, or any other infraction against conservative values relating to women. In most cases, the victim is a woman and the killer is a relative who escapes punishment by seeking forgiveness for the crime from family members. But rights activist Farzana Bari was more cautious, saying the bill still allowed a judge to decide whether a murder qualified as an "honour killing" or not.Only about one-third of the 446 legislators attended the session, but debate was raucous.Conservative Senator Hafiz Hamdullah said parliament should instead address elopements by women, claiming 17,000 had done so since 2014."Why don't we see what are the reasons behind such killings? Why are girls eloping from their homes?" he said.

 Philippine President Tells Obama "You Can Go To Hell, I Will Buy Weapons From Russia" -- After comparing himself to Hitler last week, only to apologize to the Jewish community shortly after, Philippines President Rodrigo Duterte found it impossible to keep his foot out of his mouth again, and told US president Barack Obama "you can go to hell" in a speech Tuesday that was his latest tirade against the U.S. over its criticism of his deadly anti-drug campaign; the president also said the United States had refused to sell some weapons to his country but he did not care because Russia and China were willing suppliers. Duterte also lashed out once again at the European Union, which has also criticized his brutal crackdown: "EU, better choose purgatory. Hell is full already. Why should I be afraid of you?" In a speech quoted by AP before a local convention attended by officials and business executives, Duterte "outlined his disappointments with the U.S., which has asked his government to stop the widespread killings under his anti-drug campaign and has questioned whether human rights are being violated. He also described Washington as an unreliable ally, saying Filipino forces have not benefited from joint combat exercises with U.S. troops." "Instead of helping us, the first to criticize is this State Department, so you can go to hell, Mr. Obama, you can go to hell," Duterte said. Then addressing the EU, he said: "Better choose purgatory, hell is filled up." He wasn't finished. As Reuters adds, in his latest salvo, Duterte said he was realigning his foreign policy because the United States had failed the Philippines and added that at some point, "I will break up with America". It was not clear what he meant by "break up".

 Duterte Dares "Son Of A Bitch" Obama To "Withdraw Assistance", While His Popularity Soars - It has become an almost daily tradition to flip through the news looking for the latest insult by Philippine president Rodrigo Duterte hurled at US president Barack Obama. Just this past Tuesday, Duterte outlined his disappointments with the US in his latest speech aimed at Obama whom he called "son of a bitch" several weeks ago, saying that "instead of helping us, the first to criticize is this State Department, so you can go to hell, Mr. Obama, you can go to hell," Fast forward to today when Duterte issued his latest verbal assault on the lame duck president, declaring he would not bow to foreign pressure over his anti-drug campaign, while his Foreign Secretary Perfecto Yasay declared that the US “has failed us.”“I do not expect the human rights [groups], I do not expect Obama, I do not expect the EU to understand me,” said Duterte in a speech on Thursday. “Do not understand me. And if you think it’s high time for you guys to withdraw your assistance, go ahead. We will not beg for it.”  As France24 reports, Duterte's popularity has soared during his first three months in office, an independent survey showed Thursday, in an apparent endorsement by Filipinos of his brutal war on crime, or perhaps his openly outspoken ways which have challenged and insulted everyone from Obama, to the EU, to the Pope.  Some 76 percent of Filipinos polled by Social Weather Stations said they were "satisfied" with Duterte's performance, with just 11 percent reporting being "dissatisfied" and the rest undecided. The Manila-based polling group surveyed 1,200 adults nationwide from September 24-27, asking them simply about Duterte's performance as president without reference to the drug war.

Colombia rejects deal to end FARC conflict: What happens next? - (CNN)A narrow win for Colombia's opponents to a government peace deal with FARC rebels has thrown the country into disarray, leading one journalist to starkly declare, "Nobody really knows what will happen tomorrow." Likened to the fallout from the United Kingdom's "Brexit" referendum, the vote's unexpected failure has left the Colombian political classes reeling and unsure how to respond in order to save four years of hard negotiation with the Marxist militia. And while a meeting of the deal's principals is scheduled for Monday morning, FARC's financial disclosures -- and possibly a disarmament campaign that began last week-- have been questioned.In the weeks leading up to Sunday's vote, many Colombians were angered by what they saw as insufficient punishment for those who perpetrated a litany of crimes against their people.It's estimated 220,000 were killed in the 52-year conflict which displaced as many as 5 million people. At the height of its terror campaign, the armed group seized territory, attacked government forces and conducted high-profile kidnappings. The rebels also hijacked planes, made millions trafficking cocaine and forced children to fight. For just over half of those who voted, the FARC's past crimes were too much to forgive.

Colombia's President Santos keeps up push for Farc peace deal - BBC News: Following Colombians' surprise rejection of a peace agreement with the Farc rebel group, President Juan Manuel Santos is seeking dialogue with those who opposed the peace deal. Mr Santos appointed three top officials to "sit down for talks and guide this peace process to a happy ending". The "no" campaign was led by ex-President Alvaro Uribe, who wants to see parts of the deal "corrected". The two sides are expected to meet for the first time on Tuesday.The peace agreement was reached after four years of formal talks in the Cuban capital, Havana, between government and Farc negotiators. From early on in the negotiations, President Santos announced he would put the final agreement to the Colombian people in a "yes" or "no" vote. The deal was signed in a emotional ceremony on 26 September, just days before the referendum. During the ceremony, rebel leader Rodrigo Londono, better known as Timochenko, asked the victims of the Farc for forgiveness. Polls suggested the agreement would be approved by a comfortable margin. But as the results came in, it soon became clear that opposition to the agreement had been stronger than expected. The deal was rejected by 50.2% of voters. The deep-seated divisions of Colombians on the issue became clear as some took to the streets to celebrate the result while others could be seen crying and despondent in front of the giant screens on which the results had been transmitted.

Canada’s Big Bet on Stimulus Draws Global Attention - WSJ: —In the global struggle to boost growth, a Canadian experiment in fiscal spending is providing a test case for some of the world’s biggest economies. Prime Minister Justin Trudeau’s Liberal government unveiled a plan last spring to spend heavily on tax benefits and infrastructure, with $120 billion Canadian dollars (US$91.39 billion) going into infrastructure over the next decade, including about one-tenth of that on short-term projects. It’s a bold bet to inject life into an economy struggling with a rout in commodity prices, especially crude oil, which was once Canada’s top export. It also highlights the limits of monetary stimulus, since the country’s central bank cut rates twice in 2015, to 0.5%, and has acknowledged—as its counterparts around the world have—that monetary policy becomes a less powerful tool when interest rates are already low.Mr. Trudeau’s big infrastructure spend will be largely financed by a bigger deficit, which is projected to reach C$29.4 billion this fiscal year, or about 1.5% of gross domestic product. That’s a sharp turn from the balanced-budget promise of his Conservative predecessor, who hewed the austerity path Mr. Trudeau is now shunning. Canada’s efforts stand in contrast to many of the world’s economies, whose finance ministers and central bankers meet this week in Washington for semiannual meetings of the International Monetary Fund and World Bank. Some—like Australia, also hit by the commodity rout—are trying to use coordinated fiscal and monetary policy. But larger advanced economies are holding firm to tight budgets, making Canada’s embrace of debt-fueled stimulus unusual. “The eyes of the world—the economists—will be watching to see how Canada performs,” “We’re all watching to see: Will they get it right?” Though Canada is breaking from the experience of most major advanced economies, the idea of leaning more heavily on infrastructure spending to boost growth is regaining currency. Years of ultralow interest rates haven’t been enough to fuel global economic growth, and many economists say a fiscal role is needed. The Paris-based Organization for Economic Cooperation and Development in February called on governments to borrow at current low rates to boost infrastructure spending as part of a collective bid to increase global growth. Coordinated spending would help all countries get a “bigger bang for everybody’s buck,” OECD Chief Economist Catherine L. Mann said. She said Canada made the right choices in deciding what to spend its money on, and offers an example of the kind of behavior the OECD is promoting. Canada’s plan also won praise from the IMF, which has urged governments to do more to boost a sagging global economy.

Global Growth And Inflation Remain Low Initial Impact Of Brexit Is Muted: - Dallas Fed - The global economic outlook has changed little the past two months following Britain's June vote to withdraw from the European Union. Growth continues to be poor, with no particular country or area appearing to have the potential for robust growth (Chart 1). Inflation also remains low, prompting several central banks to cut policy rates and expand quantitative easing (QE) measures. Inflationary pressures remain subdued, except for a few emerging economies that continue to face both political problems and the impact of low commodity prices (Chart 2). Global trade and investment have been expanding at low rates, further dampening underlying potential growth. All major central banks continue to have highly accommodative monetary policies. U.K. Sees Mixed Responses to Brexit The fallout from the U.K.'s vote to leave the European Union, known as Brexit, has thus far been more muted than expected. The pound has weakened significantly, and U.K. manufacturing output has declined. However, the country's overall industrial production continues to expand, and the Bank of England took strong action in August to offset the impact of Brexit with both a rate cut and QE.[1] With these new policies - in addition to the recovery from the initial overreaction to Brexit and several better-than-expected data releases - the British pound has recovered 2.3 percent of its value against the U.S. dollar since its post-Brexit low on Aug. 15, and the British stock market is up 12.6 percent (Chart 3).While the full effects of Brexit will take years to be realized, available third-quarter data have been mostly positive. Retail sales increased at a 4.5 percent annualized rate in July over their second-quarter average. Following positive August results in the main services, manufacturing and construction purchasing manager surveys, Credit Suisse revised its 2016 U.K. growth forecast from 1 percent to 1.9 percent and its 2017 forecast from −1 percent to 0.5 percent. Likewise, Morgan Stanley updated its 2016 forecast from 1.2 percent to 1.9 percent and its 2017 forecast from 0.5 percent to 0.6 percent. The 1.9 percent average 2016 growth rate across the two forecasts is a significant improvement over the initial estimates but is well below the 2.5 percent 2016 growth forecast released a year ago.

Statistical Insights: What does GDP per capita tell us about households’ material well-being? | OECD Insights Blog - Although GDP per capita is often used as a broad measure of average living standards, high levels of GDP per capita do not necessarily mean high levels of household disposable income, a key measure of average material well-being of people. For example, in 2014 Norway had the highest GDP per capita in the OECD (162% of the OECD average[1]), but only 115% of the OECD average for household disposable income[2]. And in Ireland, GDP per capita was 24% above the OECD average, while household disposable income per capita was 22% below the OECD average. Conversely, in the United States GDP per capita was 34% above the OECD average while household disposable income was 46% above the OECD average. These differences between GDP per capita and household disposable income per capita reflect two important factors. First, not all income generated by production (GDP) necessarily remains in the country; some of it may be appropriated by non-residents, for example by foreign-owned firms repatriating profits to their parents. Secondly, some parts may be retained by corporations and government and not accrue to households. GDP per capita, by design an indicator of the total income generated by economic activity in a country, is often used as a measure of people’s material well-being. However, not all of this income necessarily ends up in the purse of households. Some may be appropriated by government to build up sovereign wealth funds or to pay off debts, some may be appropriated by firms to build up balance sheets, and yet some may be appropriated by parent companies abroad repatriating profits from their affiliates. At the same time, households can also receive income from abroad for example from dividends and interest receipts through investments abroad. As such, a preferred measure of people’s material well-being is household disposable income per capita, which represents the maximum amount a household can consume without having to reduce its assets or to increase its liabilities.

Global Inflation Falls To Seven-Year Low -- October 4, 2016 -- Global inflation falls to seven-year low. WSJ. Data points:

  • global inflation rates fell for the second straight month in August
  • lowest level in almost seven years
  • seven years ago: global economy in the throes of a downtown that followed the financial crisis (mark-to-market mayhem -- see below)
  • inflation rate now at 2.1% (down from 2.2% in July)
  • smallest rise in consumer prices since October, 2009, when they increased by 1.7%

Perhaps Krugman was correct. 

Negative-Yielding Bonds Jump to Almost $12 Trillion After Ebbing - The unprecedented worldwide surge in the market for bonds that are certain to lose money if held to maturity regained strength last month. The total face value of negative-yielding corporate and sovereign debt in the Bloomberg Barclays Global Aggregate Index of investment-grade bonds jumped to $11.6 trillion as of Sept. 30, up 6.1 percent from a month earlier. That sum had fallen for two months in a row from June’s $11.9 trillion peak. Demand for the safety of high-quality bonds pushed up the totals in all but two of the 13 countries with more than $100 billion in negative-yielding debt. Italy’s tally shrank by 9 percent to $361 million and Denmark’s expanded more than a third to $104 million. Japan, where policy makers moved in last month to coax yields up, remains ground sub-zero with almost $6 trillion, about half of the global total. Western Europe accounts for 47 percent, the bulk from France, Germany, the Netherlands, Spain and Italy.Less than a seventh of the world’s negative-yielding debt is owed by businesses. Finance companies issued the bulk of those corporate bonds, almost 80 percent, with original face values totaling $1.3 trillion. Sovereign and corporate debt 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 $48 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 in this story. Because the totals are based on as-issued amounts, they also don’t take into account a small amount of buybacks.

The IMF Is Worried About the World's $152 Trillion Debt Pile - Bloomberg: Gross debt in the non-financial sector has more than doubled in nominal terms since the turn of the century, reaching $152 trillion last year, and it’s still rising, the International Monetary Fund said. The figure includes debt held by governments, non-financial firms and households. Current debt levels now sit at a record 225 percent of world gross domestic product, the IMF said Wednesday in its semi-annual Fiscal Monitor, noting that about two-thirds of the liabilities reside in the private sector. The rest of it is public debt, which has increased to 85 percent of GDP last year from below 70 percent.“Excessive private debt is a major headwind against the global recovery and a risk to financial stability,” IMF fiscal chief Vitor Gaspar said in prepared remarks. “History has taught us that it is very easy to underestimate the risks associated with private debt during the upswing.” Slow global growth is making it difficult to pay off the obligations, “setting the stage for a vicious feedback loop in which lower growth hampers deleveraging and the debt overhang exacerbates the slowdown,” said the Washington-based fund.

 Three Risks to the Global Financial System as Debt Hits Record Levels - In recent years, the global financial system has weathered Brexit, China’s deceleration and emerging market mayhem. But there’s no reason to be complacent, the International Monetary Fund warns in its latest reports on global financial stability and the fiscal health of economies around the world.“The passing of these near-term risks has seen volatility fall and equity prices in advanced economies rise,” says Peter Dattels, deputy director of the fund’s monetary and capital markets department. “But medium-term risks are building because we are entering a new era of challenges.”An unprecedented era of ultralow interest rates and feeble growth has led to a record buildup in global debt levels.Historic debt levels and dwindling policy ammunition risk derailing the meager recovery forecast for next year. Anemic global growth is “setting the stage for a vicious feedback loop in which lower growth hampers deleveraging and the debt overhang exacerbates the slowdown,” the emergency lender warned.  First, European banks are facing a chronic profitability crisis. Many haven’t been able to clear the legacy debt off their balance sheets and investors are increasingly skeptical they’ll be remain profitable based on their current structures. European banks also need to restructure to become more efficient. The fund estimates that since so many bank branches pull in only a tiny percent of total deposits, closing down one-third of the branches across the region and moving more clients to digital telling would cut operating expenses by $18 billion. In the meanwhile, “high debt levels leave emerging markets sensitive to downside risks and exposed to a reversal of capital flows,” Mr. Dattels says.

Backlash to World Economic Order Clouds Outlook at IMF Talks - Bloomberg: From Britain’s vote to leave the European Union to Donald Trump’s championing of “America First,” pressures are mounting to roll back the economic integration that has been a hallmark of gatherings of the IMF and World Bank for more than 70 years. Fed by stagnant wages and diminishing job security, the populist uprising threatens to depress a world economy that International Monetary Fund Managing Director Christine Lagarde says is already “weak and fragile.” The calls for less integration and more trade barriers also pose risks for elevated financial markets that remain susceptible to sudden swings in investor sentiment, as underscored by recent jitters over Frankfurt-based Deutsche Bank AG’s financial health. “The backlash against globalization is manifesting itself in increased nationalistic sentiment, against the outside world and in favor of increasing isolation,” said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong and a former IMF official. “If we lose consensus on what kind of a world we want to have, the world will probably be worse off.” In its latest World Economic Outlook released Tuesday, the fund highlighted the threats from the anti-trade movement to an already subdued global expansion. After growth of 3.2 percent in 2015, the world economy’s expansion will slow to 3.1 percent this year before rebounding to 3.4 percent in 2017, according to the report, keeping those estimates unchanged from July projections. The forecasts for U.S. growth were cut to 1.6 percent this year and 2.2 percent in 2017. “We’d like to see an end to the creeping protectionism in the world and more progress on moving ahead with free-trade agreements and other trade-creating measures,” Maurice Obstfeld, director of the IMF’s research department, said in a Bloomberg Television interview with Tom Keene.

Election blindness: It’s the end of the world economy as we know it — and we feel fine -- As the World Bank and the International Monetary Fund convene this week in Washington for their annual meeting, there is growing evidence that the post-World War II global consensus that created them is unraveling, right at the time when the global economy is facing major economic headwinds that have been decades in the making. This great uncoupling, comes as global economic growth and trade numbers continue to disappoint and central bankers in Europe, Japan and the United States have run out of ideas about how to restore their economies to the pre-2008 meltdown expansion rates. Now, they fret over the possibility of a global recession mired in trillions of dollars in public and private debt. Just last week fears that Deutsche Bank, Germany’s largest bank, might need a taxpayer bailout caused investors to feel that pre-2008 clammy cold sweat that precipitated the meltdown. A recent report from the McKinsey Global Institute, “Poorer than their parents? Flat or falling incomes in advanced economies,” documents how the post-World War II capitalist wealth engine — which delivered increasing prosperity for each successive generation — has gone off the rails. According to the think tank, in two-thirds of the households in 25 advanced economies, household incomes were flat or had declined. This sobering news will only contribute to fading faith in the neo-liberal post-World War II belief that only ever increasing volumes of global trade, facilitated by the likes of the World Bank and the IMF, can deliver a broad-based prosperity. These seismic rumblings manifested in the vote by Britain’s electorate to leave the eurozone over the dire warnings of the IMF and even President Barack Obama. While some observers may want to believe that the pushback against international multilateralism is solely the consequence of xenophobic racism, there’s also the distinct possibility that the failure of these institutions to deliver global stability or broad-based prosperity is an issue. Here at home, the global trade model that the World Bank and IMF have promoted as the foundation for a more prosperous world has been rejected as a con job by many voters who have witnessed the hollowing out of so many American cities, once hubs of innovation and industry.

Russian government approves higher 2016 deficit as oil unsettles budget plans | Reuters- Oct 6 - The Russian government approved an amended 2016 budget on Thursday that envisages a larger deficit because oil prices have been weaker than officials had hoped. Russia's 2016 budget was initially based on an average price of $50 per barrel for its Urals oil. It has been amended to assume an oil price of $40, the average for Russia's main crude export blend Urals URL-E in the first nine months of this year, according to finance ministry data. A proposed output cut announced last week by the Organization of the Petroleum Exporting Countries (OPEC) has helped to boost prices for benchmark Brent crude in recent days, although a global supply glut has been weighing on the market. Sergei Donskoi, natural resources minister, told journalists the budget changes had been approved at a government meeting but did not elaborate. Weak oil prices have added to pressure on Russia's public finances from Western sanctions over the Ukraine conflict. The amended budget must still be approved by Russia's two houses of parliament and President Vladimir Putin before it becomes final. According to the version approved on Thursday, the deficit this year will be 3.03 trillion roubles ($49 billion), or 3.7 percent of gross domestic product, up from earlier plans for a deficit of 3.0 percent of GDP.

40 Million Russians To Take Part In "Nuclear Disaster" Drill, Days After US General Warns Of War With Moscow --As relations between Russia and the US disintegrate as a result of the escalating proxy war in Syria, which today culminated with Putin halting a Plutonium cleanup effort with the US, shortly before the US State Department announced it would end negotiations with Russia over Syria, tomorrow an unprecedented 40 million Russian citizens, as well as 200,000 specialists from "emergency rescue divisions" and 50,000 units of equipment are set to take part in a four day-long civil defense, emergency evacuation and disaster preparedness drill, the Russian Ministry for Civil Defense reported on its website. According to the ministry, an all-Russian civil defense drill involving federal and regional executive authorities and local governments dubbed "Organization of civil defense during large natural and man-caused disasters in the Russian Federation" will start tomorrow morning in all constituent territories of Russia and last until October 7. While the ministry does not specify what kind of "man-caused disaster" it envisions, it would have to be a substantial one for 40 million Russians to take part in the emergency preparedness drill. Furthermore, be reading the guidelines of the drill, we can get a rather good idea of just what it is that Russia is "preparing" for.

Nato jets scrambled as Russian bombers fly south - BBC News: Two Russian Blackjack bombers were intercepted by fighter jets from four European countries as they flew from the direction of Norway to northern Spain and back, it has emerged. Norway, the UK, France and Spain all scrambled jets as the TU-160 planes skirted the airspace of each country. It comes at a time of heightened tension between the West and Russia. Correspondents say the frequency of Russian bombers being intercepted by Nato planes has increased markedly. Spanish media say it is the furthest south such an operation has had to take place.The incident happened on 22 September but the full extent only came to light recently in a statement by the French ministry of defence (in French). It referred to it as an Air Policing [Baltic support] mission by the four countries involved. It said Norway first detected the two Blackjack bombers to the north and scrambled two F-16 fighters to accompany them towards the north of Scotland.
■1. The bombers are spotted north of Norway
■2. British jets shadow the planes around the west of Scotland & Ireland
■3. French Rafale jets intercept the TU-160s 100km off the coast of Brittany
■4. Spanish F-18 fighters pick up the bombers north of Bilbao
The British RAF then sent Typhoon aircraft from RAF Lossiemouth to intercept the planes as they flew to the west of Shetland.

Future war with Russia or China would be 'extremely lethal and fast', US generals warn | The Independent: Any future war with Russia or China would be "extremely lethal and fast" and produce violence on the scale not seen for 60 years, according to US generals. Artificial intelligence and automated weapons systems will accelerate any future conflict, Major General William Hix has warned. “A conventional conflict in the near future will be extremely lethal and fast," he told a future-of-the-Army panel on Tuesday, Defense One reports. "And we will not own the stopwatch.” Russia conducts military drill General Hix described his vision of accelerated future warfare: “The speed of events are likely to strain our human abilities.“The speed at which machines can make decisions in the far future is likely to challenge our ability to cope, demanding a new relationship between man and machine.” He warned that technological advancements made by Russia and China in recent years had forced the White House to prepare for "violence on the scale that the US Army has not seen since Korea”. The US faces existential threats from modern-states "acting aggressively in militarised competition," Lieutenant General Joseph Anderson, Army deputy chief of staff for operations, plans, and training, told the panel. "Who does that sound like? Russia?" he asked.

Do We Really Want Nuclear War with Russia? - Through an endless barrage of ugly propaganda, the U.S. government and the mainstream American press have put the world on course for a potential nuclear showdown with Russia, an existential risk that has been undertaken cavalierly amid bizarre expressions of self-righteousness from Western institutions. This extraordinarily dangerous moment reflects the insistence of the Establishment in Washington that it should continue to rule the world and that it will not broach the possibility of other nations asserting their own national interests even in their own neighborhoods. Rather than adjust to a new multi-polar world, the powers-that-be in Washington have deployed a vast array of propaganda assets that are financed or otherwise encouraged to escalate an information war so aggressively that Russia is reading this onslaught of insults as the conditioning of the Western populations for a world war. While that may not be the intention of President   Obama, who in his recent United Nations address acknowledged the risks from imposing uni-polar order on the world, a powerful bureaucratic machinery is in place to advance U.S. propaganda goals. It is operating on a crazed auto-pilot hurtling toward destruction but beyond anyone’s ability to turn it off. This machinery consists not just of outlets and activists funded by U.S. tax dollars via the National Endowment for Democracy or the U.S. Agency for International Development or NATO’s Strategic Communications Command, but like-minded “human rights” entities paid for by billionaire currency speculator George Soros or controlled by neoconservative ideologues who now run major U.S. newspapers, such as The Washington Post and The New York Times. This propaganda apparatus now has so many specialized features that you get supposedly “progressive” and “anti-war” organizations promoting a major U.S. invasion of Syria under the guise of sweet-sounding policies like “no-fly zones” and “safe zones,” the same euphemisms that were used as the gateway to bloody “regime change” wars in Iraq and Libya. There exists what intelligence veterans call a Mighty Wurlitzer, an organ with so many keys and pedals that it’s hard to know where all the sounds come from that make up the powerful harmony, all building to the same crescendo. But that crescendo may now be war with nuclear-armed Russia, which finds in all this demonizing the prelude to either a destabilization campaign aimed at “regime change” in Moscow or outright war.

Some Deutsche Bank Clients Unable To Access Cash Due To "IT Outage" --While it now seems that Friday's rumor of a substantially reduced Deutsche Bank settlementwith the DOJ, which sent the stock price soaring from all time lows, was false following a FAZ report that CEO John Cryan has not yet begun the renegotiation process, and in the "next few days" is set to fly to the US to discuss the proposed RMBS misselling settlement with the US Attorney General, Germany's largest lender continues to be impacted by the public's declining confidence, exacerbated over the weekend by a disturbing "IT glitch."  For one, it remains unclear if Friday's report halted, or reversed, the outflow of cash from DB's prime brokerage clients, which as Bloomberg first reported last week was a major catalyst for the swoon in the stock price. However, as UniCredit's chief economist Erik Nielsen notes in a Sunday notes, one thing is certain: "so long as a fine of this order of magnitude ($14 billion) is an even remote possibility, markets worry."  There is also the threat of the bank's massive derivative book, which despite attempts of many pundits to gloss over, over the weekend none other than JPM admitted that that is what the markets will likely be focusing on for the foreseeable future: But while DB's market woes have been duly discussed, at home, the bank is fighting a "rearguard action" as Reuters writes, seeking to shore up confidence among the public, politicians and regulators who say the bank brought many of its problems upon itself by overreaching itself and then reacting too slowly to the 2008 financial crisis. Making matters even worse, as Reuters and Handelsblatt reported, the bank suffered a further blow to its image this weekend with a third IT outage in the space of a few months on Saturday "that prevented some customers getting access to their money for a short time." Handelsblatt adds that "among rumors about state aid, the dramatic fall in its stock price, and an attack by hedge funds on the most important domestic bank, now come reports of a new IT glitch. "Customers can not access their cash because it is blocked", a customercomplained on Saturday morning to Handelsblatt, adding that "I am stunned: I can't make weekend purchases since I can neither get cash nor pay by card."

German Politicians Accuse US Of "Economic War" Against Deutsche Bank -- When we first heard the news that the US DOJ had slapped Deutsche Bank with a $14 billion settlement on September 15, a number that looked oddly similar to the $14 billion fine the EU slapped on Apple, we determined that this was likely nothing more than "blowback" on behalf of the US, saying "just a few weeks after the EU slapped Apple with a $14 billion bill for "back taxes," the U.S. has apparently responded with a $14 billion fine of their own to Deutsche Bank to settle an outstanding probe into the company's trading of mortgage-backed securities during the financial crisis." Today, after three weeks of unprecedented volatility in the stock price of the German lender which sent its shares to all time lows as recently as Friday, Germany has latched on to this line of attack as German politicians accused the US of waging economic war against ­Germany as, in the words of the FT, "concern continues to rise among its political and corporate elite over the future of Deutsche Bank." The German parliament’s economics committee chairman Peter Ramsauer, in an interview with Welt am Sonntag, said the move against Deutsche "has the characteristics of an economic war", adding that the US had a "long tradition" of using every available opportunity to wage what amounted to trade war "if it benefits their own economy", and the "extortionate damages claims" being made in the case of Deutsche Bank were an example of that. According to the German politician, the threat to force Deutsche Bank to pay a $14 billion fine over its mortgage-backed securities business before the 2008 global crisis “has the characteristics of an economic war.”“Extortionate damages claims” in the case are an example of that, said Ramsauer. Another German politician, Merkel ally and MEP Markus Ferber suggested, as we did, that the Deutsche Bank investigation is a “tit for tat response” from the US Department of Justice after Brussels imposed a record €13 billion penalty against Apple’s tax misdoings in Europe. It's not just Apple however: earlier this year, Germany’s Volkswagen agreed to pay $16.5 billion in the US for cheating on American diesel vehicle air pollution tests between 2008 and 2015.

Deutsche Bank Charged By Italy For Market Manipulation, Creating False Accounts -- For Deutsche Bank, when it rains, it pours, even when everyone tries to come to its rescue.   One day after its stock soared from all time lows, following what so far appears to have been a fabricated report sourced by AFP which relied on Twitter as a source that the DOJ would reduce its RMBS settlement ask with Deutsche Bank from $14 billion to below $6 billion (and which neither the DOJ nor Deutsche Bank have confirmed for obvious reason), moments ago Bloomberg reported that six current and former managers of Deutsche Bank, including Michele Faissola, Michele Foresti and Ivor Dunbar, were charged in Milan for colluding to falsify the accounts of Italy’s third-biggest bank, Monte Paschi (which itself is so insolvent it is currently scrambling to finalize a private sector bailout) and manipulate the market. Two former executives at Nomura Holdings Inc. and five at Banca Monte dei Paschi di Siena were also charged.  In what appears to be another case of "Wells Fargo-esque" scapegoating of junior employees to keep senior execs off the hook, just weeks after Milan prosecutors shelved a probe against Monte Paschi's former chairman and CEO for alleged market manipulation and false accounting as it "risked undermining investor sentiment", a judge approved a request by Milan prosecutors to try the bankers on charges involving two separate derivative transactions arranged with Nomura and Deutsche Bank, said a lawyer involved in the case who was in the courtroom Saturday as the decision was announced Bloomberg reports.  Just as importantly, the firms are also named as defendants in the indictment, as the Italian law provides for a direct liability of legal entities for certain crimes committed by their representatives. Which means even more legal charges, fines and settlements are looking likely in DB's future.  A trial is scheduled for Dec. 15.

Deutsche Bank Collapse: The Most Important Bank In Europe Is Facing A Major ‘Liquidity Event’ - The largest and most important bank in the largest and most important economy in Europe is imploding right in front of our eyes.  Deutsche Bank is the 11th biggest bank on the entire planet, and due to the enormous exposure to derivatives that it has, it has been called “the world’s most dangerous bank“.  Over the past year, I have repeatedly warned that Deutsche Bank is heading for disaster and is a likely candidate to be “the next Lehman Brothers”.  If you would like to review, you can do so here, here and here.  On September 16th, the Wall Street Journal reported that the U.S. Department of Justice wanted 14 billion dollars from Deutsche Bank to settle a case related to the mis-handling of mortgage-backed securities during the last financial crisis.  As a result of that announcement, confidence in the bank has been greatly shaken, the stock price has fallen to record lows, and analysts are warning that Deutsche Bank may be facing a “liquidity event” unlike anything that we have seen since the collapse of Lehman Brothers back in 2008. At one point on Friday, Deutsche Bank stock fell below the 10 euro mark for the first time ever before bouncing back a bit.  A completely unverified rumor that was spreading on Twitter that claimed that Deutsche Bank would settle with the Department of Justice for only 5.4 billion dollars was the reason for the bounce. But the size of the fine is not really the issue now.  Shares of Deutsche Bank have fallen by more than half so far in 2016, and this latest episode seems to have been the final straw for the deeply troubled financial institution.  Old sources of liquidity are being cut off, and nobody wants to be the idiot that offers Deutsche Bank a new source of liquidity at this point.  As a result, Deutsche Bank is potentially facing a “liquidity event” on a scale that we have not seen since the financial crisis of 2008. 

Deutsche Bank Mismarked 37 Deals Like Paschi's, Audit Says -- Deutsche Bank AG, indicted for colluding with Banca Monte dei Paschi di Siena SpA to conceal the Italian lender’s losses, mismarked the transaction and dozens of others on its own books, according to an audit commissioned by Germany’s regulator. Executives at Deutsche Bank arranged 103 similar deals with a total value of 10.5 billion euros ($11.8 billion) for 30 clients, according to the audit, a copy of which was seen by Bloomberg. The Frankfurt-based lender, Germany’s largest, adjusted the accounting of 37 of those trades in 2013, in addition to Monte Paschi’s, changing them from loans that had been kept off the books to derivatives, the audit said. The widespread use of a transaction that’s now the subject of a criminal case highlights the lender’s appetite for complexity at a time when the bank was expanding its fixed-income empire. While Deutsche Bank has since cut risky assets and eliminated thousands of jobs to bolster capital, mounting legal costs have become a source of increasing concern to investors, driving shares to a record low. “Very complex deals prevent the market and regulators from properly understanding the state of a bank’s balance sheet, inhibiting proper regulatory monitoring and distorting market discipline,” The audit found that while Monte Paschi was the only client that used a transaction to “window dress” its books, Deutsche Bank didn’t correctly account for similar deals with banks from Italy to Indonesia made between 2008 and 2010. The report also said senior executives didn’t properly authorize the Monte Paschi trade, dubbed Santorini, or adequately review the transaction after receiving a subpoena from the U.S. Federal Reserve in 2012.Monte Paschi restated accounts in 2013 after the transactions came to light and further amended results in 2015 at the request of Italy’s regulator. Deutsche Bank’s restatement of how it accounted for its side of the deals didn’t affect the firm’s profitability, and the bank didn’t adjust earnings before 2013 because the overall effect wasn’t material, the audit said. Deutsche Bank had assets of about 1.8 trillion euros at the end of September 2013.

It’s not just Deutsche. European banking is utterly broken : A little while back I somewhat unwisely penned a column declaring the financial crisis essentially over. All I meant by this was that with the return of full employment and rising living standards, most of the economic wounds of the crisis had healed, at least in the US and the UK. Yet as is evident from the events of the last week, the banking crisis itself is far from over. Nine years after the initial eruption, it still rumbles on, with the epicentre now moved from the US to Europe. Only it’s not the same crisis; in large measure, it is completely different. Today’s mayhem is not so much the result of reckless bankers and asleep at the wheel regulators, but rather of the public policy response to the last crisis itself – that is to say, regulatory over-reach and central bank money printing. All eyes are naturally focused on the specific problems of Deutsche Bank, but Deutsche is in truth no more than the canary in the coal mine. As Tidjane Thiam, chief executive of Credit Suisse, observed last week, as an entire sector, European banks are still “not really investable”. Much the same disease as afflicts Continental banks also applies to British counterparts, including Royal Bank of Scotland, Barclays and even Lloyds.All are fast being enveloped by a perfect storm of negatives, and this time around, it is substantially the policymakers and law enforcers who are to blame. There are essentially four factors at work here. First, it’s virtually impossible to make money out of banking in a zero interest rate environment, frustrating attempts to rebuild capital buffers after the bad debt write-downs of recent years. In circumstances where central banks have bought right along the yield curve, flattening it down to virtually nothing, the margin from maturity transformation all but disappears. Much the same thing has happened to the once lucrative returns of investment banking. Even Goldman Sachs has been forced to admit that it is struggling to cover its cost of capital.

IMF warns of financial stability risks - BBC News: The International Monetary Fund (IMF) has warned that risks to financial stability are growing. It warns about what it calls "medium-term" dangers in both emerging and developed economies, in its twice-yearly report. It expresses particular concerns about Europe, Japan and China. On a more positive note, the fund does say that short-term risks have abated since its previous assessment of global financial stability in April. Pressures on emerging markets have eased, the report says. Rising commodity prices (though they are still relatively low) have helped and so has the reduced uncertainty about China's prospects in the near term. Bank profits The report says investors were taken by surprise by the result of the British referendum on the European Union, but the political shock was absorbed by markets. They passed what it calls "this severe stress test". But looking further ahead, the IMF sees growing risks. A key factor is bank profits. The good news is that banks are in some respects stronger than they were before the financial crisis. They have more capital, a kind of financial buffer that enables them to survive losses. Their liquidity has improved, which means they have more chance of coping if they suddenly have to find funds quickly. But they are struggling to make money. Weak profitability makes it harder for them to build up their capital (which they can do by holding on to some profit rather than giving it all to shareholders as dividends). It also makes it harder for them to expand lending to business and consumers, as is needed to support economic recovery.

Banks With $12 Trillion In Assets Threatened By "Shocks" Even In Recovery, IMF Finds - In its latest report on financial stability released today, the IMF, which is also currently meeting to find a solution to globalization that benefits all people not just the very top, warned that risks to financial stability are growing. It warned about what it calls "medium-term" dangers in both emerging and developed economies, and expressed particular concerns about Europe, Japan and China. As cited by the BBC the report says investors were taken by surprise by the result of the British referendum on the European Union, but the political shock was absorbed by markets. They passed what it calls "this severe stress test". But looking further ahead, the IMF sees growing risks. A key factor for future bank health is profits or lack thereof. As Deutsche Bank has found out the hard way in recent weeks, weak profitability makes it harder for banks to build up their capital - which they can do by holding on to some profit rather than giving it all to shareholders as dividends. It also makes it harder for them to expand lending to business and consumers, as is needed to support economic recovery.

The New 'Too Big To Fail' - EU Proposes Taxpayer-Funded Derivatives System Bailout | Zero Hedge: It would appear the powers-that-be have just stumbled on to the ugly fact that all the bailed-in depositor money in the world won't stop the novated, rehypothecated, collateral chain collapse contagion that Deutsche Bank's $40 trillion-plus derivatives book's Damocles sword hangs over the status quo. However, being the problem-solving types, the European technocrats have a 'fair-share' solution - back a derivative clearing-house with taxpayer money to solve the new too-biggest-to-fail problem "that no one saw coming." While the "rules" right nbow are that everyone from shareholders, bondholders, and depositors alike on up the capital structure are supposedly "bailed-in" to save an ailing bank, this problem is just way too big. Here's the problem... in 3 charts... Derivatives book - yuuge... Global contagion - yuuger...  Counterparty risk - yuugest...   And so, as Bloomberg reports, the dear old European taxpayer is about to save the world... The European Union plans to give authorities sweeping powers to tackle ailing derivatives clearinghouses to prevent their failure from wreaking havoc throughout the financial system.Draft EU legislation seen by Bloomberg sets out rules on saving or shuttering clearinghouses that would apply to firms such as London-based LCH. The proposals cover everything from the creation of resolution authorities to the powers they would have when winding a company down, including writing down shares, debt and collateral.Having forced most clearing to go through central counterparties to manage risk in the financial system, the EU will come out with recovery and resolution proposals by year-end.  Clearing has come into focus after emerging as a pawn in the post-Brexit battle for London’s financial-services industry.  “If we are going to rely more on CCPs, we need to have a clear system in place to resolve them if things go wrong,” 

Italy set to cut growth forecast, up debt -- Italy is poised to cut its economic growth forecasts for this year and next, and raise its projections for the budget deficit when the cabinet meets to approve a new forecasting document. The new forecasts, which will provide the framework for the government's 2017 budget to be presented in October, will set up a potential tussle with the European Commission, which has urged Italy not to ease up on previously agreed fiscal targets. However, the eurozone's third largest economy has misfired this year and posted no growth in the second quarter, upsetting Prime Minister Matteo Renzi's previous assumptions for public finances. The Economic and Financial Document (DEF) will cut the 2016 growth outlook to around 0.9 per cent from a 1.2 per cent forecast in April, and cut next year's growth to around one per cent or 1.1 per cent from 1.4 per cent, a government source told Reuters. The goal for the 2016 budget deficit is likely to be raised marginally to 2.4 per cent from 2.3 per cent and next year's target is likely to be hiked to around 2.4 per cent from 1.8 per cent. Brussels is particularly concerned about Italy's public debt, which has risen to more than 132 per cent of gross domestic product, the highest in the eurozone after Greece's. Renzi, who has staked his career on a referendum on constitutional reform to be held in December, wants the EU's fiscal rules to be eased and has attacked other countries for failing to back Italy's stance.

The Reward for Lending Italy Money for 50 Years: 2.85% - WSJ: Italy sold €5 billion ($5.6 billion) of debt in its debut 50-year-bond issue in a further sign of how much economic stress investors will overlook amid the global hunt for yield. There were more than €18.5 billion of orders Tuesday for the bonds that mature in 2067 and that were priced at a yield of 2.85%, according to people familiar with the deal. The strong demand allowed the Italian treasury to raise more than the roughly €3 billion to €4 billion that analysts had expected. Italy’s debt sale comes as borrowing costs in developed nations have sunk to historic lows this year amid tepid global growth and inflation and extraordinary bond buying by central banks. Investors reaching for returns have bought bonds with maturities of as long as a century and from countries with lower credit ratings. Belgium and Spain both sold their first 50-year bonds in public markets this year, with each raising €3 billion. France, which has sold long-dated bonds in the past, also raised €3 billion in new 50-year debt. Meanwhile, Ireland and Belgium have both sold €100 million of 100-year bonds in privately placed deals. “The search for yield is one key reason,” said Axel Botte, a fixed-income strategist at Natixis NTXFY 4.39 % Asset Management. The yield on Italy’s 50-year bond looks high in relative terms, Mr. Botte said, and there is demand for long-dated securities from institutional investors such as pension funds that need to match their liabilities. France’s 2066 bonds yield 1.36%, according to Tradeweb. Spain’s 2066 bonds, which were sold with a yield of 3.493% in May, yield 2.55%. Yields fall as prices rise.

EU Breaks Ranks with Basel, Will Not Implement New Rules | American Banker: In a stunning move, the European Union signaled that it will not follow the Basel Committee's recommendations on standardized credit, operational and market risk rules, citing concerns that the direction of the proposals would unduly increase capital requirements and stifle economic growth."At a time when we are focused on supporting investment, we want to avoid changes which would lead to a significant increase in the overall capital requirements shouldered by Europe's banking sector," European Commission Vice President Vladis Dombrovskis said Thursday.

Central Banks on QE Highway Worry About Running Out of Road - Bloomberg: Long after their U.S. counterpart ended asset purchases and started raising interest rates, the Bank of Japan and the European Central Bank continue to rely on massive quantitative easing in a battle to revive consumer-price growth. But what worked once won’t necessarily work forever. The glow of QE is fading amid negative side effects including financial-stability concerns and reduced earnings for commercial lenders, and especially the simple difficulty of finding sufficient suitable assets to acquire. The BOJ has shifted its policy framework to keep it sustainable, while ECB staff have been told to work out how to adjust the rules of QE so it can be kept active as long as needed. Both central banks are far from their inflation goals, meaning their programs should ideally be ready for a long haul, yet signs are mounting that policy makers know there is only so far they can go. “QE, as we know it, is running out of runway,” said Frederick Neumann, co-head of Asian economic research at HSBC Holdings Plc in Hong Kong. “It turns out there aren’t an infinite number of bonds to buy. And investors are increasingly reluctant to surrender to the central bank those still left in the market.” At the ECB, talk has turned to tapering as a way to end QE rather than a sudden stop. While that says nothing about the timing of such a move, and the topic has been kept off the Governing Council’s formal agendas so far, the fact that an informal consensus is building on an exit strategy reflects a waning appetite among some policy makers for ever-more bond-buying.In Japan, where the central bank owns more than a third of outstanding government bonds, Governor Haruhiko Kuroda has switched his focus from increasing debt purchases to targeting yields across a range of maturities instead. While that move could be read as a form of tapering, few expect an end to the BOJ’s super-easy monetary policy any time soon.

"Heaven Help Us If There Is Ever A Modest Blip Of An Inflation Impulse" - By Charlie McElligott, head of cross-asset desk strategy at RBC - Despite the weakest Euro area Composite PMI since January ’15, periphery and core EGB’s are too seeing weakness, with traders noting not just the “tapering” story, but also Target 2 balance data, which is showing Italian and Spanish liabilities at 3+ year highs against German claims (2nd highest reading since 2008).  All-in-all, just the hypothetical mention of “tapering” speaks to the extent of speculative positioning in the periphery govies, with the seemingly lazy 3-day move lower in IKA (Italian BTP futures) actually being a 2.1 standard deviation event (against the returns of the past year).  To my points made for years now on risk-parity, risk-control / vol-targeting and leveraged ETPs, it’s the cost of “shadow short convexity” in the market place (as the strategies increase or decrease their exposure based on CB-repressed historical volatility), which now “more frequently than ever” smashes asset prices with stiff jolts of volatility “true-ups,” on account of their mechanical and unemotional rebalancing (and after a couple days…“back to normal” we go, as if nothing happened--this is your market structure).

  How the ECB dictatorial regime used the liquidity weapon in order to impose its terms on the Irish government - In 2010, Ireland experienced Frankfurt's political blackmail. On the 18th of November, where there was a governing council of the ECB in Frankfurt. The governor of the Irish central bank who sat on the governing council, called "Morning Ireland" which is the most important radio program in Ireland, to say that Ireland will need what he called a loan. He didn't warn the government about it and this created a massive panic. Then, the next day, there was a letter written from the then president of ECB, Jean-Claude Trichet, to Brian Lenihan, the minister of finance at the time, saying that 'if you don't apply the so-called bailout program, by this opening of the markets the following Monday, we're going to cut off access to Emergency Liquidity Assistance (ELA)', which obviously would have collapsed the Irish banking system. The ECB used the liquidity weapon in order to impose its terms on the Irish government: austerity, privatizations, labor market deregulation. The ECB enforces fiscal policy, which is not what a central bank should do. And it does this by denying ELA, or, by providing liquidity, or not providing liquidity. The ECB had basically taken over the government. In Ireland, they forced the government to bailout the banks at huge cost to the Irish population. They blackmailed the country with shutting its banks. In 2014, the Irish parliament established a committee to investigate why the Irish people had paid the debts of the banks. Jean-Claude Trichet refused to testify. He agreed to answer only predefined questions at a location of his choice. The outcome for the people was disastrous, still it's disastrous. Ireland is the so-called 'success story' of Europe. That is one big lie. Unemployment went to over 20%, youth unemployment was higher. One in four young people emigrated, the rates of deprivation went through the roof. One in three people are now deprived.

Stealth Bailout of 2 Franken-Banks Now Happening in Spain -- Don Quijones - It just doesn’t let up. Obscured somewhat by the spectacular antics of Deutsche Bank, there appears to be another bailout of two of Spain’s franken-banks: mostly state-owned Bankia and wholly state-owned Banco Mare Nostrum (BMN). The news was released so quietly that even in Spain barely a living soul is aware it’s happening. The two banks, each the product of two madcap mergers of Spain’s most insolvent savings banks, will be merged into one giant entity that is expected to become Spain’s fourth biggest bank by assets. The merger has been on the cards for a number of months since Spain’s Economy Minister (and former Lehman Brothers advisor) Luis de Guindos began dropping hints that one of the first jobs of Spain’s next elected government would be to find a solution to BMN’s ownership issues. Now it’s being brought forward, probably because the chances of Spain having an elected government any time this year are fading by the hour. For the moment, BMN is completely state-owned, after its four constituent state-owned parts — Caja Murcia, Caixa Penedès, Caja Granada y Sa Nostra — were rescued by Spain’s taxpayers and lumped together for the modest price of €1.6 billion in 2010. But by the end of this year all that was supposed to have changed. Plans had been drawn up for an IPO of the bank, but in the current environment, with banks falling like flies all over Europe, investors refuse to go near it. Hence the merger, which despite only being in the “study stage,” has already received the blessing of Spain’s caretaker government, Spain’s central bank, and Standard & Poor’s, which has promised not to downgrade Bankia’s credit rating after it has absorbed BNM’s assets and liabilities. The merger will also no doubt enjoy the undivided support of the ECB: Mario Draghi, announced just a few days ago the urgent need for greater concentration and consolidation of Europe’s banking sector. Also firmly behind the merger is a motley crew of European and U.S. investment banks. They include Morgan Stanley, which predicts that the deal could add as much as €300 million to Bankia’s profits by 2018 or 2019.

IMF official - hard to see Greek debt as sustainable without haircut | Reuters: It is hard to imagine Greece's debt being sustainable without a haircut, an International Monetary Fund official said on Thursday, adding that it remained an open question as to whether the IMF would participate in Athens' third bailout programme. "I would not say that that is all done," the IMF official said. The official said it would also be hard to imagine the Fund participating without a debt haircut for Greece. The IMF has been pushing for softer fiscal goals for Greece before it will contribute some of the 86 billion euros ($96 billion) in financing.

Europe’s health systems on life support -  Politico -- Europe’s health care systems aren’t feeling very well. Doctors have been threatening massive strikes in Britain to protest pay and conditions. Italian regions are going bankrupt trying to fund medicines. Drugmakers are pulling diabetes drugs from Germany, blaming government-set prices that don’t let them recoup their investment. Highly specialized medicines for diseases like cancer are entering the market at sky-high prices, forcing governments to choose between the need to treat their citizens and the need to spend wisely. And in many countries, people head straight to the hospital when they’re feeling sick, which makes treating patients especially expensive. Health spending flattened after the 2008 economic crisis, but it’s expected to rise from 6 percent to 14 percent of GDP in the Organisation for Economic Cooperation and Development countries within decades if something isn’t done to stem the rise, according to the rich nations’ think tank. At the same time, Europe’s population is only getting older, straining an already stretched-thin system. Thirty percent or more of nearly the entire European region’s population will be over 60 by 2050, up from between 10 percent and under 30 percent in 2015, according to recent WHO data.

Exclusive: EU's richest countries getting lion's share of bloc's investment plan | Reuters: Nearly all of the money spent so far from the European Union's 315 billion euro investment plan has gone to the 15 richest countries in the bloc, leaving the other 13 poorer ones out in the cold, a report by the European Investment Bank has found. Italy and Spain have benefited the most in financing for projects in infrastructure and innovation, along with Britain, which voted to leave the bloc in June. The report, a copy of which has been seen by Reuters, also found, however, that spending is on track for completion by its mid-2018 target date. The investment plan, launched in the middle of last year, seeks to attract private funds to finance investments, the more risky parts of which are covered by the European Fund for Strategic Investment (EFSI) using 21 billion euros of public money. By the end of June, one year into the three-year scheme, the program generated 104.75 billion of investment, or one third of the planned outcome, the EIB said in an evaluation report on the scheme, which it co-finances. "If past trends continue and if the EFSI strategy in terms of new products and new forms of cooperation materialize as planned, it can be expected that EFSI’s target for total investment will be reached in terms of approvals, with signatures and disbursements following later," the EIB said. The report said, however, it was worrying that most of the EFSI investment went to projects in the 15 richest European countries rather then the poorer 13.

The CETA Trade Pact Will Add to the Groundswell of Discontent: Why We Need More Informed Decision-Making --Things have changed. Until just a few weeks ago it was easy for economists and trade policymakers to discard the massive waves of protest across European countries against two controversial transatlantic free trade agreements as mere “irrational”, “protectionist” or “dangerously populist” impulses. But not so anymore. About the same time when hundreds of thousands of concerned German citizens took to the streets to protest against the Transatlantic Trade and Investment Partnership (TTIP) and the Comprehensive Economic and Trade Agreement (CETA), a growing chorus of senior policymakers started urging governments to heed the rising discontent, anxiety and economic insecurity among the vast majority of the populations in the advanced world. Most prominently, in a speech[1] titled “Making Globalisation Work For All” given in Canada on September 13th, I.M.F. managing director Ms. Christine Lagarde stated that many people felt they “lack control” in a “system [that] is somehow against them” and that growing inequalities have “added to a groundswell of discontent, especially in the industrialized world.” Lagarde’s plea for boosting support for low-income workers and reducing inequality came on exactly the same day Mr. Mario Draghi, the president of the E.C.B. stated —in his Premio De Gasperi lecture in Trento, Italy[2]—that the E.U. should pay greater attention to “the demands of those left behind by a society built on the pursuit of wealth and power”, and do more to help globalization’s losers by moderating its outcomes. Globalization has certainly caused dislocation and hardship, as the recent McKinsey report titled “Poorer than Their Parents? Flat or Falling Incomes in Advanced Economies” found: 65 to 70% of households in 25 advanced economies had experienced no real income growth between 2005 and 2014, up from just 2 percent of households with stagnant incomes during 1993-2005. This was known, of course, but McKinsey’s report helped publicize the facts.

Norway's PM caught playing Pokémon Go in parliament --  The Norwegian prime minister has been caught playing Pokémon Go during a debate in Norway’s parliament. Erna Solberg was pictured playing the game during a debate in the Storting on Tuesday. It’s no secret Solberg is a big fan of Pokémon Go. During an official trip in Slovakia, she took some time out to play the game, telling reporters she was keen to hatch some of her 10km eggs. This isn’t even the first time a Norwegian politician has been caught playing the game while in parliament.  The leader of Norway’s Liberal party, Trine Skei Grande, was seen playing the game during a meeting on national security back in August, at the height of Pokémon Go-mania.  And who happened to be speaking while the PM attempted to catch ‘em all? None other than Grande herself.

 French Unemployment at 12-Month High - France is bucking the trend among the major economies in the eurozone, with its closely-watched unemployment rate hitting a 12-month high in August. Europe’s second largest economy is sticking out like un sore thumb, with almost every other country in the 28 member EU trimming or holding its jobless rate.France’s jobless rate inched up to 10.5 per cent this month according to figures from Eurostat. That’s risen steadily from 9.9 per cent in May and defied the broader eurozone-wide trend where unemployment is hugging five-year lows at 10.1 per cent.  French unemployment has become a lightning rod in the country’s political debate after incumbent president, Francois Hollande, has vowed to only stand for re-election next year if the rate falls into single figures. The International Monetary Fund has warned France’s “structural unemployment” is set to remain elevated as the country is hampered by burdensome regulations and high tax levels. Currently led by a former French finance minister, Christine Lagarde, the IMF has called on France to reform its minimum wage structure and boost private sector job creation through ambitious labour market reforms.

 Spain Increases Advance Tax Payments for Large Companies -- Some 9,000 large companies will pay more up front in estimated taxes as part of an advance tax payment regime implemented by Spain's acting government to help meet EU public debt reduction goals. The government didn't list companies by name but, as of Sept. 30, Royal Decree-Law 2/2016 essentially requires corporations like Telefonica SA, Inditex SA, the Santander Group and all others with at least 10 million euros ($11.2 million) in annual sales to help the government raise an additional 8.3 billion euros to help meet its usual corporate tax revenue collection target of 20 billion euros. The new regime will require companies to make advance tax payments on reported profits, which may or may not coincide with actual taxable income, in the interest of advancing revenue to the state. The law generally would apply a minimum 23 percent rate on reported profits to large multinationals like Coca-Cola Co., Dow Chemical Iberica, General Electric Co., Pfizer Inc., Microsoft Iberica, Johnson & Johnson SA—to name a few. A minimum 25 percent rate would apply to credit entities such as Banco Bilbao Vizcaya Argentaria SA and oil exploration companies such as Repsol SA. Payments deadlines are Oct. 20 and Dec. 20.

Thousands ‘disappeared’ by General Franco’s regime in Spanish Civil War discovered in mass grave -- Eighty years after the start of the Spanish Civil War, the country is trying to recover and identify the remains of people who were forcibly 'disappeared'. It is estimated that over 100,000 men and women were executed and buried in unmarked graves during the conflict. It is thought there may be more than 2,000 mass burial sites across Spain dating from the 1936 to 1939 civil war and the ensuing dictatorship of General Francisco Franco. Only a handful have been dug up. (pictures)

98% Of Hungarian Voters Reject Migrant Quotas, But It Was Not Enough -- As we reported yesterday when looking at the preliminary results, almost all Hungarians who voted in Sunday's referendum rejected the European Union's migrant quota. The National Election Office said on its website that 98.3% of those who voted had rejected the quotas with 99.97% of votes counted. However, it was not enough, because as noted previously, turnout was too low to make the poll valid, frustrating Prime Minister Viktor Orban's hopes of a clear victory with which to challenge Brussels. Just 40% of around 8.26 million eligible people had cast a valid vote, however, less than the 50 percent needed to legitimize the result. Final results are expected next week.

 Czech President: Deport Syrian Refugees To "Uninhabited Greek Islands" --Czech president Milos Zeman has proposed that  economic migrants should be deported from Europe to “uninhabited Greek islands” or to “empty places” in North Africa.The spectacularly incredible president also proposed that the Greek debt should be progressively reduced in return for shouldering the cost of hosting hundreds of thousands economic migrants.“We are in Greece, and Greece has plenty of uninhabited islands, and big foreign debt. So if you have ‘hotspots’ in Greek islands, this would be a sort of payment of foreign debt,” Zeman told Financial Times in an interview on the islands of Rhodes where he participated in the Rhodes Forum.“Hot spots”, “uninhabited islands”, “inhabited islands”, “Greek debt” – all stuffed in one bag inside a well-shaken uninhabited and troubled mind  that is a fierce supporter of Grexit.Zeman did not make any proposal on North Africa’s debt, most likely, because he was unable to identify “empty places” or he is just confident that Africa is a state hiding its fiscal figures…

Germany wants migrants sent back to Greece, Turkey - (AFP) - Germany called Sunday for asylum seekers who entered the European Union via Greece to be forced to return there, while also urging Athens to send more migrants back to Turkey.In an interview with a Greek daily, German interior minister Thomas de Maiziere said he wants to reinstate EU rules which oblige asylum seekers to be sent back to Greece as the first EU country they reached."I would like the Dublin convention to be applied again... we will take up discussions on this in a meeting with (EU) interior ministers" later in October, he told the Greek daily Kathimerini.The Dublin accord gives responsibility for asylum seekers' application to the first country they reach -- which put Greece on the frontline of more than a million migrants who arrived in the EU last year.The accord also says asylum seekers should be sent back to the first country they arrived in if they subsequently reach another EU state before their case is examined. A huge proportion of the migrants ended up in Germany. But this clause was suspended for Greece in 2011 after the country lost an EU legal complaint which condemned the mistreatment of migrants seeking international protection.

German Mayor Beaten Unconscious After Announcing Plan To Accept Refugees --Over the past several months, the German people have become increasingly frustrated with Merkel's "open-border" policy that has allowed over 1mm migrants to flow into the country from the Middle East and North Africa.  The flood of migrants has brought with it a wave of violent crime including sexual assaults resulting in a rising nationalist tension as people have turned their backs on Merkel and her Christian Democratic Union party in recent elections.   The most recent example of backlash over the migrant crisis comes from the small German town of Oersdorf in Northern Germany.  The Mayor of Oersdorf, Joachim Kebschull (61), was recently beaten unconscious outside of the city's Town Hall where the construction committee was meeting to discuss a new housing development for migrants.  The mayor was apparently struck with a club from behind as he stepped out the Town Hall building to get a laptop from his car.  According to The Telegraph, just hours before the committee meeting Kebschull received a threatening letter saying:“He who will not listen will have to feel.” "Oersdorf for Oersdorfers"According to DW, Kebschull had been receiving threats for months.  In fact, the committee meeting had already been postponed twice over bomb threats. The controversy surrounded a local subsidized housing revitalization where the mayor wanted to offer apartments to asylum-seekers.  “If we could also offer a family of refugees a new home in our village, we would like to take this opportunity and make a small contribution to people who had to flee their homes,” the association said in a statement on its website.

More than 10,000 migrants rescued off Libya's coast in the last 48 hours, Italian coast guard say. — Quartz: The numbers say it all: more than 10,000 people have been rescued in the last 48 hours while trying to reach Europe from Libya, according to Italy’s coastguard. About 6,055 refugees were rescued on Monday (Oct. 3) and more than 4,650 others by Tuesday, in an operation coordinated by Italian authorities. The coastguard said the people were rescued from 33 boats, including 27 rubber dinghies, according to Al Jazeera English. A total of 28 bodies were also recovered during the rescue missions. The massive exodus underpins the enormity of the refugee crisis, and of smugglers trying to take advantage of calm weather after days of choppy waters. Italian and Irish navy ships alongside humanitarian organizations took part in receiving and attending to the refugees, many of whom were in critical conditions.  Just been told there are a lot of migrant boats in distress today- despite choppy waters. Could be a busy day for @MSF_Sea Team  People barely conscious with skin peeling off,shaking uncontrollably,covered in wounds @MSF_sea staff treating several in onboard hospital. Fuel mixes w/ sea water which burns them-they were likely sitting in that at sea for 10 hrs. Women 7 months pregnant.Child skin peeling off. — Bel Trew – بل ترو (@Beltrew) October 3, 2016 Italian coast guard just bought 100+ from an Irish ship on board – more to come. It's packed on deck & people are injured @MSF_Sea

 Stepping Over the Dead on a Migrant Boat – NYT, photos - It began with blips on a radar screen, 12 miles off the Libyan coast. As the rescuers approached, they found overloaded wooden vessels and rafts that evoked scenes of the slave trade. Hundreds of African migrants were crammed into boats headed for Italy. More than two dozen people were dead in one boat alone, asphyxiated from the crush aboard. In other boats, bodies were splayed on the floorboards, forcing survivors to clamber over the corpses of their fellow voyagers. Aris Messinis, an Agence France-Presse photographer aboard the rescue boat Astral, said it was like nothing he had ever seen. The passengers — from Eritrea, Ethiopia, Somalia, Nigeria and other sub-Saharan countries — were found by the Astral on Tuesday, part of a wave of more than 11,000 rescued in the Mediterranean by aid groups and the Italian Coast Guard this week. Migrants aboard a large wooden boat, which may have held 1,000 people — roughly five times its capacity — waited frantically for help. Some jumped into the water.Even with life jackets tossed to them, migrants struggled to reach the Astral and other rescue vessels, which later transferred them to Italian Coast Guard ships bound for Italy. In one of the boats, holding roughly 150 people, Mr. Messinis said that rescuers found 29 bodies — 10 men and 19 women. “They told us these people were dead from the night,” he said. At one point, passengers held a child aloft to signal rescuers of their desperation. Migrants crammed below deck were packed so tightly they struggled to get out. “Many of them haven’t seen the sea in their whole lives,” said Laura Lanuza, a spokeswoman for Proactiva Open Arms, a Spanish aid group that operates the Astral.  Despite a drop in sea crossings to Europe by migrants this year, more than 3,000 have died in perilous crossings from Libya, where political chaos has made it the main departure point for smuggling operators who care little about whether their clients survive.

France and Britain just beat Donald Trump to building a border wall - Construction started here on a roughly mile-long concrete barrier intended to separate a sprawling migrant camp from the tunnels that offer passage to Britain, the latest attempt in what has become a global effort to throw physical barriers in the way of historic streams of human migration. From a razor-wire-topped border fence in Hungary to the sealed border of Macedonia and Greece to Trump’s proposed wall , polarized societies across the world are finding that they can unite around keeping others at bay.  The “Great Wall of Calais,” as the project is informally known, is considerably shorter than Trump’s proposed partition of the United States and Mexico, but its message is much the same: keep out. The concrete wall, which will rise to 13 feet, extends a fence near the sprawling Calais migrant camp known as the “Jungle,” where more than 7,000 migrants have been stranded as they seek to enter Britain by all means possible. The concrete will be specially formulated to make it difficult to scale.  The camp here has become one of the most visible symbols of Europe’s migration crisis: a squalid no man’s land nestled between London and Paris, two of Europe’s wealthiest cities. The victorious British campaign to leave the European Union was partly fueled by concerns over immigration, while candidates for France’s presidential elections next year are already competing over being tough on migrant flows. Opponents of French President François Hollande have tried to turn the camp into a symbol of his weakness.

One Of The World's Biggest Hedge Funds Has Lost $1.8 Billion In 2016 - While hardly news by now, the latest proof that hedge funds are generally having a woeful year in a world where few financial relationships make sense, comes from UK-based Lansdowne Partners, one of the world's largest hedge funds, which according to the WSJ extended its losing run last month, after its flagship Developed Markets fund suffered another 2.3% in September losses. That equates to a loss of about $250 million.  The recent string of losses is an unpleasant - and unexpected - development for the fund, run by Peter Davies and Jonathon Regis, and its LPs as it has been one of the best-performing hedge funds in recent years. The latest monthly drop brings its YTD losses to 14.7% this year. According to the WSJ, the fund has now lost $1.8 billion YTD which places it among the worst-performing funds this year. The firm now runs about $20 billion. Putting the performance in context, equity hedge funds gained 1.5% on average in September, according to early numbers from Chicago-based Hedge Fund Research, although they still continue to underperform not only the broader market, but also the X-axis, and are now down 0.5% for the year to Oct. 4. Overall, hedge funds gained 0.6% during the month and are up 1.4% this year. Many have struggled to cope with market reversals and the influence of central bank money-printing on financial markets. Investors pulled a net $5 billion from hedge funds in the first two quarters of the year.

 Plan for UK military to opt out of European convention on human rights - Controversial plans for the military to opt out from the European convention on human rights (ECHR) during future conflicts will be introduced by ministers, to see off what the prime minister described as an “industry of vexatious claims” against soldiers. The long-mooted idea will be announced on Tuesday at the Conservative party conference by Theresa May and the defence secretary, Michael Fallon, although it was immediately criticised by human rights groups who said it was based on a false narrative of spurious lawsuits. May said the change would “put an end to the industry of vexatious claims that has pursued those who served in previous conflicts”. It would be implemented by introducing a “presumption to derogate” from the ECHR in warfare.The military and some right-leaning thinktanks have long pushed for the move, arguing that a series of court cases focused on the actions of UK troops in Iraq and Afghanistan has cost the Ministry of Defence (MoD) huge sums. The government says the litigation has cost the MoD more than £100m since 2004. Ministers say this has happened because the jurisdiction of the ECHR has been extended to conflict zones, in part due to the efforts of a handful of law firms. Fallon, in comments released ahead of his conference speech, said: “Our legal system has been abused to level false charges against our troops on an industrial scale.” He added: “It has caused significant distress to people who risked their lives to protect us, it has cost the taxpayer millions and there is a real risk it will stop our armed forces doing their job.”

BREXIT: Theresa May will trigger Article 50 before the end of March 2017 - We've finally got some more hard information about when Britain will begin the two-year process to leave the European Union.  Prime Minister Theresa May said on The Andrew Marr Show on Sunday that the UK will trigger Article 50,which will kick off the formal process to leave the 28-nation bloc, before "the end of March next year."  The announcement comes after May told The Sunday Times in an interview that the UK will not wait for German elections due in September 2017 before triggering Article 50.  May, who will give a speech to members of the ruling Conservative Party on Sunday, also ruled out an early general election, saying it would cause "instability", but said she would repeal the 1972 European Communities Act, which took Britain into what is now the EU. "We will introduce, in the next Queen's speech, a Great Repeal Bill that will remove the European Communities Act from the statute book," she told the newspaper. Overturning the act will take legal effect once Britain formally leaves the EU, the newspaper reported. The timeline for invoking Article 50 has been hotly debated. Is it better to pull the trigger as soon as possible, before European attitudes harden? Or is it more prudent to wait until everything is more rigourously prepared? Once it is invoked, the negotiations between Britain and the EU over the former's departure can begin in earnest. If no deal is reached after a two-year period, Britain will automatically leave anyway.

Banks to Miss Out on Special Favors in May’s Brexit Plans - Bloomberg: British financial-services companies will get no special favors in Brexit negotiations from Prime Minister Theresa May, who wants to change the relationship between the government and the City of London. According to three senior figures in May’s administration, the government will refuse to prioritize the protection of the sector after the U.K. has left the European Union. Her team has privately dismissed the key business demand for an interim deal with the EU to help ease the transition out of the bloc, one of the people said. All asked not to be named because the information is sensitive.The pound fell amid signs the concerns of the City, as the capital’s financial district is called, may be sidelined in a clear break from May’s predecessor. David Cameron put the risk to financial services at the heart of his failed referendum campaign to keep the U.K in the EU. He argued that Brexit would be a high-stakes “gamble” for the U.K. and its financial-services sector, which accounts for almost 12 percent of economic output and 1.1 million jobs. The shift also risks adding to investor concerns about a so-called hard Brexit. The pound resumed its decline on Tuesday amid growing speculation May’s government is prepared to surrender membership of the European single market for trade in return for more power over immigration, law-making and the budget. Sterling was down as much as 0.8 percent in London, dropping to the lowest level since 1985. In an e-mailed statement, a U.K. government spokesman said that no decision had been taken on any interim Brexit arrangements.

Pound Drops to 31-Year Low Against Dollar on Brexit Concerns - WSJ: The pound fell to a three-decade low against the dollar on Tuesday, trading below the levels it hit after Britain voted to leave the European Union in June. The currency fell 0.82% to $1.274 reaching almost 15% below where it traded on June 23, the day the U.K. went to the polls. The pound was trading down against the euro at €1.141, down 0.4%. Since the vote, sterling has barely risen above $1.34, as investors fret about the effects of so-called Brexit on the British economy and the likelihood of further Bank of England action to support growth. The latest stage in the pound’s decline came after U.K. Prime Minister Theresa May set a March date to begin exiting the EU and said full access to the country’s largest trading partner was a lower priority than controlling immigration.But in a volatile day for British markets, the country’s leading share index, the FTSE 100, headed toward a record high, as investors saw the benefits of a weaker currency for the benchmark’s companies, which make over 70% of their profits abroad. The FTSE 100 was up 1.22% at 7,069. Currency strategists expect further volatility in sterling as London and Brussels negotiate the terms of Britain’s exit. “If you’re going to go for a form of Brexit that completely undermines the industry in which you’ve got a comparative advantage—financial services— that is going to undermine that current account and weaken sterling even further” said Grant Lewis, head of research at Daiwa Capital Markets Europe. .A Downing Street spokeswoman declined to comment on sterling’s fall. Analysts and lawmakers continue to debate the effects of the weaker pound on the U.K. economy.

Scottish nationalist fury at ‘arrogant’ May government - Prime Minister Theresa May’s “spectacular failure” to heed Scottish opposition to the U.K. leaving the European Union could precipitate another independence referendum, according to Scotland’s Brexit minister Michael Russell. “This is not just about what London wants, it is about the interests that Scotland have, and the fact that they need to be heard,” Russell, a veteran Scottish National party (SNP) member of the devolved Edinburgh parliament, told POLITICO. “The arrogance of the U.K. government needs to be called to account.” May has said that Scotland — which voted to remain in the EU — will leave along with the rest of the United Kingdom. There will be “no opt out” for the devolved administrations when Article 50 is triggered next March, she told the Conservative Party conference Sunday. The prime minister added that she would “never allow divisive nationalists to undermine the precious Union between the four nations of our United Kingdom.” May’s comments were not well received in Edinburgh. Scottish first minister Nicola Sturgeon accused May of “going out of her way to say that Scotland’s voice and interests don’t matter.” “Strange approach for someone who wants to keep [the] U.K. together,” Sturgeonsaid on Twitter.

Liam Fox: EU nationals in UK one of 'main cards' in Brexit negotiations -- The uncertain status of EU nationals living in the UK is “one of our main cards” in the Brexit negotiations with the bloc, Liam Fox has said. Speaking at the Conservative party conference in Birmingham, the international trade secretary reiterated that no commitment would be given on the rights of 2 million EU citizens to remain in the UK until reciprocal rights were agreed for British citizens in Europe. Fox, who was speaking at a fringe event, said the government would “like to be able to give a reassurance to EU nationals in the UK, but that depends on reciprocation by other countries”. He said any other strategy “would be to hand over one of our main cards in the negotiations and doesn’t necessarily make sense at this point”. Hinting that a scenario could emerge where EU nationals currently in the UK were not given automatic leave to remain, Fox said: “If we do [negotiations] from the premise that the EU ‘ever closer union’ project is more important than the people, and those who go against it must be punished, we will not get such a good outcome.

Schools are asking parents if their children are immigrants - Parents usually love talking about their kids. But this year, a question in the autumn schools census is leaving some incensed.  The census this year, which takes place on 6 October 2016, asks whether the children are of foreign nationality, or born overseas. In some cases, schools are asking parents to produce passports, according to Jen Persson, a supporter of the group Against Borders for Children. And after a Conservative party conference in which the home secretary asked companies to list foreign workers, this has made some families nervous. In 2015, the then-education secretary Nicky Morgan ordered an investigation into mass migration in state schools.Persson told The Staggers: "The concern is really the potential use of the data by immigration enforcement, which seems well founded because the Home Office have had access to the database since 2012." There are also concerns about data being shared with third parties. The schools census occurs three times a year, and charts pupils' attendance, educational needs and use of free school meals. Parents may receive texts asking them to fill out the online form. Parents have the right to withold the data, but according to Persson many schools have not passed on this information: "Schools have  misunderstood the guidance. It is not clear what is required and what is optional." Even if parents do refuse, it seems information can be passed on. In Brighton and Hove, a Freedom of Information request revealed that teachers were told they could "ascribe" ethnicity to pupils in certain circumstances.

Is Britain sealing itself off?  -- The Tories' new stance is further proof that democracy is on the wane in Europe, Le Soir comments: “The xenophobia championed by Viktor Orbán and Nigel Farage is now the official policy of the UK, a country that owes its current prosperity - which could be better distributed, granted - to foreign workers and business. ... Is it Britain's symbolic exit from the EU in advance of its legal separation that has caused the embankments to crumble? Or is this just the proof that the UK had no business in our Union in the first place? The European Union is incapable of meeting the challenges at hand or defending its own democracy. More and more it resembles the UN, an eternally powerless observer of genocide such as the one now taking place in Syria. European democracy is not just under threat - it is already foundering. Will we continue to look on idly?”“There are, after all, 16.1 million British citizens who want to stay in Europe. There are two approaches to managing such a close result which has divided society and exacerbated the problem of Scottish separatism: either you seek to maintain a broad agreement with the EU, modelled on that of Norway or Switzerland, or you opt for a drastic break which leaves the country without access to the single market. The British government seems to have chosen the second approach, or at least this is what May appeared to indicate at the Conservative Party conference. … Let us hope her nationalist populism of recent days was aimed at the militants within her own party and that in the negotiations with the EU realism will prevail. The United Kingdom is a great country, but it would be ill advised to continue dreaming of splendid isolation because it won't be able to finance it without hurting its citizens.”

Forget Brussels, Brexit’s toughest battleground is the WTO - Negotiating Brexit with 27 occasionally hostile EU states will turn out to be the easy task for the U.K. That will seem like nothing next to the imbroglio Prime Minister Theresa May faces when she sets about crafting Britain’s global trade terms with the more than 160 members of the World Trade Organization. Britain is a member of the WTO under the auspices of the EU, the world’s largest trade bloc. Once the U.K. leaves, it has claimed that it will finally be free to decide for itself the tariffs it slaps on imported steel and lamb, and the levels of subsidies paid to its farmers. But Britain’s freedom to set trade policy — and the EU’s response to that new regime — also will have to conform to the dizzyingly complex architecture of the WTO. Brexit has now become “first and foremost a WTO matter,” said Daniel Guéguen, head of strategy and lobbying at Pact European Affairs. And overall, Britain’s trade terms depend on so many factors outside London’s control that they are impossible to steer from Westminster.   “The stakes are so large and the problems so interwoven with each other that the issue, while vital, becomes virtual – almost theoretical. It is like not knowing how to find the end of a ball of wool,” Guéguen observed in his blog. The good news for May is that Britain does not need to reapply to the WTO. Maika Oshikawa, the WTO’s head of accession negotiations, said that Britain would not have to run the gauntlet of a formal application process. “The U.K. is a member in its own right, so it’s not like being kicked out of the WTO,” she said. “This is not a case of applying.” That gift aside, Oshikawa said it was likely that the U.K. would need to forge political consensus among more than 163 WTO members to agree its new “schedule” — the tariffs and subsidies that farmers, manufacturers and service companies would commit to after Brexit. By the time Britain leaves, new entrants such as Bosnia, Sudan and Comoros probably also will have a say in haggling over Britain’s terms.

The Brexit Rupture Coming Down Under - naked capitalism Yves here. As the recent fall in sterling says, Mr. Market is taking a series of remarks by Theresa May at a Conservative Party conference very seriously. Even though statements made outside London at intra-party events often need to be taken with a fistful of salt, the media, particularly outlets on the Brexit bandwagon,ballyhooed that news, that she was going to embark on what amounted to a “hard Brexit,” as well as her statement that she’d pull the Article 50 trigger by the end of March. Recall that we’d long ago identified March 30 as our guess as to limit for how long May could refuse to act without the pro-Leave media going on attack. It looks as if she made the same reading. Note that May tried to have it both ways, claiming her stance was neither hard nor soft, but her giving immigration priority as a negotiating priority was widely recognized as tantamount to a hard Brexit. The New York Times’ reaction is on target with the media consensus: Over all, Mrs. May’s speech suggested that she would emphasize the right to limit immigration even if that meant securing less favorable access to European markets. David Davis, the minister responsible for negotiating Brexit, underscored the position that trading arrangements were not the only, or even the most important, part of the British equation. May’s statements, if she really means them, are tantamount to telling the City she’s abandoned the idea of securing passporting rights for them. Perhaps she is pursuing the British version of Obama’s 11th dimensional chess, hoping that the backlash will offer a way to retreat. Some of my contacts were taken aback by the news. One depicted the stance as “unstable, particularly since she has only a 12 seat majority.” May’s speech, along with actions by ministers that appear consistent with her giving a more restrictive immigration policy the pride of place, are already producing reactions overseas.

The new favorite to lead the pro-Brexit party is in 'life-threatening' condition after an altercation with colleagues : Steven Woolfe, the overwhelming favourite to succeed Diane James as leader of the UK Independence Party, says he is "well" after being punched in the head by a colleague during a meeting with other UKIP members of the European Parliament earlier on Thursday. In a statement released shortly before 3 p.m. BST (10 a.m. ET), Woolfe, who is still in a hospital in Strasbourg, France, said: "The CT scan has shown that there is no blood clot in the brain. At the moment I am feeling brighter, happier, and smiling as ever. "I would like everyone to know that the parliamentary staff, the UKIP MEPS with me and hospital staff have been brilliant. Their care has been exceptional. "I am sitting up, and said to be looking well. The only consequence at the moment is a bit of numbness on the left hand side of my face." Sky News initially reported that the MEP's condition had escalated to "life-threatening." Shortly after 2 p.m. BST, however, Sky reported that Woolfe was "conscious and recovering." About 30 minutes after that, the former UKIP leader Nigel Farage, a friend of Woolfe who reportedly was at the meeting where Woolfe was punched, told The Telegraph that Woolfe's condition was "mildly better" and that he planned to visit him later in the afternoon. What happened? Woolfe, the Manchester-born UKIP migration spokesman, was meeting with 22 other MEPs from UKIP on Thursday morning in Strasbourg, one of three cities in which the European Parliament is based. Many of the finer details of what happened there are yet to be officially confirmed, but a senior source within UKIP told Sky's Robert Nisbet that Woolfe was punched once in the head by a colleague and hit his head on a metal bar in an altercation he walked away from, only to collapse half an hour later.

 Pound value plunges 6% in 2 minutes in mysterious flash crash - The British pound has suffered a sudden collapse hitting a new 31-year low against the US dollar in mysterious circumstances, sparking market chaos in “insane” early trading. The drop was sterling's biggest since Britain voted to leave the EU in June. Sterling plunged more than 6 per cent to $1.1841 in two minutes, prompting traders to speculate about a possible trigger. As the currency recovered to $1.23, still 1.5 per cent down from late US levels, there was speculation a technical glitch or human error had sparked a rash of computer-driven orders. Naeem Aslam, chief market analyst of Think Markets, said the fall was an indicator of how low the currency could still go. “What we had was insane – call it flash crash but the move of this magnitude really tells you how low the currency can really go,” said Naeem Aslam, chief market analyst of Think Markets, in a note, according to Bloomberg.

Two-Minute Mystery Pound Rout Puts Spotlight on Robot Trading - In the span of just two minutes in early Asia trading on Friday, the British pound had plunged more than 6 percent, sending the fourth most-traded currency on the planet to the lowest level in 31 years. Mumford, who advises companies on foreign-exchange and interest-rate risks, scrambled to find out why. There was talk of France’s president pushing for a hard-line approach on Britain’s exit from the European Union, and recycled rumors of a “fat finger” trade, but nothing that would justify a drop of this magnitude.“It was out of proportion to the supposed trigger,” said Mumford, a director at Rochford Capital Pty in Sydney. While he may never be able to pin down the catalyst for Friday’s drop, Mumford and many of his peers agreed that the sell-off was probably exacerbated by computer-driven traders reacting at speeds faster than any human could muster. So-called algorithmic transactions in the foreign-exchange market have more than tripled over the last three years, accounting for almost $200 billion of daily turnover, according to Aite Group, a consultant in Boston. That one of the planet’s oldest mediums of exchange -- and the dominant reserve currency until the first half of the 20th century -- could move like the legal tender of a frontier country is almost certainly to fuel debate over computerized traders’ role in the $5.1-trillion-a-day global currency market. Friday’s move in the pound follows a flash crash in the South African rand in January and a similarly unexplained move in New Zealand’s dollar last year. “It’s one of these moves that we’re seeing more regularly,” said Hugh Killen, the Sydney-based head of foreign exchange, fixed income and commodities trading at Westpac Banking Corp., Australia’s second-biggest lender. “People are caught in a flash crash that does seem to be algorithmic driven.”

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