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Saturday, May 6, 2017

week ending May 6

FOMC Statement: No Change to Policy, Q1 Weakness "likely to be transitory" - As expected ... FOMC Statement: Information received since the Federal Open Market Committee met in March indicates that the labor market has continued to strengthen even as growth in economic activity slowed. Job gains were solid, on average, in recent months, and the unemployment rate declined. Household spending rose only modestly, but the fundamentals underpinning the continued growth of consumption remained solid. Business fixed investment firmed. Inflation measured on a 12-month basis recently has been running close to the Committee's 2 percent longer-run objective. Excluding energy and food, consumer prices declined in March and inflation continued to run somewhat below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee views the slowing in growth during the first quarter as likely to be transitory and continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.  In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 3/4 to 1 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

FOMC Keeps Rates Steady - At 2:00 pm Eastern, the FOMC made their policy announcement as their meeting came to an end. As expected the Fed did not raise the Federal Funds rate target at this May meeting.  Two items are in focus now, however. The first is the possibility of a June hike. As always, the Fed wants be clear that such a move is “on the table.” Prior to the meeting, the June hike probability was around 70% and have now jumped to 90%. These odds will adjust over the rest of the week in response to the FOMC statement and the plethora of Fed member speeches this Friday. While the Fed doesn’t want to stick hard and fast to a timetable of their hikes, they do seem to be dedicated recently to appearing reliable. They said they’d aim for 3-4 hikes this year. Though of course as Thorten Polleit points out this morning, they will likely chicken out. FOMC on rate hikes:In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.  The second is the balance sheet issue. This has been the theme recently as the Fed is giving the impression that policy normalization is on the horizon. That is, the Fed alleges that it has the wherewithal to actually trim its $4.5t balance sheet. Normalization would take it back below $1t, at least. Yeah right. Nevertheless, the minutes of this May meeting will be released on May 24th and we will have a better idea at that time as to how in depth they covered this issue. Here is the FOMC on the balance sheet: The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions. These policy decisions come on the back of the lowest GDP growth rate in 3 years. And yet, the FOMC announcement did reveal they are positioning the GDP situation and other "soft data" weakness as "transitory." This means that it is not the mark of new economic problems, just sort of an outlier. But knowing the Fed, when push comes to shove, the only thing they know how to do is suppress interest rates and increase the money supply.  In sum: nothing new here!

Parsing the Fed: How the May Statement Changed From March -- The Federal Reserve releases a statement at the conclusion of each of its policy-setting meetings, outlining the central bank’s economic outlook and the actions it plans to take. Much of the statement remains the same from meeting to meeting. Fed watchers closely parse changes between statements to see how the Fed’s views are evolving. The following tool compares the latest statement with its immediate predecessor and highlights where policy makers have updated their language. This is the May statement compared with March.

No more rate hikes from the Fed - We have today published the second edition of our Global Monetary Conditions Monitor, which covers monetary policy in 25 countries – including inflation forecasts for these countries.  Some of the key messages in the Monitor are the following:

  • Despite monetary conditions being broadly neutral in the US it is more likely that the Federal Reserve will undershoot rather than overshoot its 2% inflation target on a 2-3 year horizon. Consequently, we see no need for further rate hikes from the Fed in 2017.
  • Given present monetary conditions in the euro zone, we believe that the ECB is on track to deliver on its 2% inflation in the medium-term. However, we are somewhat worried about pressures, particularly from the Bundesbank on the ECB to “normalise” monetary policy.
  • Canadian monetary conditions have become excessively tight and the Bank of Canada needs to act to ease monetary policy.
  • Monetary conditions in the UK and Sweden have become too easy and both the Riksbank and the Bank of England should gradually move towards a more tight monetary stance.
  • Icelandic monetary conditions are far to easy and inflation could be heading towards 4% in the medium-term if monetary conditions are not tightened.

Also watch my comments on our main message in the Monitor below.

Eric Peters: If Rates Ever Rise Above 3.5%  "It Would Spark Massive Defaults" --Earlier today in his weekly note, One River CIO Eric Peters explained that in their attempt to overturn the natural order of the global economic "ecosystem", what central banks have done is "stunning, unprecedented... and arrogant", and as a result it is only a matter of time before another "peak instability" moment emerges as "it stands to reason that our volatility-selling machine will break one day. We saw a glimpse of this in 2008-09."And yet, as Peters concedes in a follow up note, those same central bankers don't have any other option but to kick the can because as the CIO notes, any attempt to break the current ultra-low rate regime would "spark massive defaults."Incidentally, those are the same defaults that should have happened during the "near systemic reset" of 2008/2009 but the Fed, in all its wisdom, decided to kick the can at the cost of trillions in global excess liquidity, and while it bought itself some time - in the process unleashing a global deflation wave thanks to zombie companies that should not exist yet do, and every day try to undercut each other on pricing - nearly ten years later it has discovered that it has no way out, for one simple reason: there is now too accumulated debt.Here is Peters "modelling" out why the Fed is stuck with no way out:“When debt expands constantly relative to GDP, there’s a limit to how high interest rates can rise without causing massive defaults,” said the Model.“There’s nothing inherently wrong with defaults, they can cleanse a system, but a rise in US defaults from today’s 2.5% to 6.0% would boost unemployment by 3%.”America’s economy is leveraged to the financial system, which includes non-capitalized liabilities; entitlements, pensions, healthcare. “US total debt/GDP is 300%, but if you include these non-capitalized liabilities, it’s more like 800%.”

How Fed policies thwart economic equality - With the first 100 tumultuous days of the Trump administration behind us and the Federal Reserve Board considering monetary-policy tightening, it is clear that U.S. bankers face a very different policy framework than just a few months ago. What happens next will drive not only bank profitability, but also and, still more importantly, political stability. This is because the next round of monetary- and regulatory-policy actions will have profound impact on whether the U.S. income and wealth gap grows even wider between rich and poor. Our new research demonstrates that regulatory and monetary policymakers must consider economic equality as they contemplate realigning the pillars of U.S. financial policy. If they don’t, then the economy won’t grow in a sustainable way and political discontent will get still worse.  The Fed is deeply worried as the U.S. economy grows ever more unequal, but it also blames widening income and wealth distributions on everyone else. It is true that demographics play a role, as do embedded economic-mobility challenges for racial and ethnic groups, and Americans living in less-affluent communities. However, at its root, economic equality is, as its name suggests, an economic phenomenon. As a result, the Fed has an important role in either improving or worsening the situation.  Look, for example, at what just one economic policy under the Fed’s control — ultra-low interest rates — has done to economic inequality. By one account, savers since the crisis have lost $2.23 trillion due to Fed-set rates. Ultra-low rates — still negative in real terms once inflation is considered — strip savers of the wealth they need to pursue life objectives such as education or buying a home or ensuring retirement security. Changes to fiscal policy won’t make up for such a loss, and Americans who suffered can’t quickly regain the economic footing they need to pursue life objectives. The Fed’s broad power over regulatory and monetary policy gives it tremendous sway over the engines of economic equality — power it should use quickly, where it can, to reduce growing concentrations of wealth and income in an ever-smaller percentage of the U.S. population. The Fed is uniquely positioned to make a major difference in narrowing the gap because of its role not only as a central bank, but also as a major financial regulator. For example, its $4.5 trillion portfolio has been shown by extensive research to favor the financial assets owned by wealthier households, with lower-income Americans generally relying on their homes and savings accounts for wealth accumulation.

 The Dollar Super-Cycle Ends  - Chris Whalen - We live in an age of asset bubbles rather than true economic  growth.  The investment world is skewed by the latest round of monetary policy experimentation by the Fed, including years of artificially low interest rates and trillions of dollars in “massive asset purchases,” to paraphrase former Fed Chairman Ben Bernanke.   These bubbles are caused and magnified by supply constraints, not an abundance of credit.  Whether you look at US stocks, residential homes in San Francisco or the dollar, the picture that emerges is a market that has risen sharply, far more than the underlying rate of economic growth, due to a constraint in the supply of assets and a relative torrent of cash chasing the available opportunities. Likewise with the dollar, the image of the financial markets is one of constraints rather than policy ease.  Since the middle of 2014, the value of the dollar against major currencies has risen sharply, suggesting a shortage of liquidity or at least a relative preference for dollars vs other fiat currencies.  The vast flow of foreign direct investment drawn into the US and then into asset classes like residential and commercial real estate illustrates the abundance of global dollar liquidity and relatively scarcity of assets.  Even with the supposedly accommodative policy by the FOMC, key measures of market liquidity continue to suggest either price and/or structural constraints, both in the US and overseas.   Looking at the effective cost of dollar credit, for example, illustrated by the notorious London Interbank Offered Rate or LIBOR, the cost of borrowing dollars in Europe has risen steadily risen since the Middle of 2015.  Again, the chart below makes us wonder if the good folks on the FOMC appreciate the degree of fundamental demand for dollar credit. With the end of the Mortgage Bankers Secondary Market Conference in New York, American lenders face a market with new origination volumes down 25-30%.  Meanwhile, the reinvestment of prepayments on $1.7 trillion worth of mortgage backed securities (MBS) held by the FOMC is essentially taking up new bond issuance by Fannie, Freddie and Ginnie combined. We have been on the record saying that the FOMC should adjust its portfolio now to accommodate private market demand for yield.  And there is no need for actual sales.  Simply ending the Fed’s reinvestment of mortgage bond prepayments would allow the interest rate markets to find a natural level and, to us, give the Fed a more accurate picture of demand upon which to adjust supply. The clear question from all of this: What happens when this latest dollar super cycle ends? Given that zero or negative rates elsewhere are driving much of the emigration into American assets, why should the dollar ever selloff, right? Regards the prospect of a dollar drop, Megan Greene tells us on Twitter that “Only way I see it in the short-run is if everyone else gets in trouble and the Fed opens swap lines w other CBs to supply QE #unlikely"  We hear all of that, but can’t help but ask the question.  All things do come to an end, including the seeming ability of the FOMC to painlessly levitate the fortunes of heavily indebted nations on a sea of easy dollar credit.  This works really well when the dollar is strong, otherwise not so much.

PCE Price Index: Headline & Core Down in March -- The BEA's Personal Income and Outlays report for March was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index fell 0.23% month-over-month (MoM) and is up 1.83% year-over-year (YoY). The latest Core PCE index (less Food and Energy) came in at -0.14% MoM and 1.56% YoY. Core PCE remains below the Fed's 2% target rate.  The adjacent thumbnail gives us a close-up of the trend in YoY Core PCE since January 2012. The first string of red data points highlights the 12 consecutive months when Core PCE hovered in a narrow range around its interim low. The second string highlights the lower range from late 2014 through 2015. Core PCE shifted higher in 2016.  The first chart below shows the monthly year-over-year change in the personal consumption expenditures (PCE) price index since 2000. Also included is an overlay of the Core PCE (less Food and Energy) price index, which is Fed's preferred indicator for gauging inflation. The two percent benchmark is the Fed's conventional target for core inflation. However, the December 2012 FOMC meeting raised the inflation ceiling to 2.5% for the next year or two while their accommodative measures (low FFR and quantitative easing) are in place. More recent FOMC statements now refer only to the two percent target. The index data is shown to two decimal points to highlight the change more accurately. It may seem trivial to focus such detail on numbers that will be revised again next month (the three previous months are subject to revision and the annual revision reaches back three years). But core PCE is such a key measure of inflation for the Federal Reserve that precision seems warranted.  For a long-term perspective, here are the same two metrics spanning five decades.

US inflation back to undershooting 2 per cent ahead of FOMC meeting - A note from JP Morgan economists on this morning’s release of the Personal Income and Outlays report for March, in which both the consumption and inflation measures arrived weaker than expected (our bold):On consumption, real consumer spending increased 0.3% in March while nominal spending was basically unchanged. These figures were softer-than-expected and included a 6.5% surge in real spending on household utilities. Excluding this jump (which was weather-related), overall real spending ticked up only 0.1% in March. … Elsewhere in the report, the core PCE deflator declined 0.138% in March, bringing the year-ago change in the index down from 1.77% in February to 1.56% in March. The March figures were close to, although slightly below, expectations. They are still notable, however, because the monthly change was the second weakest on record. Even excluding the very large drop in prices for cellular telephone services (which we estimate subtracted 0.08%-pt from the monthly change in the core PCE deflator), it still looks like March was a weak month for core inflation. The headline PCE deflator was also weak, declining 0.2% in March. A chart via Fred shows the recent dip in the year-on-year change for the Fed’s preferred inflation measure, the PCE price index — both core (blue) and headline (red): After a steady increase since the autumn of 2015, headline inflation had finally hit the Fed’s 2 per cent target in February before falling again beneath it. Core inflation had been rising at a shallower slope and fell from 1.8 per cent to slightly less than 1.6 per cent. The gang at Capital Economics explains the surprising extent of the decline as entirely down to two items, the aforementioned price competition in cellular services and the entry of a supply glut of used cars, which has been anticipated:

 Q1 2017 GDP Details on Residential and Commercial Real Estate – McBride - The BEA has released the underlying details for the Q1 advance GDP report.The BEA reported that investment in non-residential structures increased at a 9.4% annual pace in Q1.  This is a turnaround from early last year when non-residential investment declined due to less investment in petroleum exploration. Investment in petroleum and natural gas exploration increased substantially in Q1, from a $44.7 billion annual rate in Q4 2016 to a $70.6 billion annual rate in Q1 2017 - but is still down from a recent peak of $151 billion in Q4 2014 (down by more than one-half).Excluding petroleum, non-residential investment in structures increased at a 10% annual rate in Q3. The first graph shows investment in offices, malls and lodging as a percent of GDP. Office, mall and lodging investment has increased a little recently, but from a very low level.Investment in offices increased in Q1, and is up 22% year-over-year - and is now almost as high as the housing bubble years as a percent of GDP.Investment in multimerchandise shopping structures (malls) peaked in 2007 and was up year-over-year.   The vacancy rate for malls is still very high, so investment will probably stay low for some time. Lodging investment increased further in Q1.  Lodging investment is up 15% year-over-year. My guess is office and hotel investment growth will start to slow (office vacancies are still high, although hotel occupancy is near record levels).  But investment growth is still very strong this year.The second graph is for Residential investment components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, Brokers’ commissions and other ownership transfer costs, and a few minor categories (dormitories, manufactured homes). Home improvement was the top category for five consecutive years following the housing bust ... but now investment in single family structures has been back on top for three years and will probably stay there for a long time. However - even though investment in single family structures has increased from the bottom - single family investment is still very low, and still below the bottom for previous recessions as a percent of GDP. I expect further increases over the next few years.  Investment in single family structures was $257 billion (SAAR) (about 1.4% of GDP), and was up in Q1 compared to Q4. Investment in home improvement was at a $238 billion Seasonally Adjusted Annual Rate (SAAR) in Q1 (about 1.3% of GDP).  Home improvement growth has been solid.

After A Disastrous Quarter, Atlanta Fed Now Expects Q2 GDP To Hit 4.3% --Call it deja vu all over again.Four months after the Atlanta Fed started off its Q1 GDP nowcast at 2.5%, then raised it just shy of 3.5% before eventually closing the books at 0.2%, slightly below where the BEA reported Q1 GDP, moments ago the Atlanta Fed released its initial GDP forecast for Q2, and it will probably not come as a surprise to anyone that it just happens to be a tad optimistic. According to the regional Fed, best known for its initial euphoria, and subsequent tapering and accuracy, "the initial GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2017 is 4.3 percent on May 1. The advance estimate of first-quarter real GDP growth released by the U.S. Bureau of Economic Analysis on April 28 was 0.7 percent, 0.5 percentage points above the final GDPNow model nowcast released on the previous day." And this is how the Fed sees the breakdown in various components:

  • PCE contribution est. at 2.22%
  • Nonresidential equipment investment contribution est. at 0.58%
  • Nonresidential intellectual property products investment contribution est. at 0.17%
  • Nonresidential structures investment contribution est. at 0.15%
  • Residential investment contribution est. at 0.32%
  • Government contribution est. at -0.01%
  • Net exports contribution est. at -0.15%
  • Change in inventory investment contribution est. at 0.98%

Well, if the cheerful Fed hopes to be accurate this time around with its initial estimate, US consumers better start spending fast. Then again, if past is prologue, expect this number to end roughly 50% lower in three months when the first advance Q1 GDP report is released.

 Here We Go Again: NY Fed Cuts Q2 GDP To 1.8% From 2.3% (Atlanta Fed Still At 4.2%) --It appears that the Atlanta Fed and NY Fed GDP trackers have decided to flip.  While last quarter, it was the Atlanta Fed which started off optimistic, predicting just shy of 3% in Q1 GDP growth, only to slash it all they way down to 0.4%, the NY Fed kept its exuberance - in big part due to reliance on soft data - until the bitter 0.7% Q1 GDP announcement by the BEA last week. But, it's now a new quarter, and everything resets, and while the Atlanta Fed has once again started off strong, expecting 4.3% initially although modestly trimming its exuberance to 4.2% in Q2 GDP yesterday - a number which we expect to decline materially once again - this time the NY Fed, perhaps wishing to avoid another quarter of mockery, is far more cautious, and in its latest just released Nowcasting report, the NY Fed now expected Q2 GDP to grow by only 1.8%, down from 2.3% due to "negative surprises from the ISM manufacturing survey as well as import and export data only partly offset by positive surprises from the employment report." Meanwhile, the consensus Wall Street estimate is currently at 2.7%, ranging from roughly 2.1% to 3.2%. If this again proves overly optimistic, one can always blame the weather. Again.

Democrats give up hope on striking a deal with Trump  - Democrats couldn’t be less interested in the whole Jared Kushner vs. Steve Bannon drama, and they have given up on the idea that President Donald Trump’s son-in-law will push him to work across the aisle on tax reform or anything else. The crisis of confidence they felt after Trump’s shocking win has faded and his record-low poll numbers have killed any incentive in their minds to suck it up and compromise with him.  “There is zero chance of any of this working out that way, and it doesn’t matter who you’re changing,” said Rep. Ruben Gallego (D-Ariz.), who notes that many of his colleagues who once decried his absolute opposition to Trump now agree with him. “At the end of the day,” he added, “this is Donald Trump, and we don’t want to work with him.” As far as Democrats are concerned, the idea of a moderate, post-partisan staff rising to guide Trump into building bridges with them — even for the sake of building actual bridges as part of infrastructure investments Trump talks about and they agree are needed — has now entered the realm of complete fantasy. “This notion of the battle between Jared Kushner and Steve Bannon and who prevails is irrelevant in many ways to the policies,” said Rep. David Cicilline (D-R.I.), one of the chairs of the House Democratic Policy and Communications Committee, about the discord among Trump’s most senior advisers. “What Democrats are responding to is the substance of the policies: It doesn’t matter who wins the internal battles in the White House.”

Congress Reaches Deal To Keep Government Open Through September -- One of the biggest political overhangs facing the market may have just been removed, when moments ago AP and other newswires reported that House Democrats and Republicans are said to have reached a $1 trillion spending deal to keep the government - which is currently operating thanks to a last minute one-week stopgap measure enacted on Friday - open until October 1. BREAKING: Congressional Republicans, Democrats reach agreement on $1T measure to fund government until Oct. 1. — AP Politics (@AP_Politics) May 1, 2017 According to Washington Post, negotiators from both parties reached an agreement on a spending package to fund the government through the end of September, alleviating fears of a government shutdown later this week. Congress is expected to vote early this week on the package, with the bipartisan agreement expected to include increases for military spending and border security, a major priority for GOP leaders in Congress.The agreement follows weeks of tense negotiations between Democrats and GOP leaders after President Trump insisted that the deal include funds to begin construction of a wall along the U.S. border with Mexico. Trump eventually dropped that demand, leaving Congress to resolve lingering issues over several unrelated policy measures.There is a non-trivial chance the Sunday night announcement is merely a trial balloon, because as the WaPo adds "the details of the agreement were not yet clear on Sunday night" which would suggest that there is a high likelihood that whatever tentative deal was reached, ultimately falls through. For now, however, this is good news, and it has sent both the pound and yen sliding, and the dollar rising on hopes that politics will not be a major risk factor for at least 5 months.

Lawmakers seal deal on $1T plan government-wide funding bill (AP) — Congressional Republicans and Democrats forged a hard-won agreement Sunday night on a huge $1 trillion-plus spending bill that would fund the day-to-day operations of virtually every federal agency through September, denying President Donald Trump funding for a border wall and rejecting his cuts to popular domestic programs. Aides to lawmakers involved in the talks announced the agreement after weeks of negotiations. It's expected to be made public early Monday. The catchall spending bill would be the first major piece of bipartisan legislation to advance during Trump's short tenure in the White House. While losing on the wall along the U.S.-Mexico border, Trump won a $15 billion down payment on his request to strengthen the military. The measure funds the remainder of the 2017 budget year, rejecting cuts to popular domestic programs targeted by Trump, such as medical research and infrastructure grants. Successful votes later this week would also clear away any remaining threat of a government shutdown — at least until the Oct. 1 start of the 2018 budget year. Trump has submitted a partial 2018 budget promising a 10 percent increase for the Pentagon, financed by cuts to foreign aid and other nondefense programs that negotiators on the pending measure protected.

Congress Inks Spending Deal That Jettisons Trump Priorities -- President Donald Trump said he’ll sign a bipartisan $1.1 trillion spending bill that largely tracks Democratic priorities and rejects most of his wish list, including funds for a wall on the U.S.-Mexico border. “We’re very happy with it,” the president said Monday in an interview with Bloomberg News. The plan would allocate some new funding for border security, though the funds couldn’t be used to build his promised wall on the U.S.-Mexico border. The president said he will sign the bill if it remains "as we discussed." The compromise measure, announced early Monday morning, would keep the government open through the end of September. Under House procedures, a vote could be held as early as Wednesday. The plan drew howls of protest from conservatives. "I don’t think I’ll be voting for it," House Freedom Caucus co-founder Jim Jordan of Ohio said on CNN. "I think there will be a lot of conservatives who have problems with the legislation." Representative Jeff Duncan of South Carolina accused moderate Republicans of failing to "stand firm" against Democratic priorities. Although Republicans control the White House and both chambers of Congress, congressional Democrats had leverage in the talks. Republicans have had to rely on Democratic votes to pass large spending bills in recent years because of opposition by GOP fiscal conservatives in the House and a 60-vote threshold in the Senate. GOP leaders eager to focus on health-care and tax overhauls bowed to Democratic demands to eliminate hundreds of policy restrictions aimed at curbing regulations, leaving the Trump administration with few victories. "We have boosted resources for our defense needs without corresponding increases in non-defense spending," House Speaker Paul Ryan said in a statement. He said the measure will make the U.S. "stronger and safer." The spending deal includes money for Planned Parenthood, despite Republican demands to defund the group over its provision of abortions.

The End of Trump’s Revolution? -- After 100 days in office, his promise of “America First” has disappeared, and he has morphed into a conventional Republican. The brand of populism that helped Trump’s rise to power has been squeezed out by the longstanding division within the Republican Party between the GOP establishment and the conservative movement. Over the past 100 days, a conventional Republican presidency wedded to conservative orthodoxy has emerged, albeit with Trump’s distinctive character flaws. A Trumpian populist policy agenda has also been hampered by the dynamics within the White House. After the failed travel-ban orders and his demotion from the National Security Council, Steve Bannon saw the influence of his populist faction wane. Major infighting with Jared Kushner’s centrist faction further undermined Bannon’s standing and endangered his position in the administration. This chaotic environment ultimately allowed Paul Ryan and Reince Priebus to persuade Trump to favor orthodox conservatives’ priorities. No episode demonstrated this better than the Obamacare-repeal debacle. Trump and Ryan launched the Republican legislative agenda with a deeply unpopular and regressive health-care reform bill, the American Health Care Act. It would have kicked 24 million Americans off insurance by 2026, including many of Trump’s blue-collar supporters.  Another unpopular legislative initiative was Trump’s budget blueprint, which arrived stillborn as Democrats and moderate Republicans denounced cuts to popular programs such as Meals on Wheels (which actually was affected indirectly, through the elimination of Community Development Block Grants). The proposed cuts would undermine a federal safety net that holds as many as 6.2 million white working-class Americans, Trump’s key demographic, out of poverty.  And in another significant budget row, Trump blinked during negotiations with Democrats last week by withdrawing his request for border wall funding in order to avoid a government shutdown.

Immigration Group Dumps Trump Endorsement: "We Have Been Lied To, Misled, And Betrayed" -- Several times over the past couple of weeks we've written about various Trump 'flip-flops' on several key issues that took center stage during the 2016 campaign (see: "Trump Flips On Five Core Campaign Promises In Under 24 Hours"). But, Trump's failure to take action to reverse Obama's "Deferred Action for Childhood Arrivals" (DACA) executive order as well as his signature of a budget deal that excludes funding for a border wall was just more than the "Americans For Legal Immigration PAC" (ALIPAC) could handle.  As such, William Gheen, President of ALIPAC and contributor to The Hill newspaper, has just penned a scathing letter withdrawing his organization's endorsement of Trump while noting, among other things, the following: ALIPAC's announcement about Trump will be considered as a warning sign among many American patriots that we have been lied to, misled, and betrayed, and our warning will have far reaching implications for theTrump administration and his band of pro-Amnesty advisors and cabinet members. The full letter can be reviewed below:

House Conservatives May Revolt Against Spending Deal --The appropriations deal the White House and congressional Republican leaders cut to avoid a government shutdown is almost impossible to spin as anything other than a major disappointment to the right. The Washington Post’s James Hohmann lists eight major ways in which Trump “got rolled,” ranging from the ban on use of new homeland-security money for border wall construction, to higher (not lower) nondefense discretionary spending, to the removal of 160 specific conservative policy “riders.” On some very early disputes, like Planned Parenthood funding, Republicans caved early (though they are still promising to take care of that priority in the Zombie Trumpcare bill). In terms of enacting the funding bill, the White House better hope that congressional Democrats view it as a victory and vote for it. Because a lot of conservatives may defect, according to the Washington Examiner:Conservative Republicans are already shaking their heads at the spending deal reached late Sunday to keep the government open until the end of September, Rep. Jim Jordan said Monday.“I think you’re going to see a lot of conservatives be against this plan this week,” he said on CBS, adding that he’s “disappointed.” Jordan reminded everyone that it was the expectation of something very different that convinced his fellow House Freedom Caucus members to vote for the short-term funding bill enacted last December that expired on Friday:  “We did a short-term spending bill so when Republicans controlled the government we could do the kind of things we campaigned on,” Jordan said.  “We make this job too complicated,” he said. “Our job is to do what we told the voters we were going to do.” There is another alleged benefit of the deal to conservatives that the White House was quick — probably too quick — to claim: The White House agreed to punt on a lot of the president’s top priorities until this fall to avert a shutdown on Friday and to clear the deck so that the House can pass a health-care bill. “This is going to be a great week,” Gary Cohn, Trump’s chief economic adviser, said on CBS this morning. “We’re going to get health care down to the floor of the House. We’re convinced we’ve got the votes, and we’re going to keep moving on with our agenda.” This message may be aimed at consoling conservatives given the Freedom Caucus endorsement of Zombie Trumpcare. But if he’s wrong and they don’t have the votes you will have a fresh and very bitter disappointment to conservatives. And unless something changes dramatically, of course, the disappointment is inevitable after Zombie Trumpcare dies in the Senate if not in the House.

Ask a “Bond Vigilante”: Is the US budget really going to cause trouble? -- Remember the bond vigilantes?   You know, those all-powerful masters of the universe who can make presidents and monarchs beg for lower borrowing costs? (We’re assuming our readers are familiar with the James Carville quote.)Every so often there’s a story about their potential comeback, and the Trump Administration’s profligate spending! will bring the force of vigilante market justice! to bear on the US.We are not convinced. In fact, we had trouble finding any real bond vigilantes — at least, the kind who spend time policing inflationary policies rather than seizing Argentine ships or anything like that.So we had to ask a professional investor who plays a bond vigilante on the internet.Well, sort of. We called up Jim Leaviss of M&G Investments and its “Bond Vigilantes” blog, and asked if he expects real-life bond vigilantes to come after the US for fear of rising debt levels under President Trump’s proposed tax plan. Here’s what he had to say, edited a bit for clarity and with links embedded:   Historically, people used to talk about bond vigilantes in terms of deficits or significant increases in the debt-to-GDP ratio. But there’s no great evidence that the level of government borrowing has been a very significant driver of either the level of government yields, or the term premium, or the shape of the yield curve.In the US, it’s really been inflation that’s been the driver of markets and the term premium… It seems that people’s expectations of future inflation are almost entirely driven by what they see in current inflation.Under CBO forecasts, the US debt-to-GDP level will continue to rise under Trump. If we get some of the tax bills people are talking about, you’ll see an extra $2tn-to-7tn of borrowing as a result.But at the end of the day, long-term inflationary trends are driven by demographics, and that’s the driver of where we end up with long-term inflation [and rates]… People have been talking about the return of the bond vigilantes for 20 years now. In that time, we’ve seen zero, negative, and falling term premia, and negative bond yields as well. If any country generates some inflation, bond yields will react to that in a rational way. That’s all it is, really, rather than any concerted [effort from markets]. So let’s all say it together, just one more time*: Selling. Treasuries. Is. STILL. Not. A. Valid. Political. Threat.

GAO: Biggest Fiscal Threat to U.S. Is Interest on Treasury Debt – Not Social Welfare Programs -- Pam Martens -  On Wednesday, the General Accountability Office (GAO), the bipartisan congressional watchdog, released an in-depth report on the U.S. government’s challenging fiscal outlook. Despite its surprising revelations, the study received little to no coverage by major media outlets. While most Americans have been led by political rhetoric to believe that government programs like Medicare and Medicaid are the biggest threats to the future U.S. fiscal picture, the GAO study found the following: “While health care spending is a key programmatic and policy driver of the long-term outlook on the spending side of the budget, eventually, spending on net interest becomes the largest category of spending in both the 2016 Financial Report’s long-term fiscal projections and GAO’s simulations.” The GAO cited a simulation that showed net interest payments on U.S. debt increasing “from $248 billion in fiscal year 2016 to $1.4 trillion in fiscal year 2045 in 2016 dollars.” Another measurement of government debt is its percentage ratio to Gross Domestic Product – a means of evaluating how much of a drag it’s inflicting on the overall economy. The GAO study found the following: “Debt held by the public rose as a share of gross domestic product (GDP), from 74 percent at the end of fiscal year 2015 to 77 percent at the end of fiscal year 2016. This compares to an average of 44 percent of GDP since 1946.” The report further noted that both the Congressional Budget Office (CBO), and GAO’s own projections indicate that the federal government’s current fiscal path is unsustainable and policy changes must occur. Key concerns raised by these findings include the fact that federal resources that could be deployed into key priorities like rebuilding the nation’s roads and bridges are being diverted to interest on debt. Another concern expressed by the GAO is the upward rise in interest rates. While the GAO does not directly mention the Federal Reserve’s recent rate hikes, it does note the following: “In recent years interest rates on Treasury securities have remained low, lowering interest costs.  However, CBO and others project those interest rates will rise in the long term, increasing the net interest costs on the debt.

Budget deal may map U.S. Congress road ahead, via Trump bypass | Reuters: The U.S. Congress, bitterly divided for years along party lines, may be mapping a bipartisan path forward that skirts around President Donald Trump when he refuses to engage constructively with lawmakers, Democrats and some lobbyists said on Monday. The path was discernible in a nearly $1.2 trillion federal spending deal carved out over the weekend to avert a government shutdown. It had Democratic fingerprints all over it, even though Republicans control Congress and the White House. White House budget director Mick Mulvaney said Trump will sign the 2017 budget bill when he receives it from Congress on Thursday or Friday. Trump, in an interview with Bloomberg on Monday, said he was "very happy" with the deal announced late on Sunday. Democrats claimed victory on issue after issue in the agreement, which will keep the lights on in Washington through the end of the federal fiscal year on Sept. 30, provided it holds up and wins final approval as expected. Trump scored a partial win, getting a commitment for up to $15 billion in additional funding for a military buildup. That was about half of what he originally asked for. No money was included for Trump's proposed U.S.-Mexico border wall. Democratic opposition to it was solid and support from Trump's fellow Republicans was soft. Mulvaney said Trump will seek wall funding in a budget proposal coming in late May. At a White House briefing, Mulvaney defended the concessions Trump made to reach an agreement, saying Democrats gave up on some items they had wanted as well in order to find a compromise. "Everything we got in this deal ... lines up perfectly with the president's priorities," he said. Democrats took an opposite view.

Trump: US ‘needs a good shutdown’ | TheHill: President Trump on Tuesday called for a "good shutdown" in September to fix the "mess” in government. He also expressed frustration that legislation needs 60 votes in the Senate because of the filibuster, saying it would be necessary to elect more Republicans or "change the rules." “The reason for the plan negotiated between the Republicans and Democrats is that we need 60 votes in the Senate which are not there! We either elect more Republican Senators in 2018 or change the rules now to 51%. Our country needs a good 'shutdown' in September to fix mess!" he wrote in a series of tweets.Trump's unprecedented comments appear to reflect frustration with the spending deal Congress is poised to approve this week. The legislation would fund the government through September and represents the first major bipartisan legislation of Trump's presidency. Democrats have argued that they won most of the battles surrounding the bill, and several media accounts have suggested that Trump and the White House were losers in the negotiations. 

Trump raises stakes for next shutdown fight | TheHill: Less than 48 hours after Congress reached a bipartisan deal on 2017 spending, President Trump warned the next round might not be so easy. The president on Tuesday roiled the debate over a 2018 spending package — five months before Congress’s deadline to pass it — by promoting the notion that a “good shutdown” in September would go a long way toward fixing the “mess” in Washington. Arriving by tweet just after 9 a.m., the comment — unprecedented for a sitting president — was seen as no threat to the 2017 omnibus funding package, which Congress is expected to send to Trump this week to prevent a shutdown on Saturday. But it appears to reflect Trump’s frustration with reports and analyses, many from conservative allies, that the Republicans were rolled during the negotiations over the current bill, which included almost none of the prominent policy riders the White House had initially demanded.Democrats have been triumphant, claiming a lopsided victory in the debate, and both The New York Times and The Washington Post deemed Trump among the losers. Trump, the consummate ­deal-maker who puts a premium on winning, lashed out Tuesday morning, blaming Senate Democrats for forcing the Republicans’ hands and urging an overhaul of Senate rules to empower the GOP majority. “The reason for the plan negotiated between the Republicans and Democrats is that we need 60 votes in the Senate which are not there! We either elect more Republican Senators in 2018 or change the rules now to 51%,” Trump tweeted. “Our country needs a good ‘shutdown’ in September to fix mess!”

GOP senators dismiss Trump filibuster change | TheHill: Senate Republicans on Tuesday emphatically dismissed President Trump’s demand that they get rid of the legislative filibuster to enact his agenda. Trump blamed the Senate rules, which require 60 votes to pass most legislation, for the exclusion of key priorities from spending bills, such as money to construct a southern border wall. “Either elect more Republican senators in 2018 or change the rule now to 51 percent,” Trump tweeted. But the idea fell flat with GOP lawmakers, revealing a continuing disconnect between the White House and Capitol Hill. Senate Republican Whip John Cornyn (Texas) in a floor speech said that lowering the threshold to 51 votes would be a “real mistake.” “The rules have saved us from a lot of really bad policy,” he said, armed with a list of laws that would have passed had the filibuster not been in place. Senate Majority Leader Mitch McConnell (R-Ky.) slammed the door on the idea a few hours later, saying the elimination of the filibuster “will not happen.” “There is an overwhelming majority on a bipartisan basis not interested in changing the way the Senate operates on the legislative calendar,” he said

Congress approves budget deal with extra CDFI funding — Despite an effort by the Trump administration to defund government aid for community development funding institutions, the Senate approved 79 to 18 a budget deal Thursday that included $258 million in funding for the CDFI fund. The package passed the House on Wednesday and will now head to President Trump's desk, where he is expected to sign the deal.

 US Treasury 'studying' ultra-long bonds; urges Congress to lift debt ceiling --The US Treasury reiterated on Wednesday that it is “studying” the concept of issuing bonds with tenors of more than 30 years, signalling secretary Steven Mnuchin is serious in his considering of ultra-long issuance. Mr Mnuchin has repeatedly said that the country should mull over the idea of issuing debt of longer durations, following several other developed economies that have done the same. “Treasury continues to meet with a broad variety of market participants in order to assess the costs and benefits associated with issuing ultra-long bonds,” the department said in its quarterly refunding statement on Wednesday. Borrowing over longer time horizons could help fund the Trump administration’s plans for a large infrastructure spending programme, ease the hit to the sovereign bond market that would come from when the Federal Reserve begins reducing the size of its vast portfolio, and help increase the average duration of US debt, analysts have said. However, numerous investment banks have also noted that such plans could reduce the consistency of US debt offerings, something that has helped to drive the allure of the Treasury market, the biggest sovereign debt market in the world. The longer-term assets may also face liquidity issues, since pension funds and insurers are seen as likely to be the biggest buyers of the instruments, and they would be expected to hold them until maturity instead of trading them. The Treasury also said it “urges Congress to protect the full faith and credit of the United States by acting to increase or suspend the statutory debt limit as soon as possible”. The debt ceiling suspension expired on March 15, and the department has been taking “extraordinary measures” since then, as it awaits an increase.

FULL TRANSCRIPT: President Donald Trump’s interview with “Face the Nation” CBS

The North Korea Nightmare Continues - If North Korea truly desires state of the art nuclear weapons and missiles - something that can deliver an atomic payload to say Los Angeles - then we are indeed in for some tense time ahead.  The only way Kim Jong-un - the portly pariah of Pyongyang - can truly develop a medium-range missile that can hit even Hawaii or Alaska is through a rigorous testing program. Even in failure, the Kim regime gains vital technical data that creates pathways to future success. The same goes for making nuclear weapons small enough to place atop such a missile. While Washington,  So where do we go from here? As I have explained on a few occasions now, we do have options short of a unilateral strike - not an option at all if you consider what happens if you can’t guarantee taking out every single one of Kim’s nuclear weaponsFirst, President Trump and his team must work to contain North Korea's nuclear and missile programs so they are unable to gain any outside assistance. Tough secondary sanctions would be placed on any nation, financial entity, company, or individual who dares help the regime develop such weapons. The Trump administration must make it clear: if you seek to profit from helping one of the world's most rogue regimes build nuclear weapons or long-range missiles you will pay the most severe of prices—slapped with the label of international pariah. Second, the Trump administration must use sophisticated cyber tools, just as the Obama administration did in the case of Iran's nuclear program, to trip up North Korea’s nuclear and missile efforts at every turn. While reports indicate such efforts seem underway, the administration should make every effort to ramp these programs up as much as possible. Again, the goal would be to slow the progress of these programs, and increase their cost. Lastly, and as repulsive as it sounds, the time has come where talks with North Korea would be most wise - something the administration now seems open to after remarks to the contrary. To be fair, history shows such an option has a slim chance of success—Pyongyang is not exactly the most reliable of negotiating partners and has rarely kept its word. But considering the risks, we owe it to our allies and the American people—the potential new targets of North Korea’s nuclear tipped missiles—to act on Winston Churchill’s axiom: to jaw-jaw is always better than to war-war.

Defiant North Korea Warns Of More Atomic Tests, Will Boost Nuclear Deterrence "To The Maximum" -- North Korea's regime defied an increasingly broader chorus of voices, including the US, Japan, China, South Korea and Russia, saying on Monday that it will continue its nuclear weapons tests, and warned it would "speed up to the maximum” its measures for bolstering its nuclear deterrence in response to the U.S. increasing "aggression and hysteria" against the country, a North Korea Foreign Ministry spokesman says in statement distributed by the official Korean Central News Agency. "Now that the U.S. is kicking up the overall racket for sanctions and pressure against the DPRK, pursuant to its new DPRK policy called 'maximum pressure and engagement', the DPRK will speed up at the maximum pace the measure for bolstering its nuclear deterrence," a spokesman for North Korea's foreign ministry said in a statement carried by its official KCNA news agency. North Korea's "measures for bolstering the nuclear force to the maximum will be taken in a consecutive and successive way at any moment and any place decided by its supreme leadership," the spokesman said. North Korea has carried out five nuclear tests and a series of missile tests in defiance of U.N. Security Council and unilateral resolutions. It has been conducting such tests at an unprecedented rate and is believed to have made progress in developing intermediate-range and submarine-launched missiles. The communist nation test-launched a missile on Saturday which Washington and Seoul said was unsuccessful, but which nevertheless drew widespread international condemnation.

Duterte Warns Trump: "That Guy Kim Simply Wants To End The World" -- In a rare comment on the deteriorating North Korean situation, outspoken Philippine president Rodrigo Duterte urged the US to show restraint after North Korea's latest missile test and to avoid playing into the hands of leader Kim Jong Un, who "wants to end the world". The notoriously blunt Duterte said on Saturday that the Southeast Asia region was extremely worried about tensions between the United States and North Korea, and said one misstep would be a "catastrophe" and Asia would be the first victim of a nuclear war. "There seems to be two countries playing with their toys and those toys are not really to entertain," the president said quoted by Reuters during a news conference after the ASEAN summit in Manila, referring to Washington and Pyongyang. “One miscalculation of a missile, whether or not a nuclear warhead or an ordinary bomb, one explosion there that would hit somebody would cause a catastrophe.Duterte also warned the United States, Japan, South Korea and China that they are sparring with a man who was excited about the prospect of firing missiles. Duterte's speech, which was delivered in his capacity as chairman of ASEAN, was due to speak by telephone to U.S. President Donald Trump later on Saturday. He said he would urge Trump not to get into a confrontation with Kim."You know that they are playing with somebody who relishes letting go of missiles and everything. I would not want to go into his (Kim's) mind because I really do not know what's inside but he's putting mother earth, the planet to an edge."

Trump leaves door open for military action against North Korea - CNN. President Donald Trump has refused to rule out the use of military force against North Korea, just hours after Pyongyang launched a missile test in defiance of international pressure. In an interview for CBS's "Face the Nation," Trump downplayed the significance of North Korea's "small missile launch," which occurred early Saturday. But when asked by host John Dickerson if he would consider military action in response to another nuclear test, Trump responded: "I don't know. I mean, we'll see." Still, Trump expressed tepid admiration for North Korea's leader. "People are saying, 'Is he sane?' I have no idea," the President said, before noting Kim Jong Un's rise to power at a young age. "So obviously, he's a pretty smart cookie," he said. "But we have a situation that we just cannot let -- we cannot let what's been going on for a long period of years continue." Later, when asked at during a factory tour before a rally in Harrisburg, Pennsylvania, to mark his 100th day in office what his message on North Korea is, Trump told reporters: "You'll soon find out, won't you?" Pressed on whether that meant military action, Trump said, "You'll soon find out." The missile launched Saturday blew up over land in North Korean territory, said US Navy Cmdr. Dave Benham, a spokesman for the US Pacific Command.

White House: China ‘starting to do something’ on North Korea - National Security Adviser H.R. McMaster praised China on Sunday for steps toward confronting North Korea — including public statements, messages in the Chinese press, and a "more strident and stringent enforcement of existing U.N. sanctions." "Yes, we do see China starting to do something," McMaster told Chris Wallace on Fox News Sunday. "But it is clear, more needs to be done. We are going to ask China to do more as we do more, as [well as] our South Korean and Japanese allies." McMaster said the U.S. could not "tolerate" the risks from a North Korean nuclear buildup, and he accompanied his diplomatic stance with a renewed threat, saying Trump would solve the issue "one war or another." Between the lines: For the U.S. audience, McMaster is giving Trump a pat on the back for successfully recalibrating his rhetoric on China. For the international audience, McMaster is prodding Beijing to amp up efforts to further isolate North Korea.

US national security adviser says 'be prepared for military action against North Korea' - America's National Security Adviser has said America should be “prepared” to take military action against North Korea. Lieutenant General HR McMaster called on other world powers to prevent the rebellious regime from developing a nuclear arsenal, saying the state was acting in "open defiance of the international community". Although he said the Trump administration would prefer to "work with others" to resolve the issue "short of military action", he said the US must be prepared for its armed forces to intervene.“North Korea poses a grave threat to the United States, our great allies in the region, South Korea and Japan ... but also to China and others. And so it's important, I think, for all of us to confront this regime,” he said in an interview with Fox News. “This regime that is pursuing the weaponisation of a missile with a nuclear weapon. And so this is something that we know we cannot tolerate ... The President has made clear that he is going to resolve this issue one way or another." He added: “It may mean ratcheting up those sanctions even further and it also means being prepared for military operations if necessary." President Donald Trump said on Saturday he would "not be happy" if North Korea carried out another missile test, adding that his Chinese counterpart President Xi Jinping would likely feel the same. He refused to say whether this meant military action, saying: "I don't know, I mean, we'll see." He added: “We shouldn't be announcing all our moves. It is a chess game. I just don't want people to know what my thinking is.” 

The $3 trillion ‘catastrophic’ cost of a North Korea-US war - IF A North Korea war does become a reality, one unmanageable $3 trillion consequence that hasn’t been widely acknowledged threatens to wreak havoc on the world. The defiant nation launched another missile test today, just hours after stern warnings from Donald Trump that a “major, major conflict” was possible. The conflict between Kim Jong-un and Donald Trump could unfold in several ways, but it is the 25 million citizens of the hermit state whose fate could trigger a global catastrophe. A thermonuclear war would be a humanitarian and ecological disaster for the entire region, with radiation causing a nuclear holocaust that tears into South Korea, China, Russia and Japan. But if conventional weapons are used and the Kim regime collapses (a more likely scenario), we may face an alternative nightmare.The first consequence would be that the Kims and all those connected with the ruling Workers’ Party of Korea would have to flee compatriots angry at years of human rights violations and public executions. “Secret police and party officials would seek refuge in neighbouring China or Russia,” Australian National University researcher Leonid Petrov told “There’s no space for the Kim clan in a unified Korea, his brother, cousin, aunts and uncles, they are inseparably connected with the regime and will be prosecuted as criminals. So what will Kim Jong-un’s people do without their supreme leader? With a lack of money, food and shelter if the regime collapses, they too may seek refuge in China, Russia and South Korea, but those countries will not necessarily be open to an influx of North Korean refugees.“South Korea might use the opportunity to exploit North Koreans who have less education or experience in enterprise. Millions of North Korean workers could become second class citizens, there could be widespread discrimination, even the border might be kept for years to stop mass immigration. It will take at least a decade before the level of prosperity will be equalised between North and South. During that 10 years, the reunification is going to be very expensive, $3 trillion or more. There’s going to be definite social tension between South Koreans and North Koreans. .

The Relentless Push Towards War --The only real constant to be found in both European and US politics is war.  A steady feature of both regions for the past 20+ years has been small, lucrative conflicts waged against countries unable to effectively defend themselves. It doesn’t seem to matter who’s in office in the US = Republican/Democrat, conservative/liberal - there’s a war machine constantly running. My concern is that there's a building risk that one day that war machine is going to bust apart. And when it does, the long relative peace that the US and Europe have enjoyed (even as they’ve visited a lot of death and destruction elsewhere) will be shattered.As I’ve written extensively in the past, as was the case with Russia last fall, this push to war includes a series of carefully-crafted talking points being endlessly repeated over the print and airwaves.  It’s an ever-present condition of living in our manufactured reality, where what we are told to care about is beamed at us around the clock  in a rather tediously but emotionally-manipulative way on the “news.” The news about North Korea is at a fever pitch.  Again, we have to ask, why now? The Trump administration on Wednesday declared North Korea "an urgent national security threat and top foreign policy priority." It said it was focusing on economic and diplomatic pressure, including Chinese cooperation in containing its defiant neighbor and ally, and remained open to negotiations. He also said he wants South Korea to pay the cost of the U.S. THAAD anti-missile defense system, which he estimated at $1 billion, and intends to renegotiate or terminate a U.S. free trade pact with South Korea because of a deep trade deficit with Seoul.U.S. officials said military strikes remained an option but played down the prospect, though the administration has sent an aircraft carrier and a nuclear-powered submarine to the region in a show of force. Any direct U.S. military action would run the risk of massive North Korean retaliation and huge casualties in Japan and South Korea and among U.S. forces in both countries.  (Source)   Let’s see here…what could possibly go wrong? How about everything?

Does Washington Plan To Nuke Russia & China? - Paul Craig Roberts - Not everyone likes to hear about the threat of nuclear war. Some find refuge in denial and say that nuclear war is impossible because it makes no sense. Unfortunately,humankind has a long record of doing things that make no sense.In previous posts in recent years I have pointed out both written documents and changes in US war doctrine that indicate that Washington is preparing a preemptive nuclear attack on Russia and China. More recently, I have shown that Washington’s demonization of Russia and President Putin, the incessant lies about Russian deeds and intentions, and the refusal of Washington to cooperate with Russia on any issue have convinced the Russian government that Washington is preparing the Western populations for an attack on Russia. It is obvious that China has come to the same conclusion.It is extremely dangerous to all of mankind for Washington to convince two nuclear powers that Washington is preparing a preemptive nuclear strike against them. It is impossible to imagine a more reckless and irresponsible act. Yet this is precisely what Washington has doneLt. Gen. Viktor Poznikhir, Deputy Head of Operations of the Russian General Staff has concluded that Washington in pursuit of global hegemony is implementing an anti-ballistic missile system that Washington believes can prevent a Russian nuclear response to a US pre-emptive attack.  In short, Washington is preparing to launch a nuclear war.  As I explained previously, the theory behind this insane scheme is that after America’s preemptive strike Russia will be so devastated that Russia would not retaliate with any remaining forces out of fear that Washington would launch a second major strike. Washington also plans to use agents in place to assassinate as many members as possible of the Russian government, thus leaving the government in confusion without leadership. Yes, the insane American/Israeli neoconservatives are this determined to exercise hegemony over the world. Yes, Washington is sufficiently criminally insane to risk the destruction of life on earth based on the supposition that Washington’s offense will work perfectly and Russia and China’s capabilities will be so degraded that no retaliatory response will occur.

Who Is Interested In A Conflict In North Korea? --   To answer this question, it is necessary to examine what would entail a US attack on North Korea. Suffice it to say that as the neocon Senator John McCain has admitted, the US would be unable to defend Seoul (as well as its US bases nearby) in the first 24 to 48 hours of a conflict. A city of 20 million inhabitants, together with military bases containing thousands of soldiers, would suffer untold loss of life. The United States would certainly suffer huge losses, revealing weaknesses that could be exploited in future conflicts, a consideration that would need to be considered if contemplating shooting down DPRK missiles. China would certainly not be happy to risk a humanitarian catastrophe on its own border, not to mention being eventually forced to intervene to defend its ally (there is a treaty between the two countries). Japan and South Korea would be hit hard, being clearly exposed to a North Korean retaliatory attack; so they clearly do not want a war with Pyongyang. The great truth about the Korean Peninsula is that despite the fact that every country flexes its muscles and seems ready to act, no one wants this eventuality, as no one could win this war, and everyone would suffer devastating effects both economically and militarily. This is not to mention the popular uproar that would arise from so many civilian deaths, let alone were there to be a nuclear escalation. In the Korean peninsula, we are faced with a great strategic game in which the DPRK becomes more difficult to attack with each passing day, thanks to its conventional forces rather than its nuclear power. This is something that western planners tend to ignore in order to avoid accentuating the power of the DPRK. Unfortunately for them, this is something that is far too well known to US soldiers, and especially South Koreans, which is why a real attack on the DPRK is absolutely out of the question for Seoul.. At the end of the day, in Korea we are faced with a lot of smoke and mirrors, threats and promises. But realistically, no one wants an actual conflict.On the contrary, war rhetoric rewards virtually all the actors involved. Japan and South Korea aim for more American involvement in the region, but for very different reasons.

Furious North Korea Threatens "Final Doom" After US Deploys Strategic Bombers - Another day, another jawboning escalation out of North Korea, which on Tuesday accused the US of pushing the Korean peninsula "to the brink of nuclear war" after two strategic U.S. bombers flew training drills with the South Korean and Japanese air forces in another show of strength. As Reuters reports, the two supersonic B-1B Lancer bombers were deployed amid rising tensions over North Korea's pursuit of its nuclear and missile programs.North Korea said the bombers conducted "a nuclear bomb dropping drill against major objects" in its territory at a time when Trump and "other U.S. warmongers are crying out for making a preemptive nuclear strike" on the North."The reckless military provocation is pushing the situation on the Korean peninsula closer to the brink of nuclear war," the North's official KCNA news agency said on Tuesday."Any military provocation against the DPRK will precisely mean a total war which will lead to the final doom of the US."

Washington Is the Real Threat to Peace on the Korean Peninsula- The current crisis on the Korean Peninsula is the product of a militarized state, led by an unpredictable and capricious leader, which cannot be trusted with nuclear weapons. That militarized state is of course the United States, and that unstable and capricious leader is Donald Trump.If Western media is to be believed, of course, the precise opposite is the case. How could it be otherwise, given that the dominant historical and news narrative is written to suit the interests of the powerful at the expense of the less powerful or powerless? It is why we are continuously fed a distorted rendering both of the current crisis and nature of the DPRK (North Korea). Indeed, from this rendering you would be entitled to believe that it was North Korea that, in its history, had used nuclear weapons — and used them against civilians — rather than the United States. You would also be entitled to believe that it was North Korea that had destroyed one country after another since the Second World War rather than the United States and its allies. This is the trouble with Western ideology; it rests on foundations of historical distortion and, dare we say it, fake news.North Korea's crime is not that it is led by an anti-democratic despot, as we are expected to believe. How could it be so when among Washington's closest allies is a Saudi kleptocracy for whom even the mention of the words democracy and human rights will earn you a flogging, and perhaps even worse? And how it could it be, considering that the various other anti-democratic despots that Washington has counted among its friends and allies over the years? The reality is that the demonization of North Korea, the aggression being leveled against it, has more to do with imperialism than democracy. It is the same imperialist aggression responsible for destroying the country between 1950 and 1953, during the most destructive war fought since the Second World War. Up to 5 million Koreans, north and south, perished — the majority of them civilians — while North Korea was almost completely obliterated courtesy of a US bombing campaign that took the carpet-bombing of towns, cities, and villages to a new level of wanton destruction. It was, as with the Vietnam War a decade later, a war that was fought in the context of a Cold War that by then was underway between East and West.

Trump Says "Would Be Honored" To Meet With Kim Jong-Un - In a surprising foreign policy pivot, President Trump told Bloomberg during an Oval Office interview that he would meet with North Korean leader Kim Jong Un "if the circumstances were right."“If it would be appropriate for me to meet with him, I would absolutely, I would be honored to do it,” Trump said Monday in an interview with Bloomberg News. “If it’s under the, again, under the right circumstances. But I would do that.” It was not immediately clear what circumstances Trump considers "right."The US president added that “most political people would never say that,” regarding his willingness to meet with the reclusive Kim, “but I’m telling you under the right circumstances I would meet with him. We have breaking news.” Kim’s regime, a source of heightened geopolitical tension over the past month, has repeatedly defied the US and international sanctions with continued development of its nuclear and intercontinental ballistic missile program. It would mark the North Korean leader's first summit: as Bloomberg adds, Kim has never met with a foreign leader since taking charge after his father’s death in 2011 and hasn’t left his isolated country. In January, Trump vowed that he wouldn’t let North Korea develop a nuclear weapon capable of reaching the U.S. mainland, and North Korea has labeled American military moves in the region as acts of “intimidation and blackmail.” North Korea has continued to test missiles this year, and last weekend the communist country arrested a third US citizen.

Trump Follows Instincts, Not Establishment, With Overtures to Kim and Duterte — President Trump continued his outreach to rogue leaders on Monday, declaring he would meet North Korea’s dictator, Kim Jong-un, provided the circumstances were right, even as the Philippine president, Rodrigo Duterte, brushed aside the president’s invitation to visit the White House, saying he might be “too busy.” Mr. Trump’s unorthodox overtures — to a nuclear-armed despot who brutally purged his rivals, and an insurgent politician accused of extrajudicial killings of drug suspects — illustrated the president’s confidence in his ability to make deals and his willingness to talk to virtually anyone. Above all, they highlighted his penchant for flouting the norms of diplomacy, no matter his larger aim. No sitting American president has met with a North Korean leader since Mr. Kim’s grandfather Kim Il-sung established a Stalinist state there after the Korean War. However vague and impromptu, Mr. Trump’s offer shook up an unsettled situation on the Korean Peninsula, which has been alarmed by the prospect of a military clash between the United States and the North. “Kim Jong-un would be delighted to meet with President Trump on the basis of one nuclear leader to another,” said Christopher R. Hill, a career diplomat who was special envoy on North Korea under President George W. Bush. “If I were Trump I would pass on that.” Mr. Duterte’s backhanded response to Mr. Trump, however, also showed the pitfalls of his personal brand of diplomacy. The president had already gotten fierce criticism from human rights groups for embracing a man viewed by many as being responsible for the deaths of thousands of people involved in the drug trade. Now he faces being snubbed by Mr. Duterte as well. .

Senate Quietly Drops Russian Sanctions Bill, Focuses On Iran Crackdown -- Much to the likely chagrin of the mainstream media, and Democratic Party blame narratives everywhere, Politico reports that the leaders of the Senate Foreign Relations Committee have reached a decision that’s sure to disappoint Russia hawks: They’re not taking up a Russia sanctions bill anytime soon.Instead, Committee Chairman Bob Corker of Tennessee and ranking Democrat Ben Cardin of Maryland have agreed to move forward on a measure to counter Russian influence in Eastern Europe without using sanctions as well as an Iran sanctions bill.“The ranking member and I are in strong agreement on a pathway forward and that's what we're going to do. We're going to do an Iran sanctions bill. It'll be done toward the end of this work period. We're also working together on a bill to push back against Russia in Europe and what they're doing, and those are the two courses of action that we're taking.”The measure to counter Russian influence is expected to draw from a bill put forward by Cardin in January but will strip the measure of its sanctions. The Iran sanctions bill was introduced in March by Corker and has bipartisan support. It’s in retaliation for Iran’s ballistic missile development, support for U.S.-designated terrorist groups and human rights violations. Cardin’s sanctions bill is co-sponsored by 10 Republican defense hawks, including Sens. John McCain of Arizona, Lindsey Graham of South Carolina and Marco Rubio of Florida. Cardin spokesman Sean Bartlett confirmed the agreement in an email.“Senator Cardin stands by the series of proposals he's laid out on Russia but looks forward to working with Chairman Corker on this bill as an initial step to hold Russia accountable for its destabilizing activities,” Bartlett said.

When It Comes to Iran, Trump & Company Ignore Facts -- If you placed your hopes that a President Donald Trump would bring some sanity back to U.S. foreign policy, especially with respect to U.S./Iran relations, you made a mistake. Trump’s Administration, using the voice of his Secretary of State Rex Tillerson, is beating the drum denouncing Iran as the biggest sponsor of terrorism in the World. The chutzpah award on this point goes to Saudi Arabia’s Foreign Minister, Adel al-Jubeir, who declared in October 2015: . . .that Iran “is the biggest sponsor of terrorism in the world, and it is working on destabilizing the region. If it wants to build good relations with its neighbors, it ought to deal with them based on the good neighborliness principle and not to interfere in their affairs. We [would] welcome such a step.” The Saudi Foreign Minister conveniently ignored the fact that 15 of the 19 terrorists who hijacked planes and attacked America on 11 September 2001 were Saudis not Iranians. Iran is no innocent on the issue of terrorism. The Revolutionary Guard and their agents, following the ordres of the Mullahs, were responsbile for the deaths of thousands from hundreds of terrorist attacks since the early 1980s. But it is wrong to insist that Iran continues to be the major force driving the terrorist violence seen in the Middle East, Europe, Africa and America. In contrast to the period 1982 thru 1989, which was the high water mark of Iran reliance on terrorism as a key component of its foreign policy, Iran has shifted towards more conventional political and military methods for achieving its national goals.

Wilbur Ross: U.S. Airstrike on Syria Was ‘After-Dinner Entertainment’ for Mar-a-Lago - U.S. Commerce Secretary Wilbur Ross called the April 6 U.S. missile strike on Syria "after-dinner entertainment" for President Donald Trump's guests at Mar-a-Lago during a conference on Monday.  Ross, a billionaire banker without previous experience in government, was describing Trump's dinner with China's President Xi Jinping at the Florida club. He was speaking at the annual Milken Institute Global Conference, known for bringing together billionaires and leaders in Beverly Hills, Calif.  “Just as dessert was being served, the president explained to Mr. Xi he had something he wanted to tell him, which was the launching of 59 missiles into Syria,” Ross said, according to Variety. “It was in lieu of after-dinner entertainment.” The audience laughed at the remarks, Variety reports, and Ross continued: “The thing was, it didn’t cost the president anything to have that entertainment.”  At least seven were killed in the attack, according to the Syrian military. The airstrike took place two days after the Syrian government used chemical weapons against civilians.

Russia, Iran, Turkey Ban US Planes Above Syrian "Safe Zones" -  Russia said it’s ready to send peacekeepers to Syria after Turkey and Iran agreed on Thursday to Russia's proposal for "de-escalation zones" in Syria. The move, welcomed by the United Nations, has been met with scepticism from the United States as the so-called safe-zones will closed for warplanes of the United States and those of the U.S.-led coalition.  As Bloomberg reports, the three countries signed a memorandum on the creation of so-called de-escalation areas on Thursday after two days of talks in Kazakhstan that also included representatives of the Syrian government and rebel groups.  Opposition leaders distanced themselves from the plan, saying they can’t accept Iran as a guarantor of the truce and that they want “clear and tangible” guarantees the deal will be enforced.The U.S. also expressed doubts, as State Department spokeswoman Heather Nauert said Thursday that the U.S. has “concerns” about the accord, “including the involvement of Iran as a so-called “guarantor,”’ and said Russia should do more to stop violence.The four safe zones to be established in Syria will be closed for flights by US-led coalition warplanes, said the Russian envoy to the Astana peace talks, where the zones were agreed upon.“Russia is ready to send its observers” to help enforce the safe zones,President Vladimir Putin’s envoy to Syria, Alexander Lavrentiev, told reporters in the Kazakh capital, Astana. “We believe the Syrian crisis can only be resolved through political methods.”“As for [the coalition] actions in the de-escalation zones, starting from now those zones are closed for their flights,” Aleksandr Levrentyev told journalists in the Kazakh capital.

Trump, Putin Hold Phone Call, Discuss North Korea, Syria; Agree To Set Up Meeting- As the White House announced late on Monday, today shortly after noon. Russia's Vladimir Putin and U.S. President Donald Trump held a phone conversation in which they agreed to try to meet in July and work together to try to strengthen a shaky ceasefire in Syria, the Kremlin said in a statement.“Vladimir Putin has called for restraint and decreasing of the level of tensions on the Korean peninsula" the statement said. “It has been agreed to work jointly on a diplomatic solution that will settle the crisis.”The Kremlin called the talks between Putin and Trump business-like and constructive, and said the two leaders had emphasized coordinating their actions to fight international terrorism, the traditional cop out when the real topic of discussion is something entirely different.Putin and Trump decided to “activate the dialogue between the heads of the foreign ministries of both countries who will seek variants to secure the ceasefire regime, stabilize it and control it,” the statement says. “The goal is to create the background that would help launch a real peace process in Syria. This means that Russia’s foreign minister and the US secretary of state would inform their leaders about progress in this regard."On North Korea, the Kremlin said Putin called for restraint and that the two leaders had agreed to work together to make diplomatic progress there too. The two presidents also spoke in favor of organizing a face-to-face meeting around the time of the G20 summit in Hamburg July 7-8. Separately, a White House statement said that the two leaders agreed that "all parties must do all they can to end the violence" in Syria and that Trump and Putin also discussed working together against Islamic militants throughout the Middle East. "The conversation was a very good one, and included the discussion of safe, or de-escalation, zones to achieve lasting peace for humanitarian and many other reasons," a White House statement said.

Trump, Putin Look to Mend Fences Starting With Syria Cooperation - U.S. President Donald Trump and Russian President Vladimir Putin had what the White House called a “very good” call during which they agreed to step up efforts to cooperate on resolving the Syria conflict and the fight against terrorism. “President Trump and President Putin agreed that the suffering in Syria has gone on for far too long and that all parties must do all they can to end the violence,” according to a White House statement Tuesday. “The conversation was a very good one, and included the discussion of safe, or de-escalation, zones to achieve lasting peace for humanitarian and many other reasons.” The two appeared to be overcoming heightened tensions over a U.S. missile strike last month on Russia’s ally Syria and allegations of Moscow’s interference in last year’s U.S. presidential campaign. Steadying the U.S.-Russia relationship could open the way to the broader cooperation Trump promised during the campaign, when he said the world would be better off if the Cold War rivals got along. They also discussed having their first one-on-one meeting in July on the sidelines of the Group of 20 summit in Germany, according to the Kremlin. While its statement said the two leaders were “in favor of organizing a personal meeting,” the U.S. statement didn’t mention that possibility. The positive tone contrasted with a chilly meeting that Putin had earlier Tuesday with German Chancellor Angela Merkel in the Black Sea resort of Sochi, where the two clashed over Ukraine, human rights and election meddling. A senior Russian lawmaker, Konstantin Kosachyov, said Putin’s conversation with Trump showed that both countries are moving toward a “constructive” phase in their relationship, according to the state news service Tass.

U.S. watchdog finds major internal flaws hampering Afghanistan war effort - In its quarterly report to Congress, the Special Inspector General for Afghanistan Reconstruction (SIGAR) urged the Trump administration — which is reviewing U.S. policy toward Afghanistan at a time of sustained Taliban aggression and diminished American assistance — to take a hard look at its programs and priorities and to focus aid more narrowly. “Security is the most obvious and urgent challenge” to rebuilding the country after 16 years of war, the report said. It noted that since 2002, 61 percent of the $71 billion in U.S. reconstruction aid has gone to train, equip and support the 300,000-strong Afghan defense forces. Nevertheless, the SIGAR report said, those forces continue to be hampered by internal problems — such as poor leadership and corruption — as well as by an agile and determined foe that is making it difficult for them to control territory. It noted that more than twice as many Afghan soldiers and police personnel were killed in 2016 as the 2,400 U.S. troops lost since 2001. In an interview here Sunday, Inspector General John F. Sopko noted that senior U.S. military officials, including Gen. John W. Nicholson, the commander of the U.S. military mission in Afghanistan, have described the conflict as being at a stalemate and have suggested that several thousand more U.S. troops are needed to tip the balance. The current troop level is 8,400. “If there is a stalemate, the question is why and how it can be improved,” Sopko said. “The why is corruption, the why is poor leadership. . . . If leadership is poor, the people below don’t care, and they wonder why they have to die.” 

 Wilkerson: “We’re Staying in Afghanistan for the Next 50 Years” -- naked capitalism - Yves here. On Real News Network, Colin Powell’s former chief of staff Lawrence Wilkerson describes the lunacy of what passes for US strategy in Afghanistan. Note there are some sour notes. For instance, Wilkerson depicts Larry Summers as directly connected to Goldman Sachs. Summers was a protege of former Goldman co-Chairman, later Treasury Secretary Bob Rubin, but Summers never did a stint at Goldman (he did have a handsome sinecure from hedge fund DE Shaw).

Merkel hits back at Trump over NATO spending | TheHill: German Chancellor Angela Merkel is pushing back at President Trump's demands that Germany meet NATO's target of spending two percent of gross domestic product on defense. According to Bloomberg, Merkel said Friday that Germany would continue to count foreign aid towards the two percent target, despite the Trump administration's insistence that aid not be counted. “As much as the U.S. government demands meeting NATO’s 2 percent defense spending goal by 2024, we will stand just as much by our 0.7 percent spending on development aid,” Merkel said in her remarks. Trump has hit Germany repeatedly for not meeting NATO's spending targets. In March, Trump sent out several tweets about a meeting with Merkel. He accused Germany of owing "vast sums of money" to NATO. "The United States must be paid more for the powerful, and very expensive, defense it provides to Germany!", Trump tweeted. But Merkel defended her country's spending priorities, saying she favors aid as much as defense. “Germany has always made clear that diplomacy and development aid have to be deployed in addition to defense expenditures,” Merkel said. “So I want to make it very clear, Germany stands by what we call our comprehensive approach, which is not confined to military deployments.”

Mexico calls on Trump to reuse TPP deals to reanimate Nafta -- Mexico is urging Donald Trump to reuse agreements reached under the aborted Trans-Pacific Partnership to create a manufacturing powerhouse between the US, Mexico and Canada to compete with low-cost producers in China. Ildefonso Guajardo, Mexico’s economy minister, said in an interview with the Financial Times that elements of TPP could be used to renegotiate the North American Free Trade Agreement between the three countries. His comments came as the US president agreed not to scrap Nafta, after repeated threats to tear it up. But despite his U-turn last week saying he would bring Nafta “up to date through renegotiation”, Mr Trump backtracked again on Sunday when he told CBS news he could still terminate the pact if the renegotiations failed to provide “a fair deal for all”. Mr Guajardo, lead trade negotiator, said using sections of TPP would offer the US president a quick and relatively easy victory on trade. We are part of the solution that has maintained competitiveness for the US versus China Ildefonso Guajardo, Mexico’s lead trade negotiator“A package is already in your pocket,” he said. “But my message is that if you become extremely greedy you may waste a victory that is already there.” If they agreed to talks, it would be a rare point of agreement between countries whose relations have been strained since Mr Trump described Mexican immigrants as rapists during his election campaign and promised to build a wall along their border. Mr Guajardo said that rather than seeing Mexico as a rival because of its trade surplus with the US, Washington should regard it as a partner in competition with low-cost Chinese manufacturers.

 Canada Retaliates, Threatens Multiple Trade War Actions Against The US -- The trade war between North America's two biggest economies is just getting started. Ten days after Trump unexpectedly imposed duties on Canadian softwood exports drawing loud protests from domestic lumber companies, the Canadian government has threatened to retaliate with multiple trade actions against the US, demanding a long-term deal without which several American industries could soon be targeted. Canada's Prime Minister Justin Trudeau said he would launch the first salvo in a letter to B.C. Premier Christy Clark, informing her that he's seriously considering her request for a ban on thermal coal exports and that it's being explored by federal trade officials. The second threat: a direct tit-for-tat escalation, with possible duties against Oregon-based industries. That also happens to be the home state of a Democratic senator, Ron Wyden, who has been a hardliner on the lumber dispute.

Trump’s Tax Plan Leaves the Swamp Untouched -- President Trump’s tax plan gives those of us with long memories a strong sense of déjà vu. We’ve seen this play before, and the ending is inevitably modest: a few of the pieces of a horrendously complex, unfair tax system are moved around, victory is declared, and the creatures of the Swamp—those self-serving elites that benefit from the complex, unfair monstrosity—continue raking in their billions of dollars in fees while the rest of us are burdened with billions of dollars in tax-preparation costs.  The opening act of this tax-reform play always starts with a claim that by golly, this time we’re really going to simplify the tax code. Trump’s plan calls for reducing the number of tax brackets and eliminating all deductions other than those for charity and mortgage interest; by way of compensation, the standard deduction will be doubled. Such changes make for catchy headlines, but the reality is the tax code will still run to thousands of pages. The Tax Foundation explains the three layers of compliance complexity:

  • Title 26 of the U.S. Code, the tax statutes enacted by Congress, runs to 2,600 pages.
  • The details are left to the IRS (Internal Revenue Service), which publishes roughly 9,000 pages of regulations.
  • If you end up in tax court, there are around 70,000 pages of case law to pore over to make your case.

Simple changes like reducing the number of tax brackets skirt the core problem with the U.S. tax system: the entire tax code is little more than a clearinghouse of political bribes paid for with tax breaks and a complexity thicket that requires the services of legions of accountants, tax attorneys, software coders, and specialists in tax-avoidance strategies. This clearinghouse and complexity thicket are intrinsically unfair, as insiders and the super-wealthy can avoid taxes via political influence and offshore tax havens. This systemic unfairness erodes the social contract’s key compact: that the playing field will be kept more or less level for all participants.

How Does Trump’s Tax Plan Help the Middle Class? ‘Honestly, We Don’t Know’ -   President Donald Trump’s economic advisers pitched his new tax plan as a cut for the middle class and not the wealthy, but the opposite may be true. Tax policy experts say its current provisions would undoubtedly mean lower taxes for top earners, while the impact on middle incomes is less clear. Trump’s blueprint -- a list of bullet points released on April 26 -- would directly reduce taxes for upper earners by cutting the top income-tax rate to 35 percent from 39.6 percent; eliminate the Alternative Minimum Tax, which raises the tax bills of certain taxpayers on the higher side of the income scale; and scrap a 3.8 percent investment income tax under Obamacare that applies to individuals with incomes of more than $200,000. The plan would also repeal the estate tax, which would save an estimated $200 billion over a decade for individuals with estates worth more than $5.45 million. So-called pass-through businesses also would pay the same 15 percent tax rate that Trump has proposed for corporations, which would financially benefit not only mom-and-pop shops but also big partnerships like law firms and business empires like his own. “We can confirm that outline shows plenty of benefits to high-income earners,” said Alan Cole, an economist with the conservative-leaning Tax Foundation. “And for the middle class? Honestly, we don’t know.” As the name suggests, pass-through businesses pass their income through to their owners, who pay taxes at their individual rates. For high-income owners, that rate is currently 39.6 percent, and reducing it to 15 percent would be a major tax cut. In an interview with Fox News that aired on April 28, Trump brushed aside concerns about the pass-through cut. He focused on his call to cut the top individual rate to 35 percent and to eliminate most deductions. “If I’m individually paying 35 percent, I will tell you that’s more,” he said during the interview. “I’m going to end up paying more than I pay right now.” He added: “The reason I will pay more is because I’m going to lose all the deductions.”

Trump’s Tax Cuts May Be More Damaging Than Reagan’s - As a young New York Times reporter nearly four decades ago, I helped chronicle the rollout of what proved to be among our country’s greatest economic follies — the alchemistic belief that huge tax cuts can pay for themselves by unleashing faster economic growth.Buoyed by this idea, Congress passed the largest tax reductions in history just seven months after Ronald Reagan’s inauguration. I was deeply skeptical of the illogical notion that tax cuts could somehow pay for themselves, so much so that I was attacked by name on the Wall Street Journal op-ed page. That, in turn, caused consternation among my editors in an era when reporting was meant to be less analytical.Nonetheless, I felt no joy as the plan immediately made a bad economy worse.  Now comes Donald Trump, essentially trying to revive that same supply-side credo (famously branded “voodoo economics” by George H. W. Bush) with his proposal for $5.5 trillion of tax giveaways, mostly for business. Even some of the outsize personalities that I encountered in 1981 are back, most notoriously the concept’s godfather, Arthur Laffer, who advised the Trump presidential campaign. What proved a bad idea then is a worse one now. Unemployment was 7 percent and rising when President Reagan took office. Today, with unemployment at just 4.6 percent, broad-based fiscal stimulus isn’t likely to create much new employment. For its part, the Reagan tax cut increased the budget deficit, helping elevate interest rates over 20 percent, which in turn contributed to the double-dip recession that ensued. The stock market fell by more than 20 percent. Fiscally, the revenue loss totaled 2.9 percent of the average gross domestic product between 1981 and 1985. But perhaps the greatest damage inflicted by the Reagan tax cuts was to our political psyche, making respectable — particularly among Republicans — the terrifying notion that high deficits resulting from tax cuts don’t matter because faster economic growth will quickly close the gap. (At the time, this idea was called supply-side economics, but it has now been rebranded with the phrase “dynamic scoring.”)

Under the Trump Tax Plan, We Might All Want to Become Corporations -- Corporations are people, Mitt Romney once told us. But if the Trump administration’s tax plan were to become law, in the future a whole lot of people may just become corporations. That’s because of a huge loophole implied by the broad tax ideas the administration recently released. Unless revised in actual legislation, the plan would give millions of Americans the opportunity to cut their taxes by essentially turning themselves into small business entities. This mind-bending curiosity of the tax code could undermine the very idea of a job as we know it — or, arguably, accelerate a shift that has been underway for years. The opportunity to game the system arises from the huge gap between the tax rate paid on individual income — up to 39.6 percent now, or 35 percent under the Trump plan — and the low rate on business income the president proposes, of 15 percent. He seeks to apply that rate to all businesses, including “pass-through” organizations such as limited liability companies and S corporations, and that is where the opportunity for games arises. For example, I am currently an employee of The New York Times, paid a salary every two weeks to write articles about economics. My earnings are labor income; I happen to be in the 28 percent tax bracket. Suppose I instead formed Irwin Scribblings L.L.C., a “company” dedicated to providing economics writing services. Irwin Scribblings could then contract with The Times to provide articles about economics for a rate equivalent to the value of my current salary and benefits. Under current law, I would pay the same taxes on that business income that I do on personal income. In important ways I would be worse off, as I would need to pay more of my own payroll taxes, wouldn’t have unemployment insurance, and would need to get health insurance through some channel other than my employer. But under the Trump tax plan, my tax rate would fall to 15 percent from 28 percent, saving thousands of dollars a year — enough to justify those annoyances.

Stockman Slams Trump's "Dead On Arrival" Tax Plan, Warns Wall Street's "Delusional" For Believing It -- David Stockman has a stern message for investors: They're living in a fantasy land about Trump."I don't know what the stock market is thinking but if they have faith in a giant fiscal stimulus and tax cut then it's a delusional faith that's going to be badly disappointed and I think fairly soon," rages the former director of the Office of Management and Budget under President Reagan, during a recent interview with CNBC.Stockman said that "Wall Street is totally misreading Washington," and President Trump's promises of tax reform will be "dead before arrival."The president is "essentially a 70-year old kid in a candy store who wants one of everything: More for defense, veterans, border walls, law enforcement, infrastructure and 'phenomenal' tax cuts, too—without the inconvenience of paying for any of it," said Stockman.Of the proposed tax bill announced this week, he said, "It's a wonderful fantasy…but there's no way to pay for the $7.5 trillion cost of the main features.""I like [the tax plan] but you have to pay for it either with a new tax like the border adjustment tax, which is dead, or spending cuts which Trump has ruled off the table," Stockman explained."What you have down there is a total fiscal calamity that is going to basically dominate Washington."Stockman expects a "constant fiscal crisis and stalemate" in D.C., which will ultimately delay the "good stuff," like a tax cut, from ever happening. Of Trump's first 100 days in office, Stockman again referred to the White House as a "pop up store giving out candy before the 100th day to say they've accomplished something." Adding,"this isn't a serious plan, it can't be done. And I think it's only indicative of the huge trouble that's brewing down there in the beltway."

Steve Rattner is peddling nonsense about America’s budget deficit - President Donald Trump wants to cut taxes. Reasonable people can disagree whether this is a good idea and can also disagree on the merits of the specific priorities reiterated last week. But reasonable people also need to support their arguments with actual substance rather than platitudinous scare-mongering — especially when their argument includes dire warnings against the long-term consequences for the budget deficit. A recent article by former “car czar” and disgraced private equity investor Steven Rattner fails the test.  Rattner worries that “huge, unpaid-for tax reductions that saddle us with large amounts of new debt” will burden “our children and grandchildren”. Rattner’s main piece of evidence is the 1981 tax cut, which he claims “increased the budget deficit, helping elevate interest rates over 20 percent, which in turn contributed to the double-dip recession that ensued”.  Literally none of that is true.  The most salient economic event of the early 1980s was Paul Volcker’s decision — implicitly backed by the majority of the American people — to crush inflation by any means necessary. That meant imposing what West German Chancellor Helmut Schmidt called “the highest real interest rates since the birth of Christ” and inflicting the worst US downturn since the Great Depression. The losses in jobs and output were comparable to, if not worse than, what happened during the financial crisis, although the subsequent recovery was far stronger. Between the end of 1979 and the end of 1982 the unemployment rate increased from 6 per cent to almost 11 per cent. The downturn hit tax revenues since fewer people working means less income to tax. In addition to the tax hit, there was a lot more spending on jobless benefits and other programmes meant to help the needy. Unsurprisingly, the federal government budget deficit widened from about 2 per cent of gross domestic product in 1979 to roughly 7 per cent by mid-1983. This is a general pattern. For more than six decades, changes in America’s federal government budget balance are almost perfectly inverted with changes in the jobless rate:

Third Time The Charm: White House Plans Wednesday Healthcare Vote, Confident It Has The Votes  Will third time be the charm for Trump's attempt to pass a Republican healthcare bill? After two consecutive failed attempts to repeal Obamacare at the end of March and again last week, on Monday morning Trump's two key advisers, first Gary Cohn then Reince Priebus, said they think there are enough votes to pass the revised GOP healthcare proposal."Do you have the votes for healthcare?" Cohn was asked on CBS This Morning. "I think we do," he answered.m "This is going to be a great week," Cohn continued. "We're going to get healthcare down to the floor of the House. We're convinced we got the votes and we're going to keep moving on with our agenda."Cited by The Hill, Cohn, who serves as director of the National Economic Council, also touted the administration's tax plan. "We're very excited about our tax plan as well," he said. "We're going to continue to drive President Trump's agenda forward." Trump chief of staff Reince Priebus echoed Cohn's optimism telling CBS that he thinks the vote “will happen this week" and added that “we’ll have tax reform by the end of the year.”Furthermore, Axios reports that House Republicans told Democrats that Wednesday is the likely day for the vote on repealing and replacing the Affordable Care Act.That's one reason they wanted to announce the budget agreement last night — they wanted to get it out of the way ahead of the health care vote.Speaker Ryan's office did not confirm the story, but it also didn't issue a denial. Another leadership aide says no official call has been made. It's probably a good idea not to make other plans for Wednesday, just in case.After pulling legislation from the House floor in March, and failing to secure enough votes at the end of last week when Trump's first 100 days in office ran out, GOP leaders are now vowing they will not call a vote until they have enough votes for its passage.On Friday, House Majority Leader Kevin McCarthy said he did not "have anything scheduled for next week," regarding the healthcare bill. However, he added that "as soon as possible, we will bring that bill to the floor."

GOP struggles to find ObamaCare repeal votes | TheHill: The Republican bill to repeal and replace ObamaCare appears to lack sufficient votes to pass the House, despite hopes from GOP leaders and the White House that it might be approved by the lower chamber this week. According to The Hill's whip list, 21 Republicans oppose the bill — the maximum number of GOP defections that can be afforded — assuming every Democrat also votes against it. The latest Republican to announce his opposition is Rep. Billy Long (Mo.), a staunch conservative who often says he was “Tea Party before Tea Party was cool.” He told The Hill he wouldn't support the bill because of the impact it could have on people with preexisting conditions. “I have always stated that one of the few good things about ObamaCare is that people with pre-existing conditions would be covered,” Long said in a statement to The Hill. “The MacArthur amendment strips away any guarantee that pre-existing conditions would be covered and affordable.” An amendment authored by Rep. Tom MacArthur (R-N.J.) would allow states to apply for waivers to two ObamaCare provisions: essential health benefits, which mandates what services insurers must cover, and “community rating,” which essentially bans insurers from charging people with preexisting conditions more for coverage.While the AHCA keeps an ObamaCare provision banning insurers from denying coverage to people with preexisting conditions, allowing states to waiver out of community rating means insurers could charge sick people more. States that get that waiver would have to have a high-risk pool as a backstop for people priced out of coverage. But those pools, in the past, have seen waiting lists, high premiums and other issues. 

GOP congressman: People with pre-existing conditions lead “bad” lives - Republican Congressman Mo Brooks, who is a member of the US House Freedom Caucus, responsible for creating the new TrumpCare plan to repeal Obamacare, said today that people who have pre-existing conditions lead bad lives and are therefore to blame for their conditions. Here’s Brook’s unbelievable statement to CNN this afternoon: (video)  What’s important to realizes is that people like Brooks created TrumpCare. The entire legislation was made to appease people like Brooks in the GOP “Freedom Caucus.” People who think you are to blame for your asthma, for your mom’s cancer, for your dad’s diabetes, and for your child’s leukemia. It’s unbelievably heartless.

GOP suffers surprise defection on Obamacare repeal - President Donald Trump dialed up his campaign-trail ally Rep. Billy Long on Monday, after the Missouri Republican announced his decision to vote against the Republican plan to replace Obamacare. The goal was straightforward: Persuade Long to change his mind.It didn't work. Though Long hails from a deeply conservative district that overwhelmingly backed Trump over Hillary Clinton in November, and Long supported earlier versions of the legislation, the president's entreaties fell short, GOP insiders said.  It was an unexpected blow for House GOP leaders and the White House, who were bullish over the weekend that they were on the cusp of clinching the votes to pass the legislation. Instead, the scramble for support is still very much on. “I have always stated that one of the few good things about Obamacare is that people with pre-existing conditions would be covered," Long said in a statement. "The MacArthur amendment strips away any guarantee that pre-existing conditions would be covered and affordable,” he added, referring to the last-ditch compromise between conservatives and House moderate Rep. Tom MacArthur (R-N.J.).And the task was made even harder by an unforced error from Trump. The president told Bloomberg News in an interview Monday morning that the bill might change to provide more protections to people with preexisting conditions. “It’s not in i ts final form right now,” he said. Trump's comments frustrated the House whip effort, as some members interpreted them to mean the president was reopening negotiations.

 GOP bill hung up on pre-existing conditions | TheHill: Rep. Fred Upton (R-Mich.) on Tuesday became the latest House Republican to come out against the ObamaCare repeal-and-replace bill, underlining how the legislation is losing support from lawmakers who fear it could hurt people with pre-existing health conditions. Some lawmakers expressed doubts that the healthcare bill would come up for a vote this week despite a push from House leaders to get it to the floor before a one-week recess. “I guess all things are possible, but at least right now I don't see that happening,” said Rep. Phil Roe (R-Tenn.), who said there are too many “no” votes piling up.The opposition from Upton, a former chairman of the House Energy and Commerce Committee, was significant. He is widely respected on the issue, having written healthcare legislation in the past, and described the changes to the bill as a bridge too far. "I’ve supported the practice of not allowing pre-existing illnesses to be discriminated against from the very get-go," Upton said. "This amendment torpedoes that, and I told leadership I cannot support this bill with this provision in it." The revised bill would allow states to waive certain ObamaCare protections that now prevent insurers from charging people more based on their health. The provision — inserted to win over the House Freedom Caucus — has become perhaps the biggest obstacle to passing the healthcare bill, causing members like Upton to turn against it. 

Outlook for Obamacare repeal turns bleak - POLITICO: A sense of gloom settled over House Republicans on Tuesday as support for their Obamacare repeal plan seemed to erode even further and members began reckoning with the unthinkable: They may never be able to repeal Obamacare. But House GOP leaders and the White House kicked into high gear Tuesday night in a last-ditch effort to save the bill. Story Continued Below Speaker Paul Ryan and his team began crafting an amendment aimed at assuaging moderates' concerns about how the bill treats people with pre-existing conditions. The language, multiple sources say, is expected to be released Wednesday. President Donald Trump, meanwhile, is personally wading in to save the bill, calling members who oppose the legislation to help whip support, two sources told POLITICO. Trump will also huddle with opponents of the bill at the White House Wednesday, the sources said. And insiders are crossing their fingers that he can flip enough to "yes" to push the bill over the finish line. Discussions of a new amendment followed a disheartening day for House Republicans. Rank-and-file members increasingly acknowledged the difficult path to passage for their long-stalled bill, the American Health Care Act. Their pessimism stemmed from the defection of a key leadership ally, Rep. Fred Upton. The Michigan Republican, who once authored a slew of Obamacare repeal measures, said the latest GOP proposal failed to protect people with preexisting conditions.House Freedom Caucus Chairman Mark Meadows (R-N.C.), who helped broker the latest version of the AHCA, said Upton’s departure could be a significant blow to the cause. “Obviously that’s not a move in the right direction,” Meadows said. Rep. Chris Collins (R-N.Y.) described the recent loss of support as “disappointing” and said he’s worried about the House Republican health care effort. Collins even suggested scrapping the latest version of the plan — the result of painstaking negotiations between House conservatives and a top moderate — and reverting to an earlier iteration of the bill that had more support from centrists. 

ObamaCare repeal gains votes and momentum | TheHill: Reps. Fred Upton (R-Mich.) and Billy Long (R-Mo.) on Wednesday said they would support the GOP’s ObamaCare repeal-and-replace bill with the addition of an amendment, giving the effort new momentum as GOP leaders push toward a floor vote. The two Republicans made the announcement at the White House after meeting with President Trump. "I think it is likely now to pass the House,” Upton said. But Upton added he’s “not on the whip team” and can’t definitively say there are enough votes for it to pass. Both Upton and Long dealt a setback to the healthcare measure earlier this week, when they came out against it because they saidit failed to protect people with pre-existing conditions. The new amendment from Upton would provide $8 billion over five years to help people with pre-existing conditions afford their premiums in states that are granted a waiver from ObamaCare’s protections. The liberal Center for American Progress estimated on Tuesday that the high-risk pools are underfunded by much more: $200 billion over 10 years. The GOP bill already includes $130 billion over 10 years, which was not swaying many moderates as of Tuesday. Upton himself said on Tuesday afternoon that more money for the high-risk pools “does not do the trick,” but he appeared to have a change of heart on Wednesday. 

"We Have Enough Votes": House To Vote Thursday To Repeal Obamacare -- The Republicans are giving Obamacare repeal another try, and this time they may succeed.Just a few hours after we reported that "Obamacare repeal suddenly looks possible" when two key Republicans - Fred Upton and Billy Long  - flipped and decided to support the GOP healthcare bill, leading to immediate speculation the bill has enough support, the WSJ reported that House Majority Leader Kevin McCarthy told reporters Wednesday evening the House will vote on Thursday on the Republican bill to replace most of Obamacare: “we will be voting on the health-care bill tomorrow because we have enough votes.”When asked by a reporter about whether the bill would have to be pulled from the floor again for lack of support, McCarthy replied: "Would you have confidence? We're going to pass it. We're going to pass it. Let's be optimistic about life."McCarthy also cited an insurer pulling out of the ObamaCare exchanges in Iowa Wednesday as a reason the law needs to be quickly repealed.  "That's why we have to make sure this passes. To save these people from ObamaCare, which continues to collapse." And so just like at the end of March, when the GOP was confident it had whipped enough names, only to pull the vote in the last moment, the announcement once again sets up a high-stakes vote that is expected to come down to the wire. The House GOP bill, if passed, would roll back much of the 2010 health-care law, replacing its subsidies with a system of tax credits largely tied to age. Until Wednesday, Republican leaders had struggled to secure the 216 votes they need to pass the bill, which is expected to receive no Democratic support. They pulled the bill from the floor in late March, when conservatives and centrists defected and it became clear the legislation didn’t have the support to pass. Last week, GOP leaders also opted not to vote on the bill ahead of Trump's first 100 days in office.

GOP rushing to vote on healthcare without analysis of changes | TheHill: House Republicans are once again fast-tracking consideration of their ObamaCare replacement bill without knowing the full impact of the legislation they’ll vote on Thursday. The nonpartisan Congressional Budget Office (CBO) is not expected to have completed its analysis detailing the effects of the latest changes to the legislation overhauling the nation’s healthcare system in time for the Thursday vote. Leadership’s decision to press ahead with the floor action means lawmakers will be voting on the bill without updated figures from their nonpartisan scorekeeper on how many people would lose coverage under the bill or how much it would cost. When asked why the vote would not wait for the score, Rep. Fred Upton (R-Mich.) -- the lead sponsor of a new amendment to the bill that might push it over the finish line -- said “because I don’t expect it probably for a couple weeks.” “I wish that we had it, alright?” Upton added. “I wish that we had had it in committee, I said so at the time.” The lack of a score comes despite years of GOP attacks on Democrats for what Republicans argued was a rushed process that rammed through ObamaCare in 2010. The latest bill text was posted Wednesday, just one night before the vote. Upton’s amendment adds $8 billion over five years aimed at helping people with pre-existing conditions afford their premiums in states that choose to repeal ObamaCare protections preventing sick people from being charged exorbitantly high premiums. Many health policy experts doubt that $8 billion is enough money. And Upton himself said Wednesday that he doesn’t know for sure that it will be Some lawmakers acknowledged that it would be helpful to have an analysis, known as a “score,” from the CBO, but said they could not wait for it. 

We Don’t Need No Stinkin’ CBO Score -- The House leadership, that is. According to The Hill: The House will vote without waiting for a new Congressional Budget Office (CBO) analysis of Upton’s changes or the amendment from Rep. Tom MacArthur (R-N.J.) that won over the House Freedom Caucus. That analysis will eventually provide insight into the bill’s effects on coverage and its cost.  What’s the difference between what went down in flames earlier, and what is coming now? The text is not accessible to me yet (I searched here), but my understanding is it allows to waivers so states can drop the pre-existing conditions… and adds $8 billion over ten years to fund high risk pools.  Here’s some illustration of the sheer insufficiency of $8 billion. From CBPP: The details behind this additional $8 billion are unclear; some accounts suggest it would go to fund state high-risk pools, while others suggest it would go for other purposes. But either way, the additional funding wouldn’t come remotely close to addressing the severe problems that the bill creates for people with pre-existing conditions. Notably, the $8 billion would restore less than 1 percent of the nearly $1 trillion the House bill cuts from programs that help people afford coverage. This seems in some ways even worse for coverage than the first plan, which CBO assessed thusly: CBO and JCT estimate that enacting [H.R. 3762] would affect insurance coverage and premiums primarily in these ways:

  • The number of people who are uninsured would increase by 18 million in the first new plan year following enactment of the bill. Later, after the elimination of the ACA’s expansion of Medicaid eligibility and of subsidies for insurance purchased through the ACA marketplaces, that number would increase to 27 million, and then to 32 million in 2026.
  • Premiums in the nongroup market (for individual policies purchased through the marketplaces or directly from insurers) would increase by 20 percent to 25 percent—relative to projections under current law—in the first new plan year following enactment. The increase would reach about 50 percent in the year following the elimination of the Medicaid expansion and the marketplace subsidies, and premiums would about double by 2026.

Well, I can’t be sure it’ll be worse. For certain, the representatives voting tomorrow won’t know for sure because the House leadership is heck-bent on a vote without knowing. For them, it is clear, more knowledge is not helpful.

The very bad House health care replacement plan just keeps getting worse. Over at WaPo, with many useful links to facts, all of which are being willfully ignored in the political process. EG, the House R’s are unsurprisingly pushing ahead without a CBO score of the impact of their amendments to their already toxic American Health Care Act. Facts, of course, are not their friends. I don’t like it anymore than you do when economists veer into political punditry, but I can’t resist a few observations. If the amended bill passes the House, and the word on the street is that it may well do so, then:

  • —It shows that so-called Republican moderates provide no buffer at all against the hard right. They were bought off in this case by a fig leaf that they surely know won’t prevent the loss of affordable coverage. Why that is the case, I don’t know, but it suggests they do not believe their constituents will hold them accountable.
  • —Part of that calculus might represent their belief, if not hope, that whatever comes out of the Senate will be less draconian than the House bill. Then, there’s some sort of reconciliation of the two.
  • —A few people have asked me: if the House passes this bill, what happens in the Senate? I’ve got no idea, but I can’t imagine they want to spend a lot of time fighting about the impact of this bill over there, especially once CBO scores it. A new score would be even uglier than the last one in terms of loss of coverage, as this one will reflect the return of “medical underwriting,” higher premiums for those with pre-existing conditions, including cancer, asthma, depression, and the belief that tax cuts pay for themselves.
  • —If Senate R’s were smart, they’d just bring this damn beast up for a vote and be done with it. But I doubt they’ll do so. So, good news, folks! We’re not done fighting about health care, and instead of improving the ACA, we’re going to have fight like h-e-double-hockey-sticks not to go backwards.

The AHCA-but-worse plan should not be passed by the House today – EPI - A vote in favor of the American Health Care Act (AHCA) today would be a vote to make the vast majority of Americans poorer, less healthy and more financially insecure. The AHCA would cost 24 million Americans their health insurance coverage. The majority (14 million) would lose it to breathtakingly large cuts (almost $900 billion over the next decade) to the vital Medicaid program. Further, 7 million Americans would lose the coverage they get through their employer if AHCA passes. Costs would skyrocket for those who still needed coverage in the nongroup market. A 64 year-old making 175 percent of the federal poverty line would pay $12,900 more each year for the health insurance plan’s premiums under AHCA, but would also face deductibles and co-pays that would cost thousands more than they do currently. For the entire nongroup market, out-of-pocket costs after premiums would rise by $25 billion each year by 2026 if AHCA is passed. On top of this severe degradation of health and financial security, the AHCA would also drag on job-growth in coming years. This drag would occur because the AHCA cuts to Medicaid and insurance subsidies reduce growth in economic activity and job creation far more powerfully than the AHCA tax cuts boost this growth. By 2022, this drag could lower employment by 1.8 million unless some countervailing macroeconomic boost neutralized the AHCA job-losses. This drag on job-growth would felt in nearly every Congressional District.

High-risk pools won’t match Obamacare’s protections for pre-existing conditions - House Republicans want to replace the protections Obamacare provides for people with pre-existing conditions with federally funded high-risk pools.GOP lawmakers are scurrying to save their health care bill by proposing to pump more money into a fund aimed at helping states and insurers deal with high-cost patients. The latest change: an additional $8 billion over five years to support high-risk pools in states that seek waivers to opt out of two key Obamacare insurance provisions. While states would be able to design their high-risk pools in different ways, they would not offer the same protections that Obamacare does for those with pre-existing conditions, experts say.  The new funding likely wouldn't go far, especially if many states decided to apply for waivers, said Larry Levitt, senior vice president at the Kaiser Family Foundation.  The ACA absolutely has problems. But one thing it's done well is provide coverage to people with pre-existing conditions. $8 billion could provide coverage to a few hundred thousand high-risk enrollees, out of millions who might need it.  Even under pretty conservative estimates, a minimally adequate high-risk pool could cost $25 billion per year nationwide.  Prior to the health reform law, consumers who have or who previously had medical issues -- even if it were years earlier and completely resolved -- could be denied coverage or charged much more in premiums. Obamacare remedies that by requiring insurers to cover everyone and charge them the same amount, regardless of their health history. Also, it mandates all policies cover 10 essential health benefits, including prescription drugs, hospitalization and doctors' visits, so the sick could be assured their treatments are covered. "The rules under Obamacare were comprehensive," said Karen Pollitz, senior fellow at the non-partisan Kaiser Family Foundation.  This expansive coverage, however, comes with a high price tag. It bumps up the cost of premiums for everyone. That's why the conservative Freedom Caucus set its sights on getting rid of these popular provisions.

The Michigan Morsel - To corral some last-minute votes, the House leadership has endorsed the Upton amendment to the American Health Care Act. The legislative text was released late yesterday, giving members no time to understand what it does before they vote on it today. That’s a shame: the amendment works at cross-purposes with other parts of the AHCA, is arbitrarily structured, and is ambiguous on a key point. It’s another example of the perils of doing health policy on the fly.Under the earlier MacArthur amendment to the AHCA, states can apply for waivers from some of the Affordable Care Act’s rules, including the rule that insurers can’t take health status into account when setting rates. In waiver states, insurers will be allowed to hike the premiums of people with preexisting conditions who have a lapse in coverage. The goal is to encourage healthy people to maintain continuous coverage—a Republican-friendly substitute for the individual mandate. You want to go without insurance? Fine. But you’ll be fenced out of the insurance markets if you develop some terrible disease. That’s a harsh policy, but it’s an explicable one. (Waivers might also undermine community rating for people without a coverage gap, as Matthew Fielder expertly explains. But let that pass for now.) What’s more, the policy responds to a genuine problem: without the individual mandate, and with savage cuts to ACA subsidies, the exchanges will have a hard time attracting healthy enrollees. The 30% continuous-coverage penalty is too small to make a difference. With a waiver, however, the states can pull out the big guns. If you believe in the MacArthur amendment—if you believe in it so much that that’s what it took to secure your support for the AHCA—the last thing you’d want to do is dilute the penalty for going without coverage. But that’s exactly what the Upton amendment does. The amendment appropriates $8 billion over five years and gives it to those states that allow insurers to discriminate against people based on their health status. The money must be used “for the purpose of providing assistance to reduce premiums or other out-of-pocket costs of individuals who are subject to an increase in the monthly premium rate for health insurance coverage as a result of [a] waiver.” In other words, the state will offer you some financial assistance when an insurer charges you more because of a preexisting condition.As a policy matter, this makes no sense. If you think it’s cruel to withhold insurance from people with preexisting conditions, then you should retain the rule banning discrimination on the basis of health status. Instead, the Upton amendment tries to correct a problem that the AHCA itself creates.

Should a state government decide marginal increments of health care? -  Tyler Cowen - That is one of the debates swirling around the resuscitated Republican health care plan (NYT summary), which now seems to have some chance of passing.  Sarah Kliff writes:The Republican solution to sick people who need health insurance in a post-Obamacare world is increasingly coming to center on three words: high-risk pools.The White House has reportedly secured the support of Rep. Fred Upton (R-MI), a longtime legislator, by promising an additional $8 billion to fund these programs. That would mean the Republican plan has nearly $115 billion that states could use, if they wanted to, for high-risk pools.…There were 35 state high-risk pools before the Affordable Care Act passed. To control costs, they would often do things like charge higher premiums than the individual market. Most had waiting periods before they would pay claims on members’ preexisting conditions, meaning a cancer patient would need to pay premiums for six months or a year before the high-risk pool would cover her chemotherapy treatments.Kliff then notes those pools have proved quite expensive.  And:The Republican bill doesn’t require states to build high-risk pools — it just gives them the option. And it has little to say about how states should build them if they decide to do so. It is possible they would also have lifetime limits and preexisting condition waiting periods. Those details are hugely important, but are unlikely to get sorted out until after the bill passes and the Trump administration begins to write regulations. I don’t favor ACHA, which I see as bringing no benefit and also as involving a cynical desire to repeal Obamacare simply to fulfill a campaign promise (and it needs a CBO score).  Still, I see many people fulminating about this change toward high risk pools, yet without defending their position much beyond a hand wave.  Should all requests for emergency medical care receive additional government funding?  Obamacare itself does not embody anything remotely like that principle, for instance consider all the medical conditions not covered under the mandate, or covered only imperfectly.  Not to mention the rare diseases that receive only limited R&D dollars.  And we’re about to run out of yellow fever vaccine — nasty!  The list goes on and on.  How are those pandemic preparations coming?

House passes ObamaCare repeal | TheHill: House Republicans on Thursday passed legislation aimed at repealing and replacing ObamaCare, taking a major step toward a long-held goal and setting in motion an overhaul of the nation’s health system. The narrow 217-213 vote is a victory for GOP leaders, who faced a tumultuous path to getting the bill to the floor. The measure had to be pulled in March because of a lack of votes, but a series of deals since then brought on board the conservative Freedom Caucus and then wavering moderates. "Today we made history by taking the first important step toward rescuing hardworking families from the failures and skyrocketing costs of Obamacare," House Majority Whip Steve Scalise (R-La.) said in a statement. Twenty Republicans voted against the bill, most of them centrists hailing from swing districts that Democrats are targeting in 2018. After the vote, Republican lawmakers loaded into Capitol Police buses to drive to the White House for a celebration with Trump. As they got on board, a group of protestors gathered nearby, chanting "shame!" at them. Trump, flanked by House Republicans, said from the White House Rose Garden he was "confident" the Senate would also vote to repeal ObamaCare. "Yes, premiums will be coming down. Yes, deductibles will be coming down. But very importantly, its a great plan and ultimately thats what its all about," Trump said.

GOP lawmaker admits not reading 'every word' of healthcare bill | TheHill: Rep. Chris Collins (R-N.Y.), a top ally of President Trump, admitted Thursday he did not read the entire text of the GOP's healthcare bill that passed earlier in the day, but said his staff did. "I will fully admit, Wolf, I did not, but I can also assure you my staff did," Collins told host Wolf Blitzer on CNN's "The Situation Room." "You know, I have to rely on my staff and I can probably tell you that I read every word and I wouldn't be telling you the truth, nor would any other member," he continued. "We rely on our staff and we rely on our committees and I'm comfortable that I understand this bill in its entirety, Wolf, without pouring through every word and I'm just being quite honest. That's the way it is," he said. Rep. Jim Himes (D-Conn.) quickly trolled Collins on Twitter after Collins admitted he didn't read the amended bill in its entirety. And now you're very very famous. — Jim Himes (@jahimes) May 4, 2017 House Republicans successfully passed the American Health Care Act by a narrow 217-213 vote Thursday. The legislation repeals and replaces key ObamaCare provisions. No House Democrats supported the healthcare bill, and many publicly slammed the bill as "abominable" and a "tax cut for millionaires." Twenty Republicans broke with their party to oppose the bill. 

Softening his approach, Trump helps seal a healthcare deal | Reuters: U.S. President Donald Trump, on his third try at overhauling Obamacare, sent no tweets attacking fellow Republicans, set no deadlines and issued no public ultimatums. Lawmakers who met with him said he spoke with them, not at them. Some lawmakers and aides in the U.S. House of Representatives were hesitant to credit Trump or his softer approach with Thursday's 217-213 vote rolling back President Barack Obama's signature 2010 healthcare overhaul. Several aides emphasized the role of House Republican leaders and Vice President Mike Pence in bridging differences between the party's moderates and hardline conservatives. Others said they saw a different Trump at work this week versus March 24, when he backed a bill that collapsed and again in April when his fellow Republicans failed a second time. Representative Mark Sanford, a Republican member of the conservative House Freedom Caucus, said on Thursday that in March the White House threatened to work against his re-election bid if he balked at supporting the healthcare bill. This time Trump, who took office in January, was "largely absent," Sanford said, adding: "They got it clear that threats were not going to work with me." In White House talks with Republican Representatives Fred Upton and Billy Long, Trump helped to nail down critical moderate votes.

House Passes AHCA: How It Happened, What It Would Do, And Its Uncertain Senate Future - On May 4, 2017 the House of Representatives passed the American Health Care Act (AHCA) by a near party-line vote of 217 to 213. The AHCA was first introduced in the House on March 6, 2017 in response to the long-standing promise by Republican members of Congress to repeal the Affordable Care Act. The AHCA, however, does not repeal the ACA. It does not touch the provisions of six of the ACA’s ten titles dealing with Medicare payment, quality, and care delivery reforms; fraud and abuse; workforce reform; biosimilars; prevention; or many other issues.  What the original AHCA did do was eliminate, according to a Congressional Budget Office analysis of the bill, almost $900 billion in taxes imposed by the ACA on higher-income taxpayers and health care providers or insurers. It also cut Medicaid by an equivalent amount by phasing out enhanced funding for the Medicaid expansion and moving Medicaid to a block grant or per capita cap program. On March 13, 2017, the Congressional Budget Office released its analysis of the initial AHCA bill. Its analysis was not encouraging. It did project that the bill would save $337 billion over ten years, as $1.2 trillion in cost reductions (mainly from the Medicaid cuts and reduction in premium assistance to low-income Americans) was offset by an $883 billion reduction in revenues. The CBO projected, however, that the amendment would result in 14 million people dropping or losing coverage by 2018, rising to 24 million by 2026. The losses would come primarily from repeal of the individual mandate and Medicaid cuts.On March 20, 2017, however, the bill’s Republican sponsors modified the initial bill with a manager’s amendment. This amendment made several significant changes in the AHCA’s Medicaid provisions, including allowing states to opt for a block grant rather than per-capita cap. It also made changes in the AHCA’s tax repeals, moving the repeal dates on most up from 2018 to 2017. A further manager’s amendment offered on March 23 delayed the repeal of the ACA’s Medicare surcharge for a year and added $15 billion to the Patient Stability Fund for 2020 to cover maternity, mental health, and substance use disorder care. It also would have allowed states to define the essential health benefits to determine the coverage of benefits by premium tax credit.  On April 6, yet another amendment was offered in an attempt to move the bill forward. The amendment created an “invisible-risk sharing” program to supplement the AHCA’s Patient Stability Fund. Under the invisible risk sharing provision, health plans would identify enrollees with high-cost conditions at the time of enrollment. Insurers would cede 90 percent of the premiums collected from these enrollees to the federal risk pool, which would share in the costs of claims above a certain threshold incurred by these enrollees.  The AHCA blazed back to life on April 23, when amendments were introduced by Tom MacArthur (R-NJ) intended to pick up votes from the conservative House Freedom Caucus. Those amendments would allow states to apply for waivers from the ACA’s essential health benefit (EHB) and the AHCA’s 1 to 5 age rating requirements. Under the ACA, insurers are required to cover ten categories of EHB at levels equivalent to typical employer plans. Waivers would allow them to establish less generous minimum benefit requirements. The amendment also removed the earlier amendment allowing all states to establish EHB requirements for premium tax credit purposes. Finally, the Upton amendment offered by congressman Fred Upton (R-MI) (summary) will create a fund of $8 billion for the years 2018 to 2023 to be granted to states that permit insurers to charge higher premiums to high-cost individuals who have had a gap in coverage based on health status to be used to provide “assistance to reduce premiums or other out-of-pocket costs of individuals who are subject to an increase in the monthly premium rate for health insurance coverage as a result of such waiver.”

Here's What's In The House Republicans' Health Care Bill --- House Republicans approved their plan to replace the Affordable Care Act on Thursday. Here's a rundown of key provisions in the American Health Care Act and what would happen if the Senate approves them and the bill becomes law.The bill would no longer require people to buy insurance through the marketplaces created by the Affordable Care Act, also known as Obamacare, if they want to use federal tax credits to buy coverage. It also would eliminate the tax penalty for failing to have health insurance coverage, effectively doing away with that requirement altogether. In place of that mandate, the bill encourages people to maintain coverage by prohibiting insurance companies from cutting them off or charging more for pre-existing conditions as long as their insurance doesn't lapse. If coverage is interrupted for more than 63 days, however, insurers can charge people a 30 percent penalty over their premium for one year.The House Republican plan would eliminate the income-based tax credits and subsidies available under the Affordable Care Act, replacing them with age-based tax credits ranging from $2,000 a year for people in their 20s to $4,000 a year for those older than 60.That means some people will see their costs go up while others would pay less, depending on your age and where you live. This Kaiser Family Foundation interactive map shows how the change would play out across the country.The bill eliminates nearly all the taxes that were included in the Affordable Care Act to pay for the subsidies that help people buy insurance. Those cuts, which add up to about $592 billion, include a tax on incomes over $200,000 (or $250,000 for a married couple); a tax on health insurers and a limit on how much insurance companies can deduct for executive pay; and a tax on medical-device manufacturers.The Republican plan would gradually roll back the Medicaid expansion starting in 2019 by cutting the federal reimbursement to states for anyone who leaves the Medicaid rolls. People often cycle in and out of the program as their income fluctuates, so the result would likely be an ever-dwindling number of people covered.The House bill also converts Medicaid from an entitlement program, in which the government pays all the health-related costs for those who qualify, to a grant program. The federal government would give states either a set amount of money for each Medicaid enrollee or let them choose to receive a fixed-dollar block grant.The Congressional Budget Office estimated in March that the bill would cut Medicaid spending by $880 billion AHCA maintains protections for people with pre-existing conditions, with some important exceptions (see waivers, below). That means that someone with high medical expenses pays the same premium for the same policy as anyone else his age in his area.This section of the bill essentially amounts to an optional, state-level full repeal of Obamacare. It would give states the ability to apply for a waiver that lets them opt out of most of the regulations and consumer protections that were included in the Affordable Care Act.

AHCA: Pre Existing Conditions List - The Republican plan to repeal and replace the the Affordable Care Act (ACA), which narrowly passed a vote in the House today, rolls back protections for people with pre-existing conditions, which could increase health care costs for an estimated 130 million Americans. The American Health Care Act stipulates that states can allow insurers to charge people with pre-existing conditions more for health insurance (which is banned under the ACA) if the states meet certain conditions, such as setting up high-risk insurance pools. Insurers still cannot deny people coverage outright, as was a common practice before the ACA's passage, but they can hike up premiums to an unaffordable amount, effectively pricing people out of the market. In fact, premiums could reach as high as $25,700 per year for people in high-risk pools, according to a report from AARP. People who receive insurance through their employer would not be affected, unless they lost their job or moved to the individual insurance market for some other reason. But what counts as a pre-existing condition? While it depends on the insurer—they have the right to choose what counts as "pre-existing"—these ailments and conditions were universally used to deny people coverage, according to the Kaiser Family Foundation, a nonprofit focusing on health care research. (list)

Goldman Explains What The Repeal Of Obamacare Really Means -- After months of internal discord, House Republicans finally approved a bill to overhaul Obamacare, which they have been attacking since it was enacted in 2010.  While there are various nuances, here are the bill's main provisions courtesy of Reuters: [….]  And while all of the above works in theory, there remains a rather sizable gap between the theory and practice. So for all those curious what yesterday's bill passage means in practical terms, here is Goldman's Alec Philips with the explanation:House Passes AHCA BOTTOM LINE: The House has passed its health legislation but the issue is unlikely to be resolved for several more months, if at all.The main effect of House passage is to delay the consideration of tax legislation, which looks even more likely than before to be delayed until 2018. MAIN POINTS:

    • 1. The House passed its ACA replacement bill, the American Health Care Act (AHCA) 217-213, which moves the debate to the Senate. However, Republicans in that chamber are unlikely to support the House bill in sufficient numbers, likely requiring substantial changes to the bill. In addition, procedural hurdles exist that could require several aspects of the House-passed bill to be stripped (including those that relate to the recent political compromises used to bring hesitant lawmakers onboard). It is far from clear at this point whether the Senate will be able to pass its own version of the AHCA at all, and at a minimum it is likely to take months to do so.
    • 2. In our view House passage of the AHCA is likely to further delay the consideration of tax reform. House passage arguably reduces doubts that Republicans can assemble a working majority for controversial legislation in the House, which suggests that complex tax legislation might be achievable as well.However, since the House cannot act on tax reform using the “reconciliation” process until the Senate has passed (or decides not to pass) its own health legislation, tax legislation looks unlikely to emerge until September in our view. Given the time it will likely take to reach an agreement on tax legislation, this suggests that enactment of tax legislation is unlikely until Q1 2018. While our base case is still that legislation is more likely than not to pass in 2018, further delays could push consideration of tax legislation too close to the upcoming midterm election, reducing the likelihood that tax legislation is enacted in the next two years.

Senate GOP rejects House Obamacare bill - POLITICO: After all the energy the House just expended on ramming through its Obamacare repeal, the Senate is about to start over. “We’re writing a Senate bill and not passing the House bill,” said Sen. Lamar Alexander (R-Tenn). “We’ll take whatever good ideas we find there that meet our goals.” Story Continued Below They need to end up with a bill that can win over 50 of the 52 GOP senators in the narrowly divided chamber. And even if they accomplish that, their bill could be unpalatable to House conservatives. The House bill squeaked through on a 217-213 vote. The two chambers have not coordinated much in recent weeks as the House — with an assist from the White House — frantically worked to kick the health care bill to the other side of the Capitol. Senate Republicans say they’ll take the time they need to understand the House bill’s ramifications. And they will insist on a score from the Congressional Budget Office before voting, unlike the House. “Like y’all, I’m still waiting to see if it’s a boy or a girl,” said Sen. Lindsey Graham (R-S.C.). “Any bill that has been posted less than 24 hours, going to be debated three or four hours, not scored? Needs to be viewed with suspicion.” The Senate GOP has been preparing for health care to land in its lap, but only in the most general fashion and with little input from the House. Two key House committee chairmen briefed the entire GOP caucus on the lower chamber’s plans in March, but there has been nothing equivalent since then. “I turned the volume off some time ago and have no idea what the House is even passing,” Sen. Bob Corker (R-Tenn.) said shortly before the House vote was scheduled. Alexander has established a working group ranging in ideology from conservative Texas Sen. Ted Cruz to the more centrist Ohio Sen. Rob Portman, some of whom met with Senate Majority Leader Mitch McConnell (R-Ky.) on Thursday. McConnell said Thursday that the House vote was "an important step," but the Senate won't move forward on anything until the parliamentarian and CBO review the bill. “There will be no artificial deadlines in the Senate. We’ll move with a sense of urgency but we won’t stop until we think we have it right.” said Alexander, who will be a leading figure in the Senate’s overhaul effort. 

Sanders on Trumpcare: 'Take This Bill and Throw It in the Garbage'  --Senator Bernie Sanders said in a CNN interview tonight that, in its present form, the Trumpcare bill was not going to pass through the Senate.'This bill, in its current form is not getting through the Senate, said Sanders.  ‘You take this bill, and you, we don't want to clog up toilets or anything, but you just toss this into a garbage can and start again. This bill is a disaster.' Remember what he told you, "we are gonna provide healthcare for everybody and it's gonna be less expensive." Providing healthcare for everybody is not throwing 24 million people off health insurance." 'When you are dealing with legislation that dealing with 1/7th of the American economy, this is huge', said Sanders. He added, 'Don't you think there might've been a hearing or two to discuss the implications of this legislation? These guys put it together in a few weeks time, zero hearings, they didn't hear from the American medical association, who opposed this legislation. They didn't hear from the hospitals that opposed this legislation. They didn't hear from the AARP, the largest senior group in America, who opposed this legislation because it'll be a disaster for older workers.' Sanders concluded,'We're gonna start from zero and hopefully, come up with a legislation that improves on Obamacare. Hopefully, we'll provide health insurance to all of our people and do it in a more cost effective way.'  (video)

New York AG: I'll sue if Senate passes ObamaCare repeal | TheHill: New York Attorney General Eric Schneiderman (D) warned Congress on Friday that he would file a lawsuit to protect abortion rights if the Senate passes the House GOP's healthcare bill. In an interview with CNN's Erin Burnett, Schneiderman attacked the bill, called the American Health Care Act, as "bad public policy." "It doesn't protect people with pre-existing conditions, it will cost millions of people healthcare," he said. Schneiderman said that the bill in its current form is unconstitutional due to attacks on "prohibited state funding." "In a tricky way, [it] tries to wipe out Planned Parenthood," he said. "It's an effort to kill off Planned Parenthood, which would impose an undue burden on women's Constitutionally-protected rights." The Senate is unlikely to pass the House's version of the bill. On Thursday, it was announced that a group of senators are working on their own version of the ObamaCare repeal. It's unclear if the Senate version will include an attempt to defund Planned Parenthood. "I hope it'll never become law, I hope we'll be able to save a lot of time and trouble and not have to bring this litigation," Schneiderman said.

Senate To Write Its Own Obamacare Repeal Bill - The Republican House spent Thursday afternoon celebrating the passage of a Healthcare bill that nobody has scored, let alone read, and already the Senate has poured cold water over the first and so far only achievement of the Trump administration. The reason, as we reported this morning, and as Bloomberg and The Hill confirm, several key Senate Republicans have said they will set aside the narrowly passed House health-care bill and write their own version instead, a sign of how difficult it will be to deliver on seven years of promises to repeal Obamacare. In the wake of the House’s razor-thin 217-213 vote, the Senate made clear it was going in a different direction.  It started with GOP Senator Dean Heller, who is up for reelection in 2018 and is considered one of the most vulnerable. Heller said he wouldn’t support the House’s bill in its current form.  “We cannot pull the rug out from under states like Nevada that expanded Medicaid and we need assurances that people with pre-existing conditions will be protected,” he said in a statement. A second senator, Rob Portman, made clear his concerns over how the House bill treats Medicaid. While ObamaCare expanded the healthcare program to more low-income Americans, the House bill would eliminate that expansion in 2020. “I’ve already made clear that I don’t support the House bill as currently constructed,” Portman said in a statement, “because I continue to have concerns that this bill does not do enough to protect Ohio's Medicaid expansion population, especially those who are receiving treatment for heroin and prescription drug abuse.” Senator Lamar Alexander pointed to the difficulties to come. He highlighted his three priorities for the bill, which include rescuing Americans in areas where their health marketplaces may not have any insurers offering plans in 2018. "The Senate will now finish work on our bill, but will take the time to get it right,” Alexander, chairman of the Senate Health, Education, Labor and Pensions Committee, said in a statement. Senator Lindsey Graham tweeted that “A bill — finalized yesterday, has not been scored, amendments not allowed, and 3 hours final debate — should be viewed with caution.” Finally, Alaska’s Lisa Murkowski, who has been very critical of the House bill, said Thursday she hopes they start with "a clean slate" in the Senate.

Five changes the Senate could make to the ObamaCare repeal bill | TheHill: GOP senators are making it crystal clear. The House’s ObamaCare repeal-and-replace bill is getting changed. Senators say the legislation can’t pass the upper chamber in its current form, and they are looking to put their own stamp on the bill. Here are five big changes that senators will be eyeing. Tax credits The Senate is likely to change the bill to provide more tax credits to better help low-income people afford health insurance.Under the House bill, a single 64-year-old making $26,500 would have to pay more than half his or her salary — $14,600 per year — in premiums, according to the nonpartisan Congressional Budget Office. This stark datapoint made the rounds on social media after CBO scored the bill in March. In part, this is because insurers can only charge older adults three times more than those who are younger and generally healthier under the Affordable Care Act. The House bill lets carriers charge older adults five times as much as young people. Also, tax credits are more generous for those with lower incomes under ObamaCare, and thus, lower premiums. … Medicaid has emerged as one of the thorniest issues of the ObamaCare repeal and replace debate. About 24 million more people could be without health coverage by 2026 under the House’s bill, according to a March CBO analysis. The House passed its latest bill before CBO could finish a new analysis. This could be a big problem in the Senate, where a number of Republicans are worried about passing a measure that could leave more people in their states uninsured. … Senator Bill Cassidy suggested a new litmus test for a Senate bill. “I ask, does it pass the Jimmy Kimmel test?,” Cassidy told CNN. “Will a child born with congenital heart disease be able to get everything she or he would need in the first year of life? I want it to pass the Jimmy Kimmel test.” Cassidy was answering a direct question about whether he would support a bill that imposed caps on the amount of money an insurer would have to spend on a policy, but the meaning of his remarks appeared broader… The Senate parliamentarian has control over the strict parameters of what can be in a reconciliation bill, the fast-track budget maneuver Republicans are using to repeal and replace ObamaCare because it only requires 51 votes to pass. “I do think that the language of the MacArthur amendment allowing waivers from the essential health benefits and community ratings rules is definitely something that is going to be challenged under the Byrd rule and is definitely vulnerable,”

Senate Kills State-Sponsored Retirement Plans For Private Sector Workers -- In a narrow vote, 50 (yes) to 49 (no), the Senate by resolution killed an Obama-era rule that greenlighted state-sponsored auto-IRA retirement programs for small business workers. A majority vote was needed to repeal the rule. The AARP cried foul and urged a “no” (don’t repeal the rule) vote because: “Too many small business employees don’t have a way to save for retirement out of their regular paycheck.” That’s 55 million workers. “This is an industry effort to try to preserve that customer base for itself even though they’ve had no interest in that customer base for years. Putting sand in the wheels of these state efforts is a destructive thing to do,” says Alicia Munnell, director of the Center for Retirement Research at Boston College. The message: you’re on your own for retirement if you don’t have a workplace retirement plan.  Basically the Department of Labor rule, issued last August, “blessed” these state-sponsored plans. It gave the states a rule that they could rely on to automatically enroll individuals into an Individual Retirement Account and not be subject to federal ERISA rules. President Donald Trump is expected to sign off on the resolution (Resolution 66), adding to his deregulatory agenda. He already signed off on an earlier vote (Resolution 67) in March that killed Obama-era proposed rules issued in December that would have opened the way for cities and localities to offer similar retirement programs. New York City Comptroller Scott Stringer, for example, had proposed a “New York City Nest Egg” retirement plan which would have been geared towards the 1.5 million private-sector city workers who don’t have access to plans at work. It had auto-IRAs but also included a municipally-backed retirement plan option. Now that plan has been shelved.

On his 100th day in office, President Trump is still running a bare bones government - President Donald Trump is barreling into his 100th day in office, and the federal government remains a bare-bones operation.There are 549 key positions in Trump’s administration that require Senate confirmation. Trump has yet to nominate anyone to 468 of them.“You can’t run everything through a single small pipe and expect to get the business of government done,” says Max Stier, the CEO of the nonpartisan Center for Presidential Transition, which works with both parties to think through staffing government positions.So far, among positions needing Senate approval, Trump has formally nominated 35 people, 25 of whom have been confirmed. There are an additional 28 people Trump has said he will nominate but has not yet formally nominated. Labor Secretary Alexander Acosta was the most recent confirmation on April 27, three days before Trump’s 100-day mark.Comparably, at this point his presidency, former President Barack Obama had 69 positions confirmed and a total of 190 people nominated.  The lack of appointees has made for a directionless federal government. With only temporary employees in top positions, career public servants have spent months without the ability to execute real work, Julia Ioffe wrote for the Atlantic in March:The action at Foggy Bottom has instead moved to the State Department cafeteria where, in the absence of work, people linger over countless coffees with colleagues. (“The cafeteria is so crowded all day,” a mid-level State Department officer said, adding that it was a very unusual sight. “No one’s doing anything.”) Trump is known for using a small team; his campaign operated with a staff of fewer than a dozen for much of the election cycle and long touted the efficiency of vetting ideas through a two- to five-person chain. But despite Trump’s claims of a great and speedy transition, the reality is that his small team has hit a lot of roadblocks and has many holes in key positions.

Rex Tillerson proposes cutting 2,300 jobs at State Department - Secretary of State Rex Tillerson is proposing to eliminate 2,300 jobs as part of a plan to cut more than a quarter of the State Department's budget for the next fiscal year, officials said Friday. The plan will almost certainly meet resistance from lawmakers opposing President Donald Trump's proposal to shrink the size of the federal government. Tillerson's proposal reduces the number of new diplomats being hired and includes the State Department and U.S. Agency for International Development's possible consolidation, according to officials briefed on the proposal. The staff cuts would amount to about 3 percent of the department's roughly 75,000-strong workforce. The proposal is a response to the Office of Management and Budget's call to slash the State Department and USAID budgets by 31 percent through deep cuts to foreign aid and other programs, said the officials, who weren't authorized to speak publicly about the as-yet unreleased plan and requested anonymity. Tillerson's plan would entail a 26 percent budget reduction, they said. In an interview with NPR that aired Friday, Tillerson said he intended to reorganize the department to make it more efficient and focused. "What we really want to do is examine the process by which the men and women — the career foreign service people, the civil servants, our embassies — how they deliver on that mission," he said.

Tillerson faces his toughest audience yet: The State Department - Rex Tillerson has some serious explaining to do.Morale is plunging among the U.S. diplomats and civil servants who work for the secretary of state. Many are aghast at President Donald Trump’s desire to dramatically slash the State Department’s budget and Tillerson’s apparent agreement. Some State staffers are eyeing the exits as malaise grips the department—and before expected organizational restructuring. And just about everyone is seeking clarity from the new administration about its foreign policy objectives.Few, however, are counting on Tillerson to offer much solace in a speech he’s scheduled to give to the department Wednesday morning — only his second address to the agency as a whole since Feb. 2, his first full day on the job. Stakeholders inside and outside State are particularly flummoxed that Tillerson is giving the speech, and planning to survey staffers, after he’s already decided to trim at least 2,300 positions. It’s a backward approach, they say.“He’s dug such a big hole, it’s going to be hard to get out of,” said Ilan Goldenberg, a former State Department official now with the Center for a New American Security. “If he really wanted to do things right, he would actually say, ‘Don’t believe the numbers and don’t believe the stories about the budget cuts. But I do believe we have to cut some fat, and before I decide on how much to cut or if anything to cut, I want to hear from you.’” State Department officials would not say whether Tillerson will answer audience questions after he speaks Wednesday. On Monday night, he announced in an email that the department will conduct an online survey of employees, the “first phase” of a discussion about the “goals, priorities and the strategic direction of our organization.”

U.S. needs to balance foreign alliances: Tillerson | Reuters: U.S. Secretary of State Rex Tillerson on Wednesday outlined for his staff how an "America First" agenda translates into foreign policy, but did not address the Trump administration's proposed budget cuts, which worry many diplomats. It was the first time Tillerson had addressed all employees since his first day on the job on Feb. 2, when he spoke to hundreds of State Department officials in the building's lobby, and the most thorough explanation yet of the Trump administration's approach to foreign policy. Some allies and even some U.S. officials have interpreted Republican President Donald Trump's "America First" agenda, which puts Americans' interests at home ahead of those of its partners overseas, as a threat to retreat from the world. Tillerson said U.S. foreign policy priorities had gotten "a little bit out of balance" in the previous decades, with the United States too focused on promoting economic activity and trade with emerging economies. "These are really important relationships to us, and they're really important alliances, but we've got to bring them back into balance," he said, speaking without notes and walking around the stage in a packed State Department auditorium. He also signaled that the United States would de-emphasize human rights concerns in some of its interactions with other countries, saying that while U.S. values remain constant, its policies can adapt. "If we condition too heavily that others must adopt this value that we've come to over a long history of our own, it really creates obstacles to our ability to advance our national security interests, our economic interests," Tillerson said.

One of Trump's most controversial advisers is reportedly out of the White House - Sebastian Gorka, a controversial White House adviser who works on national security issues, is reportedly leaving his role in the White House, according to multiple reports.  Citing an unnamed senior administration official, the Washington Examiner reported Sunday that Gorka would leave soon for a new role dealing "with the 'war of ideas' involved in countering radical Islamic extremism."CNN senior White House correspondent Jim Acosta later tweeted that he had confirmed the report. The new role, according to the Examiner, will include an appointment to a federal agency. The White House didn't immediately respond to a request for comment.Gorka found himself under fire in March when the Forward published a story alleging that Gorka is a sworn member of a Hungarian far-right group known as Vitézi Rend, which is listed by the State Department as having been "under the direction of the Nazi Government of Germany" during World War II.  Gorka is widely disdained within the national security field, and several national-security experts have cast doubt on his credentials, questioning whether he has the experience to give advice in the White House.

Giving the Behemoths a Leg Up on the Little Guy - NYT - Every year, the internet gets a little less fair. The corporations that run it get a little bigger, their power grows more concentrated, and a bit of their idealism gives way to ruthless pragmatism. And if Ajit Pai, the new chairman of the Federal Communications Commission, gets his way, the hegemons are likely to grow only larger and more powerful.  This column is nominally about network neutrality, the often sleep-inducing debate about the rules that broadband companies like Comcast and AT&T must follow when managing their networks. But really, this is a story about ballooning corporate power.At the moment, the internet isn’t in a good place. The Frightful FiveAmazon, Apple, Facebook, Microsoft and Alphabet, Google’s parent company — control nearly everything of value in the digital world, including operating systems, app stores, browsers, cloud storage infrastructure, and oceans of data from which to spin new products. A handful of others — Comcast, AT&T, Verizon — control the wired and wireless connections through which all your data flows. People used to talk about the internet as a wonderland for innovative upstarts, but lately the upstarts keep getting clobbered. Today the internet is gigantic corporations, all the way down. Which brings us to net neutrality. The rule basically prevents broadband providers from offering preferential treatment to some content online — it blocks Comcast from giving, say, a speed boost to a streaming video company that can afford to pay over one that cannot.  Amid many legal battles, neutrality rules in some form have governed the internet for years.  But under President Trump, net neutrality is on the chopping block. Last week, Mr. Pai outlined an effort to loosen the rules; his vision is likely to come to pass.

Stephen Colbert’s Diatribe Against Trump to Be Reviewed by FCC - Comedian Stephen Colbert’s profanity-tinged tirade against President Donald Trump, aired nationally on CBS, will be reviewed by the Federal Communications Commission because of viewer complaints, said Ajit Pai, the agency’s chairman.“We are going to take the facts that we find and we are going to apply the law as it’s been set out by the Supreme Court and other courts and we’ll take the appropriate action,” Pai said in an interview on talk-radio station WPHT-AM in Philadelphia. CBS, the broadcaster of Colbert’s “The Late Show,” could face a fine, he said.Colbert has said he stands by his May 1 monologue criticizing Trump for cutting short an interview with a CBS journalist, though the late-night host said he should have been less crude. One joke suggesting a sexual relationship between Trump and Russian President Vladimir Putin drew criticism for being vulgar and homophobic. The FCC regulates programming broadcast on television. Programs like “The Late Show” that air after 10 p.m. have looser rules, but they still are prohibited from including obscene content -- overtly sexual, offensive and lacking serious literary, artistic, political or scientific value. It’s rare for the FCC to take action against a broadcaster under the rules, and Pai, who was selected by Trump to lead the agency, would face criticism himself if the FCC punished CBS.

No, the NSA Has NOT Stopped Spying On Americans’ Emails The NSA announced Friday that they would stop the controversial program which sweeps up all emails and text messages which an American exchanges with someone overseas that makes reference to a real target of NSA surveillance.By way of background, if Russia’s Putin was an NSA target, and an American received an email from a Russian saying “I hate Putin”, then that American could be surveilled by the NSA.Washington’s Blog asked Bill Binney what he thought of the NSA’s announcement.Binney is the NSA executive who created the agency’s mass surveillance program for digital information, who served as the senior technical director within the agency, who managed six thousand NSA employees, the 36-year NSA veteran widely regarded as a “legend” within the agency and the NSA’s best-ever analyst and code-breaker, who mapped out the Soviet command-and-control structure before anyone else knew how, and so predicted Soviet invasions before they happened (“in the 1970s, he decrypted the Soviet Union’s command system, which provided the US and its allies with real-time surveillance of all Soviet troop movements and Russian atomic weapons”).  Binney is the real McCoy.  Binney has been interviewed by virtually all of the mainstream media, including CBS, ABC, CNN, New York Times, USA Today, Fox News, PBS and many others. Specifically, we asked Binney:Do you buy it? Or do you think they’re just collecting under a different authorization/program?Binney responded: Short answer, NO.

NSA collected Americans' phone records despite law change: report | Reuters: The U.S. National Security Agency collected more than 151 million records of Americans' phone calls last year, even after Congress limited its ability to collect bulk phone records, according to an annual report issued on Tuesday by the top U.S. intelligence officer. The report from the office of Director of National Intelligence Dan Coats was the first measure of the effects of the 2015 USA Freedom Act, which limited the NSA to collecting phone records and contacts of people U.S. and allied intelligence agencies suspect may have ties to terrorism. It found that the NSA collected the 151 million records even though it had warrants from the secret Foreign Intelligence Surveillance court to spy on only 42 terrorism suspects in 2016, in addition to a handful identified the previous year. The NSA has been gathering a vast quantity of telephone "metadata," records of callers' and recipients' phone numbers and the times and durations of the calls - but not their content - since the September 11, 2001, attacks. The report came as Congress faced a decision on whether to reauthorize Section 702 of the Foreign Intelligence Surveillance Act (FISA), which permits the NSA to collect foreign intelligence information on non-U.S. persons outside the United States, and is scheduled to expire at the end of this year. Privacy advocates have argued that Section 702 permits the NSA to spy on Internet and telephone communications of Americans without warrants from the secret Foreign Intelligence Surveillance Court, and that foreign intelligence could be used for domestic law enforcement purposes in a way that evades traditional legal requirements.

Trump pushes back against ban on state medical marijuana interference | TheHill: President Trump issued his first "signing statement" Friday on a $1 trillion spending bill to fund the government through September. In the statement, Trump said that some provisions of the bill could interfere with his constitutional authority, arguing that he isn't legally bound to limits imposed by Congress such as one banning the Justice Department from interfering with state medical marijuana laws. "Division B, section 537 provides that the Department of Justice may not use any funds to prevent implementation of medical marijuana laws by various States and territories. I will treat this provision consistently with my constitutional responsibility," his statement reads. Marijuana advocates earlier this week cheered the spending bill's provision, which protects certain states that have legalized marijuana amid fears that the Trump administration would rein in legalization laws. Attorney General Jeff Sessions  has a long history of opposing marijuana, telling a conference of state attorneys general in February that he's "dubious" to the drug's benefits. He has also called the drug “more dangerous … than a lot of people realize." "Marijuana is against federal law, and that applies in states where they may have repealed their own anti-marijuana laws,” Sessions told conservative radio host Hugh Hewitt in March. “So yes, we will enforce law in an appropriate way nationwide.”

Trump set to sign religious liberty order: report | TheHill: President Trump has reportedly invited conservative leaders to visit the White House on Thursday for the signing of an executive order on religious liberty. Politico reported Tuesday that two senior administration officials confirmed the plan. One source noted that the language of the order has not yet been finalized by the White House lawyers, but a draft leaked in February would give businesses and individuals the ability to claim broad religious objections. The Trump administration has been under fire since, with critics arguing that it would allow discrimination against the LGBT community. Following the initial leak, Vice President Pence and his team have reportedly worked on rewriting the language of the document. One conservative source familiar with the new text, however, told Politico that the language is still "very, very strong." The potential signing of the executive order would also coincide with the National Day of Prayer. Pence reportedly has been ramping up pressure on Trump to sign the order. Similar legislation caused a national controversy under Pence's watch as Indiana governor.

Leaked Draft of Trump’s Religious Freedom Order Reveals Sweeping Plans to Legalize Discrimination -- A leaked copy of a draft executive order titled “Establishing a Government-Wide Initiative to Respect Religious Freedom,” obtained by The Investigative Fund and The Nation, reveals sweeping plans by the Trump administration to legalize discrimination. The four-page draft order, a copy of which is currently circulating among federal staff and advocacy organizations, construes religious organizations so broadly that it covers “any organization, including closely held for-profit corporations,” and protects “religious freedom” in every walk of life: “when providing social services, education, or healthcare; earning a living, seeking a job, or employing others; receiving government grants or contracts; or otherwise participating in the marketplace, the public square, or interfacing with Federal, State or local governments.” The draft order seeks to create wholesale exemptions for people and organizations who claim religious or moral objections to same-sex marriage, premarital sex, abortion, and trans identity, and it seeks to curtail women’s access to contraception and abortion through the Affordable Care Act. The White House did not respond to requests for comment, but when asked Monday about whether a religious freedom executive order was in the works, White House spokesman Sean Spicer told reporters, “I’m not getting ahead of the executive orders that we may or may not issue. There is a lot of executive orders, a lot of things that the president has talked about and will continue to fulfill, but we have nothing on that front now.”  Language in the draft document specifically protects the tax-exempt status of any organization that “believes, speaks, or acts (or declines to act) in accordance with the belief that marriage is or should be recognized as the union of one man and one woman, sexual relations are properly reserved for such a marriage, male and female and their equivalents refer to an individual’s immutable biological sex as objectively determined by anatomy, physiology, or genetics at or before birth, and that human life begins at conception and merits protection at all stages of life.”

Trump order to ease ban on political activity by churches | Reuters: President Donald Trump will take executive action on Thursday to ease a ban on political activity by churches and other tax-exempt institutions as part of an order on religious liberties, a senior White House official said on Wednesday. Trump's executive order to mark the National Day of Prayer will also mandate regulatory relief to religious employers that object to contraception, such as Little Sisters of the Poor, the official said in a briefing. The order does not include provisions to allow government agencies and businesses to deny services to gay people in the name of religious freedom, as was feared by some civil liberties and gay rights groups. "This executive order isn't about discrimination," said the official, who spoke on condition of anonymity. "Anything currently illegal under current law would still be illegal." "It directs the IRS to exercise maximum enforcement discretion to alleviate the burden of the Johnson amendment which prohibits religious leaders from speaking about politics and candidate from the pulpit," the official said. Trump frequently complained about the 1954 law known as the Johnson amendment during his campaign for the presidency, bolstering his support among religious conservatives who contend it violates free speech and religious freedom rights. Changing the law altogether would require action in the Republican-led U.S. Congress. "And it provides regulatory relief for religious objectors to Obamacare's burdensome preventive services mandate, which is a position supported by the Supreme Court decision in Hobby Lobby," the official said.

Inside Evangelical Leaders’ Private White House Dinner -- On the eve of the first National Day of Prayer of his presidency, Donald Trump invited his closest evangelical advisors to join him for a private, long-awaited dinner celebration at the White House. For the first time since they formed last June, the members of Trump’s campaign advisory board were meeting together not in weekly phone calls but in person, and having already accomplished what a year ago many thought was a long shot. Less than four months into Trump’s presidency, their biggest hope of getting a conservative Supreme Court justice on the bench had been reached, and their supporters' other objectives were in sight. As they gathered in the Blue Room, news was spreading through Washington that Trump was preparing an executive order to relax prohibitions on religious organizations’ political activities, and the House of Representatives was preparing to vote on a repeal of the Affordable Care Act.Most of Trump’s evangelical advisory board flew in for the event, including Trump’s longtime spiritual advisor Paula White, Southern Baptist pastor Robert Jeffress, evangelist Franklin Graham, Focus on the Family Founder James Dobson, former Congresswoman Michele Bachmann, South Carolina televangelist Mark Burns, Faith and Freedom Coalition chairman Ralph Reed, and others. They were joined by top White House officials, including Vice President Pence, Second Lady Karen Pence, Ivanka Trump and Jared Kushner, Reince Priebus and Steve Bannon. The evening, guests say, was more a celebration of their victories so far than a discussion on future policy. Trump took photos with the guests in the Red Room, Graham kick off festivities with a prayer, and a dinner of shrimp scampi with parsley butter, red wine braised short ribs, and wild ramp gnocchi was served. White presented Trump with a gift on behalf of the group from the Museum of the Bible, a framed page of an original King James Bible from 1611 A.D., “a Bible which as you know was commissioned by a political leader in service to the church,” she said.

Trump Cons Religious Idiots With Meaningless Executive Order, Completely Forgets To F*ck The Gays -- On Wednesday, we got GRRR MAD because rumor had it Donald Trump was going to do an awful “Fuck The Gays” executive order, to protect bigoted religious morons from condemning themselves to eternal hellfire because the government forced them to be nice to gay people. It was allegedly going to be modeled after the “Fuck The Gays” bill in Mike Pence’s Indiana.It turns out we got GRRR MAD too soon, because conman Donald Trump played his religious wingnut followers for the fools they are, for the most part.In the Rose Garden on Thursday, after being introduced by slimy fake Christian Vice President Mike Pence, the snake oil salesman Trump addressed a crowd of slobbering morons, flanked by his “spiritual adviser,” the televangelist Paula White, who sells “resurrection seeds” for the low, low price of $1,144. The occasion was the National Day Of Prayer, because Donald Trump prays SO MUCH ALL THE TIME. And as promised, he signed a “religious freedom” executive order that says … basically not shit, really! If you want to read the full thing, click here, or if you’re lazy, here’s the one page summary the White House distributed last night: OMG HE FORGOT TO FUCK THE GAYS, WHAT A STUPID HEAD! Jared and Ivanka must have been like, “Dadddyyyyyyy, our hairdressers are gay and all the interior designers who put tacky gold-plating on everything at Mar-a-Lago are gay, daddddddddy NO!” Then they assured Daddy they would help him make it look like he was doing something for religious right fuckheads, even though he wasn’t.

Atheists Sue President Trump Over His ‘Religious Liberty’ Executive Order -- An atheist group is suing President Donald Trump over his religious liberty executive order, which loosens restrictions on political activity by religious groups.The Freedom From Religion Foundation filed suit Thursday in federal court against Trump and the Internal Revenue Service, claiming the order is unconstitutional because it makes government favor religion over nonreligion. Although the executive order applies to all nonprofits, FFRF believes it will be selectively enforced so as to only benefit churches and religious organizations.“We will not allow people of faith to be targeted, bullied, or silenced anymore,” Trump said while announcing the order on Thursday. “And we will never, ever stand for religious discrimination, never ever.”FFRF calls that and the order a “message to Christians, and particularly evangelicals” that the government will no longer bar them from endorsing candidates, donating to campaigns, or otherwise engaging in politics. “President Trump’s EO creates the appearance of government endorsement of churches and religious organizations and a preference for these religious organizations above similarly situated nonreligious organizations,” the suit reads.Andrew Seidel, staff attorney at the FFRF, told The Daily Beast the order’s language is vague enough to benefit religious organizations at the expense of non-religious groups. “It’s very poorly worded. Trump and the White House have made it very clear that they intend for this order to ease restrictions on churches, especially on Evangelical churches,” Seidel said. Meanwhile, the lawsuit claims secular nonprofits will still be prohibited from endorsing candidates or otherwise participating in the upcoming 2018 elections if they want to keep their tax-exempt status. Those groups are classified as 501(c)(3).

 Trump Army secretary nominee withdraws amid fierce opposition | TheHill: Army Secretary nominee Mark Green has withdrawn from consideration amid fierce opposition from Democrats and advocacy groups, he announced Friday. Green blamed “false and misleading attacks” against him and said he was stepping aside so as not to be a distraction. “It is with deep regret I am withdrawing my nomination to be the secretary of the Army,” he said in a statement. “I am honored that President Trump nominated me for this position. I appreciate his support and confidence in me, as well as that of [Defense] Secretary [James] Mattis and many others, and their desire to Make America Great Again by preparing our military to face the many challenges in the world for the safety and security of our nation.”Green stirred intense controversy over past comments and his voting record as a Tennessee state senator. Opposition mounted over his stances on the LGBT community, Muslims, Latinos, birth control, evolution and the Second Amendment, among other issues. He’s said that “transgender is a disease” and agreed with a questioner who said “we need to take a stand on the indoctrination of Islam in our public schools,” among other controversial statements. Green had defended himself by saying liberals are twisting his words and attacking him for his religion. He reiterated these complaints in his withdrawal statement. “Tragically, my life of public service and my Christian beliefs have been mischaracterized and attacked by a few on the other side of the aisle for political gain,” he said. “While these false attacks have no bearing on the needs of the Army or my qualifications to serve, I believe it is critical to give the president the ability to move forward with his vision to restore our military to its rightful place in the world.” 

Additional $120 million to protect Trump and family expected - Business Insider: The bipartisan spending agreement from Congress scheduled to be approved this week reportedly sets aside more than $120 million to alleviate the financial burden on agencies tasked with protecting President Donald Trump and his family. About $60 million will be allocated to the US Secret Service, which requested the additional funds for expenses that include costs for Trump's security detail and protecting Trump Tower in New York City, according to a New York Times report that cited the legislation. About $34 million of it will go toward the costs of protecting Trump through the end of the fiscal year. Another $23 million is reported to go toward retrofitting Trump Tower with equipment and personnel — which also requires the government to rent space inside the building, according to a Homeland Security official. With his weekend trips to Mar-a-Lago in Palm Beach, Florida, Trump has yet to visit Trump Tower, his primary residence, since taking office; however, his wife, Melania, and his son, Barron have been living there in his absence, according to The Times. The remaining $60 million is reportedly reimbursing local municipalities — such as New York City and Palm Beach County's "extraordinary law enforcement personnel costs." Protection for Trump in his Palm Beach estate has often drawn the scorn of critics, who highlight the added costs of renting additional golf carts and activating Coast Guard units to provide adequate protection during the president's weekend trips.

Ethics Rules Waivers for Trump’s Team to Get Federal Scrutiny -- The top federal ethics agency is conducting a review that will examine every waiver of conflict of interest rules President Donald Trump’s appointees have received. The five-page memorandum from the U.S. Office of Government Ethics, posted online late Friday, seeks documentation of waivers granted to appointees ordinarily required to recuse themselves from matters in which they or family members have a financial interest. Issued by the agency’s director, Walter Shaub, it specifies that all agencies and appointees, “including White House officials,” must comply with the notice, which covers appointees in the administrations of Trump and former President Barack Obama. Trump issued an ethics order in January, days after being inaugurated, requiring his appointees to recuse themselves from matters involving former employers and clients for a period of two years. However, the White House and federal agencies can suspend that requirement for various reasons, including in cases where having an official’s expertise in a matter outweighs the potential for a conflict of interest. Such waivers aren’t required to be disclosed under federal law.  Seven Democratic senators, led by Sheldon Whitehouse of Rhode Island, wrote to Trump requesting that he make such waivers public following media accounts of former lobbyists and other officials in his administration receiving secret waivers. In the April 20 letter, the lawmakers wrote that Obama made such documents publicly available, adding, “You have not followed this precedent.”

Jared Kushner failed to reveal business ties to Goldman Sachs and George Soros on government forms -- Jared Kushner failed to reveal his business connections to Goldman Sachs and billionaires George Soros and Peter Thiel when filling out financial disclosure forms required for his job as a White House adviser. The president’s son-in-law and senior adviser didn’t identify his partial ownership stake in Cadre, a tech startup pairing investors with real estate developers, and other ties to large financial institutions on his disclosure forms, reported the Wall Street Journal. The 36-year-old Kushner’s stake in Cadre makes him business partners with other part owners such as the Goldman Sachs Group Inc., conservative bête noire George Soros and tech investor Peter Thiel — a prominent backer of President Donald Trump.The newspaper reported that Kushner failed to divulge those ties, as well as loans worth at least $1 billion, from more than 20 lenders, and personal guarantees on more than $300 million of that debt. Kushner’s lawyer, Jamie Gorelick, said the Cadre stakes are held through a limited liability corporation he owns, which was reported in the financial disclosure form. She said Kushner had discussed his Cadre ownership with the Office of Government Ethics, and Gorelick claims he had resigned from the startup’s board and given up his voting rights.A spokesman from the Office of Government Ethics did not respond to the Journal‘s request for comment, and White House spokeswoman referred questions to Gorelick. Rep. Jerrold Nadler (D-NY) last month accused Kushner of committing perjury by lying to the FBI on his security clearance forms about contacts with Russian officials.Gorelick said Kushner omitted those contacts — including meetings with Russian ambassador Sergey Kislyak and Russian banker Sergey Gorkov, a graduate of the Kremlin’s spy school – by submitting the disclosure forms prematurely, on Jan. 18. The attorney said she notified FBI officials the following day that Kushner would update those forms to disclose his contacts with Russia. Ethics experts said Kushner did not appear to have violated disclosure rules with the financial filings, but they said the arrangements should have been revealed to avoid the appearance of conflict of interest.

Jared Kushner didn't disclose business ties to George Soros, Peter Thiel, and Goldman Sachs, or that he owes $1 billion in loans -- Jared Kushner didn't disclose his business ties with George Soros, Peter Thiel, and Goldman Sachs, or that he owes $1 billion in loans, The Wall Street Journal reported on Tuesday. The top White House adviser and son-in-law of Trump failed to identify his part ownership of Cadre, a real-estate startup he founded, which links him to the Goldman Sachs Group and the mega-investors George Soros and Peter Thiel, sources told The Journal.  Business Insider first reported on Kushner's involvement with Cadre last June. Here's more about what Cadre is.   Jamie Gorelick, an attorney for Kushner, told The Journal in a statement that Cadre was part of BFPS Ventures LLC, a company Kushner owns and identified in his government financial-disclosure forms. Gorelick also said a revised version of Kushner's form that includes Cadre would be made available once ethics officials have looked at it. Kushner also failed to identify debt of more than $1 billion from 20 lenders and personal guarantees to pay more than $300 million of that, according to The Journal. While Gorelick called revisions to the disclosure "very normal," ethics experts told The Journal that the loans and guarantees should be disclosed so officials could decide whether Kushner needs to recuse himself from issues that involve his lenders. Investment in startups like Cadre should definitely be disclosed, experts said. "Anything that presents a potential for the conflict of interest should be disclosed so that the public and the press can monitor this," Trevor Potter, a former chairman of the Federal Election Commission, told The Journal. A source told The Journal that Kushner planned to recuse himself from anything that concerned Deutsche Bank or RBS, two lenders that have given him money for his properties or companies and to which he has provided personal guarantees on loans.  He still owes money to Bank of America, Blackstone Group, Citigroup, UBS, Deutsche Bank, and RBS, all of which were not disclosed, according to The Journal.

State Department Promotes Ivanka Trump’s Book In Another Ethics Blunder - A State Department office retweeted Ivanka Trump’s post promoting her new book on Wednesday, likely violating a federal rule that bars the use of public office for private gain. A federal government employee “shall not use his public office for his own private gain, for the endorsement of any product, service or enterprise, or for the private gain of friends, relatives, or persons with whom the employee is affiliated in a nongovernmental capacity,” according to the Code of Federal Regulations (5 CFR 2635.702, to be specific).Trump, who serves as a White House special counselor, had already canceled her book tour last month to avoid breaking the ethics rules around self-promotion.“Out of an abundance of caution and to avoid the appearance of using my official role to promote the book, I will not publicize the book through a promotional tour or media appearances,” the first daughter announced on Facebook.  Trump has continued to use her personal Twitter account to promote her book, Women Who Work, after reportedly consulting with the Office of Government Ethics. But that advice would not cover @GenderAtState, the official account run by the State Department’s Office of Global Women’s Issues.

The Rule of Law Won’t Save Us - As right-wing courtiers go, John Yoo is no small bean. A prolific scholar and professor at Berkeley Law, Yoo has championed a vision of presidential power resembling that of a Hanoverian king. He was also a Justice Department lawyer in the Bush administration, producing such choice gems as a defense of warrantless wiretaps and a greenlight for the US program of state-sponsored torture.Not exactly the kind of guy you would expect to complain about abuse of executive authority. So when the New York Times published a column by Yoo expressing “grave concerns about Mr. Trump’s uses of presidential power,” it was rather rich.For the past several months, many legal commentators have added to the litany of slamming President Trump as a threat to the rule of law. But two things stand out in Professor Yoo’s contribution. For one, nearly half of the op-ed is spent defending the expansive, unitary executive Yoo made a career promoting — a “robust vision of the presidency” which, he admits, “supports some of Mr. Trump’s early executive acts.” Secondly, the criticisms John Yoo makes of Trump’s “more dubious” actions do seem a bit mild. His main gripe is not the substance, but the procedure, of the president’s agenda.  Even the immigration ban on seven Muslim countries, as Yoo would tell it, still “falls within the law”; its one potential flaw is that Trump had the nerve to call it what it is — “a Muslim ban.” Yoo rather gives the game away when he says this:Had Mr. Trump taken advantage of the resources of the executive branch as a whole, not just a few White House advisers, he would not have rushed out an ill-conceived policy made vulnerable to judicial challenge. Yoo’s op-ed is less interesting as a statement of constitutional theory than as a reminder of something liberals do not like to admit: that the “rule of law” and other bourgeois norms are hardly a good check on presidential mischief. For many decades, presidents were able to exert their worst abuses not despite, but really through, the established rules of our legal order — especially with people like John Yoo on hand to lend them some legitimacy.

Senator Asks FBI Director To Clarify “Inconsistencies” On Trump Dossier  Senate Judiciary Committee chair Chuck Grassley has asked the FBI to answer for apparent “material inconsistencies” in information it has presented him regarding the unverified dossier alleging that Russia was in a position to blackmail President Donald Trump. In a letter to FBI Director James Comey dated April 28, Grassley says there were “inconsistencies” in information Comey gave to him during a private briefing on March 15 with Sen. Dianne Feinstein, the ranking member on the committee, and “information contained in Justice Department documents made available to the Committee only after the briefing.” “Whether those inconsistencies were honest mistakes or an attempt to downplay the actual extent of the FBI’s relationship with [the author of the dossier] Mr. [Christopher] Steele, it is essential that the FBI fully answer all of the questions,” Grassley wrote in the letter. The dossier was first published by BuzzFeed News in January. On Monday evening, Grassley told reporters he couldn't comment on the inconsistencies because of the classified nature of the information. "We were briefed in a secured room and I read the material in a secured room, so I can't talk about that," he said. Grassley's letter comes just two days before Comey is set to testify before the Judiciary committee, in a hearing entitled “Oversight of the Federal Bureau of Investigation.” In his letter, Grassley also requests documents on any payments the FBI may have made to Steele. The Washington Post reported in February that the FBI had “reached an agreement” with Steele before the election “to pay him to continue” investigating ties between Russia and the then-Trump campaign, but that the deal never came to fruition.

Former Obama security adviser declines invite to testify (AP) — Former President Barack Obama's national security adviser, Susan Rice, on Wednesday declined an invitation to testify at an upcoming Senate hearing on Russia's interference in the 2016 election.Rice's lawyer notified the senators chairing the hearing of her decision not to attend in a letter. Two other former Obama administration officials are scheduled to testify before a Senate Judiciary subcommittee on Monday. The subcommittee is one of three congressional panels investigating Russia's role in the 2016 election.Rice's refusal to testify is the latest twist in the congressional investigations into possible links between Russia and the Trump campaign and the ongoing debate over whether the probes are truly independent and bipartisan. Rice was invited to testify only by the Republican chairman of the subcommittee, and not by the top Democrat on the panel, her lawyer said.CNN first reported Rice's decision.Rice became a central part of the Russia investigation when President Donald Trump said she may have committed a crime when she asked intelligence analysts to disclose the name of a Trump associate mentioned in an intelligence report. Rice has said she did nothing improper. But she has become a key former Obama administration official in a position to answer questions from lawmakers.

As Russia Investigation Widens, U.S. Lawmakers Get Rare Access to Raw Intel | Foreign Policy: On Tuesday, members of the Senate Intelligence Committee boarded a bus to Langley, Virginia, as part of their probe into Russian election meddling. Many facets of the congressional probe into Russian election meddling are unusual, but these field trips are part of yet another “first” for the intelligence panel: access to raw intelligence. “Committee members have been granted unprecedented access, similar to what the Gang of 8 has had,” a spokeswoman for Vice Chairman of the Senate Intelligence Committee Mark Warner (D-Va.) wrote in an email to Foreign Policy, referring to the small bipartisan group of high-ranking lawmakers who regularly get access to sensitive materials from the intelligence community. “Committee members as well as staff are personally reviewing the intelligence at Langley,” she continued. After “significant negotiations,” the chairman and vice chairman got access to “categories and types of intelligence documents that have never been provided to Congress before” — even beyond what the Gang of Eight has received in the past. The congressional probes into the Russian hacking of the 2016 election are running in parallel to the FBI’s investigation. The bureau’s director, James Comey, testified to Congress on Wednesday but offered no new details about the investigation. Sen. Warner’s office wouldn’t say specifically what types of intelligence are being shared beyond noting that it is “raw.”

Trump-Russia investigation reignites as Senate asks aides to hand over notes - A Senate committee has asked Trump campaign aides to hand over notes and records from meetings with Russian officials and businesses, as congressional investigations between the president’s associates and Moscow appear to regain momentum. In a letter to Carter Page, a former Trump foreign policy adviser, dated 28 April, the Republican and Democratic leadership of the Senate intelligence committee asked him to attend a closed hearing and provide a list of documents on any dealings with “any Russian official or representative of Russian business interests” between June 2015 and January this year. Similar letters are reported to have gone to several other figures in Trump’s circle, including an informal adviser, Roger Stone, according to the New York Times.On Friday, Senate intelligence committee chairman Richard Burr and his Democratic counterpart, Mark Warner, warned Page that if he did not submit the relevant documents by next Tuesday, the committee would “consider its next steps at that time”, an apparent threat of subpoena.In a grudging reply to the Senate seen by the Guardian, Page said he would try to comply with the committee’s “request for even more irrelevant data”. “As previously noted, I remain committed to helping the Senate select committee on intelligence in any way that I can,” Page wrote. “But please note that any records I may have saved as a private citizen with limited technology capabilities will be miniscule in comparison to the full database of information which has already been collected under the direction of the Obama administration.” Page said he had been the target last year of a Foreign Intelligence Surveillance Act (Fisa) warrant, which are normally issued when intelligence or law enforcement agencies can show probable cause that the subject is in the service of a foreign power.

FBI director says he feels ‘mildly nauseous’ about possibility he affected election, but has no regrets - FBI Director James B. Comey gave his most exhaustive defense yet Wednesday of his role in politically sensitive investigations, telling a Senate panel that he has no regrets — despite feeling “mildly nauseous’’ at the thought that his decisions about a probe into Hillary Clinton might have affected the outcome of the election.He also said he was confident in the FBI’s handling of an ongoing probe of any contacts between Russian officials and associates of President Trump.  Through nearly four hours of sometimes combative questioning from Democrats and Republicans on the Senate Judiciary Committee, Comey offered his most full-throated explanation of his actions to date, and he never wavered from his core contention — that the FBI has stayed above the political fray even as its investigators probed senior aides to both the Republican and Democratic presidential candidates. “Lordy, has this been painful,” he said. “I’ve gotten all kinds of rocks thrown at me and this has been really hard, but I think I’ve done the right thing at each turn.” Comey appeared to win few new converts to his way of thinking, given the intense partisanship still swirling around the now-closed probe of Clinton’s use of a private email server while she was secretary of state, as well as the current investigation into whether any Trump associates may have coordinated with Russian officials to interfere with the election campaign. After the hearing, Sen. Patrick J. Leahy (D-Vt.) said he was unswayed and that he still believed Comey did the wrong thing by telling Congress days before the election that he was reopening the Clinton probe to examine thousands of emails found on the laptop of a spouse of a senior Clinton aide. In defending his decisions, Comey offered some new details about what FBI agents found last fall, after they realized a laptop belonging to former New York congressman Anthony Weiner (D) contained thousands of work emails involving Clinton. At the time, Weiner was married to Huma Abedin, who was a senior aide to Clinton. Agents were looking at Weiner’s laptop because he was under investigation for possibly inappropriate communications with a minor. “Somehow, her emails were being forwarded to Anthony Weiner, including classified information,’’ Comey said, adding later, “His then-spouse Huma Abedin appears to have had a regular practice of forwarding emails to him for him to print out for her so she could deliver them to the secretary of state.”

Comey Says Huma Abedin Sent Anthony Weiner Classified Emails -- Listen to this exchange between James Comey and Sen. John Kennedy, where Comey admits that Hillary Clinton's chief of staff, Huma Abedin, sent her husband, Anthony Weiner, classified emails. Yet, Comey concluded that no crimes had been committed because he could not prove criminal intent.“Somehow, her emails were being forwarded to Anthony Weiner, including classified information. His then-spouse Huma Abedin appears to have had a regular practice of forwarding emails to him for him to print out for her so she could deliver them to the secretary of state.” What!?  Kennedy then pressed Comey into admitting that if Weiner had read the emails, he would've been committing a crime. What comes next can only be described as pavement ape logic, where the FBI chief said he didn't think Weiner "ever read the emails." So, it's alright to send classified emails to Weiner, providing he promised not to open his eyes and read them? His job was simply to print out the stuff and then deliver it to his wife, in between sexting underaged girls. Right, got it."His role was to print them out as a matter of convenience," Comey said. He noted that the FBI ultimately determined that neither Abedin nor Weiner committed a crime because the bureau could not conclude they had criminal intent. "That was a central problem over the course of the Clinton email investigation — we had to prove that people knew that they were communicating about classified information in a way that they shouldn't have been, and that they were doing something unlawful. That was our burden, and we didn't meet it. We could not prove that the people sending that [classified] information were acting with any kind of criminal intent."

Comey's testimony causes spike in lookups of 'nauseous' | TheHill: FBI Director James Comey’s testimony before the Senate Judiciary Committee on Wednesday caused a massive spike in searches for the word “nauseous” on Merriam-Webster’s website. Comey told the panel that the thought of the FBI influencing the outcome of the 2016 election made him “mildly nauseous.” The remark quickly caused a spike in searches for “nauseous” on the Merriam-Webster website. The dictionary reported a 4,793 percent increase in searches of the word following Comey’s testimony.

Yes, Obama’s $400,000 Speech is a Problem -- Richard Eskow -- A new poll shows fully two-thirds of the American public agrees with this statement: “The Democratic Party is out of touch with the concerns of most people.” And scarcely more than one in four Democrats themselves think the party understands most people’s everyday concerns. It was also just announced that Barack Obama, following in the well-heeled footsteps of Bill and Hillary Clinton, will be paid hundreds of thousands of dollars for giving a speech on behalf of a Wall Street firm. Anyone who thinks these two facts aren’t connected isn’t paying attention. Obama’s payday reflects a longstanding pattern of behavior from Democratic leaders: Talk like liberals, govern from the center, and make a lot of money once you’re out of office. Their policies are better than Trump’s and the GOP’s, but that adds even more bite to that poll’s other major finding: Democrats are viewed as even more out of touch with everyday concerns than Trump, a twitter-happy billionaire president who weekends at his palatial estate. Democrats need a better message, to be sure. But they also need messengers who will walk the walk after they have talked the talk.

 Wall Street Lawyer Jay Clayton Confirmed as SEC Chair -- The U.S. Senate voted on Tuesday to confirm attorney Jay Clayton to head the Securities and Exchange Commission, the agency tasked with policing and writing rules for Wall Street. In a 61-37 vote, the Senate approved the nomination, with some moderate Democrats joining their Republican colleagues in supporting his confirmation. Clayton could be officially sworn in as SEC chairman as soon as Thursday.The White House still must complete some paperwork, including an action by President Trump to formally designate him as SEC chairman. Clayton is a longtime partner at law firm Sullivan & Cromwell who specializes in advising clients on public and private mergers and acquisitions and capital-raising efforts.  Clayton worked on the initial public offering of Alibaba Group Holding Company and has also represented, where his wife Gretchen works. She is now expected to step down from her post, a move that will make it easier for her husband to mitigate potential conflicts of interest. "I look forward to working closely with my fellow Commissioners and the dedicated career staff at the SEC to serve the American public and advance the SEC’s important mission," Clayton said in a statement.

Trump administration set to replace top banking regulator Thomas Curry: WSJ | Reuters: The Trump administration plans to replace Comptroller of the Currency Thomas Curry as chief overseer of federally chartered banks, the Wall Street Journal reported on Monday. The change, which could happen as soon as this week, could lead to President Donald Trump replacing Curry with an acting head of the agency, WSJ reported, citing people familiar with the matter. The Office of the Comptroller of the Currency (OCC), which oversees the federal banking system, administers hundreds of bank supervisors stationed inside large U.S. financial firms. Curry, appointed by the Obama administration for a five-year term that expired in April, could remain in the role until a new appointment is made. President Trump is considering Joseph Otting, a former banker at OneWest Bank who worked with Treasury Secretary Steven Mnuchin, to take on the responsibility of this office and replace Curry, the paper said. Keith Noreika, a banking lawyer at Simpson Thacher & Bartlett LLP, is being considered as acting comptroller, WSJ said. Noreika was part of Trump's transition team for Treasury. He also advised Treasury on its $250 billion Troubled Asset Relief Program, or TARP, in 2008.

Trump replaces key Obama-era bank regulator - POLITICO: The Treasury Department said Wednesday that attorney Keith Noreika will lead a key bank regulatory agency, effective Friday, on an interim basis until a permanent replacement is confirmed. Noreika will take over as head of the Office of the Comptroller of the Currency, replacing Thomas Curry, who has served in the post for five years and helped oversee the layers of tough regulation rolled out after the financial crisis. Noreika will be tasked with finding ways to peel back many of those regulations, mandated by the 2010 Dodd-Frank Act that President Donald Trump has vowed to dismantle. "Keith Noreika has deep experience in helping banks operate in a safe and sound manner, provide fair access to financial services, and provide credit needed for business expansion and job growth,” Treasury Secretary Steven Mnuchin said in a statement. “I am confident that he will capably lead the OCC in carrying out its important mission.” Curry’s term ended April 9, and though he could have served in that position until a replacement was confirmed by the Senate, the Treasury secretary has discretion to replace the sitting agency head at any time.Mnuchin said before the announcement that administration officials “very much appreciate Curry’s leadership” at the agency. Senate Banking ranking member Sherrod Brown blasted the decision to remove Curry before a Senate-confirmed replacement had even been announced. “Comptroller Curry has been a strong, independent watchdog for the nation’s biggest banks, and a dedicated, thoughtful public servant who helped respond to the worst financial crisis in generations,” Brown said in a statement. “It is disturbing that the President is rushing to replace Mr. Curry with an acting appointee who has clear conflicts of interest, and lacks any experience in running such an important agency.” Noreika comes from Simpson Thacher & Bartlett, where he was a partner in the firm's financial institutions practice. He worked with banks hoping to comply with the so-called Volcker rule, which bans banks from making risky bets with deposits, and rules put in place by the CFPB. Both of those issues are at the heart of Republican efforts to overhaul financial rules. 

President Trump, This Is No Way to Drain the Swamp --  Pam Martens  -- For the past three decades, Thomas J. Curry has been a public servant, specializing in bank supervision. Most recently, Curry served as head of the Office of the Comptroller of the Currency (OCC), the regulator of national banks – which oversees some of the biggest banks in the U.S. Yesterday, the Trump administration announced that Curry would be replaced with Keith Noreika, who will serve as Acting Director of the OCC until the U.S.  Senate confirms a permanent new head. Noreika’s history has been that of a bank lawyer for two decades.Noreika has been with the corporate law firm Simpson Thacher & Bartlett LLP for the past 10 months. Prior to that, however, he spent almost 18 years at Covington & Burling, the law firm where the top dogs in Obama’s Justice Department sprang from. Those top dogs, including U.S. Attorney General Eric Holder, failed to prosecute one top executive of any Wall Street bank for their role in the 2008-2010 financial collapse, despite mountains of evidence of serial frauds at the banks.  Equally noteworthy, Covington & Burling has a history of its law partners moving into the top slot at the OCC. John Dugan, a former bank lobbyist who has returned to Covington to chair its Financial Institutions Group, headed the OCC from 2005 to 2010 – the critical period leading up to and including the subprime mortgage meltdown, fraudulent foreclosures, robo-signing, the rigged peddling of mortgage-backed securitizations and the largest taxpayer bailout of banks in U.S. history. Prior to Dugan, another Covington & Burling partner, Eugene Ludwig, was appointed by President Bill Clinton to head the OCC from 1993 to 1998. That was the period leading up to the repeal of the Glass-Steagall Act in 1999. As a result of that repeal, commercial banks were allowed to merge with Wall Street investment banks, creating today’s Frankenbank era of “too-big-to-fail.”Ludwig had joined other Wall Street sycophants in the Clinton administration (like Robert Rubin and Larry Summers) to champion the deregulation of Wall Street.

Trump to meet Monday with 100-plus community bankers — President Trump is scheduled to meet with the top leadership of the Independent Community Bankers of America on Monday, including more than 100 of its members, the group said late Sunday.  The meeting was requested by the president, according to Cam Fine, the president and CEO of the group, and is expected to also include Vice President Mike Pence.  The meeting with the ICBA comes at the beginning of the group's fly-in to Washington, where community bankers are urged to directly lobby the administration and their members of Congress. The ICBA said it hopes to raise several issues this week, including regulatory relief, the reauthorization of flood insurance, tax reform, credit unions' federal tax exemption, a farm bill and a stop to what it views as the Farm Credit System's "mission creep." While Trump has met with small groups of bankers before, this is by far his largest gathering with community bankers. Since taking office, he has repeatedly sought to reassure them that he is committed to regulatory relief. He signed an executive order requiring Treasury Secretary Steven Mnuchin to examine what can be done to provide help to institutions as part of a review of the Dodd-Frank Act. Trump also met with a smaller group of community bankers in March. Participants in that meeting came away impressed, saying the president repeatedly asked his advisers if he could fix problems in the system by issuing new executive orders (many of the problems bankers brought to him either required legislation or action by an independent regulator).  Community bankers are hopeful for the passage of regulatory relief this year, though the outlook for sweeping legislation is poor.  While House Financial Services Committee Chairman Jeb Hensarling is expected to see his relief bill pass the panel on Tuesday, the legislation stands little chance in the Senate. Democrats broadly support providing relief to community bankers, but are opposed to many of the Hensarling bill's provisions, including its restructuring of the Consumer Financial Protection Bureau.

Trump administration aiming for two-tiered regulatory system - — During a meeting with more than a hundred community bankers on Monday, Trump administration officials made it clear they favored a system with different rules for small and big banks.  Community bankers have long sought so-called two-tiered regulation, but policymakers are generally unwilling or unable to shake up the existing system, which imposes many of the same regulations across the spectrum of institutions.   During the meeting, President Trump largely reiterated comments he’s made in the past, discussing the importance of community banks for the economy and small businesses. But his willingness to speak to so many bankers at once, combined with comments by his senior advisers who also attended, sent a strong message to attendees. “He has changed the tone,” said Cam Fine, president and chief executive of the Independent Community Bankers of America, which helped to organize the meeting. “We did not have a single meeting like this in eight years at the White House … he has given a bunch of dispirited bankers, who felt like beaten dogs for the last eight years, hope. The morale of our members is sky high right now.”  Though the meeting was light on prescriptive policy plans, Vice President Mike Pence and National Economic Council Director Gary Cohn both spoke of the need to reduce regulations, according to participants. Cohn in particular suggested moving to a two-tiered regulatory system where big and small banks would play by different rules, they said.  “They understand the two different business models that are out there,” said Timothy Zimmerman, chairman-elect of the ICBA and president and CEO of the $486 million-asset Standard Bank in Monroeville, Pa.  Cohn also told bankers that the administration is looking at reinstating some form of the Glass-Steagall Act, the Depression-era law that separated commercial and investment banking, though he suggested a new version would be significantly different.

Trump Eyes Breakup of Big Banks While Wooing Their Smaller Rivals -- President Donald Trump's latest comments on breaking up the biggest banks came as White House officials met with more than 100 community bankers, among the fiercest advocates of dismantling global financial firms with multiple business lines."There are some people that want to go back to the old system," the president said in a Bloomberg News interview Monday, referring to the Depression-Era Glass Steagall Act, which separated investment and commercial banks. "We're going to look at that."Trump and others in his administration have made similar comments in recent months but questions remain about what the White House's legislative proposal for a breakup might look like - if it produces one. The president, in the meantime, joined Vice President Mike Pence and White House economic adviser and former Goldman, Sachs executive Gary Cohn in discussing "regulatory burdens" during the Independent Community Bankers of America's annual conference in Washington, a confab for more than 1,000 industry leaders.It's possible that Trump made the comments to signal support for the group, a sector hit hard with collateral damage from the 2008 financial crisis."If we've learned anything over past few months it is not to take anything President Trump says at face value," said Boston University Law Professor Cornelius Hurley. "It's no coincidence that Trump made these comments today. The community banks have a tremendous clout in public, but it's the Gary Cohns of the world that name the tune behind the scenes."

Trump is considering new Glass-Steagall-style bank rules - President Donald Trump on Monday said he is considering breaking up big Wall Street banks, by splitting their consumer business from their investment operations. "I'm looking at that right now," he told Bloomberg News. White House spokesman Sean Spicer said there were no further details and no announcement was planned. Shares in banks initially fell after President Trump's comments before recovering ground. US banks were permitted to own both High Street banks and investment banking operations in 1999, when the Glass-Steagall Act was repealed. Some argue the repeal set the groundwork for the financial crisis in 2007-8. During the campaign, President Trump expressed support for a "21st-century" Glass-Steagall Act. "There's some people that want to go back to the old system, right? So we're going to look at that," the president told Bloomberg, in response to a question about breaking up the banks.

 Trump Says He's Considering Moves to Break Up Wall Street Banks: President Donald Trump said he is actively considering breaking up giant Wall Street banks, giving a push to efforts to revive a Depression-era law separating consumer lending and investment banking. “I’m looking at that right now,” Trump said Monday in an interview with Bloomberg News in the Oval Office. “There’s some people that want to go back to the old system, right? So we’re going to look at that.”During the presidential campaign, Trump called for a “21st century” version of the 1933 Glass-Steagall law that required the separation of consumer lending and investment banking. The 2016 Republican party platform also backed restoring the legal barrier, which was repealed in 1999 under a financial deregulation signed by then-President Bill Clinton. A handful of lawmakers blame the repeal for contributing to the 2008 financial crisis, an argument that Wall Street flatly rejects. Trump officials, including Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn, have offered support for bringing back some version of Glass-Steagall, though they’ve offered scant details on what an updated approach might look like. Both Mnuchin and Cohn are former bankers who worked for Goldman Sachs Group Inc. 

House panel to vote on GOP Dodd-Frank rewrite | TheHill: The House Financial Services Committee is expected to vote Wednesday on a Republican bill to uproot the Dodd-Frank Wall Street Reform and Consumer Protection Act. The panel began marking up on Tuesday the Financial CHOICE Act, sponsored by Chairman Jeb Hensarling (R-Texas), which would repeal major parts of the post-recession financial regulation. Key federal agencies and authorities created and expanded by the law would be drawn back and conducted in closer oversight of Congress, all long-sought GOP goals. Democrats are fiercely opposed to the bill and prolonged the contentious hearing in protest. The committee recessed at midnight Wednesday, with votes on several amendments expected to begin shortly after 9 a.m. An additional round of amendment votes is expected Wednesday evening. A vote on recommending the bill for passage will likely occur before the House is scheduled to recess on Thursday morning. The committee will vote on several amendments to the bill offered by Democrats that would undo key provisions sought by Republicans and the financial sector. An amendment from Rep. Nydia Velazquez (D-N.Y.) would maintain direct funding of the Consumer Financial Protection Bureau through the Federal Reserve, while the CHOICE act gives Congress control of the CFPB’s budget. The CFPB would lose its independent agency status, and its director would be fireable at will by the president. The president would also appoint and remove a deputy director, and the new bureau would be limited to enforcing current laws, losing its power to crack down on “unfair or deceptive acts or practices.”

Letter to U.S. House Financial Services Committee on the Financial CHOICE Act -- EPI Director of Research Josh Bivens sent the following letter to the U.S. House Financial Service Committee concerning the Financial CHOICE Act. Download PDF

CHOICE Act Markup Drags On After GOP Sinks Dem CFPB Amendments -- The House Financial Services Committee on Wednesday killed a handful of Democratic amendments aimed at altering some of the most significant overhauls contained in Chairman Jeb Hensarling’s plan to replace the 2010 Dodd-Frank Act, especially those related to the Consumer Financial Protection Bureau. The panel voted along party lines to reject one Democratic amendment to the Texas Republican’s Financial CHOICE Act that would have preserved the CFPB’s independent funding stream. The GOP proposal, H.R. 10, would make the CFPB subject to the congressional appropriations process. Another defeated Democratic amendment would have kept the CFPB’s authority to target predatory behavior (Unfair, Deceptive or Abusive Acts or Practices) at financial services companies. Members of the panel debated those proposals Tuesday night before returning to Capitol Hill Wednesday to hold recorded votes. Since this morning, the panel has been debating amendments on a variety of issues ranging from the Labor Department’s fiduciary rule to monetary policy reforms, but the committee has postponed votes on the new proposals. The ongoing debate means that the markup will almost certainly carry over into Thursday morning. A GOP committee aide said that Republicans are expecting five to six more amendments from Democrats, and that all recorded votes on outstanding amendments could be held off until Thursday. The lengthy debates on Democratic amendments made it clear that the currently pending proposals are unlikely to receive the panel’s approval. One amendment, offered by Rep. Stephen Lynch (D-Mass.), would have gotten rid of CHOICE’s repeal of a Labor Department rule that places new fiduciary requirements on retirement investment advisers. For around two hours, lawmakers re-litigated the effectiveness of the fiduciary rule, which among other provisions established a private right of action if advisers sell certain products in violation of the regulation. Several Republicans reiterated that they would prefer seeing the Securities and Exchange Commission create a best-interest standard, instead of the DOL. 

'Every single soul knows this bill won't become law' — The House Financial Services Committee vote Tuesday on a sweeping regulatory relief bill featured a lot of sound and fury, but how much it truly signified was decidedly unclear. The vote stretched throughout the day and into the evening, including more than two hours when the text of the 600-plus page bill was read out loud, and showcased sharp partisan divisions and occasionally colorful language. While it is ultimately expected to pass the panel along largely party lines, few expect it to stand a chance in the Senate.

Why the Choice Act is a threat to corporate stewardship - For over 40 years, some shareholders have been protecting the environment, improving working standards and increasing corporate accountability using a little-known but effective tool called a shareholder proposal. But now this tool is threatened by the legislative push to reform financial regulation. Shareholder proposals allow investors to put questions related to a company’s environmental, social, and governance (ESG) policies to a vote of all shareholders. But this right would be stripped away from most shareholders by Section 844 of Financial Choice Act, the bill authored by House Financial Services Committee Chairman Jeb Hensarling, R-Texas, to unwind much of the post-crisis regulatory regime. As an advocate for corporate governance and sustainability, I strongly oppose this provision. Shareholder proposals have long been an effective tool for promoting the interests of long-term investors. While most proposals do not receive majority support or result in immediate policy changes, the primary purpose of a shareholder proposal is to initiate a dialogue between companies and shareholders regarding long-term issues that may escape attention in a financial market primarily driven by quarter-by-quarter performance. Shareholder dialogue does not coerce companies into action, but does offer corporate leadership the benefit of an independent and objective perspective of a group that, like the corporation itself, is focused on creating long-term value. These discussions may center on traditional corporate governance issues such as executive compensation or board structure and composition, or on material sustainability issues such as fair treatment of labor, climate change or equal employment opportunity. Over the years, policies related to many of these issues have become a routine part of business planning for many companies, with benefits both for society as a whole and for the long-term performance of companies.

House panel approves reg reform bill along party lines — After more than two days of debate, the House Financial Services Committee on Thursday approved its sweeping Dodd-Frank Act rollback bill. The Financial Choice Act, sponsored by Chair Jeb Hensarling, R.-Tex., can now proceed to the House for a full vote from the chamber, which is expected to approve it. Still, it is highly unlikely it will be approved by the Senate. Banking Committee Chairman Mike Crapo acknowledged as much last month, saying large changes would require bipartisan support, which the Choice Act currently lacks. 

House Republicans Move to Gut Bank Regulations - — Republicans took a big step toward repealing the Affordable Care Act on Thursday, and they took a small step toward dismantling another of President Barack Obama’s signature pieces of legislation, the Dodd-Frank Act. With only the support of Republicans, the House Financial Services Committee voted in favor of the Financial Choice Act, a bill that would gut central financial regulations created in the aftermath of the 2008 financial crisis. The bill is expected to get a vote from the full House in the coming months. But, in its current form, it is not expected to pass in the Senate, where it would need support from Democrats to garner the necessary 60 votes. The Choice Act would exempt some financial institutions from capital and liquidity requirements, essentially excusing them from the 2010 Dodd-Frank Act if they hold enough cash. It would replace the Orderly Liquidation Authority, which critics say reinforces the idea that some banks are too big to fail, with a new bankruptcy code provision intended for large financial institutions. It also would weaken the powers of the Consumer Financial Protection Bureau. Under the proposed law, the president could fire the agency’s director at will. Republicans hailed the committee vote as a win for financial institutions. “Our plan replaces Dodd-Frank’s growth-strangling regulations on small banks and credit unions with reforms that expand access to capital so small businesses on Main Street can grow and create jobs,” said Representative Jeb Hensarling, Republican of Texas and chairman of the House Financial Services Committee.  After a long markup section, the nearly 600-page bill passed, 34 to 26. The 19 amendments Democrats offered were rejected. They assailed the legislation as a giveaway to the banks. “The Wrong Choice Act is a deeply misguided measure that would bring harm to consumers, investors and our whole economy,” said Representative Maxine Waters of California, the ranking Democrat on the committee. “The bill is rotten to the core and incredibly divisive,” she said. “It’s also dead on arrival in the Senate, and has no chance of becoming law.”

Regulating Wall Street: What Needs to Happen Next? - Tim Taylor -- The Wall Street Reform and Consumer Protection Act of 2010--commonly known as the Dodd-Frank act--was a peculiar piece of legislation. It did not directly change financial rules or regulations; instead, it told financial regulators to write new rules in nearly 400 areas. Given that writing a regulation involves a legislatively-mandated process that includes rounds of mandatory feedback and cost-benefit calculations, it's eyebrow-raising but not especially shocking that six years after passage of the bill: "Of the 390 total rulemaking requirements, 274 (70.3%) have been met with finalized rules and rules have been proposed that would meet 36 (9.2%) more. Rules have not yet been proposed to meet 80 (20.5%) rulemaking requirements." As these hundreds of new regulations began to take effect, and to interact with each other and the real world, there was inevitably going to be a need for follow-up legislation. A Republican-backed bill called the Financial CHOICE Act passed through the House Financial Services Committee earlier this week. A group of faculty members at the New York University Stern School of Business and the School of Law have combined to publish an e-book called Regulating Wall Street: CHOICE Act vs. Dodd-Frank, which offers a bunch of readable short essays on these topics.  My overall take is that although Dodd-Frank had some useful steps, it was most usefully interpreted as a cry by Democrats for "more regulation." Conversely, the Financial CHOICE act is essentially pushback by Republicans for "less regulation." Dodd-Frank is full of problems and missed opportunities, but the Financial CHOICE act, even if it is turns out to be amended in sensible ways, would leave behind additional problems while managing miss many of the same opportunities. US financial reform legislation doesn't offer much inspiration for ability of US legislators to see the bigger picture. The "Introduction" by Thomas Cooley gives a useful overall perspective on the NYU volume:

Is systemic risk a Dodd-Frank fallacy? | American Banker As Treasury Department officials review the Financial Stability Oversight Council’s designation process, they should also re-examine how the Dodd-Frank Act defines systemic risk.The FSOC’s duty to identify “systemically important financial institutions” has been hamstrung by Dodd-Frank’s flawed concept of systemic risk, which confuses symptoms with causes, and shifts attention toward prescriptions that are unlikely to forestall the next financial crisis.  Dodd-Frank assumes that some institutions will radiate systemic risk when they fail — a risk that can spark a financial crisis — while others fail without systemic impact. The economic cost of systemic risk, according to this concept, is slower economic growth as financial services are disrupted in the wake of a financial crisis. But these assumptions are dubious at best. Systemic risk is a modern analog to “luminiferous aether,” a substance described by 19th-century physicists to help them explain light travel through space, but experiments later showed to be imaginary.Similarly, Dodd-Frank-style systemic risk was invented to explain why SIFI failures are the cause of financial crisis. Like aether, maintaining a belief in systemic risk will perpetuate a flawed theory — in truth, SIFIs failed because there was a financial crisis, not the reverse. The Dodd-Frank focus on SIFIs and systemic risk leads to a prescription to treat the symptoms of the crisis — more regulation for SIFIs. However, these treatments are at best indirect palliatives for the true causes of the crisis: misguided economic policies that sparked bubbles in the housing market and flawed capital rules that allowed financial-sector leverage to soar.Moreover, the Dodd-Frank focus on SIFIs and systemic risk creates the impression that SIFIs play an especially important role in the e conomy and consequently must be preserved by all means necessary. The flip side of this view is that non-SIFI institutions are unimportant because their failure has no impact on financial stability.

Ending Too Big to Fail: Resolution Edition -- The autumn 2008 experience convinced many observers of the need for a robust resolution regime in which financial behemoths could be re-organized quickly without risk of contagion or crisis. The question was, and remains, how to do it. Dodd-Frank provided a two-pronged answer: the FDIC would first rely on the bankruptcy code (Title I), and second, on a resolution temporarily funded (if necessary) by government resources (Title II). The second piece is commonly known as Orderly Liquidation Authority (OLA), which is funded by the Orderly Liquidation Fund (OLF). (It would be more accurate to label these as a resolution authority and a resolution fund, since they are intended to reorganize and restructure, rather than liquidate the firm in question.)In response to dissatisfaction with parts of this solution, Congress and the President are working on refinements. Last month, the House passed a bipartisan revision of the bankruptcy code (Financial Institutions Bankruptcy Act, or FIBA) that would expedite the resolution of adequately structured intermediaries. And, on April 21, President Trump ordered a Treasury review of OLA, expressing concern that the OLF authorization to use government funds “may encourage excessive risk taking by creditors, counterparties, and shareholders of financial companies.” This post considers FIBA and how it fits in with the existing Dodd-Frank mechanism. To summarize, FIBA buttresses the first element—making credible its reliance on the bankruptcy code. However, it does not substitute for essential parts of the second: (1) the authority to use temporary government funding (OLF); and, (2) the ability to work directly with foreign regulators in cases (like Lehman) involving extensive operations abroad.

How ending FDIC's resolution powers would hurt Americans -- Republican politicians have launched a full-scale attack on the “orderly liquidation authority,” the provision in Title II of the Dodd-Frank Act that empowers the Federal Deposit Insurance Corp. to unwind a failing financial conglomerate in a manner that avoids chaos in the financial system. But the effort to unwind this authority is unfortunate. In the last couple of weeks, the White House issued an orderto review the OLA and the House Financial Services Committee released the Financial Choice Act, a proposed replacement to Dodd-Frank, which calls for the OLA’s elimination. Critics of the FDIC’s resolution authority charge that the agency’s access to a Treasury Department liquidity facility — the Orderly Liquidation Fund — is akin to bailout authority. They instead favor reforms to the bankruptcy code to deal with the failure of large firms. But this ignores the point behind creating the OLA. One of the primary drivers behind the failure provision was the Lehman Brothers bankruptcy in the crisis. At that time, there was no regulator legally empowered to guide a behemoth through the liquidation process with the aim to prevent market panic. The only other legal choice besides letting Lehman go bankrupt was for a government bailout. So the Lehman estate was left up to the bankruptcy courts. But in a bankruptcy, lawyers have the incentive merely to rescue as much as possible for their clients. In contrast, under the OLA, the FDIC’s objective is to help unwind a bank while trying to protect the safety and soundness of the American financial system and economy. Without such a regime in place, the financial system and economy would fall victim to the competing interests of various individual parties, none of whom would be focused on the big picture. Opponents of the OLA idea seem to ignore that a failed large bank is not just a domestic problem, but rather an international one. Partly for this reason, other countries have followed the U.S. lead in crafting resolution regimes. International coordination in the establishment of laws and institutions to resolve global banks is crucial. Relying on a bankruptcy judge to handle a cross-border resolution is dangerous because she would only have authority in the U.S., without the ability to coordinate on a bilateral or global basis. 

This Chart Proves Paul Krugman Is Dead Wrong on Wall Street Reform  --By Pam Martens - In August of 2014 Krugman wrote that the Dodd-Frank financial reform legislation that Obama had signed into law in 2010 “is a success story.” Krugman’s rubber stamp of Dodd-Frank came despite the fact that JPMorgan Chase, the country’s largest bank, had just two years earlier – long after the passage of Dodd-Frank – used hundreds of billions of dollars of its depositors’ money in its commercial bank, Chase, to make wild gambles in derivatives in London, losing at least $6.2 billion along the way. This so-called “London Whale” debacle correctly convinced millions of Americans that the only way to truly reform Wall Street was to remove the taxpayer-backstopped, insured deposits from the grasp of Wall Street by restoring the Glass-Steagall Act of 1933. That legislation barred commercial banks holding insured deposits from merging with their casino cousins – the investment banks and brokerage firms on Wall Street.On December 15, 2014, Krugman was back on his soapbox after Citigroup used its lobbying muscle to effectively repeal a critical component of the Dodd-Frank legislation, with the result that trillions of dollars of dangerous derivatives were left on the books of the insured commercial banks which were now housed under the same roof as Wall Street’s high risk investment banks.On December 15, 2014, Krugman wrote: “I’d argue that regulating insured banks is something of a sideshow, since the 2008 crisis was brought on mainly by uninsured institutions like Lehman Brothers and A.I.G.”So many writers at the New York Times are repeating this false narrative that it’s beginning to sound like a scripted story line that has some invisible, but powerful, public relations firm behind it. […] Citigroup’s tentacles extended into every other major Wall Street bank but no one knew for certain which firms had major exposure to it, particularly on its over-the-counter derivatives contracts which remain a black hole to this day. The result was the massive dumping of its stock on a fragile market, which served to beat down the stock of all of its peers. The chart below shows how dramatically Citigroup sold off during the crisis versus the S&P 500. This selloff continued long after Lehman and AIG had succumbed to the crisis. Yes, the failures of the Dodd-Frank legislation have cast a negative light on the legacy of Barack Obama’s presidency, but why is it Paul Krugman’s job to massage that legacy into something it’s not?

 Accounting scandals put the Big Four on the spot  - From the shambles of the Oscars ceremony to the more serious matters of US lawsuits and UK regulatory investigations, it has been a difficult year for PwC. Its rival KPMG is hardly faring better. The Big Four accountancy firm was castigated by Senator Elizabeth Warren for failing to spot dubious practice at the lender Wells Fargo. Now its auditing of Rolls-Royce is under investigation in the UK after the engineering company admitted bribery and corruption offences going back 20 years. These scandals are not on the grand scale of the Enron fraud, which led to Arthur Andersen’s demise. Yet they highlight the failure of the accountancy profession and its regulators to resolve, in the intervening 15 years, the fundamental question of how far auditors should be expected to go in their efforts to uncover bad behaviour. The rules require them to “obtain reasonable assurance” that accounts are “free of material misstatement”. This leaves considerable scope for interpretation. Auditors should be on the lookout for fraud, as well as innocent error, and are expected to conduct checks to try to detect it, especially in areas that account for a significant proportion of a company’s balance sheet.However, auditors have always argued that it is not their job to pursue evidence of wrongdoing, second guess management or find out when they are being lied to. An audit will never have the rigour of a forensic investigation — at least, not unless companies pay significantly higher fees.  What is clear is that there is a wide gap between auditors’ own idea of how far their responsibilities stretch and the expectations of investors and the general public. The creditors of failed companies are increasingly inclined to hold their auditors responsible. The accountancy firms are predictably reluctant to see these questions tested in court — judging by PwC’s settlement of the lawsuits brought against it by the administrators of the failed mortgage lender Taylor, Bean & Whitaker, and the failed broker MF Global. This is regrettable. Greater clarity is needed on the scope of auditors’ responsibilities — and on the costs this may entail.

How a Prepaid Card Company Emerged as a ‘Major Opponent’ to CFPB -- It had been 20 days since the Consumer Financial Protection Bureau finalized the first comprehensive rules for the prepaid card industry—a fast-growing market where Netspend has made millions of dollars. While the rule and its tighter restrictions were the “big news,” it wasn’t necessarily for good news for Woods, chief executive of Netspend’s parent company, Total System Services Inc.  Woods predicted the CFPB’s rules—"all 1,689 pages,” he said—would cost the company, based in Columbus, Georgia, between $80 million and $85 million in overdraft and other fee revenue. Woods cited the new rules—they require companies to check the creditworthiness of consumers before providing overdraft services—for the company’s decision to “no longer offer optional overdraft protection on our current prepaid card programs.” Netspend and Total System Services by then had spent hundreds of thousands of dollars lobbying on prepaid card rules and other regulatory matters. Months after that conference call, the two companies are not backing down. Netspend is pushing the CFPB to delay the rule, and on Capitol Hill, Total System Services is jumping into an effort to tear up the new regulation. Last month, the CFPB proposed delaying the prepaid card rule’s effective date by six months—from October 2017 to April 2018—citing industry concerns about complying in time. On April 5, Netspend pushed for a longer delay of 12 months. That extension would push the rule’s effective date past July 2018, when CFPB director Richard Cordray’s five-year term expires. Netspend said it wanted the additional time to work with its partners and revise its packaging for the cards, which consumers can purchase online or in stores to use for everything from making purchases and ATM withdrawals to receiving direct deposits. A Netspend spokesman said thousands of cardholders had previously written the CFPB and urged it to “preserve overdraft as an option for customers.” “The bureau’s prepaid rule is eliminating a valuable tool used by many people to meet basic needs such as buying food, paying for medication or filling their tank with gas so they can get to work. For those struggling families, the prepaid rule is not solving a problem—it is creating one,” the Netspend spokesman said.

Wells Fargo warns legal bill could swell by $200m -- Wells Fargo has warned its litigation bill could be $200m higher than previously thought as the US bank sheds new light on a series of lawsuits it is facing over the bogus account scandal.   In a quarterly filing on Friday, Wells said “reasonably possible” losses from legal actions against it could exceed its existing provisions by $2bn — up from a $1.8bn figure it disclosed three months ago.  The document shows how lawsuits are piling up against Wells after thousands of its employees, under pressure to hit sales targets, turned to fraud. Workers signed up as many as 2.1m customers for cards and accounts over several years without their authorisation or consent, in some cases faking signatures.The legal hangover is the latest reminder that the now-notorious episode is still affecting the $277bn bank. Directors including chairman Stephen Sanger narrowly avoided being voted down by shareholders last week at the bank’s annual meeting in Florida. Here is a summary of the different legal claims against Wells, as disclosed in the filing:

 Undocumented workers filled quotas in Wells Fargo fraud, ex-bankers say -- Tim Sloan’s denial could hardly have been more categorical. The CEO of Wells Fargo was seated onstage in Los Angeles Monday, alongside four other top executives from different industries. They were gathered to talk about “creating meaningful lives for the 21st century workforce,” the kind of lofty topic you’d expect at the annual Milken Institute Global Conference. At one point, the moderator asked Sloan to respond to recent claims that Wells, as part of the fraudulent-accounts scandal that brought down his predecessor John Stumpf, had specifically preyed on undocumented workers. "It's not true," Sloan told the audience of more than 100. "When I hear something like that, it hurts," he said. "It's not the Wells Fargo that I know. It’s not the Wells Fargo that I care about." But it is the Wells Fargo that Yesenia Guitron says she knew. In several interviews, Guitron, who worked for the bank in St. Helena, Calif., from 2008 to 2010, described a surreal, pressure-cooker sales environment in which undocumented vineyard workers provided a simple answer to an impossible math problem. Bankers were pushed to fulfill a daily quota of eight new account openings — a standard goal at branches around the country — in a town with about 5,000 residents, said Guitron. "In 125 days, you are going to run out of customers to sell accounts to," she said, given that the St. Helena branch employed five bankers. “Desperate times call for desperate measures,” Guitron said, describing the prevailing ethos in the branch that she says she tried, and failed, to counteract. Often those bankers opened as many as 10 accounts under a single vineyard worker's name without the worker's knowledge, she said.

JPMorgan's Dimon says biggest fear is bad public policy | Reuters: Jamie Dimon, the chief executive officer and chairman of JPMorgan Chase, on Monday railed against what he called excessive U.S. regulations and called on Washington to come together to build a more business-friendly economy that supports workers. "The real issue I'm worried about is bad public policy," Dimon said, speaking at the annual Milken Institute Global Conference. "We're leaving a lot of people behind." As a member of the White House's new Strategic and Policy Forum, Dimon is part of the group of business leaders tasked with finding a way to create more jobs in the United States. Dimon joined the task force despite not supporting President Donald Trump in his campaign - a move he attributed to the need to support "the pilot" flying the airplane. Dimon stressed that technology advancements are not the enemy of job creation. "You'd be living in tents, hunting buffalo, and dying at 35," were it not for developments in tech, he said. "Mankind will adjust and find other things to do as robots take their place. If it (technological developments) goes too fast, then we can create policies that make up for it." Dimon, who has led the bank as CEO since December 2005, shrugged off any aspirations for running for office, when asked on stage. He said it was too late for him to live as a civil servant and that he does not want to be a mayor, a senator or governor. "You've got to start early. President Obama wrote two books about himself before he did anything," Dimon said - a line that prompted laughter and applause from the hundreds of business leaders, financiers and government officials packed into the Beverly Hills Hilton ballroom. Dimon said the government needs to spend more money on programs that provide education and work opportunities for people, particularly those in poor, economically depressed urban neighborhoods. "I think there are legitimate complaints about what we didn't do to help the problems of these folks," Dimon said. "It's a terrible thing - those inner city kids who may be a Colin Powell, a Barack Obama, Albert Einstein, and we'll never know because we didn't give them the opportunity that most of us had."

Congress must not cut the banking cord to impoverished communities -- Congress may soon decide the fate of the Community Development Financial Institutions Fund following the Trump administration budget proposal to ax the program, a move that would have drastic consequences for communities that rely on the federal subsidies for desperately needed economic opportunities. If you haven’t heard of the CDFI Fund, it may be because you don’t live in one of the low- and moderate-income communities where the $250 million that goes to the fund is critical to creating jobs, business growth and other community development. The seven straight years of economic growth in the U.S. has not yet reached those communities. In these areas, rising incomes, reduction in unemployment, access to capital and generally greater economic opportunity for small and midsize businesses have not occurred. While the overall level of unemployment is down to 4.7% in the United States, there are states and counties where the unemployment is as high as 17%. The CDFI Fund, which was set up in 1994 as a Treasury Department program, focuses on those overlooked communities. The fund has been instrumental in generating economic growth in LMI communities. It provides targeted resources and programs that invest federal dollars with private investment. Since its inception, the CDFI Fund has awarded more than $2 billion through its CDFI program for financial and technical assistance, $419 million in bank enterprise awards and $50 billion in New Markets Tax Credits. As of Jan. 31, there were 136 banks that are certified community development financial institutions located in 28 different states, including Washington D.C. That’s nearly three times the number of such CDFIs than just 15 years ago. Based on data from SNL Financial, the total assets that are controlled by these banks increased from $5 billion in 2001 to approximately $44.9 billion in 2016 — a compound annual growth rate of 14.6%. And when it comes to providing access to capital for LMI communities, CDFI banks have increased loans from $2.9 billion in 2001 to $30.8 billion in 2016 — a compound annual growth rate of 16%.

 Foreign Banks Subpoenaed Over Alleged Treasury Market Manipulation - Federal prosecutors have subpoenaed several (foreign) banks as part of a criminal investigation into possible manipulation of the U.S. Treasuries market, according to people familiar with the matter. U.S. authorities have been examining the U.S. Treasuries market for roughly two years. As Bloomberg reports, in November 2015, Goldman Sachs disclosed that U.S. authorities had sought information related to its trading of when-issued securities, which are among the least transparent instruments in the world’s largest debt market. And now, the Justice Department issued subpoenas last month to banks including UBS, BNP Paribas, and the Royal Bank of Scotland seeking information on the $14 trillion market, said two people, who asked not to be named because the investigation is confidential. Read more here... As a reminder, 'When-issued' securities have been a government-debt market fixture since the U.S. Treasury Department effectively authorized their use in 1975. Investors can buy them from a Wall Street bond dealer to guarantee they will be able to get their hands on a bond, bill or note once it’s auctioned by the government. When-issued securities act as placeholders for bills, notes or bonds before they’re auctioned. The instruments change hands over the counter, with lifespans of just days. There’s scant public information on trading volumes or the market’s biggest players. When debt sells for less than when-issued prices indicate, traders say the auction “tailed.” Auctions tailed more than half the time in every type of security except for the 10-year note between 2010 and 2014, a Cleveland pension fund alleged in one of the lawsuits against the primary dealers. The chances that a supposedly predictive market would be so consistently off, in a direction that favors the people selling the security, is lower than 1 percent, the fund alleged.

Breaking Banks: Fintech charter backlash; change our thinking  (podcast )  American Banker's Rob Blackwell and Marc Hochstein discuss the pushback from state regulators and consumer advocates against the OCC's proposed charter; at the EFMA Distribution Summit in London, Chris Skinner and Jim Marous hold forth on fintech.

 Have rogue employees met their match in AI? -- During a recent visit to IBM’s digs in the chic Astor Place section of Manhattan, I got a peek at how Watson — the famous (and increasingly useful) artificial intelligence machine — is being taught to look for signs of improper trading, fraudulent account openings and other employee misdeeds."We take all of traders' emails and chats and run them through our personality insights and tone analyzer and identify whether there’s anger, are they happy, are they sad?" said Marc Andrews, vice president of Watson Financial Services Solutions. “We’re analyzing the behavioral patterns that are associated with misconduct: How do people start behaving right before they get involved in misconduct?”One thing Watson has discovered, according to Andrews, is that U.S. traders stop using profanity and angry language just before doing something they shouldn’t.  But in the U.K., traders’ use of profanity rises when they go rogue.

Wall Street's fear gauge hits lowest level since before crisis - Wall Street’s so-called fear gauge on Monday slid to its lowest level since before the credit crisis as the broad US stock market inched closer to a new all-time high and the technology-heavy Nasdaq Composite closed at a record.The Chicago Board Options Exchange’s implied volatility index, also known as the Vix, slipped as much as 9 per cent on Monday afternoon to touch 9.90, its lowest mark since February 2007. The gauge measures the prices of short-term US equity options and is constructed to reflect how volatile traders think stocks will be in the coming month. It has remained stubbornly subdued over the past year, despite a string of geopolitical events that investors and strategists had warned could rock markets, including US and French elections and the Brexit vote in the UK.“It has been a surprising development this year that with all the uncertainties we would be looking at the least volatile four-month start to a year in several decades,” said Rocky Fishman, an equity derivatives strategist at Deutsche Bank.The latest step down by the Vix comes as polls in the French presidential election continue to suggest low odds of a victory by the anti-euro populist Marine Le Pen this weekend. That has buoyed equities and quelled a tremor of volatility that erupted last month. The S&P 500 has advanced 1.7 per cent since the first round of the French election on April 23, including a 0.2 per cent rise on Monday that took the stock index to 2,388, near a new record high. The Nasdaq, which is up more than 3 per cent over the same period, advanced 0.7 per cent on Monday to set its sixth straight closing record. Apple, Amazon and Facebook — part of the so-called Fangs stocks that have driven the Nasdaq’s 13 per cent rally so far this year — all closed at record highs.

With Apple Raking In $3.6 Million In Cash Every Hour, Traders Ask When Will It Start Spending --  Both AAPL and the broader Nasdaq index are trading at new all time high ahead of Apple's earnings on Tuesday, where in addition to the company's operating results and iPhone sales, investors will pay close attention to Apple's record cash hoard - expected to rise well above a quarter trillion dollars - and especially to hints Tim Cook may reveal about the company's cash usage plans. In addition to the traditional speculation about potential AAPL M&A, the WSJ points out that the money, more than 90% of which is stockpiled outside of the U.S., has drawn fresh attention as President Donald Trump has proposed slashing business taxes and granting a one-time tax holiday on corporate cash brought home. Those policies could ratchet up pressure on the tech giant to dole out more money to shareholders or make splashy acquisitions. Here are some striking facts about Apple's cash cushion from the WSJ:

  • As of December, the company had $246.09 billion total cash, cash equivalents, and securities. Apple, like most multinational American companies, parks most of that cash offshore rather than paying U.S. taxes on its overseas profits.
  • Apple’s results will show the company doubled its cash in just over 4½ years. In the last three months of 2016, it racked up cash at a rate of about $3.6 million an hour.
  • With the exception of financial companies, Apple’s stash exceeds that of any other U.S. company in recent history, said Jennifer Blouin, an accounting professor at University of Pennsylvania’s Wharton School. “I have never seen a company in this kind of extreme position, barring a winding-down,” she said. “Apple’s a cash box right now.”
  • Apple cash and cash equivalents are spread across short- and long-term securities, including corporate securities, U.S. Treasury securities and money-market funds.

Apple's historical cash build up in one chart:

The mobile app security hole that should keep bankers up at night - Researchers have found a glaring set of vulnerabilities in the ways that banks on both sides of the Atlantic establish secure, encrypted connections between their servers and customers’ mobile devices. The transport layer security, or TLS, protocols banks use to secure online banking sessions are as baffling as they are essential. They involve the participation of multiple entities—a bank’s server, client-side validators, and security certificate authorities—all of which provide necessary reputational and cryptographic checks on the system. As complex as it is, TLS gets the job done, at least on web browsers. But mobile applications are another story altogether. The developers who build these apps are increasingly opting for simplified implementations, and recent blunders suggest that modifying TLS for mobile financial applications is much more difficult than it seems. In some cases, app developers are just getting it completely wrong in ways that could have detrimental consequences for customers. For example, researchers from the University of Birmingham in England discovered a vulnerability in mobile banking apps used by two major banks in the U.K. If exploited, the vulnerability would allow an attacker to intervene on a session and decrypt all data passing between the app and the user. “If this attacker carries out this attack and they’re on the same network, then they’ll be able to perform any banking actions that a legitimate user would do on a mobile app in their victims’ names” and steal login information for follow-up snooping, said Chris McMahon Stone, one of the researchers on the paper, who presented his work last month at a financial cryptography conference in Malta. Stone and his colleagues at Birmingham University are now digging into North American banking apps, to see if the same vulnerability is replicated on this side of the pond. Separately, the consulting firm Accenture and NowSecure, a company focused on mobile app security, investigated the banking apps used by 15 major North American financial institutions and found that all of them contained at least one security flaw. TLS problems were a “recurring theme,” according to their report, released last week, “as 40% of security issues identified were mapped back to insecure communication.”

Credit unions look to blockchain to solve digital identity crisis -- Banks and credit unions spend an inordinate amount of time learning who their customers are, verifying that they are who they say they are and proving to regulators that they know with whom they are doing business. The standard means of authenticating a customer who calls in is to have the call center representative play 20 questions. Not only is that a waste of time better spent serving members, but it leaves a lot to be desired."If I call up my trusted credit union and they act like they don't know who I am and don't believe I am who I say I am, that's a lousy experience," said Bill Hampel, chief policy officer at the Credit Union National Association. There are other, more automated methods—texting a verification code to the customer's smartphone, or using the customer's voiceprint to identify him. But the former method stores the authentication proof on the customer's phone, which is no safeguard if hief gets ahold of the device. And the latter, says Hampel, depends on a third-party vendor system that doesn't come cheDig into the subject and it becomes clear that while humans do a decent job of identifying people in the real world, we screwed up the analog-to-digital conversion.The solution may be to rethink digital identity itself. For the past year, CUNA has been studying the benefits of creating a distributed ledger that employs credit unions as nodes. Several of the larger credit unions among the trade group's roughly 5,000 members together chipped in several hundred thousand dollars to finance a working proof of concept.Its first test case will be authenticating a member over the phone. For that, the CULedger project, as it is called, is counting on an open-source technology called Sovrin, a blockchain network designed specifically for the creation and management of digital identities. What makes these identities unique is that they are meant to be "self-sovereign," meaning that individuals retain independent control over their personal information. When interacting with a business, such as a bank or credit union, users can present unfalsifiable cryptographic proof of their identity.

 How technology mitigated a crisis in FFELP student loan ABS - Generous repayment plans have soured many investors on bonds backed by federally guaranteed student loans. But it could have been worse. These programs slow the rate of repayment on Federal Family Education Loans, putting the bonds they back at risk of technical default if the securities fail to pay off at maturity. When Moody’s Investors Service and Fitch Ratings raised the alarm early in 2015, eventually putting some $100 billion of bonds under review for downgrade, the market sold off heavily. New issuance ground to a halt. Yet Navient and Nelnet, the two largest student loan servicers, avoided downgrades on some $18 billion of FFELP bonds. They did so using a strategy that, at first, did not seem promising: extending the maturities of the bonds. While simple in principle, this solution was complicated by a requirement that 100% of investors in a tranche approve the change. Without consent from every single holder, no matter how small, an amendment cannot pass. Their efforts were aided by DealVector, an online registry of asset ownership and messaging platform, which helped the two servicers identify holders and collect votes. Over the past year, the two servicers have sent about 165 tranches out for consent; some 60% of those were successful, and about 10% are still in process. The total original face value of tranches passed to date exceeds $18 billion. This undoubtedly helped restore confidence in the sector, allowing Navient and Nelnet to resume issuing FFELP bonds, even though some investors, including banks and credit unions, continue to view the asset class skeptically.  The market revival, in turn, encouraged banks to resume unloading FFELP portfolios.  So far this year, Navient has issued nearly $3 billion in FFELP bonds. Nelnet completed a single, $426 million FFELP securitization in October; it has yet to come to market this year. The company also completed a private student loan securitization, in December.

Oaktree founder warns of risky private equity financing -- Financial engineering techniques used by private equity managers to flatter their investment returns could pose systemic risks to the stability of financial markets, a senior partner at a global alternative investment management firm has warned. . Ultra-low interest rates have encouraged many private equity managers to use bank loans rather than clients’ capital to pay for their investments in companies. But this little-known practice — known as subscription line financing — could become a source of significant risks to banks during a market downturn, says Howard Marks, co-chairman and founder of $100bn manager Oaktree Capital. “It does seem that subscription lines may be adding to risks at a variety of levels,” wrote Mr Marks in a memo published on Oaktree’s website last week. “I haven’t read much about this subject but we should all be thinking about it.” Mr Marks’ warning echoes criticisms made by Willis Towers Watson, the world’s largest adviser to pension schemes, which said last year that private equity managers were using subscription line financing to manipulate the returns on which the payment of their performance fees are based. Ludovic Phalippou, a finance professor at the University of Oxford’s Saïd Business School, has warned that some investors do not fully understand how subscription line financing can work to the advantage of the private equity manager. “With these sorts of tricks, the internal rate of return of a private equity fund can appear stratospheric, even if the amount of money returned net to investors is modest. In some cases, performance fees will be paid when they would not have been due without that trick,” he said. The cost of servicing subscription lines can run into millions of pounds, which can reduce final returns for investors. In addition, the fees and interest on these bank loans are paid by the investor, not the private equity fund manager. “The payment of these costs [fees and interest on the bank loans] is a permanent net negative for the fund [investor],” said Mr Marks.

April 2017: Unofficial Problem Bank list declines to 151 Institutions -- This is an unofficial list of Problem Banks compiled only from public sources.Changes and comments from surferdude808:  Update on the Unofficial Problem Bank List for April 2017.  During the month, the list dropped from 151 to 148 institutions after four removals and one addition.  Aggregate assets fell by $5.2 billion to $36.1 billion.  A year ago, the list held 223 institutions with assets of $64.6 billion.Actions were terminated against The Heritage Bank, Hinesville, GA ($542 million); The Bank of Commerce, Sarasota, FL ($183 million); and Peoples National Bank, Niceville, FL ($103 million).This Friday, the FDIC closed a bank for the fourth time this year shuttering First NBC Bank, New Orleans, LA ($4.7 billion).  This is the largest failure since the $5.9 billion Doral Bank, San Juan, PR on February 27, 2015.  Since the on-set of the Great Recession in 2007, 525 insured institutions with assets of $749 billion have failed with resolution costs of $96.3 billion. The addition this month was Admirals Bank, Boston, MA ($323 million).  Also, the FDIC issued a deposit insurance termination action against Builders Bank, Chicago, IL ($41 million).

Late pays on CMBS loans rise again in April -- Late payments on loans securing commercial mortgage-backed securities rose in April as borrowers failed to make balloon payments on maturing loans. The delinquency rate for U.S. commercial real estate loans in CMBS is now 5.52%, an increase of 15 basis points from March, according to Trepp. After hitting a post-crisis low in February 2016, the reading has consistently climbed over the past year as loans from 2006 and 2007 have reached their maturity dates and have not been paid off via refinancing. The rate has ascended in 12 of the last 14 months.

UBS pays $445 million over toxic mortgages and failed US credit unions - (Reuters) - UBS Group AG paid $445 million to settle claims that the Swiss bank sold toxic mortgage securities that helped sink two federal credit unions, a US regulator said on Monday. The National Credit Union Administration said the payment resolves claims that UBS misled the US Central and Western Corporate credit unions about the risks of roughly $1.15 billion of residential mortgage-backed securities bought in 2006 and 2007. UBS' payment is on top of $79.3 million it paid last year to resolve similar NCUA claims involving two other failed credit unions. The bank did not admit wrongdoing, the NCUA said. Erica Chase, a UBS spokeswoman, in an email said: "With today's settlement another legacy matter has been resolved." The NCUA said it has recovered nearly $4.8 billion from banks over mortgage securities it said led to the 2009 and 2010 failures of five credit unions.Some lawsuits targeted banks that sold the securities, while others targeted trustees that allegedly failed to monitor loan servicers or require banks to buy back defective loans. The NCUA said it uses sums it recovers to pay claims against the Constitution Corporate, Members United Corporate, Southwest Corporate, US Central and Western Corporate credit unions. Such settlements provide "a measure of accountability for the firms that sold faulty securities," NCUA Acting Board Chairman J Mark McWatters said in a statement. The NCUA voluntarily dismissed its case against UBS last week in connection with the settlement, court records show. The case is National Credit Union Administration Board v. UBS Securities LLC et al, US District Court, District of Kansas, No. 12-02591. 

Massachusetts sues Ocwen for “abusive” mortgage servicing practices - Massachusetts recently put Ocwen Financial out of business in the state as part of a wave of state regulators that placed various business restrictions on Ocwen for alleged rampant errors with homeowners’ escrow accounts and other issues at the nonbank, but it looks like the state isn’t done with Ocwen yet.Specifically, Massachusetts’ Office of Consumer Affairs & Business Regulation’s Division of Banks recently prohibited Ocwen from acquiring new MSRs, prohibited it from originating new loans, prohibited it from servicing any mortgages in the state, and ordered Ocwen to transfer all mortgages it services to other servicers.Ocwen fought back against Massachusetts’ regulations, asking a court to restrain the state’s cease and desist order because it would “cause significant harm” to its customers in the state.But, the Division of Banks isn’t the only Massachusetts governmental entity that is now targeting Ocwen.Recently, Massachusetts Attorney General Maura Healey announced that the state is suing Ocwen for widespread “abusive” mortgage servicing practices.According to Healey’s office, Massachusetts’ lawsuit claims that Ocwen charged homeowners in the state for “unnecessary and expensive force-placed insurance policies, imposed excessive fees on delinquent borrowers, and failed to properly process escrow and insurance payments.” Massachusetts’ complaint also claims that Ocwen failed to respond to borrower disputes about their accounts and to correct account errors.

Trump picks Pam Patenaude to serve as HUD deputy secretary  - HousingWire Woman of Influence Pam Patenaude (pictured above with daughter, Megan) was originally shortlisted to serve as the Secretary of the Department of Housing and Urban Development. That position ended up going to Ben Carson, as HousingWire first reported.Now in another HousingWire first, President Donald Trump plans to install Patenaude in the true position of power at HUD – deputy secretary.Back in November, rumors began to emerge that the Trump administration was considering Patenaude, who currently serves as the president of the J. Ronald Terwilliger Foundation for Housing America’s Families, to serve as the HUD secretary.The HUD secretary, like many other Cabinet positions, is the public face of the department, conducting meetings with housing leaders around the country, listening to local concerns, and celebrating milestones.The deputy secretary, however, handles most of the day-to-day operations. And the Trump administration announced Friday that Patenaude is its choice to serve in that key role. Readers of HousingWire will likely be familiar with Patenaude, as she was featured on the cover of HousingWire Magazine last year, and previously recognized as one of HousingWire Magazine’s Women of Influence  Patenaude is a former adviser to Presidents Ronald Reagan and George W. Bush. During the younger Bush’s administration, Patenaude served as HUD assistant secretary for community, planning and development.

Trump tax cuts could force GSEs to borrow from Treasury - If proposed tax cuts were enacted, Fannie Mae and Freddie Mac would be required to make an initial adjustment that could wipe out their capital.  While proposed corporate tax cuts by the Trump administration would largely be good for Fannie Mae and Freddie Mac, they would be required to make an initial adjustment that could force a draw from their line of credit with the Treasury Department. Such a move would likely alarm members of Congress, who have been anxiously watching the government-sponsored enterprises' dwindling capital levels as they continue to debate housing finance reform. If the GSEs must take a draw from the Treasury, lawmakers are likely to speed efforts to reform the system or put pressure on the firms’ regulator to allow them to rebuild capital.

MBA's Stevens slams calls to 'recap and release' GSEs - Mortgage Bankers Association President and CEO David Stevens is confident that housing finance reform will move forward under the Trump administration, but criticized calls to simply let the government-sponsored enterprises recapitalize and be returned to shareholders without additional reforms. "Recap and release is more like rewind and repeat. It would return the GSEs to their previous state without safeguards to ensure the positive progress during conservatorship remains and without any guarantee the agencies will operate in a manner that protects the taxpayer going forward," Stevens said at the group's National Secondary Market Conference in New York. Instead, recapitalization "lines the pockets of a select few."

U.S. mortgage agencies' overhaul may take more than five years - official | Reuters: An overhaul of U.S. mortgage agencies Fannie Mae and Freddie Mac might take longer than five years, depending on how severe the proposed changes are, an official at Federal Housing Finance Agency (FHFA) said on Monday. If there is a "very radical" reform of the two government-sponsored enterprises, "we need more time" for the transition, Robert Ryan, special adviser and acting deputy director at the FHFA that regulates Fannie and Freddie, said at a conference sponsored by the Mortgage Bankers Association (MBA). The Trump administration has set its sights on Fannie and Freddie. Earlier Monday, Treasury Secretary Steve Mnuchin repeated his call for the reform of Fannie and Freddie at the Milken Institute Global Conference and the government is expected to release a plan by 2018. Fannie and Freddie guarantee U.S. home loans and repackage them into securities for sale to investors. The government took the government-sponsored enterprises (GSEs) into conservatorship in 2008 during the global financial crisis after they suffered massive losses on bad mortgages due to the housing bust. Under the conservatorship, profits from the two agencies have been going to the Treasury Department, even after they repaid the government for a combined $187 billion bailout. Over the years, several ideas have been floated on how to deal with Fannie and Freddie, ranging from turning them into public companies again to phasing them out completely. Last month, the MBA issued a report recommending the two agencies should be restructured as primary loan guarantors, together with a group of publicly held, regulated mortgage guarantors.In 2016, Fannie and Freddie accounted for a combined 65 percent of new mortgage-backed securities involving single-family mortgages. Outstanding single-family mortgages grew to nearly $10 trillion last year. Because of Fannie and Freddie's heavy footprint in the U.S. mortgage and bond markets, a major restructuring would likely be complicated, analysts said. 

Housing reform becomes urgent as GSEs' capital buffer nears zero --No matter what form government-sponsored enterprise reform takes, Federal Housing Finance Agency officials are stressing that it should account for the fact that the GSEs' capital buffer will soon hit zero. "I think the biggest and most significant risk is the continually declining capital buffer," Bob Ryan, the FHFA's acting deputy director of the division of conservatorship, told attendees at the Mortgage Bankers Association's National Secondary Market Conference in New York Monday. 

Supreme Court says cities can sue big banks over housing bubble - The Supreme Court ruled Monday that federal anti-discrimination law allows cities to sue a bank over lending practices they allege led to urban blight but said they face a high standard in proving those practices directly harmed the local governments. The ruling was a mixed one for Miami, which was at the forefront of a move by cities nationwide to sue big lending institutions under the federal Fair Housing Act. Banks have previously been sued by individuals and taken to task by the federal government for lending practices. But these new cases are the first in which cities are the plaintiffs and are demanding that banks be held accountable for harming their communities. A majority of the justices agreed that cities, not just individuals, can sue under the Fair Housing Act. [Supreme Court seems to favor Miami suing banks whose lending practices led to neighborhood blight] “This court has repeatedly written that the FHA’s definition of person ‘aggrieved’ reflects a congressional intent to confer standing broadly,” Justice Stephen G. Breyer wrote for himself and four other justices. But the justices unanimously decided that a lower court had incorrectly allowed Miami’s lawsuit against Wells Fargo and Bank of America to go forward without more proof that the bank practices had directly harmed the city by, for instance, reducing the amount of property taxes it received. Instead, cities must show “some direct relationship between the injury asserted and the injurious conduct alleged,” Breyer wrote.The half-full, half-empty opinion seemed to reflect an effort at compromise among the eight justices who heard the case. Chief Justice John G. Roberts Jr. joined the four liberals in the majority opinion that cities could sue under the Fair Housing Act, but the justices did not describe what would constitute the direct relationship that must be shown. That hard work was left for the lower court on remand.

The Supreme Court says cities may sue banks over predatory lending - The Economist --  In Bank of America v City of Miami, the Supreme Court considered whether Miami may attempt to recoup losses it suffered from the 2008 recession by suing Bank of America and Wells Fargo, two of America’s biggest banks, for extending low-cost loans to white people while selling black people and Latinos risky mortgages with high fees and inflated interest rates. Miami claimed that a decade of discriminatory lending contributed to segregation and led minority borrowers to miss payments and lose their homes. Foreclosures then depressed property values, bringing boarded-up windows and dangerous street corners. This spurred Miami to spend more on policing, fire protection and other city services while its tax base withered. The impact on the city’s finances, Miami claimed, made it an aggrieved party under the Fair Housing Act (FHA), a law passed in 1968 prohibiting racial discrimination in the lease, sale and financing of property.  At the oral argument on election day in November, only the four liberal justices seemed receptive to Miami’s claim. Justice Roberts and Justice Kennedy sounded unwilling to set a precedent that would allow cities to sue banks for millions of dollars whenever they could draw a line plausibly connecting the dots between a lending practice and a neighbourhood’s decline. The FHA, Justice Kennedy said, “doesn't prohibit decreasing property tax values”. Justice Roberts added, in colloquy with Miami’s lawyer, “I don't see how you can say that your loss of property taxes is a direct injury”. But in the end, Justice Kennedy sided with the banks while Justice Roberts joined Justice Stephen Breyer’s majority decision. Justice Breyer’s workmanlike opinion has something for both sides. First, turning to Gladstone, Realtors v. Village of Bellwood (1979), he accepted Miami’s contention that cities are, under certain circumstances, eligible to sue for damages under the FHA. Miami, he wrote, “is an ‘aggrieved person’ able to bring suit under the statute”. Yet bringing a suit and winning it are two different things. “[T]o establish proximate cause under the FHA”, Justice Breyer held, “a plaintiff must do more than show that its injuries foreseeably flowed from the alleged statutory violation”. Proving damages in this context must be a matter of direct injury: absent a concrete harm flowing directly from the bank’s loan scheme, a city has no case.

Housing bias suits against banks get mixed high court review - The U.S. Supreme Court issued a mixed decision on the reach of the main federal housing-discrimination law, telling a lower court to reconsider whether Miami can sue banks for lending practices the city said contributed to urban blight. The ruling is a partial victory for Bank of America Corp. and Wells Fargo & Co., which appealed a lower court ruling that said Miami could press the suits under the Fair Housing Act. The majority opinion by Justice Stephen Breyer said it wasn't clear whether the city had shown the type of direct injury required for the suit to go forward. But Breyer wouldn't go as far as three conservative colleagues, who said the court should have thrown out the lawsuit, which grew out of the subprime mortgage crisis. Miami said the banks targeted minorities for riskier and costly loans, leading to foreclosures that cost the city property-tax revenue and forced it to spend more on police and fire services. Bank of America and Wells Fargo said Congress didn't intend to allow private lawsuits by a plaintiff who wasn't a victim of discrimination and whose interests are so far removed from the alleged wrongdoing. Miami is also suing Citigroup Inc., though that bank wasn't part of the Supreme Court case. Breyer said cities are eligible to file lawsuits under the Fair Housing Act, saying they fell within the "zone of interests" Congress was seeking to protect. He said, however, that a federal appeals court made it too easy for Miami to meet the traditional requirement that a plaintiff show it was harmed by a defendant's actions. He said a violation of the Fair Housing Act caused "ripples of harm" well beyond the particular misconduct. "Nothing in the statute suggests that Congress intended to provide a remedy wherever those ripples travel," Breyer wrote. He said the statute requires "some direct relation between the injury asserted and the injurious conduct alleged." Chief Justice John Roberts joined the court's four liberals in the majority. Justices Clarence Thomas, Anthony Kennedy and Samuel Alito issued a partial dissent. New Justice Neil Gorsuch didn't participate in the case, which was argued in November. Similar suits have been filed around the country, including claims by Los Angeles and three Georgia counties. 

More properties underwater in the first quarter: Attom - Seasonal factors contributed to an 89,000-unit increase in the number of seriously delinquent properties in the first quarter from the fourth quarter of 2016. The quarter ended with nearly 5.5 million homes seriously underwater, compared with 5.4 million at the end of the fourth quarter and 6.7 million for the first quarter of 2016.

Black Knight on Mortgages "19 Percent of Active HELOCs Are Scheduled to Reset in 2017"  --Black Knight Financial Services (BKFS) released their Mortgage Monitor report for March today. According to BKFS, 3.62% of mortgages were delinquent in March, down from 4.08% in March 2016. BKFS also reported that 0.88% of mortgages were in the foreclosure process, down from 1.25% a year ago. This gives a total of 4.50% delinquent or in foreclosure. Press Release: Black Knight’s March Mortgage Monitor: 19 Percent of Active HELOCs Are Scheduled to Reset in 2017 Today, the Data and Analytics division of Black Knight Financial Services, Inc. released its latest Mortgage Monitor Report, based on data as of the end of March 2017. This month, Black Knight took a closer look at home equity lines of credit (HELOCs), particularly on the share of HELOCs with draw periods – typically a 10-year term of interest-only payments before payments become fully amortizing – ending in 2017. Accounting for just under $100 billion in outstanding unpaid principal balances (UPB), these HELOCs represent the last of the pre-crisis lines of credit – those originated from between 2004 and 2007. As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, as draw periods end and HELOCs reset with new payments, borrowers can face very different monthly obligations.  “In 2017, 19 percent of active HELOCs are facing reset,” said Graboske. “This is the largest share of active HELOCs facing reset of any single year on record, although the approximate 1.5 million borrowers slated to see their HELOC payments increase this year is about 100,000 fewer borrowers than in 2016. With the lines beginning to reset this year and early into 2018, we’re seeing the last of the pre-crisis-era HELOCs that the industry has been focusing on since early 2014. After deceleration in early 2018, we will have a lull of several years in reset activity. On average, borrowers facing resets this year are looking at a ‘payment shock’ of about $250 per month over their current HELOC payments – more than doubling their current payments, in fact. Historically, those increases have impacted HELOC performance significantly; delinquency rates of 2006 vintage HELOCs – which reset last year – jumped by 74 percent. That was marginally lower than the 2004 and 2005 vintages, which saw delinquency rates rise by 90 and 88 percent, respectively. Payment shocks remain high for lines resetting in 2018 but then drop along with the overall volume of resets in 2019. 

MBA: Mortgage "Purchase Apps Up, Refis Down in Latest Weekly Survey" ---From the MBA: Purchase Apps Up, Refis Down in Latest MBA Weekly Survey Mortgage applications decreased 0.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 28, 2017.... The Refinance Index decreased 5 percent from the previous week. The seasonally adjusted Purchase Index increased 4 percent from one week earlier. The unadjusted Purchase Index increased 5 percent compared with the previous week and was 5 percent higher than the same week one year ago... The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) increased to 4.23 percent from 4.20 percent, with points decreasing to 0.32 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

CoreLogic: House Prices up 7.1% Year-over-year in March --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 7.1 Percent in March 2017 Home prices nationwide, including distressed sales, increased year over year by 7.1 percent in March 2017 compared with March 2016 and increased month over month by 1.6 percent in March 2017 compared with February 2017, according to the CoreLogic HPI. ...“Home prices posted strong gains in March 2017, and the CoreLogic Home Price Index is only 2.8 percent from its 2006 peak,” said Dr. Frank Nothaft, chief economist for CoreLogic. “With a forecasted increase of almost 5 percent over the next 12 months, the index is expected to reach the previous peak during the second half of this year. Prices in more than half the country have already surpassed their previous peaks, and almost 20 percent of metropolitan areas are now at their price peaks. Nationally, price growth has gradually accelerated over the past half-year, while rent growth for single-family rental homes has slowly decelerated over the same period, according to the CoreLogic Single-family Rental Index, recording a 3 percent rise over the year through March.” “A potent mix of strong job gains, household formation, population growth and still-attractive mortgage rates in the face of tight inventories are fueling a continuing surge in home prices across the U.S.,” said Frank Martell, president and CEO of CoreLogic. “Price gains were broad-based with 90 percent of metropolitan areas posting year-over-year gains. Major metropolitan areas were especially hot with CoreLogic data indicating that four of the largest 10 markets are now overvalued. Geographically, gains were strongest in the West with Washington showing the highest appreciation at almost 13 percent, and Seattle, Tacoma and Bellingham posting gains of 13 to 14 percent.

High Ground Is Becoming Hot Property as Sea Level Rises — Harewood had a realization, one that he illustrates with his hands. One hand represents the city of Miami Beach. The opposite hand, moving like the incoming tide, demonstrates how the seas will eventually rise, potentially bringing the coastline of South Florida closer to Miami's historically black neighborhoods — properties like his investments in Liberty City that sit on comparatively higher ground.  "Oh, Miami Beach is going under, the sea level is coming up," Harewood said. "So now the rich people have to find a place to live. My property is 15 feet above sea level, theirs is what? Three under?   "So OK," he said, taking on the voice of a rich developer, "let's knock down the projects, and we move in and push them out."    If there's anything more complicated than the global forces of thermal expansion, ice sheet melt and ocean circulation that contribute to worldwide sea-level rise, it might be the forces of real estate speculation and the race-based historical housing patterns that color present-day gentrification in Miami. One of the great ironies of those historic housing patterns in Miami is that for decades under Jim Crow, laws and zoning restricted black people to parts of the urban core, an older part of the community that sits on relatively higher ground along a limestone ridge that runs like a topographic stripe down the eastern coast of South Florida. Now, many of those neighborhoods, formerly redlined by lenders and in some places bound in by a literal color wall, have an amenity not yet in the real estate listings: They're on higher ground and are less likely to flood as seas rise. Whether it's climate change or an eye for good real estate returns, historically black communities on higher ground are increasingly in the sights of speculators and investors. Real estate investment may no longer be just about the next hot neighborhood, it may also now be about the next dry neighborhood. "It's hideously complicated, like everything else," said Hugh Gladwin, an anthropologist at Florida International University in Miami whose specialty is using geographic information system mapping to understand large, diverse urban settings. He's beginning to see evidence that suggests climate change is now a part of the gentrification story in Miami real estate.

Housing and cars: update for April: It's time for a monthly update on houses, and let's take a little look at vehicle sales as well. If there is going to be a consumer downturn, generally the first thing that gets turns down is housing, over a year before the actual downturn, and then car sales, about 6 to 9 months before the downturn. The story on housing through the first quarter of the year was surprisingly good. Interest rates didn't cause a pullback at all. In Permits for single family homes -- the least volatile of the most leading metrics -- had the highest 3 month rolling average of any time in over 9 years. March was less than 0.5% off December's high water mark (red in the graph below): The *other* least volatile, but somewhat less leading, metric is private residential construction (blue in the graph above) and true to form that has followed permits higher. The more volatile overall permits number has been generally flat for the last six months, as multi-family construction lags. Similarly, the quarter over quarter comparison for starts (which are even more volatile on a monthly basis) has also been flat, although the 3-month rolling average made its post recession high in February. Meanwhile, the even more volatile - but slightly more leading - new home sales (green) trended higher in the first quarter: Finally, although these aren't nearly so important to the economy, the much larger amount of existing home sales has also been trending high, and just made its latest expansion high this month: One thing is nearly certain, and that is, unless housing actually turns down, the consumer is simply not rolling over, and no recession is near.   Turning to motor vehicle sales, these too are somewhat volatile on a month over month basis.  They tend to have long plateaus during expansions. For example, during the 2000s expansion, sales were between 16.5 and 18.5 for several years before tailing off under 16.5 in the 6 months before the 2008 recession

Construction Spending decreased in March --Earlier today, the Census Bureau reported that overall construction spending decreased in March: Construction spending during March 2017 was estimated at a seasonally adjusted annual rate of $1,218.3 billion, 0.2 percent below the revised February estimate of $1,220.7 billion. The March figure is 3.6 percent above the March 2016 estimate of $1,176.4 billion.Private spending was unchanged, and public spending decreased in March:Spending on private construction was at a seasonally adjusted annual rate of $940.2 billion,nearly the same as the revised February estimate of $940.1 billion. ...In March, the estimated seasonally adjusted annual rate of public construction spending was $278.1 billion, 0.9 percent below the revised February estimate of $280.7 billion.  This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.Private residential spending has been generally increasing, and is still 26% below the bubble peak.Non-residential spending is now 5% above the previous peak in January 2008 (nominal dollars).Public construction spending is now 15% below the peak in March 2009, and only 6% 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 7%. Non-residential spending is up 6% year-over-year. Public spending is down 6% year-over-year.

March's Construction Spending Fell 0.2% After Record High in February  - The seasonally adjusted annual rate of construction spending for March 2017 was estimated at $1,218.3 billion, per the latest report from the U.S. Census Bureau.  This is 0.2% below February’s estimate which was revised up from $1,192.8 billion to a record high of $1,220.7 billion. January’s estimate was also revised up again from $1,183.8 billion to $1,198.8 billion. March’s estimate is 3.6% higher than a year ago with construction spending at $1,176.4 billion in March 2016.Total construction spending for the first three months of 2017 totaled $259.5 billion. This is 4.9% above the $247.5 billion spent during the first quarter of 2016.Private construction spending for March was at a seasonally adjusted annual rate of $940.2 billion, remaining virtually unchanged from February’s estimate which was revised up from $917.3 billion to $940.1 billion. January’s private construction spending estimate was revised up from $910.0 billion to $924.4 billion  Private residential construction spending for March 2017 was estimated at $503.4 billion, up 1.2% from February. Private nonresidential construction spending was at a seasonally adjusted annual rate of $436.8 billion, a 1.3% drop from the revised estimate from the previous month. Total private construction is up 7.0% from a year ago. The four largest sectors of private nonresidential construction spending in March were Power at $93.4 billion, Commercial at $77.6 billion, Manufacturing at $68.9 billion and Office at $65.6 billion.

Homeownership Among US Millennials At All Time Low --After dropping to an all time low 62.9% in Q2 of 2016, the US homeownership rate rebounded modestly in the subsequent two quarters, before once again taking a step lower according to the latest Census data, released last week, and which showed that the percentage of US homeowners declined from 63.7% to 63.6% in Q1 of 2017, less than 1% from the all time lows in the series history going back to the mid 1960s. A breakdown of the data by age group reveals that the primary driver for this latest decline was once again the youngest age cohort. While older Americans, especially those 65 and older, have predictably seen only modest declines in their homeownership in recent decades, it was the youngest age group, those 35 and younger, i.e. the Millennials, who once again decided against owning and chose to rent instead. As shown in the chart below, the homeownership rate for Americans 35 and younger slumped from 34.7% as of December 2016 to 34.3%, in line with the lowest rate reported by the Census Bureau going back nearly a quarter century. Of note: the largest decline in the homeownership rate following the collapse in the house market occurred for households aged 35 to 44, although it appears to be stabilizing in recent quarters.

Millennials hold one-third of the country's $3.6 billion in consumer debt, and it could destroy the economy -- US consumer debt is approaching a record 20% of GDP, and millennials owe most of it. Millennials — 21 to 34-year-olds — hold an estimated $1.1 trillion of the country's $3.6 trillion in consumer debt, according to UBS, as rising student and auto loans outweigh a drop in mortgages. And all that rising debt is coming with rising default risks. A UBS evidence lab survey found that 52% of people worried about defaulting on any loan over the next 12 months were in the 21 to 34 age group. That's not good news considering those same individuals are meant to be the largest source of spending on big-ticket purchase items like houses and cars over the next year (see the chart below).  There is already evidence that millennials are changing their spending habits on smaller items where, according to Lindsay Drucker Mann of Goldman Sachs Research, millennials are willing to search for the lowest price on an item or patiently wait for the right deal to pop up."We see areas where millennials are willing to spend, but overall, they're not levering themselves up to make their dollars go further; they're being much smarter and much more conservative about their balance sheets," Drucker Mann said on a January  episode of Goldman Sachs' "Exchanges at Goldman Sachs" podcast.

March Real Median Household Income: Up 0.3% YoY -- The Sentier Research median household income data for March, released this morning, came in at $58,673. The nominal median fell by $41 month-over-month and is up $1,545 year-over-year. In percentages, the latest month is down 0.1% MoM and up 2.7% YoY. Adjusted for inflation, the latest month is up $128 MoM and $183 YoY. The real numbers equate to changes of 0.2% MoM and 0.3% YoY. In real dollar terms, the median annual income is 0.8% lower (-$6,24) than its interim high in January 2008. As we've pointed out in previous updates, the absence of real income growth in 2016 was undoubtedly a key contributor to the rise in populism that has become a major focus of contemporary journalism. The first chart below is an overlay of the nominal values and real monthly values chained in the dollar value as of the latest month. The red line illustrates the history of nominal median household, and the blue line shows the real (inflation-adjusted value). Callouts show specific nominal and real monthly values for the January 2000 start date and the peak and post-peak troughs.

Personal Income increased 0.2% in March, Spending increased less than 0.1% --The BEA released the Personal Income and Outlays report for March:Personal income increased $40.0 billion (0.2 percent) in March according to estimates released today by the Bureau of Economic Analysis. ... personal consumption expenditures (PCE) increased $5.7 billion (less than 0.1 percent). ..Real PCE increased 0.3 percent. The PCE price index decreased 0.2 percent. Excluding food and energy, the PCE price index decreased 0.1 percent.The March PCE price index increased 1.8 percent year-over-year and the February PCE price index, excluding food and energy, increased 1.6 percent year-over-year. The following graph shows real Personal Consumption Expenditures (PCE) through March 2017 (2009 dollars). The dashed red lines are the quarterly levels for real PCE. The increase in personal income was below expectations,  and the increase in PCE was close to expectations.

45% Of Americans Spend Up To Half Of Income Repaying "Excessive/Frivolous" Credit Card Debts  --On several occasions we've pointed out that the baby boomer generation is, to put it mildly, ill-prepared for retirement.  In fact, over 50% of baby boomers have basically no savings set aside for retirement at all.  Now, a new survey from Northwestern Mutual helps to shed some light on why Americans are completely incapable of saving money. First, roughly 50% of Americans have debt balances, excluding mortgages mind you, of over $25,000, with the average person owing over $37,000, versus a median personal income of just over $30,000.   Therefore, it's not difficult to believe, as Northwestern Mutual points out, that 45% of Americans spend up to half of their monthly take home pay on debt service alone....which, again, excludes mortgage debt. Of course, if Americans are incurring this much debt then it must be for absolute necessities like healthcare and basic nutritional needs, right?  After all, the entire federal entitlement farce is dependent upon helping good hardworking, trustworthy Americans who, for the most part, spend their money wisely but sometimes need just a little extra help to make ends meet.Well, at least that's the illusion that Democrats would love for you to subscribe to...unfortunately it couldn't be further from the truth.  In reality, the Northwestern Mutual survey found that Americans spend 40% of their monthly income on discretionary expenses including "entertainment, leisure travel and hobbies." Adding insult to injury, nearly a quarter of all respondents said that "excessive/frivolous spending" was the cause of their debt problems.

The Chart That's Keeping Goldman Up At Night  -- The spread between "hard" and "soft", or survey and sentiment data, ever since the election has been extensively noted and discussed on this website in recent months (especially since over the past two months the soft data has rolled decisively over, while the Citi economic surprise index has crashed at the fastest pace on record). Which is why it will come as no surprise to readers that, as Goldman writes in a note looking at "Peak Sentiment", over the past six months, US “sentiment surveys” have outpaced both “activity surveys” and “hard data”. This rise in sentiment has accelerated in the post-election period, prompting many (Goldman included) to link the surge in sentiment with optimism about the new administration’s pro-growth policy. It has also spilled over into equity markets in general, and institutional and retail traders in particular.That is a problem for one simple reason: as Goldman points out, based on empirical studies, "positive sentiment negatively correlates with future asset returns", or the more confident the market, the greater the subsequent drop. Additionally, Goldman notes that "the correlation between consumer sentiment and market sentiment suggests that the former might be useful as a contrarian market timing signal." To shows this possibility, the following Exhibit plots year-ahead 12-month returns on the S&P 500 vs the Conference Board Consumer Confidence index. The plot suggests that for values of the CBCC below 50, median returns are significantly higher.  Conversely, when the CBCC moves much above its current level of 120, the expected median return begins to decline and eventually turns negative (the median return is 9.7% for the CBCC at 120, falling to 5.0% at 130 and to below zero above 136). In results not reported here, we have also explored this timing signal on other assets and found a similar pattern for high-yield credit spreads, but not for 10-year yields or the trade-weighted Dollar.

America’s rising consumer confidence mostly due to the elderly and less-educated - After more than a decade of disappointment, American consumers are now more hopeful than at any point since the housing bubble: Those who think surveys of expectations have predictive power for spending and saving might therefore conclude the uptick bodes well for America’s growth outlook. However, a closer look at who exactly is excited about the future suggests there is less here than meets the eye.Deutsche Bank’s Torsten Slok points out that the improvement in expectations is entirely due to Americans without a college degree, rather than those with greater spending power and higher earning potential. Americans with degrees have been getting steadily less optimistic since mid-2015: Americans without degrees are as optimistic now as they’ve ever been since the survey began nearly four decades ago. Only the peak of the tech bubble compares. By contrast, Americans with degrees are about as confident in the future as they were in September 2007, when the credit crisis had already begun: The shift since the election looks even starker if you look at the gap in expectations across the two groups over time. The change since November 2016 is unprecedented: Slightly less dramatic, but nevertheless revealing, is the change in expectations among younger people, who have their most productive years ahead of them, relative to older people, who do not. Since the start of 2015, the outlook among the young has deteriorated sharply, albeit from a high base. Meanwhile, the expectations of Americans ages 55 and older have soared in the wake of the election to their highest level in more than fifteen years:

US Student, Auto Loans Hit New All Time High Of $2.6 Trillion -- One month after we, and every other financial media, reported that US credit card debt had risen back over $1 trillion for the first time since January 2017, the Fed demonstrated just how meaningless such reports are when in its latest consumer credit report it revised the total stock of revolving debt back under $1 trillion for the month of March, while boosting December's amount to $1,000.1 billion, meaning that all those "$1 trillion in credit card" debt headlines were about 4 months late. Fed screwing around with the financial reporters aside, the latest monthly report showed that total consumer credit rose by $16.4 billion, more than the $14 billion expected, an increase which was offset by a downward revision to the February consumer credit number from $15.2 billion to $13.8 billion. Revolving credit accounted for $2 billion of the increase with the rest, or $14.4 billion, in the form of auto and student loans. And speaking of student and auto loans, the Fed also released its latest quarterly estimate for the two series as of March 31, and as one would expect, the numbers rose to new all time highs, and as of the end of the first quarter, US consumers owed $1.44 trillion in student loans, an increase of $32 billion for the quarter and $80 billion for the year, as well as $1.12 trillion in auto loans, an increase of $8 billion Q/Q and $73 billion Q/Q. This means that as of March 31, Americans owed two and a half times as much on their auto and student loans, as on their credit cards, a new all time high.

U.S. Light Vehicle Sales at 16.8 million annual rate in April - Based on a preliminary estimate from WardsAuto (and some CR calculations), light vehicle sales were at a 16.79 million SAAR in April. That is down 3% from April 2016, and up 1.6% from last month.This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for April (red, light vehicle sales of 16.79 million SAAR mostly from WardsAuto).This was below the consensus forecast of 17.2 million for April. After two consecutive years of record sales, it looks like sales will be down or move sideways in 2017.  The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Carmageddon: After Abysmal April Sales, Auto Workers Prepare For "Extended" Summer Shutdowns - Auto OEMs typically shut down plants once a year during the summer to retool for model changeovers and whatever general maintenance is required.  But this year summer shutdowns will be about much more than just retooling plants.  With inventory soaring on dealer lots, auto OEMs will likely have no choice but to extend their typically summer shut down schedule and it will take a 'yuge' toll on the 1,000s of auto workers that are considered "short term" employees and not eligible for unemployment benefits...the folks who pretty much single-handedly voted Trump into the White House.As we noted yesterday (see "Auto Bloodbath: Every OEM Misses April Sales Estimates As Inventories Continue To Soar"), after an abysmal March print and growing speculation on wall street that auto sales are looking less like a "plateau" (Ford's label not ours) and more like a debt-fueled bubble on the verge of an epic collapse, auto investors were looking toward April auto sales for signs of hope.  Unfortunately, the "hope" trade failed to materialize as every single, major auto OEM missed their April sales estimates in fairly spectacular fashion.  The total auto SAAR came in at 16.8mm for April, compared to hopes of 17.1mm, and the YoY change in unit sales was the worst since 2011. Meanwhile, inventory days continued to soar to multi-year highs with GM leading the pack on "channel stuffing" with over 935,000 unsold cars sitting on dealer lots.

GM Auto Inventory Hits 10 Year High: Most Since November 2007, One Month Before The Recession Started -- When we summarized yesterday's disappointing monthly car sales report, which badly missing expectations showing the fourth consecutive month of declining auto sales - the first time this has happened since July 2009 -  we noted what may be the biggest concern for the auto industry: inventory days continued to trend higher as OEMs push product on to dealer lots even though sale-through to end customers has seemingly stalled.We highlighted GM, one of the few OEMs to actually disclose dealer inventories in monthly sales releases, which reported that April inventories increased to 100 days (935,758 vehicles) from 98 days at the end of March and just 71 days (681,402 vehicles) in April 2016. Indicatlvely, analysts say an overall inventory level of 60 to 70 days is healthy. 100 is not.Of course, GM management was eager to deflect attention from this troubling statistic, and said that soaring inventories are normal and, somehow, "reflect strong sales", as per the press release: "As planned, GM’s inventories reflect strong sales, lower car production and strategic, launch-related growth in truck and crossover stocks." Or maybe not, because around the time of our post, Automotive News reported Nick Bunkley pointed out something troubling: with 935,758 unsold GM units collecting dust in dealer lots, this was the highest inventory number in 9.5 years, the highest since Nov. 2007, and, as Bunkley reminds us, "one month before the recession officially began."

Tesla Burns Through $620 Million, Loses $13,000 Per Car Made Ahead Of Model 3 Launch --Traders were looking forward to today's "black box" earnings from Tesla as it would be the first quarterly report that combined Tesla Motors operations with a full quarter from cash-bleeding monstrocity SolarCity following the pair's merger, and would also provide much needed information about the "imminent" launch of the Model 3. And, as usual, Elon Musk managed to fool those who were only focusing on the headline numbers, which were both good and bad: while TSLA missed earnings, reporting a (non-GAAP) 4Q loss per share of $1.33, or $215 million, far worse than the consensus estimate loss of $0.82. On a GAAP basis, the company reported a loss of $330 million, or $2.04 per share, compared with a loss of $283 million or $2.13 a share in the year-earlier quarter. This amount to a loss of over $13,000 for each of the 25,051 cars delivered in the quarter. Now the good news: Tesla reported revenue of $2.70 billion, beating estimates of $2.56 billion. However, much of this "beat" was thanks to $214 million in "energy generation and storage" revenues. Now on  to the automotive business which was helped by a 69% increase in the sale of Model S sedans and Model X SUV during the quarter compared to a year earlier. Tesla reported 1Q deliveries of 25,051, the most ever, and said that the company's first half delivery outlook remains unchanged and hopes to deliver 47,000 to 50,000 deliveries, in line with prior expectations.

#Carmageddon Not Yet, But Hot Air Hisses out of Auto Bubble - Wolf Richter - Most auto industry gurus were once again too optimistic with their dreary forecasts for new vehicle sales in the US. Kelley Blue Book had figured they’d drop 3.1% in April year-over-year to 1.45 million units. Forecasts in terms of the seasonally-adjusted annual rate of sales – a key industry metric – ranged from 16.9 million SAAR at Baum & Associates and at Goldman Sachs to 17.5 million SAAR at LMC Automotive. The analyst average forecast was 17.1 million SAAR, down 0.35% year-over-year. But customers were under sticker shock, and were hobbled by other issues, and what the auto industry produced was this:

  • Total sales in April fell 4.7% year-over-year to 1.426 million vehicles, according to Autodata; cars sales plunged 11.1% and even truck sales edged down 0.1%.
  • Year-to-date sales, at 5.49 million vehicles, are now down 2.4%. At this rate, this will pan out to be the dreaded “car recession.”
  • Sales in terms of SAAR fell 3% year-over-year to 16.88 million. The pessimists among the forecasters were almost there.

So April had one fewer selling day than April 2016, but this didn’t come as a surprise to forecasters. And SAAR accounts for it.  Note: These are unit sales (deliveries) by franchised dealers to their customers, and by manufacturers to large fleets and to their own employees under their employee programs.   A 4.7% drop in sales, bad as it is, wouldn’t qualify for #carmageddon. These things happen. But here’s the thing: Automakers had shelled out $3,465 in incentives per new vehicle sold, on average, according to TrueCar estimates. A record for the month of April. It beat the prior record of $3,393, set in April 2009. It amounts to about 10% of suggested retail price, similar to March. The last period when incentive spending was at this level of MSRP was in 2009 as the industry and sales were collapsing.The #carrmageddon point to watch: despite the 13.4% year-over-year surge in incentive spending to nearly $5 billion, total vehicle sales fell 4.7%! When these massive incentives fail to even slow the sales decline, serious problems lurk beneath the surface. This table shows the largest automakers, their year-over-year sales performance – the sea of red ink – along with average per-unit incentive spending and total incentive spending:

Big Summer Shutdowns Loom for U.S. Auto Plants as Sales Sputter - Auto workers may be getting some extra time off around Independence Day, but they won’t be celebrating. They’ll know it means sales are weak and that profits -- and profit-sharing checks -- could be shrinking.Manufacturers used to shut plants for a week or two in July for maintenance and to keep inventories in check. As sales boomed in recent years, most factories cranked out cars without a break. This summer, widespread closures may be back, and for weeks longer than before. The reason: four straight months of declining sales and little expectation the trend will reverse anytime soon.It’s probably not what President Donald Trump wants to hear. He has admonished Ford Motor Co., General Motors Co. and Toyota Motor Corp. for building factories in Mexico and demanded more U.S. jobs be created, taking credit for some new investments in the U.S. that had been long in the planning.“You see what’s going on with the car companies,” Trump said in an interview Monday with Bloomberg News. “They’re all talking about building in the United States because of me.”The reality isn’t so upbeat, with automakers aiming to draw down bloated inventories by ratcheting back output.“We’re not seeing the same picture as the president,” said Michelle Krebs, a senior analyst with Cox Automotive. “We are not seeing any new plants being built in the United States or increases in production. The fact is we have passed the sales peak and we’re now seeing decreases in production.” None of the major automakers would discuss plans for factory intermissions this summer, saying it was too early to tell what closures might be necessary. Erich Merkle, head of U.S. sales analysis at Ford, said that with the company’s inventories at 83 days worth of vehicles, it may not need to add downtime if the market stays where it is.

Detroit Is A Stark Reminder Peak America Was Over 50 Years Ago --The most common saying amongst the baby boomer generation is “America is not like it was when I was growing up”. Have you ever wondered what that means? Let’s first examine Jefferson Avenue and Conner, 1949-2010. As quickly as the city had grown, Detroit started to decay in the 1960’s. East Jefferson Avenue was once home to some of Detroit’s most prestigious industrial plants, including Chalmers, Hudson, Briggs, and Continental. The loss of many of these plants started in the 1960’s and had a devastating impact on the neighborhoods nearby, leading to a mass exodus of residents. The Strauss–Howe generational theory, authored by William Strauss and Neil Howe may explain why Detroit started unraveling in the mid-1960’s. This was due to the late phase of the generation shift called the ‘American High’, which lasted from 1946 to 1964. This was a period of massive expansion of birth rates, industry, and infrastructure — America had it all. The ‘American High’ ended in 1964 giving way to the next generational shift called the ‘Consciousness Revolution’ 1964 to 1984. During this period, Detroit started to fall ill to a disease called globalism. This is where global elites shifted capital from Detroit, and or other American cities to manufactures overseas on the basis of a human instinct called greed. In the process, many communities were destroyed as industry left producing third world conditions for the remaining few.During the ‘American High’ (1946-1964), Detroit was the epicenter of the world’s auto industry. With the hard lead-in into the ‘Consciousness Revolution’ (1964-1984) globalism started to deplete US car production. Here are a few examples of cheap labor overseas hallowing out the American auto industry:   So, here is an Uber drive to remember touring through the most dangerous neighborhoods in Detroit, Michigan. I was armed with a drone, I-phone 7, and an Uber.  The area of focus is the zip code 48204 area ranked Michigan Radio’s top six most dangerous neighborhoods in Michigan.

 AAR: Rail Traffic increased in April --From the Association of American Railroads (AAR) Rail Time Indicators. Graphs and excerpts reprinted with permission. U.S. rail carloads were 1,023,300 for the month, up 8.4% (78,949 carloads) over April 2016, thanks once again mainly to coal — coal carloads were up 26.7% (65,158 carloads) over last year’s. ... U.S. rail int ermodal traffic in April 2017 was 1,052,001 containers and trailers, up 2.3% (23,448 units) over April 2016 — but only the third highest April on record (slightly below 2014 and 2015).  This graph from the Rail Time Indicators report shows U.S. average weekly rail carloads (NSA).  Dark blue is 2017.  Rail carloads have been weak over the last decade due to the decline in coal shipments. U.S. railroads originated 1,023,300 total carloads in April 2017, up 8.4%, or 78,949 carloads, over April 2016. It’s the sixth straight year-over-year carload increase. Total originated carloads averaged 255,825 per week in April 2017. The good news is that this is up from a weekly average of 236,088 in April of last year. The bad news is that last year was the only year since sometime prior to 1988, when our data begin, in which average weekly carloads were lower than they were this April. The second graph is for intermodal traffic (using intermodal or shipping containers): U.S. rail intermodal volume in April 2017 was 1,052,001 containers and trailers, up 2.3% (23,448 units) over April 2016. In the first four months of 2017, U.S. intermodal volume was 4,439,681 units, up 1.6%, or 71,425 units, from 2016.

Trade Deficit declines slightly to $43.7 Billion in March ---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 $43.7 billion in March, down $0.1 billion from $43.8 billion in February, revised. March exports were $191.0 billion, $1.7 billion less than February exports. March imports were $234.7 billion, $1.7 billion less than February imports.  The first graph shows the monthly U.S. exports and imports in dollars through March 2017. Imports and exports decreased in March. Exports are 15% above the pre-recession peak and up 9% compared to March 2016; imports are 1% above the pre-recession peak, and up 7% compared to March 2016. In general, trade has been picking up, but has declined slightly the last two months. The second graph shows the U.S. trade deficit, with and without petroleum. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products. Oil imports averaged $46.26 in March, up from $45.25 in February, and up from $27.68 in March 2016. The petroleum deficit had been declining for years - and is the major reason the overall deficit has mostly moved sideways since early 2012. However, recently, the petroleum deficit has been increasing. The trade deficit with China decreased to $24.6 billion in March, from $20.9 billion in March 2016. Some of the increase this year was probably due to the timing of the Chinese New Year. In general the deficit with China has been declining.

March Trade Deficit Down 0.1% from Revised February -- 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.  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 $43.7 billion in March, down $0.1 billion from $43.8 billion in February, revised. March exports were $191.0 billion, $1.7 billion less than February exports. March imports were $234.7 billion, $1.7 billion less than February imports.The March decrease in the goods and services deficit reflected an increase in the goods deficit of $0.4 billion to $65.5 billion and an increase in the services surplus of $0.4 billion to $21.8 billion.Year-to-date, the goods and services deficit increased $9.4 billion, or 7.5 percent, from the same period in 2016. Exports increased $38.0 billion or 7.1 percent. Imports increased $47.5 billion or 7.1 percent.Today's headline number of -43.71B was better than the forecast of -44.5B. The previous month was revised downward by 2.0M. This series tends to be extremely volatile, so we include a six-month moving average.

March Trade Deficit Shrinks To Smallest Since October -- The US Trade Balance shrank to $43.7 billion in March, from an upward revised $43.8 billion in February, marking the month's deficit the smallest since October and less than the conesnus estimate of $44.5 billion. Imports declined by $1.7 billion, or 0.7%, to $234.7 billion, while exports dipped fractionally more, or 0.9%, even as the recently weaker dollar did little to boost US exports. Notably, the US trade deficit with China was $31.4 billion, followed by the European Union at $10 billion. The trade deficit excluding petroleum stood at $35.82b in March. The details: the deficit decreased in March 2017 according to the U.S. Bureau of Economic Analysis and the U.S. Census Bureau. The deficit decreased from $43.8 billion in February (revised) to $43.7 billion in March, as imports decreased more than exports. The previously published February deficit was $43.6 billion. The goods deficit increased $0.4 billion in March to $65.5 billion. The services surplus increased $0.4 billion in March to $21.8 billion.The March decrease in the goods and services deficit reflected an increase in the goods deficit of $0.4 billion to $65.5 billion and an increase in the services surplus of $0.4 billion to $21.8 billion.Year-to-date, the goods and services deficit increased $9.4 billion, or 7.5 percent, from the same period in 2016. Exports increased $38.0 billion or 7.1 percent. Imports increased $47.5 billion or 7.1 percentExports of goods and services decreased $1.7 billion, or 0.9 percent, in March to $191.0 billion. Exports of goods decreased $2.1 billion and exports of services increased $0.4 billion.

  • The decrease in exports of goods mainly reflected decreases in industrial supplies and materials ($1.8 billion) and in automotive vehicles, parts, and engines ($0.9 billion). An increase in capital goods ($0.7 billion) partly offset the decreases.
  • The increase in exports of services mainly reflected increases in financial services ($0.1 billion) and in maintenance and repair services ($0.1 billion).

Imports of goods and services decreased $1.7 billion, or 0.7 percent, in March to $234.7 billion. Imports of goods decreased $1.7 billion and imports of services decreased less than $0.1 billion.

  • The decrease in imports of goods mostly reflected decreases in capital goods ($0.9 billion) and in industrial supplies and materials ($0.7 billion). An increase in automotive vehicles, parts, and engines ($1.1 billion) partly offset the decreases.
  • The decrease in imports of services mainly reflected a decrease in transport ($0.1 billion), which includes freight and port services and passenger fares.

Broken down geographically, the March figures show surpluses, in billions of dollars, with Hong Kong ($2.9), South and Central America ($2.6), Singapore ($0.5), United Kingdom ($0.5), and Brazil ($0.2). Deficits were recorded, in billions of dollars, with China ($31.4), European Union ($10.0), Mexico ($6.5), Japan ($6.5), Germany ($5.0), South Korea ($2.5), Italy ($2.1), Canada ($1.9), India ($1.7), OPEC ($1.6), Taiwan ($1.1), Saudi Arabia ($0.8), and France ($0.1).

U.S. factory orders rise; core capital goods orders revised up | Reuters: New orders for U.S.-made goods increased for a fourth straight month in March and orders for capital equipment were stronger than previously reported, pointing to a sustained recovery in the manufacturing sector. Factory goods orders rose 0.2 percent, the Commerce Department said on Thursday after an upwardly revised 1.2 percent increase in February. Economists polled by Reuters had forecast factory orders gaining 0.4 percent in March after a previously reported 1.0 percent increase in February. Factory orders were up 5.2 percent from a year ago. Manufacturing, which accounts for about 12 percent of the U.S. economy, is recovering in part as steadily rising oil prices reinvigorate the energy sector, leading to demand for machinery and other equipment. The government reported last week that spending on mining exploration, wells and shafts surged at a record 449 percent rate in the first quarter. Thursday's report from the Commerce Department also showed orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans - increased 0.5 percent instead of the 0.2 percent gain reported last month. Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, rose 0.5 percent, instead of the 0.4 percent reported last month. In March, orders for machinery increased 0.3 percent. Orders for electrical equipment, appliances and components jumped 1.2 percent, while orders for primary metals rose 0.4 percent. Orders for transportation equipment increased 2.6 percent, reflecting a 31.0 percent surge in defense aircraft orders. Motor vehicle orders fell 1.7 percent, the biggest drop since August 2014. Orders for computers and electronic products fell 0.8 percent in March.Unfilled orders at factories increased 0.3 percent, rising for a second straight month. Manufacturing inventories were unchanged after rising for five straight months. 

ISM Manufacturing index decreased to 54.8 in April --The ISM manufacturing index indicated expansion in April. The PMI was at 54.8% in April, down from 57.2% in March. The employment index was at 52.0%, down from 58.9% last month, and the new orders index was at 54.8%, down from 64.5%. From the Institute for Supply Management: April 2017 Manufacturing ISM® Report On Business® The April PMI® registered 54.8 percent, a decrease of 2.4 percentage points from the March reading of 57.2 percent. The New Orders Index registered 57.5 percent, a decrease of 7 percentage points from the March reading of 64.5 percent. The Production Index registered 58.6 percent, 1 percentage point higher than the March reading of 57.6 percent. The Employment Index registered 52 percent, a decrease of 6.9 percentage points from the March reading of 58.9 percent. Inventories of raw materials registered 51 percent, an increase of 2 percentage points from the March reading of 49 percent. The Prices Index registered 68.5 percent in April, a decrease of 2 percentage points from the March reading of 70.5 percent, indicating higher raw materials prices for the 14th consecutive month, but at a slower rate of increase in April compared with March. Comments from the panel generally reflect stable to growing business conditions; with new orders, production, employment and inventories of raw materials all growing in April over March."Here is a long term graph of the ISM manufacturing index. This was below expectations of 56.5%, and suggests manufacturing expanded at a slower pace in April than in March.

Markit Manufacturing PMI: April Grows at Subdued Pace -- The April US Manufacturing Purchasing Managers' Index conducted by Markit came in at 52.8, down from the 53.3 March figure. Today's headline number was at the 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:The seasonally adjusted Markit final US Manufacturing Purchasing Managers’ Index™ (PMI™) registered 52.8 in April, down from 53.3 in March, to signal the slowest improvement in overall business conditions since September 2016. A fall in the headline PMI largely reflected weaker contributions from output and new business growth in April, which more than offset a slight rebound in job creation. [Press Release]  Here is a snapshot of the series since mid-2012.

Stagflation Strikes Again As Manufacturing Sector Slumps To Post-Trump Lows -- Confirming the weakness in the preliminary print (and on the heels of China's major disappointment), Markit's US manufacturing PMI tumbled in April to its lowest since September 2016. ISM's Manufacturing Survey confirmed PMI's for once and collapsed from 64.5 to 57.5. Worse still, stagflationary pressures remain as new orders and output slump, input prices are rising at their fastest rate since Sept 2014. Slower growth of total new work contributed to the weakest upturn in purchasing activity across the manufacturing sector since September 2016. Manufacturers also sought to reduce their inventory holdings, with stocks of purchases falling slightly for the first time in seven months. In contrast, post-production inventories increased at a modest pace in April. The latest survey signalled that the rate of expansion nonetheless eased to its weakest for seven months. New order growth also moderated to its slowest since September 2016, which survey respondents mainly linked to more cautious spending among domestic clients. Having tracked stocks for months post-Trump, it appears the respondents in the ISM survey finally gave up hope.

ISM Non-Manufacturing: Growth in April - The Institute of Supply Management (ISM) has now released the April Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services PMI. The headline Composite Index is at 57.5 percent, up 2.3 from 55.2 last month. Today's number came in above the forecast of 55.8 percent.Here is the report summary:"The NMI® registered 57.5 percent, which is 2.3 percentage points higher than the March reading of 55.2 percent. This represents continued growth in the non-manufacturing sector at a faster rate. The Non-Manufacturing Business Activity Index increased to 62.4 percent, 3.5 percentage points higher than the March reading of 58.9 percent, reflecting growth for the 93rd consecutive month, at a faster rate in April. The New Orders Index registered 63.2 percent, 4.3 percentage points higher than the reading of 58.9 percent in March. The Employment Index decreased 0.2 percentage point in April to 51.4 percent from the March reading of 51.6 percent. The Prices Index increased 4.1 percentage points from the March reading of 53.5 percent to 57.6 percent, indicating prices increased for the 13th consecutive month, at a faster rate in April. According to the NMI®, 16 non-manufacturing industries reported growth. In April the non-manufacturing sector reflected strong growth after a slowing in the rate from the previous month. Respondents’ comments are mostly positive about business conditions and the overall economy." [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.

ISM Non-Manufacturing Index increased to 57.5% in April The April ISM Non-manufacturing index was at 57.5%, up from 55.2% in March. The employment index decreased in April to 51.4%, from 51.6%. Note: Above 50 indicates expansion, below 50 contraction.  From the Institute for Supply Management:April 2017 Non-Manufacturing ISM Report On Business®  "The NMI® registered 57.5 percent, which is 2.3 percentage points higher than the March reading of 55.2 percent. This represents continued growth in the non-manufacturing sector at a faster rate. The Non-Manufacturing Business Activity Index increased to 62.4 percent, 3.5 percentage points higher than the March reading of 58.9 percent, reflecting growth for the 93rd consecutive month, at a faster rate in April. The New Orders Index registered 63.2 percent, 4.3 percentage points higher than the reading of 58.9 percent in March. The Employment Index decreased 0.2 percentage point in April to 51.4 percent from the March reading of 51.6 percent. The Prices Index increased 4.1 percentage points from the March reading of 53.5 percent to 57.6 percent, indicating prices increased for the 13th consecutive month, at a faster rate in April. According to the NMI®, 16 non-manufacturing industries reported growth. In April the non-manufacturing sector reflected strong growth after a slowing in the rate from the previous month. Respondents’ comments are mostly positive about business conditions and the overall economy." This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index. This suggests faster expansion in April than in March.

Markit Services PMI Up in April --The April US Services Purchasing Managers' Index conducted by Markit came in at 53.1 percent, up 0.3 percent from the March estimate. The consensus was for 52.5 percent. 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:Growth of business activity was sustained in April, albeit at a relatively modest pace in line with fairly limited gains in new orders. With companies able to comfortably deal with current workloads, staffing levels rose at the slowest pace in nearly seven years.On the price front, input costs increased at a sharper rate, but competitive pressures meant that charges were raised to the weakest degree for five months.The seasonally adjusted Markit U.S Services Business Activity Index continued to record above the crucial 50.0 no-change mark during April, registering 53.1, up from 52.8 in the previous month. Growth in activity has now been recorded in each survey period since March 2016. [Press Release] Here is a snapshot of the series since mid-2012.

 Weekly Initial Unemployment Claims decrease to 238,000 - The DOL reported: In the week ending April 29, the advance figure for seasonally adjusted initial claims was 238,000, a decrease of 19,000 from the previous week's unrevised level of 257,000. The 4-week moving average was 243,000, an increase of 750 from the previous week's unrevised average of 242,250.  The previous week was unrevised. The following graph shows the 4-week moving average of weekly claims since 1971.

ADP: Private Employment increased 177,000 in April --From ADP:Private sector employment increased by 177,000 jobs from March to April according to the April ADP National Employment Report®. ... 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...“In April we saw a moderate slowdown from the strong pace of hiring in the first quarter,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Despite a dip in job creation, the growth is more than strong enough to accommodate the growing population as the labor market nears full employment. Looking across company sizes, midsized businesses showed persistent growth for the past six months.”Mark Zandi, chief economist of Moody’s Analytics said, “Job growth slowed in April due to a pullback in construction and retail jobs. The softness in construction is continued payback from outsized growth during the mild winter. Brick-and-mortar retailers cut jobs in response to withering competition from online merchants.” This was above the consensus forecast for 170,000 private sector jobs added in the ADP report. 

First Look at April: ADP Says 175K 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 ADP April estimate of 177K new nonfarm private employment jobs, a decrease over March's 255K, which was a downward revision of 8K.The 177K estimate came in slightly above the consensus of 175K for the ADP number.The forecast for the forthcoming BLS report is for 185K nonfarm new jobs (the actual PAYEMS number) and the unemployment rate to increase to 4.6%. Here is an excerpt from today's ADP report:“In April we saw a moderate slowdown from the strong pace of hiring in the first quarter,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Despite a dip in job creation, the growth is more than strong enough to accommodate the growing population as the labor market nears full employment. Looking across company sizes, midsized businesses showed persistent growth for the past six months.”Mark Zandi, chief economist of Moody’s Analytics said, “Job growth slowed in April due to a pullback in construction and retail jobs. The softness in construction is continued payback from outsized growth during the mild winter. Brick-and-mortar retailers cut jobs in response to withering competition from online merchants.”  Here is a visualization of the two series over the previous twelve months.

April Employment Report: 211,000 Jobs, 4.4% Unemployment Rate --From the BLS: Total nonfarm payroll employment increased by 211,000 in April, and the unemployment rate was little changed at 4.4 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in leisure and hospitality, health care and social assistance, financial activities, and mining.... The change in total nonfarm payroll employment for February was revised up from +219,000 to +232,000, and the change for March was revised down from +98,000 to +79,000. With these revisions, employment gains in February and March combined were 6,000 lower than previously reported.... In April, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $26.19. Over the year, average hourly earnings have risen by 65 cents, or 2.5 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 211 thousand in April (private payrolls increased 194 thousand). Payrolls for February and March were revised down by a combined 6 thousand. This graph shows the year-over-year change in total non-farm employment since 1968. In April, the year-over-year change was 2.24 million jobs. This is a decent year-over-year gain. The third graph shows the employment population ratio and the participation rate. The Labor Force Participation Rate was decreased in April 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 60.2% (black line). The fourth graph shows the unemployment rate. The unemployment rate decreased in April to 4.4%. This was above expectations of 185,000 jobs, however the previous two months were revised down slightly.

April Payrolls Jump By 211K, Beating Expectations Although Average Hourly Earnings Disappoint -- Well, the Fed said the recent disappointing economic data would be "transitory" and based on the just released jobs report, it may have been somewhat right, because after growing only by a revised 79,000 jobs in March, payrolls rebounded in April, rising by more than the expected 190K to 211K, in line with the optimistic whisper estimates. The not so great news: March payrolls were revised materially lower, and denying expectations of a solid upward revision, March payrolls were said to rise by only 79K, below the 98K initially reported. Nonfarm private payrolls rose 194k vs prior 77k; est. 190k, range 155k-270k from 39 economists surveyed. Manufacturing payrolls rose 6k after rising 13k in the prior month; economists estimated 10k, range 0k to 15k from 23 economists surveyedThe change in total nonfarm payroll employment for February was revised up from +219,000 to +232,000, and the change for March was revised down from +98,000 to +79,000. With these revisions, employment gains in February and March combined were 6,000 lower than previously reported.The change in household employment was up 156k vs the prior +472k.The unemployment rate unexpectedly dropped, declining from 4.5% to 4.4%, below the 4.6% expected and to the lowest level since May 2001, as the participation rate declined.  Underemployment rate 8.6% vs prior 8.9% In April, the number of Americans not in the labor force rose by 162K to 94.375MM, the highest of 2017. Perhaps the most important indicator the Fed is looking at, Average Hourly Earnings, was somewhat soft, with the Y/Y number missing expectations of a 2.7% increase, rising only 2.5%, even as the monthly increase of 0.3% came in line with expectations.

April Jobs Report: 211K New Jobs Added, Surprises Forecast --This morning's employment report for April showed a 211K increase in total nonfarm payrolls, surprising forecasts. Over the past 3 months, job gains have averaged 174,000. The unemployment rate ticked downward from 4.5% to 4.4%.The consensus was for 185K new jobs and the unemployment rate to inch up 4.6%. February and March nonfarm payrolls were revised for a total loss of 6K.Here is an excerpt from the Employment Situation Summary released this morning by the Bureau of Labor Statistics:Total nonfarm payroll employment increased by 211,000 in April, and the unemployment rate was little changed at 4.4 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in leisure and hospitality, health care and social assistance, financial activities, and mining. 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). Note the increasing peaks in unemployment in 1971, 1975 and 1982. The mirror relationship appears to be repeating itself with the most recent and previous bear markets. 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. We've added another chart to illustrate the reality of the unemployment rate - the unemployment rate divided by the labor force participation rate.

April Jobs Report – The Numbers - Job growth in the U.S. rebounded in April and the unemployment rate fell further, the Labor Department said Friday. The strong report and the low unemployment rate could keep the Federal Reserve on track to raise its benchmark interest rate this year. Here are five key numbers from the report. The economy created a net 211,000 jobs in April, more than double the prior month’s increase and the biggest gain since February. The economy has added an average 185,000 jobs a month in 2017, roughly matching last year’s pace. The unemployment rate fell a tenth of a percentage point in April to 4.4%. That’s the lowest level May 2007–when it was also 4.4%–several months before the recession began. The rate hasn’t been lower since May 2001. The rate fell last month because the number of employed Americans grew faster than growth in the labor force. On its own, the rate suggests that the U.S. is at or near what economists consider full employment—a healthy level that won’t stoke a surge in wage inflation. The Fed projects that unemployment over the long run will average 4.7% to 5%. The labor-force participation rate—or the share of Americans holding jobs or actively looking for work—fell a tenth of a percentage point to 62.9%. That’s up slightly from a year earlier but still hovering near the lowest level in four decades. The average hourly earnings of private-sector workers grew 2.5% in the 12 months through April. That’s steady but unspectacular growth, suggesting the labor market might not be as tight as the unemployment rate would suggest. Annual wage growth was slightly higher earlier this year. Average wages grew 7 cents, or 0.27%, in April from a month earlier. A broader measure of unemployment known as the “U-6” rate among economists fell to 8.6%, the lowest since November 2007. This rate takes into account not only unemployed workers, but also Americans who are too discouraged to look for work and part-timers who would prefer full-time work. The rate has fallen more than a percentage point over the year.

April jobs report: a blowout -- except (sigh) for wages - HEADLINES:

  • +211,000 jobs added
  • U3 unemployment rate down -0.1% from 4.5% to 4.4%
  • U6 underemployment rate down 0.3% from 8.9% to 8.6%
  • Not in Labor Force, but Want a Job Now:  down -74,000 from 5.781 million to 5.707 million   
  • Part time for economic reasons: down -281,000 from 5.553 million to 5.272 million
  • Employment/population ratio ages 25-54: up +0.1% from 78.5% to 78.6%
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.06 from $21.90 to $21.96,  up +2.3% YoY.  (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.)

This was an excellent report in almost all respects. Not only were the headlines very positive, but so were most of the internals. Hours rose, aggregate payrolls rose, and the employment to population ratio continue to rise as well. People are coming off the sides maybe not in droves but pretty vigorously -- and they are finding jobs. Involuntary part-time employment is declining sharply. There were a few pockets of softness, in short-duration employment, which hasn't made a new low in 18 months, and those outside of the labor force but who want a job, which also hasn't made meaningful progress in nearly 4 years (although recently it has declined sharply as well). The labor force participation rate also declined this month.The other soft spot remains wages, which are only up +2.3% in nominal terms for nonsupervisory workers. This is probably in part due to the YoY increase in prime age participation (up over 1% from ages 25-54 in the last year), which means more competition for available jobs. So, while this month is very good news, we are still at least 0.5%, and probably more like 1%, from reasonably "full" employment, and wages are still really soft. I will repeat, as I do every month now, that the biggest danger I see in the next downturn, whenever it hits, is that we have the first actual wage deflation since the 1930s.

April Payrolls Bounce, Revisions Take March Lower: Hiring Increasingly Volatile - Today’s establishment employment report shows a huge, 211,000 jump in reported jobs vs a downward revised March. The BLS revised March even lower, to 79,000 from 98,000. Revisions also took February up to 232,000 from 219,000.Last month, economists blamed the weather. If so, the correct thing to do is average both months as employees not hired in March due to weather would have been hired in April instead.The two-month average is 145,000 per month. That’s not a disaster, but it’s not particularly strong either.The internals of the report as measured by the household survey were average. The household survey shows a gain in employment of 156,000, close to the two-month average in jobs.  Last month the BLS revised February from +235,000 to +219,000. This month the BLS changed its mind and revised February back up to 232,000. Other revisions are as noted above.Let’s dive into the details in the BLS Employment Situation Summary, unofficially called the Jobs Report.  BLS Jobs Statistics at a Glance:

  • Nonfarm Payroll: +211,000 – Establishment Survey
  • Employment: +156,000 – Household Survey
  • Unemployment: -146,000 – Household Survey
  • Involuntary Part-Time Work: -281,000 – Household Survey
  • Voluntary Part-Time Work: -23,000 – Household Survey
  • Baseline Unemployment Rate: -0.1 to 4.4% – Household Survey
  • U-6 unemployment: -0.3 to 8.6% – Household Survey
  • Civilian Noninstitutional Population: +175,000
  • Civilian Labor Force: +12,000 – Household Survey
  • Not in Labor Force: +162,000 – Household Survey
  • Participation Rate: -0.1 to 62.9 – Household Survey

Total nonfarm payroll employment increased by 211,000 in April, and the unemployment rate was little changed at 4.4 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in leisure and hospitality, health care and social assistance, financial activities, and mining.

US Payrolls Rebound In April, But 1-Year Trend Still Looks Wobbly -- The pace of job creation picked up sharply in April, the Labor Department reports. The solid increase suggests that the weak gain in March, which was revised down, was an anomaly. That’s an encouraging sign, and for the moment it revives the view that the US labor market is still expanding at a healthy if unspectacular rate. Nonetheless, the latest numbers also reaffirm that the year-over-year comparison is still signaling a decelerating trend, which has been playing out over the past two years. The monthly comparison for April, however, marks a timely rebound. Private payrolls rose 194,000 last month, a sharp improvement over March’s weak 77,000 advance. But the broader trend, for both monthly and year-over-year changes, continues to highlight the reality that workforce growth continues to slow. Private payrolls increased 1.69% in April vs. the year-earlier month, a fractionally higher gain vs. the previous update. But there’s nothing in today’s results to suggest that the two-year-old downshift in job creation is stabilizing, much less reversing. For now, the case for expecting that the downshift will end or reverse rests largely on expectations that the Trump administration will deliver pro-growth policies that make a difference. Maybe, but the hard data for employment doesn’t offer much support for that view, at least not yet. But some analysts think that the numbers have a decent chance of providing more impressive results in the months ahead.“Labor market conditions remain robust and continue to tighten,” says Ward McCarthy, chief financial economist at Jefferies LLC. “This data will keep the Fed on track for a preferred 2017 normalization timeline of rate hikes in June and September and the first step toward balance-sheet normalization in December.” The danger is focusing on the latest monthly result as the basis for assuming that the macro trend is destined to accelerate. Anything’s possible, of course, but the more reliable annual data suggests a degree of caution is still in order.

The April Jobs Report in 11 Charts -- The pace of hiring picked up in April as employers added 211,000 jobs and the headline unemployment rate fell to 4.4%. Here’s a look at some of the other key data points in today’s monthly jobs report. The overall pace of job gains has slowed somewhat, but remains healthy. The number of jobs has risen 1.5% from a year ago. . Hourly wage gains have slowed slightly, while weekly wage gains picked up a bit. Both increased about 2.5% from a year ago. . The Labor Department’s broader measures of unemployment, including discouraged workers, those marginally attached to the labor force, and part-time workers who want full-time employment, have continued to fall. The broadest measure of underemployment, which includes part-timers, has now fallen to the lowest rate since 2007. The headline unemployment rate of 4.4% has not been lower since May 2001. . The share of the population in the labor force—defined as those working or actively looking for work—has hovered at or just below 63% for most of the past year. The share of the population with jobs has slowly been rising, and climbed to 60.2% in April, the highest since February 2009. . For workers ages 25 to 54, who are unlikely to be retired or in school, the labor-force participation rate and the employment-to-population ratio are both higher and have been gradually rising in recent years. . During the recession and its immediate aftermath, people who became unemployed were more likely to drop out of the labor force entirely and stop seeking work. The share of unemployed people who give up on the labor force continued to fall this month. . Full-time jobs have been growing more quickly than part-time jobs. . Unemployment rates are coming down for workers at every education level. . Unemployment rates have also continued to trend down for different race and gender groups. . Early in the recession, the number of people who were unemployed for half a year or more had soared, but long-term unemployment has returned to nearly normal levels. . The median duration of unemployment is just over 10 weeks. That’s down by more than half from 2010 and 2011 but still elevated compared with a decade ago, or the late ’90s and early 2000s. 

Where The April Jobs Were: It Was All About Minimum Wage Again --April was a month of economic recovery: after a disappointing March, jobs rebounded strongly last month, rising from a downward revised 79K to 211K, providing some validation to Yellen's claim that the recent economic weakness was transitory. And yet, wages once again disappointed, with annual hourly earning growth declining to 2.5% from 2.7%.How is it that with the labor market supposedly near full employment, and the unemployment rate sliding to another post-recession low of 4.4%, wages simply can not rise?The answer was once again to be found in the quality of jobs added, because despite the poor headline payrolls print in March, the quality of jobs added that month was actually quite better than recent trends. This is where April disappointed: according to the BLS, the bulk of jobs added were once again in low or minimum-wage sectors such as leisure and hospitality, which added +55,000 jobs of which food services and drinking places workers, aka waiters and bartenders, added another +26,000. Another low-paying sector - education and health - added 41,000 jobs in April.Surprisingly, of the 39K professional and business services - traditionally a well-paying job category - for the second month in a row employees providing "services to buildings and dwellings", aka "doormen" dominated the category, with 9.9K jobs added.Looking at retail workers, recall that one of the main reasons for the big March jobs drop was a plunge in retail (also minimum wage) employment, which saw over 27K jobs losses last month, and another 29K in February. That has now reversed, and in April 6,300 retail workers were added.Another notable observation: last month's gain of 13K manufacturing jobs was cut in half to just 6K well-paying mfg jobs.It wasn't just low-paying jobs of course:

  • Financial activities added 19,000 jobs, with insurance carriers and related activities accounting for most of the gain (+14,000). Over the year, financial activities has added 173,000 jobs.
  • Mining jobs rose by 9,000 in April, with most of the increase in support activities for mining (+7,000). Since a recent low in October 2016, mining has added 44,000 jobs.
  • Government workers increased by 27,000 in April

The only job category that saw a decline in employment in April was Information where 7,000 jobs were lost, following a loss of 6,000 jobs the month prior.The complete breakdown of changes in key job categories in March and April is shown in the chart below.

Comment: A Solid Employment Report – McBride - The headline jobs number was above expectations, however there were combined small downward revisions to the previous two months.  There was plenty of good news - especially with the unemployment rate falling to 4.4% (although the participation rate declined slightly), and U-6 falling to 8.6%. Overall this was a solid report. In April, the year-over-year change was 2.24 million jobs. Decent job growth. This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation. The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 2.5% YoY in April.  Wage growth has generally been trending up.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 was unchanged in April at 81.7%, and the 25 to 54 employment population ratio increased to 78.6%.  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 working part time for economic reasons decreased in April. The number working part time for economic reasons suggests a little slack still in the labor market. This is the lowest level since April 2008. These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 8.6% in April. This is the lowest level for U-6 since November 2007.This graph shows the number of workers unemployed for 27 weeks or more.  According to the BLS, there are 1.63 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.69 million in March.This was the lowest number since June 2008.This is generally trending down, but still a little elevated. Although U-6,the number of persons employed part time for economic reasons, and the number of long term unemployed are still a little elevated, it appears the economy is nearing full employment. Overall this was a solid report.

April jobs report: Have we reached full employment??!! -- Jared Bernstein - Talmudic question: is the US job market at full employment? Payrolls were up 211,000, well above March’s downward revision of 79K. Such jumpiness invokes the need for JB’s patented jobs smoother. It shows average monthly job growth in a very healthy 175-185 range in recent months, which is fast enough to pressure the unemployment and underemployment rates down.The overall jobless rate, at 4.4%, is the lowest since May 2007; the underemployment rate, at 8.6%, is about at the level I consider to be consistent with full employment. Long-term unemployment–which was very highly elevated throughout earlier years of this recovery–is back down to about 1 percent of the labor force; that’s the lowest since May 2008 and almost back to its pre-recessionary low point. The number of involuntary part-timers–the group that, along with the unemployed, drives the underemployment rate–is down almost 4 million from its peak (it was 9.2 million in September of 2010 and was 5.3 million in April).Participation rates remain low relative to pre-recession levels, but part of that is our aging demographics. The prime-age (25-54) employment rate rate ticked up from 78.5% to 78.6%; it has now recovered 69% of the ground it lost during the recession. The prime-age employment rate for men, at 85.4% is two-thirds of the way back to its pre-recession peak, while the rate for women, at 71.9%, is 78% back to its January 2007 level.So, don’t even I–a bit of a holdout on this declaration–have to declare that the US labor market has achieved full employment? After all, the jobless rate is below the Fed’s estimate of the “natural rate.”Yes and no. Sorry, but there’s a key factor missing from the full employment picture: price pressures. I mean, they’re not completely absent, but neither are they obviously in the data. Let me explain.I’m not just being a grouch about this–I’m very bullish on our labor market progress (some of it is due to low productivity growth, but let’s not go there right now). But the truth is–trust me on this–no economist knows, outside of a very wide confidence interval, what the natural rate is right now. It could be percentage points below today’s 4.4%. We basically derive the full employment jobless rate by looking at correlations between unemployment and inflation (the “Phillips curve”). But, as the figure below suggests, that correlation has been very flat in recent years. Unemployment has indeed fallen to levels consistent with the Federal Reserve’s version of full employment, and wage growth has accelerated a bit. It was around 2%; it’s now about 2.5%.But inflation—I’m using the PCE core—hasn’t picked up much at all and remains below the Fed’s target rate of 2%, where it has been for years now.

Infosys to Hire 10,000 American Workers After Trump Criticism -   India’s Infosys Ltd. said it plans to hire 10,000 Americans in the next two years, following criticism from the Trump administration that the company and other outsourcing firms are unfairly taking jobs away from U.S. workers. Infosys, which employs about 200,000 people around the world, will expand its local hiring in the U.S. while adding four hubs to research technologies such as artificial intelligence and machine learning. The first location will open in Indiana in August 2017 and is expected to create 2,000 jobs for American workers by 2021, the company said. The moves come after India’s outsourcing firms have come under attack for allegedly displacing American workers with employees from overseas. Last month, President Donald Trump signed an executive order aimed at overhauling the work visa programs that Infosys and other firms use to bring overseas workers into the U.S. “In the fast-changing world of today, we need the ability to be local. We need to be trusted by our customers as being local,” said Chief Executive Officer Vishal Sikka in an interview from Indiana. “To work with a mix of global and local talent is absolutely the right thing to do.”

American Airlines gave its workers a raise. Wall Street freaked out. -- American Airlines agreed this week to do something nice for its employees and arguably foresighted for its business by giving flight attendants and pilots a preemptive raise, in order to close a gap that had opened up between their compensation and the compensation paid by rival airlines Delta and United.   Wall Street freaked out, sending American shares plummeting. After all, this is capitalism and the capital owners are supposed to reap the rewards of business success. “This is frustrating. Labor is being paid first again,” wrote Citi analyst Kevin Crissey in a widely circulated note. “Shareholders get leftovers.” Indeed, major financial players were so outraged by American’s decision to pay higher wages that they punished airline stocks across the board. American itself took it hardest on the chin, of course, but the consensus among stock analysts was that higher pay at American could signal higher pay at other airlines too, with negative consequences for the overall industry. But taking a broader view, this blinkered Wall Street perspective on labor compensation is, arguably, exactly what’s gone wrong with the American economy. Any given company obviously benefits when it’s able to get away with paying its workforce less. But one company’s workers are another company’s customers. A world in which labor never gets paid is ultimately one in which nobody has much of anything but leftovers. JP Morgan’s Jamie Baker was even more scathing than Crissey.  "We are troubled by AAL's wealth transfer of nearly $1 billion to its labor groups,” he wrote, suggesting that the move was not just contestable as a matter of business strategy, but somehow obviously illegitimate.

Spirit airlines would like its customers to know they aint worth shit. -Roger Gathman - Note to self and all within hearing. Spirit airlines is one of those discount airlines whose motto is, treat people like pigs and count on their impotence to rebel. Operating on this principle, which has solid bottom line proof, the company bumped our whole flight yesterday evening at Kansas City. After bumping the time to 911 from 7 p.m., they announced at 9:11 that there was techical difficulties and the whole flight was cancellled. Of course, stranding 200 some people in an airport at almost the last flight time of the night required not calling up a single additional employee. Instead, 200 people stood in line for six hourse until, at 2 am, we learned that we could either get a voucher for 300 dollars or we could get a ticket on Spirit for, maybe the day after the next. But they were generously throwing in a seven dollar voucher for food and a voucher for the nearby Ramada, which may or may not be full. There was no information given to the line at all, so we relied on rumors. One of the rumors, seemingly confirmed by the news, is that the technical difficulties did not inhibit our plane: rather, a plane going from Cleveland to Vegas had to make an emergency stop here, due to its technical problems, and they simply bumped us. Why the lie? To avoid having to pay us the amount of our round trip tickets, or even three times that amount, which happens when it is the airlines choice to bump you. As we desperately looked for a way out of the airport at two a.m., feeling miserable about Adam, we approached an airport cop and related our tale, and his partner thought it was hilarious that we wanted a taxi or van to take us out of the airport. It was a riot! A. told him politely that it wasn't funny. Pigs, ruled by pigs. That is the spirit of Spirit! Like United or American, the aim is to produce maximum discomfort and, in emergencies, humiliate you as much as they can get away with! This morning, we got an email with a smiley emoticon, the word sorry, and a big 50 dollar voucher from Spirit, which we can use whenever we feel like being abused for five hours at some strange airport. Fun!  But of course we have no choice. Who ever heard of the government enforcing regulations that would prevent the airlines from treating their customers like pigs. Because free enterprise.

Union busters are more prevalent than they seem, and may soon even be at the NLRB  -Besides the labor secretary, President Trump will name countless federal officials responsible for advocating for working people. One of the most important agencies to which Trump will nominate officials is the National Labor Relations Board (NLRB), which protects the rights of private sector employees to join together, with or without a union, to improve their wages and working conditions. On April 25, POLITICO reported that the Trump administration is considering Minneapolis attorney Doug Seaton to fill a vacancy on the NLRB. Seaton is a well-known union-avoidance consultant, otherwise known as a “persuader” or, more accurately, a union buster. When workers seek to organize and bargain collectively, employers often hire so-called “persuaders” to orchestrate and roll out time-tested, anti-union campaigns. Union-avoidance consultants do exactly what their job titles describe: they help employers keep their businesses union-free, by either defeating union organizing campaigns or assisting with decertification efforts to unseat an existing union.

May Day: Shorter hours — If not now, when? – sandwichman - The litany of shorter work week prophecy is prodigious. Keynes famously predicted a 15-hour work week for “our grandchildren” in 1930. Fifteen years later, in a letter to T.S. Eliot, Keynes parenthetically suggested a 35-hour work week for the U.S. in the immediate post-war period. In 1961, Clyde Dankert cited a New York Times article from 1949 in which a “well known labor economist” predicted a 20-hour work week by 1990 and a ten hour week by 2050. Eight years later, a vocational educator forecast the 20-hour week by 2000. Also in 1961, Dankert himself suggested 1980 as the year by which, “the thirty-hour workweek should be widely established and some progress made toward the twenty-five-hour week.” Three years later, he was somewhat more circumspect, “In time we should reach the 30-hour week and even the 25-hour week, but despite all the talk about the leisure society, that time is not now and will not be for quite some years. In a 1957 newsletter, First National City Bank of New York calculated that it would take 31 years to achieve a 32-hour work week if productivity increased at an average of between two and three percent a year and if workers chose to take the benefits in the same proportions of wages and hours as they had from 1909 to 1941. Alternatively, a four-day work week could be attained in eight years if productivity gains were applied exclusively to work time reduction. In fact, productivity gains from 1954 to 1979 averaged 2.4 percent per year. From 1957 to 1988, annual productivity gains averaged 2.2 percent. Assuming 40 percent of actual historical productivity gains, ten paid holidays, and four weeks annual vacation, a 32-hour workweek should have been realized by around 1990 — aside from the likelihood that progressive reduction of the hours of work would have accelerated productivity gains. Using the same assumptions, the work week in 2016 should be around 26 hours. Or perhaps people would prefer to continue with the 32-hour week and take three months annual vacation. These calculations overlook the fact that reduction of the hours of work had already stagnated in the early post-war period. If we backdate the 40 percent of productivity reduction to 1950, the 32-hour mark could have been reached seven years earlier.

 Puerto Rico files for biggest ever U.S. local government bankruptcy | Reuters: Puerto Rico announced a historic restructuring of its public debt on Wednesday, touching off what may be the biggest bankruptcy ever in the $3.8 trillion U.S. municipal bond market. While it was not immediately clear just how much of Puerto Rico's $70 billion of debt would be included in the bankruptcy filing, the case is sure to dwarf Detroit's insolvency in 2013. The move comes a day after several major creditors sued Puerto Rico over defaults its bonds. Bankruptcy may not immediately change the day-to-day lives of Puerto Rico's people, 45 percent of whom live in poverty, but it may lead to future cuts in pensions and worker benefits, and possibly a reduction in health and education services. The island's economy has been in recession for nearly 10 years, with an unemployment rate of about 11.0 percent, and the population has fallen by about 10 percent in the past decade. The bankruptcy process will also give Puerto Rico the legal ability to impose drastic discounts on creditor recoveries, but could also spook investors and prolong the island's lack of access to debt markets.The debt restructuring petition was filed by Puerto Rico's financial oversight board in the U.S. District Court in Puerto Rico on Wednesday, and was made under Title III of last year's U.S. Congressional rescue law known as PROMESA. The Title III provision allows for a court debt restructuring process akin to U.S. bankruptcy protection. Puerto Rico is barred from a traditional municipal bankruptcy protection under Chapter 9 of the U.S. code. The filing includes only Puerto Rico's central government, which owes some $18 billion in debt backed by the island's constitution. On paper, it does not include $17 billion of sales tax-backed debt, known as COFINA debt, or debt from other agencies. But those debts are likely to be pulled into the bankruptcy, or included in separate bankruptcy proceedings in coming days 

Puerto Rico To Seek Bankruptcy Protection, Launching Largest Ever U.S. Municipal Debt Restructuring --As per our report last night that following the expiration of the litigation freeze, Puerto Rico's creditors had filed a barrage of lawsuits against the insolvent Commonwealth a bankruptcy was imminent,  moments ago Puerto Rico's governor announced the commonwealth will request bankruptcy protection of a portion of the island's $70 billion in debt, setting up a showdown with Wall Street firms owed billions of dollars, in what will be the largest-ever U.S. municipal debt restructuring and further complicating the U.S. territory’s efforts to pull itself out of a financial crisis.Cited by AP, Gov. Ricardo Rossello said Wednesday that a federal control board overseeing the island's finances has agreed with his request to put the debts before a court. He told reporters that he has requested that the U.S. territory's federal financial oversight board commence a Title III proceeding under last year's Puerto Rico rescue law known as PROMESA. Title III is an in-court debt restructuring process similar to U.S. Bankruptcy.According to the WSJ, "the governor said he would petition Puerto Rico’s federal oversight board to invoke a quasi-bankruptcy law that puts its standoff with creditors before a judge. His decision marks the start to what could be a lengthy legal fight as Wall Street watches closely to see how other indebted municipal governments may fare in confrontations with investors." As a reminder, Puerto Rico and its agencies owe $73 billion to creditors, dwarfing the roughly $18 billion owed by the city of Detroit when it entered what was previously the largest municipal bankruptcy in 2013.

Pennsylvania sees biggest budget shortfall since recession | Regional | Observer-Reporter: – Pennsylvania state government is heading into the 2017 budget season with its biggest revenue shortfall since the recession, leaving budgetmakers to address an unexpectedly large budget gap with just nine weeks left in the fiscal year. Democratic Gov. Tom Wolf and the Republican-controlled House and Senate majorities are putting a wide variety of puzzle pieces on the table that could go into a final budget bill. It is not clear what will make it into the final product, or whether Wolf and lawmakers can avoid an epic budget stalemate that lasted through most of the 2015-16 fiscal year. The state Department of Revenue is reporting that it has a shortfall in excess of $1 billion, now 10 months into the fiscal year. That’s more than 4 percent, a bigger margin at this point than in any fiscal year since 2010. In January, the Legislature’s nonpartisan Independent Fiscal Office projected a shortfall of nearly $3 billion for the two fiscal years ending June 30, 2018, including the cost to maintain the state’s current programs. April’s results would push that shortfall to more than $3 billion.

Connecticut budget deficit grows as income tax receipts plummet: Connecticut’s income tax collections plummeted at the end of April leaving Connecticut with a gaping $5.2 billion hole in its budget for this year and the next two fiscal years. Revenues are down about $413 million this fiscal year, and another $597 million and $865 million in fiscal year 2018 and 2019, according to the latest estimates. That means the budget hole lawmakers and Democratic Gov. Dannel P. Malloy will have to fill after depleting the $235 million rainy day fund is about $5.2 billion. “The precipitous drop in revenue we experienced in late April creates major challenges for the state throughout the remainder of this fiscal year and into the next biennial budget we are currently working on,” Office of Policy and Management Secretary Ben Barnes said Monday. “We need to take immediate action to reduce spending between now and June 30 to reduce our current year deficit as much as possible to prevent the need to borrow to meet expenses.” The revenue from Connecticut’s top 100 taxpayers was down 45 percent, according to budget analysts. Advertisement Personal income tax revenues were down $450 million from projections. More specifically, a majority of the decline in the income tax receipts is from the withholding and finals portion of the tax, which is tied to capital gains and investment income. That part ended up being down 8.9 percent.

While Congress stalls, conservatives are scoring big wins at the state level - As Congress returns from recess, we hold out hope that they will make better use of this session than the last one and work to fulfill their campaign promises. But even while politicians in the House and Senate were away from Washington this week, state legislatures remained active.All across the nation, conservative grassroots activists are pushing for laws that will limit the size and scope of the government, increase individual liberty and restore constitutionally-guaranteed rights. And they've had some remarkable successes in the past several weeks. In Arizona, grassroots pushed to protect crucial civil and economic liberties. Although designed to target organized crime like drug cartels, civil asset forfeiture laws permitted police officers and prosecutors to seize property and money on the mere suspicion of a crime. This deprives citizens — who may never be arrested, charged, or convicted of a crime — of both their right to property and their right to due process, putting far too much power in the hands of lawyers and law enforcement.Grassroots activists made their voices heard, making more than 9,000 contacts with officials. Gov. Doug Ducey, R-Ariz., signed the bill that makes seizing property more difficult and raises the standard for prosecutors by requiring "clear and convincing evidence" that property was used in a criminal activity. Although centrist and liberal Republicans in Washington have flipped on their promises to protect the right of individuals to control their own healthcare, Iowa has made massive strides towards this key goal. "Right to try" legislation has passed in both chambers and isdue to appear on Republican Gov. Terry Branstad's desk, thanks to the relentless work of state-level activists. The legislation permits terminally-ill patients who can't get into clinical trials of drugs, after consulting with their doctor, to try drugs that have passed Phase I of FDA standards but have not yet been fully approved. To protect caregivers and insurance companies, the bill also allows hospice and insurance to refuse care and coverage to the patient after they have decided to take the drugs. In Kentucky, conservative grassroots sent 4,000 messages to state legislators to support the criminal justice reform legislation SB 120. The bill passed through the House and the Senate and was just signed into law by Republican Gov. Matt Bevin. It makes significant reforms to improve Kentucky's criminal justice system, including permitting convicts to work minimum-wage jobs while in prison, letting them study for an occupational license, and making the process of obtaining these licenses fairer after release.

Uber Under Federal Criminal Investigation for “Greyball” Software --  Yves Smith - Uber tried defying one government authority too many when it started messing with the police. In March, the New York Times broke the underlying story regarding the software program designed to defy government investigators and regulators, including police. Uber said it would stop using the program after it received a barrage of negative press. From a more recent New York Times account:The program, involving a tool called Greyball, uses data collected from the Uber app and other techniques to identify and circumvent officials who were trying to clamp down on the ride-hailing service. Uber used these methods to evade the authorities in cities like Boston, Paris and Las Vegas, and in countries like Australia, China and South Korea.Greyball was part of a program called VTOS, short for “violation of terms of service,” which Uber created to root out people it thought were using or targeting its service improperly. The program, including Greyball, began as early as 2014 and remains in use, predominantly outside the United States. Greyball was approved by Uber’s legal team.Uber’s use of Greyball was recorded on video in late 2014, when Erich England, a code enforcement inspector in Portland, Ore., tried to hail an Uber car downtown in a sting operation against the company.At the time, Uber had just started its ride-hailing service in Portland without seeking permission from the city, which later declared the service illegal. To build a case against the company, officers like Mr. England posed as riders, opening the Uber app to hail a car and watching as miniature vehicles on the screen made their way toward the potential fares.But unknown to Mr. England and other authorities, some of the digital cars they saw in the app did not represent actual vehicles. And the Uber drivers they were able to hail also quickly canceled. That was because Uber had tagged Mr. England and his colleagues — essentially Greyballing them as city officials — based on data collected from the app and in other ways. The company then served up a fake version of the app, populated with ghost cars, to evade capture.Uber, in its characteristic self-aggrandizing way, tried to justify its use of the program as a necessary competitive move, to defend itself against evil forces that were manipulating police (listen to the video in the linked New York Times story to hear the spin). Help me.  The criminal investigation is in its early stages. Reuters broke the story. The gloves are off:

 51% Of Murders In The U.S. Come From Just 2% Of The Counties --The United States can really be divided up into three types of places. Places where there are no murders, places where there are a few murders, and places where murders are very common.In 2014, the most recent year that a county level breakdown is available, 54% of counties (with 11% of the population) have no murders.  69% of counties have no more than one murder, and about 20% of the population. These counties account for only 4% of all murders in the country.The worst 1% of counties have 19% of the population and 37% of the murders. The worst 5% of counties contain 47% of the population and account for 68% of murders. As shown in figure 2, over half of murders occurred in only 2% of counties. Murders actually used to be even more concentrated.  From 1977 to 2000, on average 73 percent of counties in any give year had zero murders. Possibly, this change is a result of the opioid epidemic’s spread to more rural areas. But that question is beyond the scope of this study.  Lott’s book “More Guns, Less Crime” showed how dramatically counties within states vary dramatically with respect to murder and other violent crime rates.

This Problem Isn’t Going Away: Heartless Police Shootings of Unarmed Black Americans Continue Into the Trump Era - To be black in America means to live in a state of constant vulnerability. To be black in America means to be viscerally aware of this vulnerability especially as it relates to interactions with law enforcement. Walking with friends is dangerous. Playing with a BB gun in the park is a fatal mistake. Looking like a “bad dude” could spell the end of your life.Even leaving a party is grounds for extrajudicial murder.This vulnerability bears out statistically as much as it does anecdotally. A study from Drexel University researchers found that black people are 2.8 times more likely than whites to be killed during encounters with law enforcement. A Vox analysis of FBI data found that in 2012, black people composed 31 percent of the victims of police killings, despite comprising only 13 percent of the total United States population. The police violence imposed upon black bodies has taken an especially pronounced toll on black teens: Between 2010 and 2012, black teens were found to have been 21 times more likely than their white counterparts were to be shot and killed by police, according to ProPublica’s analysis.These trends show no sign of abating. So far in 2017, black people have constituted 25 percent of the police shooting victims, according to the Washington Post.Out of the 339 people shot and killed by police this year, 85 of them are black—and it’s only May.Even being unarmed doesn’t insulate black bodies from being on the receiving end of fatal force. A study from the University of California, Davis, found that the likelihood of unarmed black people being shot by the police is 3.49 times higher than that of unarmed whites. This is the case even though, as independent researchers noted, blacks are less likely to constitute an immediate threat at the time of a fatal police shooting than are whites. The disparities are even starker for black men. Black men composed 40 percent of all the unarmed victims of fatal police shootings in 2015 and 34 percent of all such victims in 2016, statistics severely disproportionate to their mere 6 percent representation in the United States population.

Taser Will Use Police Body Camera Videos “to Anticipate Criminal Activity” -- When civil liberties advocates discuss the dangers of new policing technologies, they often point to sci-fi films like “RoboCop” and “Minority Report” as cautionary tales. Although intended as a grim allegory of the pitfalls of relying on untested, proprietary algorithms to make lethal force decisions, “RoboCop” has long been taken by corporations as a roadmap. And no company has been better poised than Taser International, the world’s largest police body camera vendor, to turn the film’s ironic vision into an earnest reality. In 2010, Taser’s longtime vice president Steve Tuttle “proudly predicted” to GQ that once police can search a crowd for outstanding warrants using real-time face recognition, “every cop will be RoboCop.” Now Taser has announced that it will provide any police department in the nation with free body cameras, along with a year of free “data storage, training, and support.”  With an estimated one-third of departments using body cameras, police officers have been generating millions of hours of video footage. Taser stores terabytes of such video on, in private servers, operated by Microsoft, to which police agencies must continuously subscribe for a monthly fee. Taser has started to get into the business of making sense of its enormous archive of video footage by building an in-house “AI team.” . “Police departments are now sitting on a vast trove of body-worn footage that gives them insight for the first time into which interactions with the public have been positive versus negative, and how individuals’ actions led to it.” But looking to the past is just the beginning: Taser is betting that its artificial intelligence tools might be useful not just to determine what happened, but to anticipate what might happen in the future.

Sent to Prison by a Software Program’s Secret Algorithms - When Chief Justice John G. Roberts Jr. visited Rensselaer Polytechnic Institute last month, he was asked a startling question, one with overtones of science fiction. “Can you foresee a day,” asked Shirley Ann Jackson, president of the college in upstate New York, “when smart machines, driven with artificial intelligences, will assist with courtroom fact-finding or, more controversially even, judicial decision-making?” The chief justice’s answer was more surprising than the question. “It’s a day that’s here,” he said, “and it’s putting a significant strain on how the judiciary goes about doing things.” He may have been thinking about the case of a Wisconsin man, Eric L. Loomis, who was sentenced to six years in prison based in part on a private company’s proprietary software. Mr. Loomis says his right to due process was violated by a judge’s consideration of a report generated by the software’s secret algorithm, one Mr. Loomis was unable to inspect or challenge. In March, in a signal that the justices were intrigued by Mr. Loomis’s case, they asked the federal government to file a friend-of-the-court brief offering its views on whether the court should hear his appeal.  The report in Mr. Loomis’s case was produced by a product called Compas, sold by Northpointe Inc. It included a series of bar charts that assessed the risk that Mr. Loomis would commit more crimes.The Compas report, a prosecutor told the trial judge, showed “a high risk of violence, high risk of recidivism, high pretrial risk.” The judge agreed, telling Mr. Loomis that “you’re identified, through the Compas assessment, as an individual who is a high risk to the community.”  The Wisconsin Supreme Court ruled against Mr. Loomis. The report added valuable information, it said, and Mr. Loomis would have gotten the same sentence based solely on the usual factors, including his crime — fleeing the police in a car — and his criminal history.

Welfare Reform Horror in Mississippi -- Bryce Covert and Josh Israel report Last year, 11,717 low-income residents of Mississippi applied to get a meager government benefit to help them make ends meet. The state’s welfare program, part of federal Temporary Assistance for Needy Families (TANF), gives a maximum of just $170 a month to a family of three. These applicants had applied hoping to get at least that crumb of cash assistance. But out of the pool—more than 11 thousand—only 167 people were actually approved and enrolled in the program, according to state data obtained by ThinkProgress. Every other applicant was denied or withdrew, resulting in an acceptance rate of just 1.42 percent. Statistically speaking, it’s more like a rounding error.  Read their whole post (which also notes that 20% of single mothers in the USA have zero cash income). I don’t have anything to say. Clearly nothing can be done to address this horror while Republicans are in power in Mississippi and the Federal Government.

Letter to the U.S. House Education and the Workforce Committee on The Working Families Flexibility Act (H.R. 1180) -- EPI’s Ross Eisenbrey and Celina McNicholas submitted this letter to the U.S. House Education and the Workforce Committee opposing the The Working Families Flexibility Act (H.R. 1180).  On behalf of the Economic Policy Institute Policy Center (EPI-PC), we write to the Committee to express our strong opposition to The Working Families Flexibility Act (H.R. 1180), introduced February 16, 2017, by Rep. Martha Roby (R-Ala.). The Economic Policy Institute (EPI) is a nonprofit, nonpartisan think tank created in 1986 to include the needs of low- and middle-income workers in economic policy discussions. EPI-PC urges Members of the Committee to oppose this bill, which would further erode overtime protections for American workers.Millions of workers are working overtime but are not getting paid for it. This is, in part, the result of outdated overtime rules governing workers’ eligibility for overtime pay. The erosion of overtime protections has led to workers earning less money while working longer hours, and has created a generally overworked middle class. The way to address this issue is to strengthen overtime protections—not, as H.R. 1180 does, create a new employer right to avoid paying workers overtime. The Working Families Flexibility Act would amend the Fair Labor Standards Act (FLSA) to allow private-sector employers to “compensate” hourly workers with compensatory time off in lieu of overtime pay. Contrary to proponents’ claims, the bill does not create employee rights, it takes them away. It does create a new employer right—the right to delay paying any wages for overtime work for as long as 13 months. The legislation forces workers to compromise their paychecks for the possibility—but not the guarantee—that they will get time off from work when they need it

Government Eases School Meal Rules, Rolling Back Some Of Michelle Obama’s Initiatives (AP) — Schools won’t have to cut more salt from meals just yet and some will be able to serve kids fewer whole grains, under changes to federal nutrition standards announced Monday. The move by the Trump administration partially rolls back rules championed by former first lady Michelle Obama as part of her healthy eating initiative. As his first major action in office, Agriculture Secretary Sonny Perdue said the department will delay an upcoming requirement to lower the amount of sodium in meals while continuing to allow waivers for regulations that all grains on the lunch line must be 50 percent whole grain. Schools could also serve 1 percent flavored milk instead of the nonfat now required. “If kids aren’t eating the food, and it’s ending up in the trash, they aren’t getting any nutrition — thus undermining the intent of the program,” said Perdue, who traveled to a school in Leesburg, Virginia, to make the announcement. Before he signed the proclamation, Perdue and Senate Agriculture Chairman Pat Roberts, R-Kansas, ate chicken nuggets, fruit and salad with children at Catoctin Elementary. Perdue said he doesn’t see the changes as a rollback, but “we’re just slowing down the process.” He praised Obama’s nutrition efforts as first lady but said he wants the healthier meals to be more palatable. He said the department will work on long-term solutions to further tweak the rules.

Trump Destroys Michelle O's Legacy; Makes School Lunches Great Again - Michelle Obama made it her mission during her 8 years in the White House to eradicate all taste from school lunches.  Afterall, what kind of self-respecting liberal would she be if she allowed school districts and families all across the country to actually choose what food best suited their communities and children? She even made inspiring videos like "Turnip For What!?", a clever play off Lil Jon's track (great role model for children, btw)...see what she did there?Unfortunately, no amount of cutsie jingles or rap lyrics were sufficient to make the following school lunches appealing to young school kids...and we can't imagine why... In fact, in the end, rather than eating a meal with slightly too much sodium, kids simply stopped eating lunch altogether.  As the Washington Times pointed out back in 2014, over 1 million students stopped eating school lunch in the 2012-2013 school year alone. Meanwhile, schools all around the country reported they were buying food that just ended up getting thrown away or fed to pigs at local farms because no one would eat it. The National School Lunch Program saw a sharp decline in participation once the healthy standards went into effect during the 2012-2013 school year. A total of1,086,000 students stopped buying school lunch, after participation had increased steadily for nearly a decade.The report found that 321 districts left the National School Lunch Program altogether, many of which cited the new standards as a factor. The decline was “influenced by changes made to comply with the new lunch content and nutrition standards,” state and local officials said.But, in one of his first actions as Agriculture Secretary, Sonny Perdue took steps today to reintroduce some common sense into school lunches noting that "If kids aren't eating the food, and it’s ending up in the trash, they aren't getting any nutrition – thus undermining the intent of the program."  Per The Hill, in an interim final rule, aimed at giving schools more flexibility, Perdue and his department are postponing further sodium reductions for at least three years and allowing schools to serve non-whole grain rich products occasionally as well as 1 percent flavored milk.

Missouri has a new law that makes fights in grade school a felony with up to 4 years of prison time - On January 1, 2017 a revised statute went into effect that changes the laws on what punishments can and should be handed out to children who have fights in school. Previously a child could be charged with a misdemeanor and released to their parents. Now they will get plugged into the school to prison pipeline just that much faster. However, with the new law going into effect on January 1, that student will now head to a juvenile detention center and be charged with a Class E felony. That means they could spend up to four years in jail. One of the serious issues here is that schools, by the new definitions of the law, are mandated to report any and all “first degree harassment” or fights to the authorities—if those situations arise during school hours and under a school’s jurisdiction. According to Susan Goldammer, a lawyer for the Missouri School Boards’ Association who was interviewed by Kansas City 41’s KSHB, this means that the change in statute is really about tying educators’ hands. The mandated reporting laws require that we contact law enforcement. For most of our students, they are under the age of 17 and that would probably be the juvenile office. For the students that are 17 or older, we would call the police. … Just because the school district reports an offense it doesn't mean that any subsequent action will take place. It is up to the discretion of law enforcement, the juvenile office, [and] the prosecutors to determine whether a student should be charged with a crime or if action needs to be brought in juvenile court regarding the actions of the particular students. So there is a lot of discretion on the law enforcement end of it to determine if this actually results in any kind of criminal record for the students, but school districts do not have that discussion.

Puerto Rico to close 179 public schools amid crisis - ABC News: Puerto Rico is closing 179 public schools in a move expected to save more than $7 million amid a deep economic crisis that has sparked an exodus to the U.S. mainland in the past decade, officials said Friday. More than 27,000 students will be moved elsewhere when their schools close at the end of May, said newly appointed Education Secretary Julia Keleher. "We have a fiscal crisis and few resources and we've spent 10 years handing out nearly $3 billion in a system that hardly has any books," she said. "We cannot keep doing what we're doing because we don't have the resources." The news about the school closures raised concerns it could speed up the ongoing exodus from Puerto Rico. Nearly 450,000 people over the last decade have already left for Florida and other parts of the U.S. mainland to flee the worsening economic crisis. Officials initially had said 184 schools were closing but then announced at the last minute that five of those schools would remain open. The school shutdown announced Friday will be the largest mass closure of schools in the island's history, with officials saying it will in part lead to millions of dollars in savings a year for an education department that represent nearly 30 percent of Puerto Rico's $9 billion budget. Officials shuttered 150 schools over the span of five years from 2010 to 2015. Aida Diaz, president of Puerto Rico's Association of Teachers, said Keleher's plan makes sense, compared with previous closures under former administrations. "Leaders thrive off controversy, but I cannot dispute the plan," she said. "This process has been much more organized and well thought-out and incredibly backed up with data and information." She said many of the schools closing have few students and crumbling infrastructure as well as a lack of air conditioning in an island where summers are brutal. 

The real problem with school voucher programs – AEI - The Institute for Education Sciences at the U.S. Department of Education released a study last week showing that students randomly selected to receive a voucher under the D.C. Opportunity Scholarship Program had lower math achievement after one year compared to students who were not selected. These are discouraging results for school choice advocates, for Republicans in Congress who are trying to reauthorize the federally-funded program, for school choice supporter and Secretary of Education Betsy DeVos, and for the DCOSP program specifically. These results are clear evidence that, at least on some measures, the program not only failed to boost students’ performance, but actually made it worse. By comparing students who won a scholarship through a random lottery to those who did not, the study establishes that the differences between them were actually caused by the program. Choice advocates can quibble with the one-year duration of the study or take solace in its more positive findings (for instance, OSP parents believed that their children’s schools were safer than non-OSP parents did), but they should not ignore the bad news. D.C.’s voucher program is not working out as promised, and it’s not the only one. These findings come on the heels of similarly rigorous studies of voucher programs in Ohio and Louisiana that found even worse outcomes.

NY Times Lets a Charter School Propagandist Distort the Facts on Its Op-Ed Page - President Donald Trump’s adamant promotion of “school choice” and his selection of Betsy DeVos for education secretary have put advocates for charter schools in the Democratic party in a bind, and now they’re scrambling to keep the luster of the well-polished charter school brand unblemished. Their latest tactic is to carefully distinguish charters from the system of school vouchers Trump and DeVos favor, but they serve this cause poorly by making erroneous claims about how the charter industry works in most communities and what these schools do to harm public education. The latest misfire comes from David Leonhardt’s op-ed in Monday’s New York Times in which he takes on DeVos and her preference for vouchers while denigrating charter skeptics as people who need to get “an open mind.”It’s a precarious tightrope Leonhardt attempts to walk, and he stumbles quite badly.Leonhardt begins his column by calling attention to a new study showing the voucher program in the District of Columbia has had a negative impact on student achievement – a worthwhile news item to note for sure. But it becomes quickly apparent Leonhardt brings the subject up not to lambast DeVos but to miscast charter school skeptics as actors in a “caricature” debate over the fate of public education.That’s a convenient strawman that leads him to state there are those who “conflate vouchers … with charter schools,” but he cites no credible sources to substantiate his belief that critics of DeVos and school choice are incapable of distinguishing between charters and vouchers.Most concerning about Leonhardt’s column, though, is the many misleading statements he makes about how charter schools operate and what their impact is.  He cites a few credible studies showing positive impacts of charter schools on student achievement, but he doesn’t appear to have read credible reports that have found otherwise.

5 Times Charter School Founders Used Shady Real Estate Deals to Shamelessly Enrich Themselves -- As the Trump administration plans to redirect taxpayer billions to privatize K-12 education, a scholarly article by some of the nation’s leading investigators of charter school rip-offs has highlighted how their business model is prone to fiscal self-dealing. The article by Preston C. Green, Bruce D. Baker and Joseph O. Oluwole has the dense title, “Are Charter Schools the Second Coming of Enron?: An Examination of the Gatekeepers That Protect Against Dangerous Related-Party Transactions in the Charter School Sector?” But its analysis is striking, comparing corporate management practices at five large schools to the financial shell game that occurred at Enron, the Texas-based energy conglomerate that imploded a dozen years ago. On the surface, Enron was in the energy business. But behind closed doors, it was engaged in an array of dubious investments and transactions that helped its top executives amass wealth. The charter schools cited in their report similarly present a public face of being alternative public schools. But their founders also used an array of financial tactics, especially involving school real estate deals, to become rich by diverting millions from their classrooms.  Nationwide, 43 states and the District of Columbia have 6,800 charters serving 2.9 million students. They comprise 6 percent of K-12 public school enrollment, which has increased six-fold in the last 15 years. When states approved the first charters in the 1990s, the idea was to nurture locally accountable experimental schools. However, since then a K-12 privatization industry has emerged that is dominated by companies seeking to create regional or national brands, akin to any other corporate franchise. These larger charter operations tend to have non-profit and for-profit arms, which can mask an array of complicated financial relationships. The charter industry’s largest operations often are run by what’s called educational management organizations, EMOs, which “now control 35-to-40 percent of the industry with an estimated 45 percent of charter students,” the scholars said. These sophisticated operations can attract private investors because they can use their status as schools to get large tax breaks, which, in turn, are applied to a range of profit-making ventures that have nothing to do with educating under-served communities.

College Enrollment Among High-School Grads Nears Record High - About 69.7% of the 3.1 million high-school graduates between the ages of 16 and 24 headed to colleges or universities, the Labor Department said, based on data from January through October 2016. That percentage trailed the historical high for the numbers tracing back to 1959.  The labor market has been gradually improving since the recession, with unemployment dropping from 10% in 2010 to less than 5% last year. Still, students are opting to attend post-secondary schools in droves, and economists, including Federal Reserve Chairwoman Janet Yellen, have recently defended the value of higher education as a protection against globalization and technological change.  Jed Kolko, chief economist at job site Indeed, noted one caveat: Many jobs that don’t require formal education credentials — like restaurant cooks — are expected to become higher in demand over the years. In 2009, the college enrollment rate among high-school graduates rose to a record high of 70.1%, as the recession convinced many young Americans to pursue higher education in lieu of confronting a dire job market. While 2013 enrollment, which dropped to the lowest level since 2006, seemed to indicate the trend may have been unwinding, enrollment has been on the rise ever since.  Students are recognizing the high returns of college education and responding to changes in the labor market, such as the proliferation of less well-paying service jobs, said Brian Jacob, a professor of education and economics at the University of Michigan.  After years of steady enrollment growth in two-year schools, most in this cohort of high-school graduates are choosing to attend four-year colleges. These universities can thank the increased popularity of online courses and higher return on investment relative to two-year schools, Mr. Jacob said.

As College Deadlines Near, Families Wonder What They Can Pay -- This month, the New York State Legislature made the state the first in the nation to make tuition at the state’s public colleges and universities free for many full-time undergraduates from families with income under $100,000 per year. The cutoff will rise soon to $125,000.For all the program's limitations — including the requirement to live and work in the state after graduation — the most immediate response came from jealous families elsewhere who want their own states to step up. They may be waiting a while, since the National Conference of State Legislatures reports that just eight states have created anything like this. Twelve more have bills in the works.Still, free tuition does not solve every family’s financial challenge. Qualifying families in New York may still need to cover more than $50,000 over four years for fees, room and board.The Institute for College Access and Success reported this week that schools generally are still asking families with the lowest incomes to pay a higher percentage of their incomes toward college than any other groups do.There is another, very particular group of families that suffer at this time of year, too — people near and dear to my heart (and those of my colleagues). They are New York Times subscribers, people with median household incomes of $99,000 (digital) and $167,000 (print), and others like them.Nobody sympathizes with them much, and they do not ask for you to do so. But hear them out — as I do in ever larger numbers each year around this time.All week long, I spoke to them: at midnight as they worried aloud about the aid offers yet again; and at sunrise when I emailed them with thoughts and suggestions. A word cloud of their emotions about the system of paying for college would include large-font renderings of terms like “disillusioned” and “bewildered” and “disbelief.” Their own parents had sacrificed and sent them to the best colleges they could get into. Or, they had worked their way through school mostly on their own. But as this month winds to a close, they and their children still found themselves haggling for more aid based on their income, assets or academic accomplishments.

College Enrollment Is Surging But Is It Really Worth It? (Aside From The Frat Parties, Of Course) - First, according to, attending college these days can cost anywhere from $22,500 per year for a public, in-state university to $75,000 for a private education.  So, lets just assume that, on average, our snowflakes are spending $30,000 per year on a 4-year bachelor, or $120,000.

  • Attend a public in-state university for four years, living on campus ($22,500 per year for four years) for $90,000
  • Attend a public out-of-state college for four years:  $35,000 per year for four years for a total of $140,000
  • Attend a private four year college in an expensive area like Manhattan at $75,000 per year for a total of $300,000

So what do they get for that?  Well, per the Bureau of Labor Statistics, that $120,000 degree in Anthropology will earn you roughly $464 extra dollars per week or ~$24,000 per year.So, doing some quick math, we find that $24,000 tax-effected at a 25% tax rate equals about $18,000 of extra annual earnings for a college grad and implies a 15% return on invested capital. Not bad...but, unfortunately, the story doesn't end there.  You see, by choosing the college route our snowflakes not only incur the cost of college, in the form of massive student loans, but also forgo 4 years of earnings, which equates to roughly $110,000 ($692*52*.75) on a tax-effected basis. So lumping in that opportunity cost brings the true average cost of that Anthro degree up closer to $250,000, implying a roughly 7.2% ROIC.Of course, that's assuming that young Tripp Hollingsworth III actually graduates in 4 years and then promptly finds a job shortly thereafter rather than returning to mom's basement.So you decide, is a 7.2% return on invested capital sufficient to take on a life time of debt?  In fairness, it is awfully difficult to calculate the present value of a frat party, which for an 18-year-old boy may be infinite.

Fewer Indian Students Are Going to the US This Year – Are Gun Laws to Blame? --International students bring more than $32 billion a year to the US. Their numbers have steadily increased over the years and surpassed the one million mark for the first time in 2016. However, these numbers are expected to fall this year. A large number of colleges are reporting a decline in applications for admission from international students, including those from India and China. Some 47% of the international students in the US are from these two countries.A survey of over 250 colleges by the American Association of Collegiate Registrars and Admissions Officers (AACRAO) reported that 39% of colleges are seeing declines in applications from international students. However, another 35% reported an increase while 26% reported no change in applicant numbers.International students at US colleges typically pay the full out-of-state tuition, which is significantly higher than that for in-state students. And for the most part, they do not receive any kind of financial assistance. Many institutions collect additional fees from them, which sometimes add up to several thousand dollars. In crude terms, they are cash cows and treated as such by many institutions. Therefore, it is not surprising that the possibility of fewer international students this year is becoming a cause for concern. The drop in international students from India is expected to be significant this year. There is no other reason why MaryKay Loss Carlson, the chargé d’affaires of the US embassy in New Delhi would write a column in a leading newspaper to make the case for American universities and highlight their commitment and support for students from India. In her article, she notes that 166,000 Indians are already studying in the US, up from the 100,000 two years earlier. Given how popular the US already is as a higher education destination for Indian students, it seems odd that a US official would actually need to promote the US as one. There must be serious worries among US government officials that, whether or not the decline in the numbers of international student applications is severe or not, the “yield” – the actual number of students who will eventually enrol from among those who are offered admission – may be significantly lower than before.

Political polarization among college freshmen is at a record high, as is the share identifying as ‘far left’  - Catherine Rampell - One factor that might be adding fuel to the campus speech wars: Colleges are more politically polarized today than they have been in more than four decades. That is the implication of the 2016 Freshman Survey, produced by the University of California at Los Angeles’ Higher Education Research Institute and released Monday. For decades, the survey has asked first-time, full-time freshmen how they describe their political views: far left, liberal, middle of the road, conservative or far right. Last fall, the lowest share on record, 42.3 percent, identified as middle of the road.Additionally, the highest share on record identified as far left, though it’s still a small figure (4.2 percent).The shrinking of the middle is largely due to a recent rise in the share of women (who also represent a majority of college students) who identify as either liberal or far left. The share of female respondents, but not male respondents, who describe their political views this way was at an all-time high (41.1 percent for women, 28.9 percent for men). Left-wing views peaked for men way back in 1971, at 43.6 percent. The share who labeled their political beliefs as either conservative or far right peaked in 2006 for women, and 1989 for men. Another milestone was hit this year: the largest gender gap in self-reported liberalism to date (12.2 percentage points).  And before you blame colleges for liberal indoctrination, remember these were newly enrolled students, surveyed in the fall of their freshman year. That is, they arrived on campus with these political beliefs. For context, note also that the share of American adults overall who consider themselves liberal or very liberal has also been trending upward and last year was at a 24-year high, per Gallup.

Pension fights in Dallas, Houston raise fears of police, firefighter shortages - Amid efforts by the Legislature to address immediate pension crises in Houston and Dallas, some see an opportunity to push for a sea change in how cities fund pensions. Critics predict such a move could drive first responders away in droves. The bruising battles over legislative fixes to failing pension systems in Dallas and Houston could eventually evolve into a statewide war over the kind of retirement funds public employees should be offered.For decades, cities have used the promise of lucrative and dependable pensions as a way to help recruit for public safety jobs. They also use differences in pension benefits as a way to pull more experienced officers from other cities’ departments. Michael Mata was already a cop when he heard that Dallas’ pension benefits could help him retire a millionaire.“I was specifically told that when I was hired from San Antonio,” the Dallas police sergeant told the Texas Tribune last week.During legislative testimony and interviews in recent months, first responders have repeatedly said that cities have long managed to avoid paying them higher salaries for dangerous jobs by promising solid, attractive pension plans.  Yet now that the Dallas and Houston pension problems have become financial crises threatening catastrophic fallout in two of America’s biggest cities — a situation that has driven some first responders to retire or change departments — some business leaders and conservatives are pushing for a sea change in public employee retirements.  State Sen. Paul Bettencourt, R-Houston, authored Senate Bill 1752, which would allow voters in Texas cities to decide whether to switch new public employees to defined contribution plans. Such plans are akin to 401(k)s because their funds fluctuate with the market. They do not guarantee minimum monthly payments for employees to receive upon retirement, which is what defined benefit plans such as pensions do. While potentially less lucrative or guaranteed for police and firefighters, defined contribution plans can also be less costly and risky for cities, which contribute tax dollars into employee retirement funds.

Senate passes Houston pension fix --The Senate on Monday approved a measure that its author says must pass in order to ensure the pension funds for Houston firefighters, police officers and city employees remain fiscally sound. Houston has one of the highest pension obligations relative to revenue in the nation and currently faces about $7.8 billion in unfunded liabilities. As these liabilities continue to grow, bill author and Houston Sen. Joan Huffman said the system must be fixed if the pension funds are going to last. "The current situation is straining the city's finances and putting the city at risk of not reaching its pension obligations in the future," she said. Her bill, SB 2190, aims to head off potential bankruptcy of the city's three main pension funds. Police, firefighters and city workers would take reductions in retirement benefits in exchange for $1 billion in funds to shore up the current system. These funds would be provided through the issuance of pension obligation bonds. The bonds don't create new debt for the city, but pays back the police and municipal pension funds for underfunding past pension contributions. Issuance of bonds is subject to voter approval, but if the bond measure doesn't pass, the bill would then roll back the proposed benefit reductions for pensioners. The proposed benefit reductions would reduce current pension liabilities by $2.54 billion and the bill would increase employee and employer contributions into the fund. Other provisions in the bill would require that the fund maintain solvency, so that it could pay off its entire unfunded liability within 30 years, similar to a home mortgage. Should the proposed fixes not meet expectations, the bill would trigger a change in benefit structure for new hires, beginning in 2021 for police and fire and 2027 for municipal employees, moving them into a cash balance system rather than the current defined-benefits structure. It would also lower the expected investment returns to what Huffman says is a more realistic 7 percent.

CalPERS Hides Bogus Persecution: Promised Public Hearing for Lone Effective Director Held in Secret - Yves Smith - Thanks to an audience member making a video of a CalPERS board meeting in January that would otherwise have gone undocumented, we were able to publicize that the giant public pension fund was launching a full bore attack against JJ Jelincic, the only board member who does his duty by asking questions of staff. That appears to be a hanging crime in Sacramento.  This plan was so clearly dubious that not only did former general counsel, now law professor Bill Black savage the conduct of CalPERS’ board and its general counsel, Matt Jacobs, but reporter Mike Hiltzik of the Los Angeles Times also criticized CalPERS, in an article titled, One CalPERS board member asks tough questions about its investments. Why are his colleagues trying to muzzle him?The only potential check on this kangaroo court was that Jelincic asked for and was promised a public process. Apparently CalPERS is determined to censure Jelincic yet recognizes that its charges and procedures won’t stand up to scrutiny. The result is that CalPERS reneged on its promise to Jelincic and the public and insisted on a secret process. CalPERS even tried to gag Jelincic by cheekily asserting that an early April meeting was attorney-client privileged even though Jelincic had his own counsel and his interest was clearly adverse.

72,000 Iowans could be first to lose coverage as insurance market collapses: Karen Slessor’s health insurance is hanging by a thread. Slessor, a Reinbeck widow who has diabetes and arthritis, is one of nearly 72,000 Iowans who are on the brink of losing coverage as Congress tries to overhaul the country’s health care system. The at-risk Iowans buy their own health insurance policies, usually because they don’t work for employers that offer coverage and they don’t qualify for government insurance programs, such as Medicaid and Medicare. Iowa is the first state where consumers face the likelihood of losing all access to individual health insurance policies, but experts say other states could soon follow. The two largest health insurers offering individual coverage in Iowa, Aetna and Wellmark Blue Cross & Blue Shield, announced last month that they would stop selling such policies for next year because of heavy financial losses and uncertainty in the market. In most of the state, that left just one relatively small carrier, Medica. The situation became critical on Wednesday, when Medica leaders said they probably also will pull out of Iowa. “Then what would I do? I don’t know,” said Slessor, who has a Medica policy. Iowa could be on the leading edge of a national calamity. Cynthia Cox, a vice president for the Kaiser Family Foundation, said Iowa is the first state to face the likelihood of having no individual insurance carriers in most counties. In Tennessee, 16 of 95 counties are without a carrier for 2018, she said. Several other states have just one carrier left, so they could quickly be in the same boat as Iowa.

 Obamacare Implosion: Last Major Healthcare Provider Pulls Out Of Iowa Leaving No Options In 2018 --For the past several months we've observed in complete amazement as Democrats have repeatedly hailed the 'great accomplishments' of Obamacare while the system was literally, and quite tangibly, collapsing in epic fashion all around them.  The ability to blindly and shamelessly support a partisan cause irrestpective of overwhelming facts proving the ineffectiveness of that cause is truly a talent reserved only for politicians, on both sides of the aisle. The latest evidence of Obamacare's implosion comes from its stunning collapse in the state of Iowa in just a matter of a few weeks.  Early last month, 2 of Iowa's 3 remaining healthcare providers, Aetna and Wellmark, announced they would not participate in the state's exchange in 2018.  Per Bloomberg:“Earlier today we informed the appropriate federal and state regulators that Aetna will not participate in the Iowa individual public exchange for 2018 as a result of financial risk and an uncertain outlook for the marketplace,”Aetna spokesman T.J. Crawford said in an email. “We are still evaluating Aetna’s 2018 individual product presence in our remaining states.” On Monday, Wellmark Inc. said it planned to give up on the Iowa Obamacare market in 2018. Wellmark is one of the state’s largest insurers.

Trump’s new opioids strategy ‘devastates’ advocates --President Donald Trump campaigned across the country promising to fix the opioid crisis, but public health advocates say his early moves are poised to make it far worse.The newest development — a proposed 95 percent cut to the office leading the opioid fight — sparked concerns from within the agency and longtime addiction advocates."It’s devastating," said Kevin Sabet, who worked in the decades-old Office of National Drug Control Policy, advising the Clinton, George W. Bush and Obama administrations. "It’s the biggest cut I’ve ever seen or had to deal with."It's the latest item in the Trump agenda that addiction advocates fear would erode the government's ability to fight an epidemic killing more than 47,000 Americans per year. Since taking office, the Trump administration has fought to pass an Obamacare repeal bill that would result in millions more without coverage; fired a surgeon g eneral who led an unprecedented study of the opioid crisis; proposed billions of dollars of cuts to public health funding; and signaled a return to the tough-on-drugs approach to fighting addiction. “These moves fly in the face of President Trump’s promise to address the nation's opioid epidemic,” said Rafael Lemaitre, who was a senior official with the drug policy office across three administrations. "This is an epidemic that steals as many lives as the Vietnam War took during the entire conflict, and Trump's moves remove some of the most effective tools." The planned cut to the drug office, reported by POLITICO on Friday, would reduce funding from $388 million to $24 million next year and end the office’s drug-free communities and high-intensity drug trafficking programs. Both initiatives have bipartisan support in Congress.

A New Street Drug Can Kill You By Touching Your Skin: What You Need To Know - The opioid epidemic is a real tragedy. It has been devastating states like West Virginia, Vermont, and Maine - among others - and it’s been the number one factor in a major incarceration shift that is still seldom discussed by the media. But as soon as the Centers for Disease Control and Prevention (CDC) released a new set of national standards for prescribing painkillers, yet another deadly drug threat is beginning to concern authorities in certain states.  New Hampshire Governor Chris Sununu spoke at a press conference this week, warning that a drug that’s 10,000 times stronger than morphine has made its way into the state. As a result, many first responders have been left scrambling to find a way to handle this new threat. Carfentanil, a powerful new opioid, has already claimed three lives. Engineered to be used as an elephant tranquilizer, the drug’s lethal dosage is 20 micrograms. Since the product can cause deadly effects just by being sprinkled on someone’s skin, authorities are highly concerned. The drug is so powerful that first responders are even having a hard time reversing overdoses when they arrive at emergency locations. On one occasion, Hickey said, one of his men had to use six to eight doses of Narcan, an overdose reversal drug, to revive a victim - twice the dose used in most cases. As state and local authorities find themselves panicking over this issue, many will ask for tougher laws. Federal agencies will then intervene, adding further restrictions to the already heavily regulated drug market in the United States. Adding fuel to the fire, the drug war will continue to target opioids like heroin and opium while Congress continues the process of imposing strict limits on some opioid prescriptions. As more restrictions are applied, users will have a harder time gaining access to the substances they are already addicted to, forcing them to turn to the black market for their fix.

Flint water crisis: More than 8,000 residents at risk of losing homes after refusing to pay for poisoned water | The Independent: More than 8,000 people in Flint have been told they could lose both their water supply and even their homes, if they continue to refuse to pay bills for polluted water provided by the Michigan city. The residents have been sent water shutoff notices and threats that the city will take financial possession of their homes until they pay their water bills — or forever if they cannot make payments on looming deadlines. The city says the threat of taking financial control of property, known as a tax lien, is necessary because it is not bringing in enough money from its water utility. But that very same government, which serves one of the nation’s poorest cities, is still pumping dirty water through the tap after receiving close scrutiny for having dangerously high levels of lead in their drinking water. Melissa Mays, a mother and Flint resident who started the advocacy group Water You Fighting For, said that when she began seeing water shutoff notices months ago, she and her husband determined that they would simply let the utility shut off their water and they would begin living solely on bottled water. Her family has already stopped doing laundry at home, cooking with tap water, and has begun limiting their showers to seven minutes because the water is so toxic. They still don't drink the water because the filters grow bacteria, she said. She is now scrambling to pay an $891 bill by May 19 and will have to miss house and car payments to keep their home. "The thing is they've been sending me shutoff letters for months. My husband and I talked and said, 'you know what, I don't want to pay for this poison. It's made us sick,'" Ms Mays told the Independent. The letter "changes everything. We don't want to lose our home. This is our home." Some of her neighbours have simply decided they'll have to walk away from their homes. Others don't know what they're going to do. Ms Mays said there's a sense of panic in Flint. 

"It's A Public Health Crisis" - Is Pittsburgh The Next Flint? -- We have noted that Flint, Michigan is not alone with its 'poisonous water' problems, it appears Pittsburgh is near a tipping point as WSJ reports, according to EPA data, a total of seven U.S. water systems, which each serve more than 100,000 people, had lead concentrations above the federal action level of 15 parts per billion in recent months."It's a public health crisis," warns one city official.  A Reuters investigation late last year uncovered nearly 3,000 different communities across the U.S. with lead levels higher than those found in Flint, Michigan, which has been the center of an ongoing water contamination crisis since 2014.  click image for link to interactive map...  Last week, Michigan’s legislature voted to send $100 million in federal funds to Flint for lead-pipe replacements and other infrastructure upgrades. The funds were approved by the Obama administration in December. And now, as The Wall Street Journal reports, Pittsburgh, which exceeded the lead limit last July for the first time, is drawing renewed attention to the problems besetting crumbling and heavily indebted water systems nationwide. Pittsburgh’s troubled water authority has nearly $1 billion in debt and has been plagued with allegations of overbilling and water-main breaks. It began testing for lead in the late 1990s. The Pittsburgh Water and Sewer Authority serves about two-thirds of the city, or about 250,000 people. It treats water from the Allegheny River and distributes it through 1,000 miles of pipes to 81,000 homes. The authority estimates that a quarter of those homes have lead pipes.

Dangerous levels of arsenic found in rice products for babies - Business Insider: Parents should avoid giving rice to young children, scientists have said after a new study found almost three-quarters of rice-based products sold as baby food contain illegal levels of arsenic. A maximum level of arsenic allowed in rice used for baby food was introduced by the EU in January 2016 to reduce children’s exposure to the harmful toxin. But when researchers at Queen’s University Belfast tested 73 different rice-based products often given to babies, they found almost 80 per cent of rice crackers, 61 per cent of baby rice and 32 per cent of rice cereals flouted these regulations. Inorganic arsenic contaminates rice while it is growing as a result of industrial toxins and pesticides and can impact the development of young children, Andy Meharg, who led the study, told The Independent."We’re talking about immune development, growth, IQ. They’re all impacted at the levels of consumption you’d get from rice consumption," he said. "I’m not scaremongering. EU laws have been passed, and what we’re doing is saying these laws aren’t being met."  Among the products specifically marketed for children, 73 per cent contained more than the EU limit 0.1 milligrams of arsenic per kilogram of rice, while 56 per cent exceeded this overall.

Field Test of GMO Algae Sparks Outrage -- Scientists from the University of California at San Diego and Sapphire Energy released results Thursday from the first open-pond trials of genetically engineered microalgae . The study, along with research and development of genetically modified (GMO) algae for biofuels , is occurring ahead of adequate regulatory oversight, including the U.S. Environmental Protection Agency's process to establish and update regulations for genetically engineered algae to protect human health and the environment. "This study confirmed that genetically engineered microalgae grown in open ponds will escape and spread into the environment. Once this genie is out of the bottle, there is no way to put it back," said Dana Perls, senior campaigner with Friends of the Earth . "Not only is it impossible to contain GE algae in open air production, but there are currently no adequate regulations which fully address its risks to our environment, from lab to final product. Without this essential oversight, there should be no environmental release or commercial uses of GE algae and other synthetic biology organisms."  Microalgae are essential ecosystem regulators. They provide more than half of the oxygen in our atmosphere and are the base of aquatic food chains. Microalgae reproduce rapidly and are capable of horizontal gene transfer, meaning that engineered traits can quickly spread, even to unrelated species. There is concern that engineered traits may not remain stable over time. All of these characteristics suggest introduced genes could spread rapidly out of control and change over time in unpredictable ways. In addition, microalgae have produced toxic algae blooms and GE microalgae may be more harmful and difficult to control .

'Shocking' Levels of PCBs Found in Beloved Orca -- The tragic story of Lulu, a beloved orca found dead and entangled in fishing gear last year, has taken a turn for the worse. Experts with the Scottish Marine Animal Stranding Scheme found the killer whale had "shocking levels of PCBs ," or polychlorinated biphenyls, a banned but highly pervasive toxic chemical.  "The levels of PCB contamination in Lulu were incredibly high, surprisingly so," Dr. Andrew Brownlow, head of the Scottish Marine Animal Stranding Scheme and veterinary pathologist at Scotland's Rural College, told BBC News . "They were 20 times higher than the safe level that we would expect for cetaceans to be able to manage." "The threshold where we think that there is some form of physiological effect caused by PCBs is around 20-40mg/kg stored within the tissues," Brownlow said. But Lulu had a level of PCBs of 957mg/kg, putting her as "one of the most contaminated animals on the planet in terms of PCB burden," Brownlow said.  Lulu was estimated to be at least 20 years old when she died, which is why she might have built up such high PCB levels.

The Regulatory Accountability Act Subverts Science and Must Be Stopped -- Today, just days after hundreds of thousands of people marched for science, the Senate introduced a bill that would substitute politics for scientific judgment in every decision the government makes about public health and the environment. If enacted, the legislation would cripple the government’s ability to effectively carry out laws that protect us, putting everyone at more risk, especially communities of color and low-income communities that are more exposed to threats. The ill-named Regulatory Accountability Act (House version here with coverage) does nothing more than stack the deck in favor of private companies at the public’s expense. It would paralyze agencies like the Environmental Protection Agency and the Occupational Safety and Health Administration, drowning them in red tape and compromising their public service missions. It is way more dangerous than other legislation that grabs headlines (such as the bill to eliminate the EPA) because, in this political environment, it actually has a chance. Senators who support this legislation will be turning their backs on the role of science in making all kinds of decisions. Safety standards for the food we eat. Rules that protect construction workers on job sites. Limits on work hours of pilots and air traffic controllers. Protections for children from toys laden with harmful chemicals. “This bill is a weapon aimed right at public health and safety protections,” said UCS’s Andrew Rosenberg in a statement. “This bill doesn’t support accountability—it removes accountability from the industries subject to regulation.” The Regulatory Accountability Act is a bad idea. It is also not a new idea. The legislation was introduced in the last Congress, and the Congress before that.  But now, it is more likely to pass and be signed into law by an administration that is committed to the “deconstruction of the administrative state” and the rolling back of public health, consumer, and environmental protections.

Maine Bill Would Outlaw Local Pesticide Laws -- You've probably heard of plastic bag ban bans , but now state lawmakers want to legislate pesticide bans. Maine's Republican Gov. Paul LePage is backing a bill that would strip the pesticide regulations of dozens of cities and towns and prevent them from enacting new rules.  In summary, LD 1505 would prohibit a municipality from "adopting or continuing to enforce any ordinance or rule regarding the sale or use of pesticides." The legislation would affect the regulations of 27 Maine municipalities. The Forecaster 's Marian McCue reported that LD 1505 is similar to model legislation proposed by the American Legislative Exchange Council ( ALEC ), the notorious and powerful conservative lobbying group. McCue noted that a rep for the DC-based pesticide lobbying group, Responsible Industry for a Sound Environment , spoke in favor of the bill at a hearing on Monday.  Other supporters of the bill include businesses such as tree services and pest management companies who say the various local laws make it difficult to do business. According to the Press Herald , Walt Whitcomb, the commissioner of Conservation, Forestry and Agriculture, argued that local pesticide regulations were a confusing "patchwork" of controls. He added that many measures were more strict than state and federal laws and applied to products deemed safe by the U.S. Environmental Protection Agency.

Why Won't the EPA Ban This Extremely Toxic Pesticide? - The pesticide industry and Dow Chemical have a new reason to cheer. The rest of us appear to be stuck with chlorpyrifos on our food, at least for the time being.  On March 29, U.S. Environmental Protection Agency (EPA) Administrator Scott Pruitt announced the EPA would reverse a proposed ban on this extremely harmful pesticide and allow it to remain on the market. The move adds to the Trump administration's growing roster of decisions informed by "alternative facts." Nearly two decades' worth of scientific studies—including analyses by Pruitt's own agency—have documented the numerous risks this bug-killer poses to children and pregnant women. What's more, exposure to chlorpyrifos, one of the most widely used insecticides in the U.S., is extremely difficult to avoid. Farmers across the U.S. spray approximately five million pounds of it every year on crops like apples, oranges, broccoli and walnuts―more than one million pounds of it in agriculture-rich California alone.  Part of a family of nerve agents developed during World War II, chlorpyrifos, unsurprisingly, has incredible potential for harm. Research shows that exposure to this pesticide can increase the risk for behavioral issues and serious neurological damage in children, including ADHD, developmental delays and lower IQs . Scientists and doctors consider these neurological effects to be "permanent, irreversible and lifelong." Studies have also shown that children exposed to chlorpyrifos and other closely related pesticides face greater risk of developing asthma-like symptoms and diminished lung function .  A November 2016 assessment by the Obama EPA emphasized the health threats and, for the first time, highlighted the extent to which children and pregnant women are vulnerable to them. The agency found unsafe levels of chlorpyrifos residue lurking on some of our favorite fruits, vegetables and nuts—even after they were washed, peeled or cracked. And food isn't the only way people are exposed. Many farmworkers and families who live in agricultural communities also encounter the pesticide in the air they breathe and the water they drink.

Chemical Industry Bigwig Headed to the U.S. EPA - The Trump administration just appointed a chemical industry bigwig to a high-level chemical safety position at the U.S. Environmental Protection Agency ( EPA ) as deputy assistant administrator of the Office of Chemical Safety and Pollution Prevention. You read that right. Nancy Beck is coming to the EPA straight from the American Chemistry Council (ACC), the powerful lobby whose members include Dow Chemical, DuPont, Monsanto , ExxonMobil Chemical, Chevron Phillips Chemical and Bayer. Now she'll be making decisions as the deputy assistant administrator of the EPA department whose stated mission is to "protect you, your family, and the environment from potential risks from pesticides and toxic chemicals."  Here's three things to know about Nancy Beck:

  • 1. She has helped craft the chemical industry's political agenda for years. Before being appointed to her new position, Beck worked for the ACC as senior director for regulatory science policy in the Division of Regulatory and Technical Affairs. In that position, she helped draft the industry's positions on chemical legislation before Congress and key regulations at the EPA and other agencies—including the major chemical reform bill that passed last year. Just last month , she testified before a House committee and advocated for EPA to adopt ACC's scientific approach to evaluating chemical safety.  In her new position at EPA she'll oversee the agency's decisions on chemical safety—decisions that will directly affect your health as well as the financial interests of ACC's member companies.
  • 2. A House committee once called her out for "very disturbing" attempts to undermine EPA science.  Before joining the ACC, Beck was one of a handful of White House scientists who reviewed EPA regulations for the Office of Budget and Management —a job she started under the Bush Administration in 2002.  In 2009, a report by the House Science and Technology Committee called her out by name for her efforts to rewrite and at times undermine EPA's assessments of toxic chemicals. Specifically, the report found a Beck comment on a proposed EPA evaluation of a group of flame retardants to be "very disturbing because it represents a substantive editorial change regarding how to characterize the science ." It went on to say that her proposed changes "appear to enhance uncertainty" and that "the whole point of the exercise was to delay."
  • 3. She's been a vocal critic of EPA's chemical safety findings, despite her own "fundamentally flawed" approach to chemical safety. Beck has been described as a " powerful critic " of EPA's Integrated Risk Information System, or IRIS program, which researches chemical toxicity.  When Beck was a scientist in the George W. Bush administration's Office of Information and Regulatory Affairs, she helped write a controversial draft guidance that would have revamped and undermined the way EPA and other agencies evaluate chemical safety. That guidance was eventually withdrawn and significantly scaled back after the National Academy of Sciences criticized her proposed approach as "fundamentally flawed."

Choices Magazine explores 3-way connections between farm labor, immigration, and health care -- Choices Magazine, the outreach magazine of the Agricultural and Applied Economics Association (AAEA), has a special issue exploring the triangle of connections between farm labor, immigration reform, and health care policy. Philip Martin at UC Davis writes: The Trump Administration has promised to make it more difficult for unauthorized foreigners to enter and work in the United States and for undocumented workers to access health care services. Such policies, if implemented, could have serious negative repercussions on the agricultural sector, which relies heavily on immigrant workers. Replacing foreign workers could be complicated due to difficulties in sourcing and hiring domestic workers to replace displaced undocumented workers. Additionally, the health deterioration of farm workers could negatively impact labor productivity, the sector’s viability, and the nation’s domestic food supply.  Cesar L. Escalante and Tianyuan Luo focus on the implications for laborers -- and the farmers who hire them -- of reducing access to health care. Thomas P. Krumel, Jr., has an interesting article about immigrant labor supply in the meatpacking industry, including its implications for meat prices.

As global groundwater disappears, rice, wheat and other international crops may start to vanish - We already know that humans are depleting vital groundwater resources across the globe. But a new study shows one of the biggest causes of disappearing groundwater is the international food trade. About 70 percent of freshwater around the globe goes toward irrigation. Researchers from the University College London and NASA’s Goddard Institute of Space Studies now say that a third of that freshwater is drawn from the world’s aquifers — nonrenewable underground pockets of groundwater — and 11 percent of that nonrenewable groundwater is used to irrigate internationally-traded crops.  That means in time, “the current type of food that’s grown will not be able to be produced,” said Carole Dalin, an environmental engineer at the University College London who led the study published in Nature. “Or we’ll not have the same productivity, so it means prices will increase.” When water is used to grow crops, it’s no longer visible to the consumer. This study keeps track of where this ‘hidden’ water is embedded and where it ends up.To measure how irrigation drains global aquifers, International Institute for Applied Systems Analysis hydrologist and study co-author Yoshihide Wada used an in-house model that essentially places a computerized grid over the Earth and then measures soil moisture, along with water exchange between the atmosphere, soil layers and the underlying groundwater reservoirs, to see where water was going and why. He validated his calculations by comparing them with satellite measurements that track water flow and underground water storage. Meanwhile, Dalin gathered information on global trade and irrigation rates. By combining the information, they could determine how much groundwater was sapped by the agriculture required for the international food supply. Rice used 29 percent of the groundwater intended for international food crops, topping the study’s list, followed by wheat (12 percent), cotton (11 percent), maize (4 percent) and soybeans (3 percent). Citrus and sugar crops used about 5 percent each.

Wheat Soars Most On Record After Freak Snowstorm Blankets Midwest  --On Saturday, we discussed what may be the "last remaining cheap asset", namely wheat,which contributor Kevin Muir pointed out had been stuck in a vicious bear market for years, and added that over the past few years, "the weather has been as close to perfect growing conditions as a farmer could ask. All of the droughts have been on the West side of the Rockies, with the grain growing conditions on the other side experiencing ideal weather." He asked rhetorically, "how long this can continue. This winter the West Coast experienced a record amount of precipitation, will the opposite now happen in the plains?"  Incidentally, one may not even need adverse weather conditions to spark a buying frenzy. As Muir also noted, a catalyst for a spike may be purely technical: "this terrible bear market has not gone unnoticed by the speculators. Have a look at the net speculator position in the CBOT wheat contract. Specs have never been this short! Everyone believes prices can only go one way - lower! After all, we are all top performing bbq’ers and lovers."  And while his secular thesis has yet to pan out, an unexpected "perfect storm" so to speak took place just 24 hours later, when wheat prices posted record gains in Chicago on Mondayas the U.S. winter crop faced substantial losses from a freak winter storm that brought in snow and high winds that slammed into four Midwest states including Kansas, the top grower.

In threat to food security, Bangladesh moves to burn grain for fuel | Reuters: - Bangladesh plans to begin turning some of the grain it produces into ethanol to make its fuel greener – but economists and experts warn the move could hurt food security in a country that is already a grain importer. Energy ministry officials said in a gazette notification early this year that the country will begin using maize, broken rice grains and molasses to produce ethanol to mix with petrol fuel at a 5 percent ratio. But in a heavily populated country that produces relatively little in the way of climate-changing emissions and that already relies on imports of maize and other grains, the result could be rising food prices, especially for the poor, economists, business leaders and environmental experts warned. Moshiur Rahman, who convenes the Bangladesh Poultry Industries Coordination Committee, called the move to begin using grain for fuel “suicidal”. Much of Bangaldesh’s maize is used to feed animals, including chickens. But the country grows only half of the maize it needs, importing the rest from the United States and Brazil, he said, which means rising demand could mean rising prices. “Maize prices will go up if it is used for ethanol production. The price of eggs and chicken will go beyond the reach of common people,” Rahman warned. He said growing concerns about food security have led other countries – including China – to stop giving permission for new biofuel projects.

African Citizens Face Steep Fines For Not Going Green - Kenyan anti-deforestation efforts have spurred new sustainable energy policies and encouraged green non-profits to take hold across the country, but capital costs and adherence to established practices are threatening the movement’s future.  Nairobi’s required water heater policy was ahead of its time when the parliament approved it in 2012. Five years later, regulatory authorities are warning Kenyans who have not installed the mandated solar water heaters in their homes and businesses that they will face a fine of almost US$10,000 (one million shillings) in May, when the nation’s police are set to begin enforcing the law. Residential and commercial buildings with water needs upwards of 100 liters per day are now required to have solar water heaters part of their design, per policy. Otherwise, in addition to the fines, the government will order electricity providers to blacklist non-compliant estates. This could include hospitals, restaurants, boarding schools, other businesses, and even homes with more than three bedrooms. The initiative, which the government says would boost economic activity and lower power burdens on the national electric grid, has been slow to take hold. ERD audits show that only 150,000 of three million homes and buildings have installed the required systems.

Outbreak of Killing in Brazil as Landowners Work to Displace Farmers - Nine men, including an Evangelical pastor, massacred in a remote part of western Brazil were knifed and shot to death, police said yesterday after releasing the bodies for burial, according to the Malay Mail OnlineNo arrests were announced in the slayings which took place Thursday (April 20) in a hard-to-access settlement in Mato Grosso state. A human rights group said the killings were part of a pattern of brutal pressure from rich landowners to displace small-scale farmers from lucrative territories.  The state’s security service said in a statement yesterday that the victims, all men, ranged in age from 23 to 57.  They were reported to be inhabitants of Gleba Taquarucu do Norte, which is near the border with Bolivia and only reachable on foot or by boat, with no cellphone coverage. One was a pastor from the popular Assembly of God church, police said. “Preliminary information is that the victims showed signs of stabbings and gunshots,” the police statement said.  CBN radio and other Brazilian media reported that some of the dead had been found decapitated, while Globo news site said there were signs of torture and that some victims had been tied up.   Earlier, police described the raid as the work of “hooded attackers.” Globo reported that the victims had been starting to work on unauthorized plots of land and that they were killed inside the huts they’d erected at the site.  The Landless Rural Workers Movement (MST) reported another murder in the struggle for land on April 23. This time it was in the Settlement Liberdade, municipality of Periquito. Around 8 pm, comrade Silvino Nunes Gouveia, 51, a regional leader of the MST, was brutally murdered with 10 shots.  According to Malay Mail Online, the Pastoral Land Commission described a network of armed gangs employed by ranchers using “terror to get the small producers to leave the area.”

Worrisome first quarter of 2017 --  With the first quarter of 2017 now past, the year is shaping up to be one of climate extremes: high temperatures, low sea ice, and coral bleaching.  Global surface temperatures continue to increase in-line with climate model predictions, and the world has now experienced an increased global temperature of about 0.8 degrees C (1.5 degrees F) since 1970. Temperatures for the first three months of the year were actually warmer than the 2016 average, and there is a reasonable chance that 2017 for a fourth consecutive year will be the warmest on record. Global sea ice extent is near historic lows in the Arctic and Antarctic, and Arctic sea ice volume has also been decreasing as it ages and thins, with less new ice to replace it. The Great Barrier Reef experienced an unprecedented second consecutive year of coral bleaching, the only major coral bleaching on record to have occurred other than in an El Niño year. Global surface temperatures were surprisingly warm in the first quarter of 2017. Despite the end of the large 2015/2016 El Niño, temperatures remained high with January, February, and March each being the second warmest on record, after 2016. Average temperatures during the first three months of 2017 were warmer than the average of all months in 2016; taking into account the current El Niňo status and the historical relationships between January-March and annual temperatures, estimates are that there is about a 50/50 chance that 2017 will surpass 2016 as the warmest year on record. The figure above shows the NASA global surface temperature record, combining weather station measurements over land with data from ships and buoys in the oceans. Temperatures have increased fairly consistently since 1970, the start of the “modern warm period” when the climate effects of human emissions became large enough to be judged the main driver of climate change. Much of the year-to-year variation can be explained by El Niño and La Niña events, which are associated with globally warmer and cooler temperatures respectively. The green dot represents the average of January through March 2017; the red dot and error bars represent the best prediction of full-year 2017 annual temperatures.

WMO Update: 50-60% chance of El Niño later this year -- There is a 50-60% chance of an El Niño event forming in middle to late 2017, according to a new Update from the World Meteorological Organization. The El Niño/Southern Oscillation (ENSO) is a naturally occurring phenomenon involving fluctuating ocean temperatures in the central and eastern equatorial Pacific, coupled with changes in the atmosphere. It has a major influence on weather patterns in many parts of the world and has a warming impact on global air temperatures. Following borderline weak La Niña/cool-neutral conditions during the second half of 2016, sea surface temperatures and most atmospheric fields returned to more ENSO-neutral levels in January 2017 that continued to the present. However, sea surface temperatures in the far eastern tropical Pacific Ocean increased to 2.0° Celsius or more above average during February and March, creating very heavy rainfall and a trade wind collapse from the Galapagos Islands to the coasts of Ecuador and Peru. This localized warming – known in Peru as a “coastal El Niño” - is different from the more broadly known El Niño warming pattern, but its impacts on the affected areas were just as big. Many of the climate models surveyed indicate that basin-wide neutral conditions will persist through to June 2017. The subsequent development of an El Niño during the second half of 2017 is more likely than the continuation of neutral conditions. The emergence of La Niña appears very unlikely, according to the Update, which is a consensus-based product, based on contributions from leading centres around the world that monitor and predict this phenomenon, and expert assessment of the results of climate models. It should be kept in mind that predictions of ENSO made before May or June for the second half of the year typically have less certainty than outlooks made later in the year.

Temperature-boosting El Niño set for early return this year - The El Niño climate event that helped supercharge global warming to record levels in 2015 and 2016 is set for an early return, according to a forecast from the World Meteorological OrganizationEl Niño events are prompted by natural fluctuation in ocean temperatures in the Pacific but have a global impact, leading to flooding, droughts and heatwaves. They also exacerbate the increased extreme weather events occurring due to the continued heating of the world as a result of human-caused climate change.The World Meteorological Organization (WMO) said on Friday that a new El Niño was 50-60% likely before the end of 2017. “Memories are still fresh of the powerful 2015-2016 El Niño which was associated with droughts, flooding and coral bleaching in different parts of the world and which, combined with long-term climate change, led to the increase of global temperatures to new record highs in both 2015 and 2016,” said Maxx Dilley, director of WMO’s climate prediction and adaptation division.It is unusual for El Niño conditions to return so swiftly, said Tim Stockdale, principal scientist at the European Centre for Medium-range Weather Forecasts (ECMWF), one of the leading prediction centres around the world and which contributed to the WMO forecast. “Normally we would expect a longer interval before another warming. But, having said that, El Niño variability is really rather irregular.”Friday’s forecast is a early one, based on observations, climate models and historical trends. At present the likelihood is that any El Niño event will be a moderate one. “It will become clearer in the next couple of months,” said Stockdale. However, regional warming associated with El Niño has already caused very heavy rains and floods in Peru and Ecuador, after the sea surface temperatures in the far eastern tropical Pacific ocean rose to 2C or more above average during February and March. This phenomenon has in the past sometimes been followed by a global El Niño.

El Nino conditions are developing in the Pacific: Kemp (Reuters) - El Nino conditions are developing across the Pacific with an increasing probability that a full-fledged El Nino episode will occur during the second half of 2017.  Pacific equatorial winds have slackened since the start of the year and a characteristic tongue of warm water has begun to form stretching from Peru towards the international dateline. Both are consistent with the development of El Nino and are likely to strengthen during the second and third quarters. The U.S. government’s Climate Prediction Center (CPC) last month forecast El Nino conditions would prevail by the end of the northern hemisphere summer, but put the probability at only 50 percent. Most El Nino indicators have strengthened since then so the probability is likely to be revised higher when the CPC issues its next forecast later in May. But the strength of any future El Nino remains highly uncertain as does its impact on temperatures and precipitation across North America this winter.   El Nino and the Southern Oscillation (ENSO) describe closely linked oceanic and atmospheric processes that stretch across the Pacific and the neighbouring maritime continent of South East Asia. The oceanic component sees cold water well up from the deep ocean off the coast of Peru and move west across the Pacific carried on the surface equatorial current. There is a return flow of warm water eastwards across the Pacific on countercurrents to the north and south of the equator and also on an equatorial undercurrent deeper in the ocean. The atmospheric component sees warm moist air rise over the maritime continent and western Pacific, then flow east through the upper atmosphere towards South America.The air cools and sinks over the colder waters off South America, before returning towards Asia in a steady westward flow known to mariners as the trade winds. The oceanic and atmospheric circulations are coupled, with the equatorial winds helping drive the surface equatorial current, and sea surface temperature differentials reinforcing the rising and falling air columns. But the strength of the circulations and the degree of coupling varies at seasonal, annual and inter-annual scales. When the circulations are particularly strong and tightly coupled, the equatorial winds accelerate, the equatorial current picks up and colder than average water is carried further from the Peru coast towards the dateline. When the circulations are weak and uncoupled, the winds slacken, the current slows and warmer than normal water extends from Peru to the dateline. The stronger, cooler phase of this cycle is termed La Nina while the weaker, warmer phase of the cycle is El Nino.  Effects tend to strengthen as the year progresses and peak between October and January, when El Nino or La Nina becomes most intense.

Yes, I am a climate alarmist. Global warming is a crime against humanity -- Most of us have wondered about the human context of past crimes against humanity: why didn’t more people intervene? How could so many pretend not to know? To be sure, crimes against humanity are not always easy to identify while they unfold.  We need some time to reflect and to analyze, even when our reasoning suggests that large scale human suffering and death are likely imminent. The principled condemnation of large scale atrocity is, too often, a luxury of hindsight.  I’m a climate alarmist because there is no morally responsible way to downplay the dangers that negligent policies – expected to accelerate human-caused climate change – pose to humankind.  There can be no greater crime against humanity than the foreseeable, and methodical, destruction of conditions that make human life possible – hindsight isn’t necessary.  There is no amount of ideological deception capable of altering basic physics, chemistry and biology. It is ethically untenable for intelligent people to look the other way while elected officials deny reality, and our opportunity to avoid catastrophe slips away.  We know that the continued acceleration of climate change will bring more droughts, rising seas, more extreme weather, longer forest fire seasons and destructive storm surges. This in turn would lead to more water stress, crop failures, poverty, starvation, warfare and ever worsening refugee crises.  We know that the warming already achieved is expected to displace millions of people in low lying regions. Indeed, at our current rate of warming segments of the Middle East, Africa, and South Asia, will likely become uninhabitable for future generations.  This is not a problem for the distant future. People reading this right risk dying of impacts related to climate change. Anyone who claims global warming is not catastrophic is ill informed – or playing a disingenuous game of privilege. Such a person is probably white, male, living in an affluent nation, politically conservative, and of a relatively wealthy demographic. It is a fact that those least responsible for global warming, the global poor living in the global south, are most immediately vulnerable to climate change. This reality carries profound moral implications. Whole island nations in the southern hemisphere, such as the South Pacific’s Kiribati, Tuvalu, the Marshall Islands, and the Indian Ocean’s Maldives, are under threat from rising seas.  Citizens of these and other low-lying regions will be, or are already being, forced to assimilate to other lands. When indigenous populations are displaced and subjected to forced assimilation by outsiders exploiting resources for their own profit it constitutes a form of cultural genocide—and history teaches that the large scale displacement of cultural groups can raise the risk of physical genocide.

PIOMAS May 2017 - Arctic Sea Ice Blog - Another month has passed and so here is the updated Arctic sea ice volume graph as calculated by the Pan-Arctic Ice Ocean Modeling and Assimilation System (PIOMAS) at the Polar Science Center:  It's no surprise 2017 is still lowest on record, according to the PIOMAS model. If during the last week of April the Arctic wouldn't have cooled down (somewhat) like it did, the gap with previous years would've grown even bigger. But as it is, things haven't changed all that much since the end of March. The lead over number 2, 2011, has decreased from 1731 to 1642 km3. The difference with record low year 2012 (at the minimum) is practically unchanged.   Here's how the differences with previous years have evolved from last month:  The annual maximum was also reached in April and I will discuss it below, but first want to go through the usual graphs shown in this update. Starting with Wipneus' version of the PIOMAS sea ice volume graph showing more details:  The trend line on the PIOMAS sea ice volume anomaly graph has barely left two standard deviation territory, but as I wrote last month, it is exceptional that it's so close to it at this time of the year:As for average sea ice thickness (a crude calculation of PIOMAS volume numbers divided by total JAXA sea ice extent, hence the name PIJAMAS), 2017 continues to be extremely low:  And the same goes for the Polar Science Center thickness plot:  And now for that maximum.  Based on the average of the last 10 years I calculated that this year would probably end up somewhere around 20795 km3, and it turned out to be a tad lower: 20756 km3. That means that this past winter saw the lowest amount of sea ice volume growth after the minimum since 2006 and 2007: This makes sense if we look at the sea ice age distribution map that was posted in yesterday's monthly update on the NSIDC website, as sea ice age is an indicator of volume/thickness: There is no barrier of multi-year sea ice in the Beaufort Sea whatsoever, and a lot of three-year ice is poised to be pushed out of Fram Strait, while the thickest ice could be squeezed through the garlic press of the Canadian Archipelago again, as well as Nares Strait (where no arches have formed this winter). Not looking good. Not looking good at all.

Arctic sea ice keeps scraping the bottom of the barrel -- The astounding transformation of the Arctic before our very eyes continues. Yet another month has passed with record low sea ice. This April merely tied April 2016 for the lowest extent on record, but it’s hardly reason to celebrate. The Arctic was missing 394,000 square miles of ice, with each day setting a record low or within 36,000 square miles of setting one. That’s a sickly sign of the changes hitting the region. Temperatures averaged up to 14°F above normal in part of the Arctic last month, fueling the melt season. Scientists at the National Snow and Ice Data Center said the rate of ice loss was about average. But after hitting a record low maximum in March, there’s simply less sea ice to melt. That means even in an average month, records are more likely to be set.’

How a Melting Arctic Changes Everything  -- Eight countries control land in the Arctic Circle. Five have coastlines to defend. The temperature is rising. The ice is melting. The race for newly accessible resources is beginning. And Russia is gaining ground.  This is the first in a three-part series.  The story of the Arctic begins with temperature but it’s so much more—this is a tale about oil and economics, about humanity and science, about politics and borders and the emerging risk of an emboldened and growing Russian empire. The world as a whole has warmed about 0.9 degrees Celsius (1.7 degrees Fahrenheit) since 1880. Arctic temperatures have risen twice that amount during the same time period. The most recent year analyzed, October 2015 to September 2016, was 3.5C warmer than the early 1900s, according to the 2016 Arctic Report Card. Northern Canada, Svalbard, Norway and Russia’s Kara Sea reached an astounding 14C (25F) higher than normal last fall. Scientists refer to these dramatic physical changes as “Arctic amplification,” or positive feedback loops. It’s a little bit like compound interest. A small change snowballs, and Arctic conditions become much less Arctic, much more quickly.“After studying the Arctic and its climate for three-and-a-half decades,” Mark Serreze, director of the National Snow and Ice Data center, wrote recently. “I have concluded that what has happened over the last year goes beyond even the extreme.” Sea ice has diminished much faster than scientists and climate models anticipated. Last month set a new low for March, out-melting 2015 by 23,000 square miles.  Compared with the 1981-2010 baseline, the average September sea-ice minimum has been dropping by more than 13 percent per decade. A recent study in Nature Climate Change estimated that from 30-50 percent of sea ice loss is due to climate variability, while the rest occurs because of human activity. Receding ice decreases the Earth’s overall reflectivity, making the Arctic darker and therefore absorbing even more heat. With a greater percentage of seasonal ice, which disappears each Arctic summer, nations of the north have more time and opportunity to explore the resources beneath and within their territorial waters. The sea-ice loss is President Vladimir Putin’s gain. Already the largest country on the planet, Russia stands to gain access to shipping routes and energy reserves, and a strategic military advantage from the opening of the Arctic.

An Ice-Free Summer in the Arctic Ocean Would Be Deadly for the Northern Hemisphere  Climate scientists don’t like to get pinned down on making date-specific projections about the effects of global warming. But after months of watching Arctic sea ice languish at a record low, the big question has surfaced once again: When will we see the Arctic’s first ice-free summer?According to University of Exeter climate researcher James Screen, the latest modeling suggests that, unless heat-trapping greenhouse gas emissions stop soon, an ice-free Arctic summer will happen as soon as 2046.“That’s our best estimate, give or take 20 years,” Screen said during an April 24th press conference at the European Geosciences Union conference in Vienna. The ice decline is clearly linked with rising global temperatures, and the chances that the Arctic will be ice-free increase dramatically when the average global temperature rises between 1.7 and 2.1 degrees Celsius, Screen said. There’s a good chance an ice-free Arctic Ocean in the summer would have a strong effect on seasonal weather patterns across land areas in the Northern Hemisphere, and it would have big implications for ocean ecosystems. Polar bears use sea ice to hunt for seals, and a complete meltdown would also affect the blooming cycles of plankton, which serves as food for whales, fish, and birds. Further, ice-free conditions in the Arctic Ocean would also spur an increase in shipping, fishing, and, potentially, oil and gas drilling. Screen, an expert on how the melting sea ice affects the path of weather systems around the Northern Hemisphere, said that the regional distribution of ice decline is important. In recent years, most melting has been in the Barents Sea, which leads to cooling over Eurasia. That spatial variation means that, as the pattern of melting changes, the effects over land areas will shift as well.

A new crack in one of Antarctica's biggest ice shelves could mean a major break is near - Another branch has appeared in a huge crack on one of Antarctica’s largest ice shelves, and scientists fear it’s only a matter of time before a huge chunk — potentially containing up to 2,000 square miles of ice — breaks away. If this happens, the ice shelf may become increasingly unstable and could even fall apart.Scientists have been closely monitoring the Larsen C ice shelf, located on the east coast of the Antarctic Peninsula, where a large rift in the ice — now about 111 miles long — has been advancing in rapid bursts in recent years. Between the beginning of December and the middle of January alone, the crack lengthened by about 17 miles. And since 2011, it has grown by about 50 miles.Over the past few months, scientists have noticed that the crack has stopped extending in length but has continued to widen at a rate of more than three feet per day. It’s already more than 1,000 feet wide. And now, scientists have noticed a worrying development: A new branch has split off from the main rift, about six miles below the tip of the original crack, and has splintered off in the direction of the ocean. The new branch is about nine miles long. Altogether, only about 12 miles of ice now stand in the way of the whole chunk splitting off into the sea.

UAE to DRAG ICEBERG from Antarctica to solve water shortage set to last 25 years  -- The scorching Middle Eastern country, and much of the transcontinental region, is in the midst of a drought with some studies suggesting a water shortage could last for the next 25 years. The UAE, which is among the top 10 water-scarce countries in the world, hopes to help ease the stress of a drinking water shortage by towing an iceberg from the freezing Antarctica in order to create more drinking water. The National Advisor Bureau Limited’s (NABL) managing Director Abdullah Mohammad Sulaiman Al Shehi says an average iceberg contains "more than 20 billion gallons of water” which would be enough for one million people over five years. Up to four-fifths of an iceberg’s mass is underwater, and due to their vast density, they would theoretically not melt in the boiling climate of the Middle Eastern coastal line.Mr Al Shehi says it could take up to a year to drag the huge body of ice up to the UAE, and the project is set to begin in 2018. Not only will it partially solve a water crisis, but it could also become a tourist attraction.

NY Times hired a hippie puncher to give climate obstructionists cover --Yesterday, New York Times subscribers were treated to an email alert announcing the first opinion column from Bret Stephens, who they hired away from the Wall Street Journal. Like all Journal opinion columnists who write about climate change, Stephens has said a lot of things on the subject that could charitably be described as ignorant and wrong. Thus many Times subscribers voiced bewilderment and concern about his hiring, to which the paper’s public editor issued a rather offensive response. Justifying the critics, here’s how the paper announced Stephens’ first opinion column in an email alert (usually reserved for important breaking news): In his debut as a Times Op-Ed columnist, Bret Stephens says reasonable people can be skeptical about the dangers of climate change. In his column, Stephens pooh-poohed climate change as a “modest (0.85 degrees Celsius) warming of the Northern Hemisphere since 1880,” citing the 2014 IPCC report. However, Stephens packed three big mistakes into that single sentence. Here’s what the IPCC said (emphasis added):The globally averaged combined land and ocean surface temperature data as calculated by a linear trend show a warming of 0.85 [0.65 to 1.06] °C over the period 1880 to 2012 The northern hemisphere warms faster than the global average because it has more land and less ocean than the southern hemisphere (water warms slowly), so this is an important mistake that underestimates the global temperature rise. On top of that, since 2012 we’ve seen the three hottest years on record (2014, 2015, and 2016), so even the 0.85°C warming figure is outdated (it’s now right around 1°C).  Most importantly, the global warming we’ve experience is in no way “modest.” We’re already causing a rate of warming faster than when the Earth transitions out of an ice age, and within a few decades we could be causing the fastest climate change Earth has seen in 50 million years. The last ice age transition saw about 4°C global warming over 10,000 years; humans are on pace to cause that much warming between 1900 and 2100 – a period of just 200 years, with most of that warming happening since 1975.

Court delay hands Trump victory over Obama climate change rule - POLITICO: A federal appeals court granted President Donald Trump's request to halt a lawsuit over the Obama administration's most important climate change regulation on Friday, handing the him a major victory in his bid to revoke the rule that would have required power plants to curb their greenhouse gas emissions. The decision by the D.C. Circuit Court of Appeals sends the rule back to Trump's EPA to review and most likely quash the regulation that had been at the heart of former President Barack Obama's strategy to combat emissions of carbon dioxide from coal-burning power plants. Story Continued Below Today's ruling comes just as Trump signed a new executive order to begin rolling back Obama's restrictions on offshore oil and gas drilling and just one day ahead major climate change protests planned for Washington and several other cities around the country. The administration is also debating whether to remain in the Paris climate change agreement. Trump said in an interview published this morning that the pact is "not a fair situation" and that China, Russia and India aren't contributing enough money to help poorer countries cope with the effects of climate change. The court had been expected to decide soon on whether the rule, called the Clean Power Plan, was legally sound under the Clean Air Act, but the Trump administration asked the judges to halt their deliberations so it could take another look at the regulation. EPA Administrator Scott Pruitt has been one of the rule's most vociferous opponents, and as the attorney general of Oklahoma had helped spearhead the legal challenges seeking to overturn it.The court's pause in the case means EPA will not have to contend with a potentially awkward opinion that could have upheld the regulation as Trump's EPA worked to dismantle it. Many legal observers believed after last year’s arguments that the rule would have survived most, if not all, of the legal challenges. 

23 environmental rules rolled back in Trump's first 100 days -  President Trump, with help from his administration and Republicans in Congress, has reversed course on nearly two dozen environmental rules, regulations and other Obama-era policies during his first 100 days in office. Citing federal overreach and burdensome regulations, Mr. Trump has prioritized domestic fossil fuel interests and undone measures aimed at protecting the environment and limiting global warming. (list with details) 

This is what Washington will look like if the worst climate change projections come true -- Estimates for how badly Washington—and the rest of the United States—could be flooded if the worst projections for sea-level rise come to pass are more severe than previously thought, according to an organization of climate scientists. In the most extreme circumstances, polar melting and ice-sheet collapses could raise global sea levels by ten to 12 feet by 2100, up from eight feet.The forecast, by Climate Central, is based on revised projections about sea-level issued in January by the National Oceanic and Atmospheric Agency, which also warned that the effects of climate change could be accelerated if the amount of heat-trapping pollutants released into the atmosphere is not reduced.“What’s changed is that we use to think six or seven feet was the most we could possibly see this century, and now we’ve more or less doubled that,” says Ben Strauss, a scientist at Climate Central. “When our best science says something this bad is a possibility, it’s critical in understanding it better. The science is very clear that the more we emit, the greater the likelihood we could see sea-level rise that is this catastrophic.”For a better look at our potential water-logged future, Climate Central created a plugin for Google Earth that shows how bad the damage would be if it the flooding happened today. As shown in the image above, much of the National Mall would be underwater, along with big chunks of several DC neighborhoods, including Penn Quarter, Navy Yard, Anacostia, and Southwest Waterfront. (The Wharf, the massive development set to open this fall, would be almost completely submerged.)The tarmac at Washington Reagan National Airport would be washed away. Nationals Park would fill up like a bowl after water comes rushing over the right-field wall.

EPA says website undergoing makeover to match Trump, Pruitt views | Reuters: The website of the U.S. Environmental Protection Agency,, is getting a makeover to reflect the views of President Donald Trump and EPA Administrator Scott Pruitt, the agency said on Friday. “As EPA renews its commitment to human health and clean air, land and water, our website needs to reflect the views of the leadership of the agency,” it said in a statement. Trump, a climate change doubter, campaigned on a pledge to boost the U.S. oil and gas drilling and coal mining industries by slashing regulation. He also promised to pull Washington out of a global pact to fight climate change. The first page to be updated is one that reflects Trump’s executive order on energy independence, which calls for a review of the Clean Power Plan put into place by his predecessor, President Barack Obama, the statement said. "Language associated with the Clean Power Plan, written by the last administration, is out of date," it said. "Similarly, content related to climate and regulation is also being reviewed." The Clean Power Plan aimed to sharply reduce carbon dioxide emissions from electrical power generation over 25 years, focusing on reductions from coal-burning power plants and increasing the use of renewable energy and energy conservation. “We want to eliminate confusion by removing outdated language first and making room to discuss how we’re protecting the environment and human health by partnering with states and working within the law,” J.P. Freire, associate administrator for public affairs at the agency, said in the statement.

Trump's big EPA website changes reach 'whole new level of willful ignorance' --  When the Environmental Protection Agency (EPA) took down its sprawling climate change website on Friday evening, it did so with no prior notice to rank-and-file employees. The move, the agency says, is aimed at reflecting the EPA's "new direction" under the Trump administration. But some insiders and activists don't see it that way.They fear the move is an attempt to alter the climate change-related scientific facts and data that the agency has long presented to the public. The EPA's climate site, after all, is among the largest and most relied upon in the entire federal government, rivaling NASA's plethora of image-heavy sites. It's also been around for two decades, surviving multiple administration changes  including some like George W. Bush who were not exactly friendly toward climate science findings. "The process, which involves updating language to reflect the approach of new leadership, is intended to ensure that the public can use the website to understand the agency's current efforts," the EPA said in a statement. "The changes will comply with agency ethics and legal guidance, including the use of proper archiving procedures. For instance, a snapshot of the last administration’s website will remain available from the main page." While the statement makes the changes seem administrative, don't be fooled. The revisions notice raises serious questions about what will be rewritten and how.

 Climate contrarians want to endanger the EPA endangerment finding –- Although Trump’s EPA administrator Scott Pruitt has been among the biggest proponents of withdrawing America from the Paris climate agreement (using bogus ‘blame China’ arguments to make his case), climate deniers have been unhappy with him. That’s because Pruitt doesn’t want to challenge EPA’s carbon pollution endangerment finding – he thinks it would be a lost cause. A group of contrarian scientists released a white paper trying to pressure him to attack the finding anyway. Briefly, the endangerment finding stemmed from a 2007 Supreme Court decision in which 12 states sued the EPA, calling on the agency to regulate carbon pollution under the Clean Air Act. The Supreme Court ruled in favor of those states, ordering EPA to determine if greenhouse gas emissions endanger public health and welfare. After considering the scientific evidence, including the latest IPCC report, national climate science assessments, etc., the EPA issued its endangerment finding correctly concluding that carbon pollution clearly endangers public health and welfare via its climate change impacts. As a result, the EPA is legally required to regulate carbon pollution. The Obama EPA followed that legal requirement by crafting the Clean Power Plan. Early in his presidency, Trump signed an anti-climate executive order calling on EPA to review and revise the Clean Power Plan. In effect, it’s currently on hold. However, that review process takes years, and in 2020 the next president’s EPA could make the carbon pollution regulations even more aggressive. As long as the endangerment finding is in place, there is a legal requirement for the EPA to regulate carbon pollution. Enter a white paper published by a number of contrarian scientists, including a few of the less than 3% of climate scientists who reject or minimize human-caused global warming. The white paper tries to make the case that the EPA endangerment finding is wrong. Not surprisingly, aside from being poorly written, the arguments in the white paper are astonishingly bad.

Trump administration lawyers to discuss Paris climate deal - POLITICO: Trump administration lawyers plan to meet Monday to discuss the legal implications of remaining in the Paris climate change agreement, two people familiar with the meeting told POLITICO. Critics of the 2015 accord have quietly been mounting a behind-the-scenes effort to convince President Donald Trump that sticking with the deal would pose legal hurdles. The meeting is expected to include lawyers from the White House, National Security Council, State Department and Justice Department, the sources said, though they said the list of attendees and timing could still change. A Thursday meeting of Trump administration officials about the Paris agreement focused largely on legal issues. Critics of the deal, led by chief strategist Steve Bannon and Environmental Protection Ageny Administrator Scott Pruitt, have pushed several legal arguments, including that the Paris deal restricts countries from weakening their domestic emissions-reduction targets and that any decision to remain could be used in court to counter the administration's bid to undo former President Barack Obama's climate regulations for power plants. The Monday meeting was organized after Ivanka Trump, the president's daughter and a proponent of remaining in Paris, called for a deeper assessment of those legal questions after the issue bubbled to the forefront on Thursday, sources said. Backers of the accord were surprised when the White House Counsel's Office signaled during the Thursday meeting that it agreed with Pruitt's legal concerns. Current and former State Department officials strongly disagree with Pruitt's contentions about the legal issues.

How Team Trump Plans To Kill Obama’s Paris Climate Deal By Declaring It A Treaty - As President Trump’s top advisers prepare to hash out a final policy on the Paris climate agreement dumped onto their laps by President Obama, another option has hit the table: Declare the deal a treaty and send it to the Senate to be killed. The treaty option could emerge as the middle ground in the increasingly tense battle between “remainers” on the one hand, who say the president should abide by Mr. Obama’s global warming deal, and the Paris agreement’s detractors, who say Mr. Trump would be breaking a key campaign promise if he doesn’t withdraw from the pact. At an initial meeting of top staffers Tuesday, several memos and letters that were circulated laid out the options, including the treaty proposal put forth by Christopher C. Horner and Marlo Lewis Jr., senior fellows at the Competitive Enterprise Institute. Under their vision, Mr. Trump could toss out Mr. Obama’s decision that the Paris accord was an executive agreement, declare it a treaty and send it to the Senate, where it would need a two-thirds vote for ratification. Given Republican control of the chamber, the agreement’s opponents say senators would either shelve the deal or outright defeat it. Either option would derail the deal, the memo suggested. “That option affirms that we are a nation of laws, not men and, importantly, discourages both our negotiating partners and future U.S. officials against attempting to circumvent our system,” the memo says.

In the Trump White House, the momentum has turned against the Paris climate agreement --Foes of the Paris climate agreement have gained the upper hand in the ongoing debate at the White House over whether the United States should pull out of the historic pact, although President Trump has yet to make a final decision, according to participants in the discussions and those briefed on the deliberations.Senior administration officials have met twice since Thursday to discuss whether the United States should abandon the U.N. accord struck in December 2015, under which the Obama administration pledged to cut U.S. greenhouse gas emissions 26 percent to 28 percent below 2005 levels by 2025.The president’s aides remain divided over the international and domestic legal implications of remaining party to the agreement, which has provided a critical political opening for those pushing for an exit. At this point officials are considering whether the United States should stay in the agreement but renegotiate it in some form, or opt out entirely. Even if Trump decides to abandon the agreement — which is not a treaty, and therefore did not undergo Senate ratification — it may take three years for the United States to formally withdraw from it.On Thursday several Cabinet members — including Environmental Protection Agency Administrator Scott Pruitt, who’s called for exiting the accord; Energy Secretary Rick Perry, who wants it renegotiated; and Secretary of State Rex Tillerson, who advocates remaining a party to it — met with top White House advisers, including Trump’s daughter Ivanka Trump and her husband, Jared Kushner, and Chief of Staff Reince Priebus. Both Ivanka Trump and Kushner advocate remaining part of the U.N. Framework Convention on Climate Change, even though the president has repeatedly criticized the global warming deal.During that meeting, according to several people who spoke on the condition of anonymity to discuss internal deliberations, White House counsel Don McGahn informed participants that the United States could not remain in the agreement and lower the level of carbon cuts it would make by 2025.  This interpretation represented a change from the White House counsel’s earlier analysis and is at odds with the State Department’s view of the agreement.

White House leaning toward exiting Paris climate pact | TheHill: White House officials are leaning toward taking the United States out of the Paris climate agreement, people familiar with the deliberations say. While some in the Trump administration have warmed in recent days to the idea of staying in the non-binding pact while potentially changing the United States’ commitment, top officials are now leaning the other way, sources said Tuesday. Trump could announce as soon as next week his plans to pull out. The Huffington Post and New York Times reported on the developments earlier Tuesday. Central to the administration’s debate is whether the U.S. could reduce its commitment to reducing greenhouse gases for the 2015 pact without running afoul of it. The agreement states that a country “may at any time adjust its existing nationally determined contribution with a view to enhancing its level of ambition,” which sources say concerns White House Counsel Don McGahn and his staff. If Trump wanted to ratchet down former President Barack Obama’s promise of a 26 percent to 28 percent emissions cut by 2025, the agreement may prevent it. The administration is also worried that staying in the accord would give environmentalists a legal argument to prevent Trump from repealing climate regulations like the Clean Power Plan. 

NATO urges global fight against climate change as Trump mulls Paris accord | Reuters: Climate change poses a global security threat that all countries must fight together, a NATO general said on Wednesday, as U.S. President Donald Trump nears a decision on whether to pull out of the Paris climate deal. The comments were the strongest yet from the U.S.-European military alliance about the importance of upholding the Paris accord. They come amid lingering tensions between the leadership of the North Atlantic Treaty Organization and Trump, who at one point called NATO "obsolete". "There is a huge necessity that the U.N. continues to involve all nations and coordinate the action of all nations," to fight climate change, General Denis Mercier, NATO's supreme allied commander for transformation, told Reuters on the sidelines of a conference in Norfolk, Virginia. "If one nation, especially the biggest nation ... if they do not recognize a problem, then we will have trouble dealing with the causes," of climate change, said Mercier. Though he did not single out any country by name, the United States is the world's biggest economy and the second largest emitter of greenhouse gases after China. Trump, a Republican, is weighing whether the United States should stay in the Paris climate agreement, a deal struck by nearly 200 countries in 2015 to limit global warming by reducing greenhouse gas emissions, and to provide funds to poor countries dealing with the effects of climate change. [L8N1I56C4] Trump has complained that the United States was treated unfairly in the agreement because it would pay more than other countries to fight global warming. He is expected to decide in the next week or two on whether the country will leave the pact, or stay in with reduced commitments.

Do-or-die: EU pushes Trump to stick to Paris climate deal | Reuters: EU officials are scrambling to persuade U.S. President Donald Trump not pull out of the Paris climate accord after his advisers warned of legal problems if Washington stayed in but lowered its commitments. European Union sources said European ministers and EU officials have been lobbying senior White House staff after hearing Trump was leaning heavily towards exiting the global pact because of the legal problems that could arise if Washington revised its climate commitments downward. Trump is expected to announce a decision as early as next week along with other energy policy changes, including ordering opening up LNG exports and Arctic drilling. "If the biggest economy in the world dumps the whole thing ... we all have to worry," one EU source told Reuters. "We are reaching out at all possible levels ... to try to explain why they do not need to leave the Paris agreement." Four U.S. sources briefed on White House meetings, who asked not to be named, told Reuters on Tuesday that opponents of the 2015 accord to cap greenhouse gas emissions had won the upper hand in recent days about whether to pull out or remain in the accord with a reduced commitment. Senior administration officials - including chief of staff Reince Priebus, chief strategist Steve Bannon, White House Counsel Donald McGahn and Environmental Protection Agency head Scott Pruitt - argued Washington risked legal challenges if it lowered its climate goals while remaining a party to the deal.The sources said White House lawyers had argued in a memo recently that changing the U.S. target, known as the Nationally Determined Contribution, could trigger these complications. 

 U.S. will lose jobs if it quits Paris climate deal: U.N. | Reuters: The United States will shoot itself in the foot if it quits the Paris climate accord because China, India and Europe will snap up the best power sector jobs in future, U.N. Environment chief Erik Solheim said on Thursday. U.S. President Donald Trump is expected to announce as early as next week whether he will take the United States out of the climate pact, having vowed during his campaign to "cancel the Paris Climate Agreement" within 100 days of becoming president. "There is no doubt where the future is and that is what all the private sector companies have understood," Solheim told Reuters in Geneva. "The future is green," he said. "Obviously if you are not a party to the Paris agreement, you will lose out. And the main losers of course will be the people of the United States itself because all the interesting, fascinating new green jobs would go to China and to the other parts of the world that are investing heavily in this." The world has now passed its "peak oil" stage, the Norwegian-born Solheim said, and was rapidly moving into the age of solar and wind. The Paris accord, agreed by nearly 200 countries in 2015, seeks to limit planetary warming by cutting emissions of carbon dioxide and other gases from burning fossil fuels. "Wind engineer is now probably the most promising job opportunity in the United States," Solheim said, adding that China and India were bringing the price of solar down so fast that coal was no longer competitive.

Trump puts critic of renewable energy in charge of renewable energy office - President Trump has appointed Daniel Simmons, a conservative scholar who sharply questioned the value of promoting renewable energy sources and curbs on greenhouse gas emissions, to oversee the Energy Department’s Office of Energy Efficiency and Renewable Energy (EERE), according to an email distributed to department employees.The selection marks one of several recent Trump appointments to top energy and environmental posts, which appear to repudiate the Obama administration’s policies aimed at shifting the nation to low-carbon sources of electricity. Last week, Trump nominated David Bernhardt, a lobbyist who served at the Interior Department under George W. Bush, as Interior’s deputy secretary. And Alex Herrgott, who had served as majority deputy staff director at the Senate Environment and Public Works Committee, has joined the White House Council on Environmental Quality to serve as associate director for infrastructure.Though no official announcement has been made, the acting head of the office, Steve Chalk, sent an email to DOE employees Monday saying that Simmons, a member of the Trump transition team, will become the principal deputy assistant secretary for EERE. Simmons will serve as acting assistant secretary until someone is confirmed by the Senate for the post, Chalk added. “Daniel has been with us through the transition and we look forward to his continued leadership and insights moving forward,” Chalk wrote.Simmons’s appointment was first reported by E&E News.  EERE’s primary mission is to foster the development of renewable and energy-efficient technologies. That includes investments in electric vehicles; solar, geothermal and wind energy; and technologies to reduce energy use in U.S. buildings.

Wood pellet fuel deemed 'carbon neutral' in U.S. spending bill | Reuters: A week after President Donald Trump vowed to impose new tariffs on Canadian lumber imports to help the U.S. timber industry, lawmakers passed a spending bill that could push U.S. government agencies to promote burning wood pellets to fuel power plants. The budget bill that the U.S. House of Representatives passed on Wednesday, which makes way for nearly $1.2 trillion in federal spending, directs the Environmental Protection Agency, the Department of Energy and the Department of Agriculture to "establish clear policies that reflect the carbon neutrality of biomass." Biomass, or wood pellet fuel, is considered a renewable energy source because it is composed of trees, which can be replaced after they are cut down. It is used to heat homes and fuel power plants. Scientists say burning wood pellets actually produces more harmful greenhouse emissions than coal or natural gas. "Recent advances in science and accounting for pollution from different types of woody biomass have clarified that burning trees to produce electricity actually increases carbon emissions compared with fossil fuels for many decades and contributes to other air pollution problems," a group of 60 U.S. scientists wrote in a 2014 letter to the UK's secretary of state for energy and climate change. The European Union already treats biomass as carbon-friendly and subsidizes its production. A biomass industry group offered praise for the measure on Wednesday. "We are thrilled to see such strong bipartisan support for biomass, which Congress is officially recognizing as the carbon neutral, renewable energy source that it is,"

Wind turbines provide 8% of U.S. generating capacity, more than any other renewable source - Wind generators accounted for 8% of the operating electric generating capacity in the United States in 2016, more than any other renewable technology, including hydroelectricity. Wind turbines have contributed more than one-third of the nearly 200 gigawatts (GW) of utility-scale electricity generating capacity added since 2007. The increase in wind development in the United States over the past decade reflects a combination of improved wind turbine technology, increased access to transmission capacity, state-level renewable portfolio standards, and federal production tax credits and grants. More than half of U.S. wind capacity is located in five states: Texas, Iowa, Oklahoma, California, and Kansas. In three states—Iowa, Kansas, and Oklahoma—wind makes up at least 25% of in-state utility-scale generating capacity. Several states with the highest wind capacity are located in the Midwest, a region with favorable wind resources. As of December 2016, nine U.S. states had no operational utility-scale wind facilities: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, South Carolina, and Virginia.   Texas alone accounts for almost a quarter of total U.S. wind capacity, and electricity generated by these turbines made up 13% of Texas's total electricity output in 2016. At particularly windy times, wind can provide a much larger share of Texas’s electricity generation. For instance, in the early hours of March 23, 2017, wind output on the Electric Reliability Council of Texas (ERCOT) grid in Texas accounted for up to 50% of the electricity generation mix, the highest wind penetration level seen in the ERCOT electric system to date.

EPA chief: US needs coal to protect electric grid | TheHill: The head of the Environmental Protection Agency (EPA) argued Wednesday that using coal for electricity is necessary for the reliability of the electric grid. Speaking on Fox Business’s “Varney & Co.,” Scott Pruitt warned of the problems of relying too heavily on natural gas, which has increased in use over the last decade as coal has fallen. Pruitt argued in part that cybersecurity concerns should inspire the country to maintain coal as a significant fuel source. “Utility companies across this country need fuel diversity. You need solid hydrocarbons on-site that you can store, so when peak demand rises, you’ve got solid hydrocarbons to draw on,” Pruitt told host Charles Payne. “What would happen if we had an attack on our infrastructure when you’ve diverted to natural gas almost exclusively and you don’t have coal there as a safeguard to preserve the grid?” he asked. “I mean, it’s a smart strategy for this country to invest in technology and innovation, burn coal, burn natural gas, use renewables, make sure we advance nuclear. But it truly needs to be a part of the fuel diversity with utilities across the country.” Earlier in his appearance, Pruitt boasted about the United States reducing its greenhouse gas emissions without regulations like the Clean Power Plan. Natural gas replacing coal over the last decade is the primary reason for that reduction. “We’re leading the world already with our CO2 footprint,” he said. “What’s interesting about the reduction of our CO2 footprint is that it’s been accomplished without any government mandate.”

 Dems blast DOE study as biased toward coal, nuclear | TheHill: A group of Senate Democrats slammed the Department of Energy’s (DOE) ongoing electric grid reliability study as biased toward power sources such as coal and nuclear. The Democrats, who all sit on the Senate Energy and Natural Resources Committee, said the study Energy Secretary Rick Perry ordered last month appears from the outset to be designed to boost coal and nuclear energy at the expense of renewable sources like wind and solar energy. “The study, as you have framed it, appears to be intended to blame wind and solar power for the financial difficulties facing coal and nuclear electric generators and to suggest that renewable energy resources threaten the reliability of the grid,” the group led by Sen. Maria CantwellMaria CantwellOvernight Energy: Trump open to gas tax increase Dems blast DOE study as biased toward coal, nuclear United explains passenger removal to senators MORE (D-Wash.) wrote to Perry Monday. ADVERTISEMENT“The notion that a 60 day review conducted by ideologues associated with a Koch brothers-affiliated think tank should supplant research and analysis conducted by the world’s foremost scientists and engineers would be a grave disservice to American taxpayers,” the senators said, referring to Travis Fisher, a veteran of the pro-fossil-fuel Institute for Energy Research, who has been tapped to lead the study. “It would constitute nothing short of an international embarrassment within a global research community that has long-relied on U.S. technical leadership.” Perry directed his agency on April 14 to study whether renewables like wind and solar are pushing baseload power sources like coal and nuclear out of the market, and whether baseload sources should be allowed to charge more money for their reliability.

Groups Sue Trump for Rollback on Safeguards for Leading Source of Water Pollution - A coalition of environmental and public health advocates filed suit Wednesday to challenge a Trump administration rollback that could wipe out critical protections for cleaning up America's leading source of toxic water pollution: coal power plant waste.  The federal lawsuit seeks to invalidate an April 25 U.S. Environmental Protection Agency (EPA) order that abruptly put an indefinite hold on a set of safeguards to control the amount of arsenic, mercury, cadmium, lead and other pollutants that spew from coal power plants into our public waters. By putting those protections on hold indefinitely, the Trump administration is allowing power plants to continue discharging toxics without any specific limits, using standards set 35 years ago.  "I don't think anything considered state of the art in 1982 would still be state of the art today, especially when you are talking about the number-one source of toxic water pollution in the country," said Earthjustice attorney Thomas Cmar. "EPA Administrator Scott Pruitt is not above the law and he doesn't have the power to roll back public health protections with the stroke of a pen."  Earthjustice filed the lawsuit on behalf of the Sierra Club, Waterkeeper Alliance and Clean Water Action in the District of Columbia's federal district court. Also joining the suit are the Environmental Integrity Project, PennEnvironment, Chesapeake Climate Action Network, Chesapeake Physicians for Social Responsibility and Prairie Rivers Network, represented by the Environmental Integrity Project. The suit asks the court to find that the EPA didn't have legal authority to put the protections on hold, didn't give public notice or allow public participation before doing so, and selectively applied its action to prioritize the interests of the coal industry over public health.  "These standards would have tackled the biggest source of toxic water pollution in the country, and now the Trump EPA is trying to toss them out. It's indefensible," said Pete Harrison, an attorney for Waterkeeper Alliance . "The EPA didn't even pretend to seek public input before plowing ahead with this rollback that could allow millions of pounds of preventable toxic pollution to go into our water."

Carbon intensity is falling in industrial, electric power sectors -- Over the last seven years, the electrical power sector has gone from being one of the most carbon-emitting sectors of the American economy per unit of fuel consumed to one of the least carbon-emitting sectors. That’s according to new data from the US Energy Information Administration (EIA). Despite the good news, the EIA’s numbers show that, since 1975, the carbon emissions of the US transportation sector per unit of fuel used has hardly changed at all. The EIA measured relative emissions across the US economy as "carbon intensity"—an average of the amount of carbon any sector gives off as it consumes different kinds of fuel. The measurements were applied to five sectors of the US economy: transportation, commercial, residential, electric, and industrial.  The industrial sector is currently the least carbon intensive in its operations, and it gives off just 44 kilograms of CO2 per million BTUs used. The EIA said part of this was due to the fact that several portions of the industrial sector run on biomass fuel. Although burning biomass releases carbon into the atmosphere, the EIA doesn’t count those emissions as energy-related CO2 emissions because most kinds of biofuel absorb CO2 from the atmosphere as growing plants. “The same consideration applies to the use of biogenic fuels in other sectors, such as wood heating in the residential sector and ethanol consumption in the transportation sector,” the EIA writes.The electricity sector has shown the most change in the last decade, going from more than 60 kg of CO2 per million BTUs used to just 48 kg of CO2. The EIA attributes this to increasing amounts of nuclear, wind, hydroelectric, and solar power used by the grid, which emit no CO2 emissions.Interestingly, the administration points out that the carbon intensity of the electric power sector using a million BTUs of fuel is now less than the carbon intensity of consuming a million BTUs of natural gas. “In other words, the combustion-weighted average of all fuels used to produce electricity in the United States (coal, natural gas, petroleum, nuclear, renewables) is now lower than the carbon intensity of natural gas.”

The Inconvenient Truth About Electric Vehicles -- An electric auto will convert 5-10% of the energy in natural gas into motion. A normal vehicle will convert 20-30% of the energy in gasoline into motion. That's 3 or 4 times more energy recovered with an internal combustion vehicle than an electric vehicle.Electricity is a specialty product. It's not appropriate for transportation. It looks cheap at this time, but that's because it was designed for toasters, not transportation. Increase the amount of wiring and infrastructure by a factor of a thousand, and it's not cheap.Electricity does not scale up properly to the transportation level due to its miniscule nature. Sure, a whole lot can be used for something, but at extraordinary expense and materials.Using electricity as an energy source requires two energy transformation steps, while using petroleum requires only one. With electricity, the original energy, usually chemical energy, must be transformed into electrical energy; and then the electrical energy is transformed into the kinetic energy of motion. With an internal combustion engine, the only transformation step is the conversion of chemical energy to kinetic energy in the combustion chamber.The difference matters, because there is a lot of energy lost every time it is transformed or used. Electrical energy is harder to handle and loses more in handling.  Another problem with electricity is that it loses energy to heat production due to resistance in the wires. A short transmission line will have 20% loss built in, and a long line will have 50% loss built in. These losses are designed in, because reducing the loss by half would require twice as much metal in the wires. Wires have to be optimized for diameter and strength, which means doubling the metal would be doubling the number of transmission lines.High voltage transformers can get 90% efficiency with expensive designs, but household level voltages get 50% efficiency. Electric motors can get up to 60% efficiency, but only at optimum rpms and load. For autos, they average 25% efficiency.

Texas Utility Proposes Rate Increase for Solar, Wind Customers - The latest example in the struggle of going green is Oncor’s requested monthly minimum charge that the electric utility wants to put on customers who have installed what the company calls residential distributed generation, including rooftop solar panels or micro wind turbines. “Private rooftop solar panels do not reduce residential peak demand, they simply shift that demand to later in the day. Therefore, that residence still needs to be served by Oncor’s system that allows it immediate access to the grid with enough capacity to meet its peak demand,” said Oncor spokesperson Geoff Bailey in a statement to NBC DFW. “Right now customers with residential distributed generation have reduced their electric delivery charges without reducing the cost to deliver it,” Bailey said. The request will be addressed by the Texas Public Utility Commission at a hearing on July 31.

Tory windfarm policy endangers cheap energy in UK, commission finds - Conservative opposition to windfarms risks the UK missing out on one of the cheapest sources of electricity, according to the head of a Shell-funded industry group. Adair Turner, chair of the Energy Transitions Commission, said wind and solar power costs had fallen dramatically globally and urged the government to rethink its ban on subsidised onshore windfarms. “We have to at least understand that a ban on doing onshore wind is giving up the opportunity of what is increasingly the cheapest form of electricity. I would not personally have that ban on onshore wind,” Lord Turner told the Guardian. A report by the commission found that the cost of wind power had fallen by 60% in the past five years. The analysis predicted that by 2040, wind and solar would account for 45% of the global power mix, with hydro and nuclear making up another 35%. “We’re basically saying by 2040, you can get the share of fossil fuel generation down to 20%, and that is quite ambitious,” said Turner. “What is distinctive is the group of people who are making that statement. It’s not just either industry or NGOs, it’s both.”

 Britain's energy supply is in jeopardy after Brexit, warn MPs - The future of Britain’s power supply has been jeopardised by Brexit and the government must act urgently to ensure nuclear power stations stay open, MPs have warned. The influential Commons business, energy and industrial strategy committee said that any gap between the UK leaving a European atomic power treaty and entering into secure alternative deals would “severely inhibit nuclear trade and research and threaten power supplies”. The cross-party group of MPs said it shared the nuclear industry’s concern that it would take more than two years to hammer out a new deal for regulating nuclear power stations and trade. It urged the government to delay exit from the European Atomic Energy Community (Euratom) or set up transitional arrangements, which may need to be longer than the three years proposed by the European parliament. In a stark warning, Iain Wright, the committee’s chair, said: “The impact of Brexit on Euratom has not been thought through. The government has failed to consider the potentially severe ramifications of its Brexit objectives for the nuclear industry. Ministers must act as urgently as possible. The repercussions of failing to do so are huge. The continued operations of the UK nuclear industry are at risk.” The committee’s report echoed a warning from nuclear energy lawyers that leaving Euratom without a new deal would see the trade in nuclear fuel grind to a halt and could ultimately force Britain’s reactors to switch off. A former government adviser had told the committee that the UK nuclear industry would be “crippled” if new nuclear cooperation deals are not agreed within two years. The Euratom treaty promotes uniform safety standards, cooperation and research into nuclear power. Justin Bowden, national officer of the GMB union, said the committee’s warning “yet again emphasises our government’s lack of anything that could be called a coherent energy policy. “In a world outside of the European Union, energy self-sufficiency is common sense and nuclear, alongside gas, will be fundamental in that reliable mix,” he said. “Decisive action must take place now. The electorate will not forgive politicians of any political party who fail in their duty to maintain the electricity supply.” 

California bill would force utilities to give rebates for energy-storage systems - SB700 would require utilities to collect up to $166 million annually from ratepayers from 2018 through 2027 to fund the Energy Storage Initiative, which would then use the funds to provide rebates to customers who install energy storage systems. “If California is to achieve 100% renewable energy and a zero carbon future, distributed energy storage sited near customer load will be key,” said Brad Heavner, policy director for the California Solar Energy Industries Association (CALSEIA). “More distributed energy storage also means less reliance on natural gas plants during peak demand and more on home-grown and renewable solar energy.” Additionally, reducing energy costs during peak use hours will mean utilities won’t need to build as much power generating infrastructure, Heavner explained, which “saves everyone money. Also, as renewables grow, we need to store the clean power generated in the daytime for use in the evening,” he continued. “Solar and storage go hand in hand to produce clean energy and have it available whenever customers need it.”

Mercedes starts delivering home energy storage units -- Daimler has announced that it has started delivering Mercedes-Benz energy storage units to homes and businesses in Germany. The units are made with the same lithium-ion battery technology that is used in Mercedes-Benz hybrid cars. Each battery pack can store 2.5 kWh of energy, but the devices can be scaled up to contain up to eight battery packs for a capacity of 20 kWh. The units are designed to work with home solar photovoltaic units to store excess electricity generated during the day instead of feeding it back to the grid. Homeowners or businesses can then use the stored energy during times of peak demand and at night when the solar panels aren’t producing electricity. Much like with Tesla’s Powerwall, businesses and larger industrial facilities can scale up their energy storage by using several of the units together. Mercedes-Benz is already working on three large industrial-scale projects, including one with 29 mWh of storage capacity, that will help to balance the energy loads and fluctuations in the German grid. For smaller customers, Mercedes-Benz is offering a customized clean energy package that will include solar panels, the energy storage unit, a battery inverter and an energy management system, plus installation. The cost of the whole set up for a small home is reported to run around $10,000.

 How much storage and back-up do high renewable grids need? - Exactly how much storage and back-up does renewable energy need? It’s a question at the heart of electricity planning and the subject of many of the myths peddled by vested interests in the fossil fuel lobby and the gullible media. The answer is: not nearly as much as the naysayers would have you think. According to the CSIRO and Energy Networks Australia, which own the local and interstate grids, a level of between 30 and 50 per cent share of variable renewable energy sources such as wind and solar can be easily accommodated without any further back-up. That’s because there is so much back-up built into the system already to support coal and gas-fired generation, either to meet peaks in demand, or to fill in gaps when coal and gas plants fail, as they do quite regularly, particularly in hot weather. The estimate also reflects the changing view of technologies and how grids are managed. It was not so long ago that most engineers would have thought 10 per cent was the absolute maximum. The Murdoch media has been misquoting an old report saying that 20 per cent is the level at which problems occur. Some network operators think 60 per cent is the level. The CSIRO and ENA says the amount of storage needed beyond that 30 to 50 per cent continues to be minimal until much greater levels of renewable energy are introduced, and then the extent of that back-up is largely dependent on local weather and climate, and their natural renewable energy sources.

Why "Disgusting" Rome Sends Trains Filled With Trash To Austria -- Rome has been struggling to cope with a rubbish crisis and Austria has spare capacity at a waste-to-energy plant near Vienna.So a deal has been struck. The Italians are paying Austrian company EVN to dispose of up to 70,000 tonnes of Roman household refuse this year.The waste is transported by train through northern Italy, over the Alps and ends up at the EVN thermal waste utilisation plant at Zwentendorf on the Danube.Up to three trains a week arrive at the Zwentendorf plant. Each carries airtight containers loaded with around 700 tonnes of Roman household waste. The refuse is incinerated and converted into hot flue gas, which generates steam. The steam is delivered to a neighbouring power station, where it is converted into electricity, which is used to power 170,000 houses in the province of Lower Austria. It may seem counter-intuitive to carry rubbish over 1,000km (620 miles) before disposing of it, but it is part of efforts in the European Union to make cities reduce the amount of waste that goes into landfills. "It is not crazy," insists Gernot Alfons, head of the EVN thermal waste plant. For him it is an environmentally friendly solution and the rubbish trains are key "The other alternative would be to put this rubbish into landfill, which creates a lot of methane emissions that create a lot of impact in terms of CO2 emissions. "It is much better to transport this waste to a plant which has a high energy efficiency like ours."

Power plants will have to cut toxic emissions under new EU rules -- Power plants in the EU will have to cut the amount of toxic pollutants such as nitrogen oxides they emit under new rules approved by member states and widely applauded by environmental groups.  Friday’s decision imposes stricter limits on emissions of pollutants such as nitrogen oxide, sulphur dioxide, mercury and particulate matter from large combustion plants in Europe. The EU’s industrial emissions directive, its main instrument regulating pollutant emissions from industrial plants, entered into force in 2011. It sets EU-wide emission limits on large combustion plants for certain pollutants which can cause respiratory diseases. However, the directive has been criticized for exemptions which have allowed more than half of Europe’s coal plants to exceed limits for harmful pollutants, according to a report by environmental groups last year. Several countries which are heavily reliant on coal, such as Poland, Bulgaria, Germany and the Czech Republic, were opposed to the changes.“EU coal power plants will now either have to reduce their pollution or close down,” said Darek Urbaniak, senior energy policy officer at WWF. “It is about time Europe quits its dirty coal addiction for good and invests in energy efficiency and renewables instead.”

Poland Looks to Nuclear in Bid to Keep Its Coal Plants Humming -- Poland hopes a nuclear power station may allow it to continue using the European Union’s biggest coal deposits to fuel the bloc’s biggest eastern economy. The country, which gets more than 80 percent of its electricity from coal, may use a pledge to build its first nuclear power plant as a bargaining chip in key talks with the EU on planned climate regulations under the so-called winter package. The clean energy source would cut overall emissions and could help Poland persuade the bloc to let it use dirty coal units for longer. “It would be best if there was no winter package, but if it’s there we want to work out a compromise,” Deputy Energy Minister Grzegorz Tobiszowski told reporters in Warsaw on Tuesday. “In its current form the proposals would limit our coal investments and we wouldn’t be able to afford it.”Power plants in the EU will have to cut the amount of toxic pollutants such as nitrogen oxides they emit under new rules approved by member states and widely applauded by environmental groups.

Nuclear Subsidies Threaten Wind and Solar Power -- The push to save U.S. nuclear plants for the sake of fighting climate change is threatening support for the bread and butter of clean power: wind and solar. New York and Illinois have already approved as much as $10 billion in subsidies to keep struggling reactors open for the next decade as part of a plan to limit fossil fuel consumption. Lawmakers in Ohio, Connecticut and New Jersey are debating whether to do the same. The reactors, which are being squeezed by low natural gas prices, offer a singular advantage in the fight against global warming because they produce round-the-clock electricity without emitting greenhouse gases. Yet renewable energy operators including NRG Energy Inc. and Invenergy LLC say keeping nuclear plants open will leave grids awash with excess power, leaving little demand for new wind and solar farms. “It’s the wrong policy -- and whether it proliferates or not is going to be a really big factor,” Invenergy Chief Operating Officer Jim Murphy said during a panel discussion at the Bloomberg New Energy Finance conference in New York Monday. Executives from companies on both sides of the debate, including reactor owner Public Service Enterprise Group Inc. and Invenergy, are attending the conference. One point is clear: greenhouse gases will increase if nuclear plants close.

 Coal Country Is Back, Along With Signing Bonuses and Pay Raises - Before dawn, a coal miner named Cameron Justice stopped at a gas station in Mingo County, West Virginia, grabbing two cans of Monster Energy drink before heading into the pits. He could use the jolt. The barrel-chested 37-year-old works six shifts a week at the Ruby Energy mine in the heart of U.S. coal country. Last year, he was lucky to get four. “We’re booming,” Justice said. “This is the biggest upswing I’ve seen in five years. Everyone’s excited.”  Like a mountain stream reviving after a drought, money is trickling into Appalachia again -- at least, for now. It begins with a trio of global forces: Chinese production curbs, President Donald Trump’s anti-regulatory policies and investor bets that have, over the last year, doubled the market value of publicly traded U.S. coal companies, to $15 billion.It ends in cities like Logan, population 1,800, where streets that once bustled with small businesses are now blighted with shuttered stores, boarded-up windows and sidewalks laced with cracks.The gossip here is no longer about mine closures and mass layoffs. Miners are snagging $1,000 signing bonuses, fully paid health insurance and raises again. (Justice just earned a 50-cent-an-hour bump.) At the Marathon gas station where Justice stopped for breakfast, business was up 15 percent in only the last couple of months. Owner Isom Ooten has extended store hours after cutting back just last year.“Coal in our counties is number one, I don’t care what they say,” Ooten said. “I want the economy to come back.”

Coal Jobs Prove Lucrative, but Not for Those in the Mines - Glenn Kellow, the coal executive who led Peabody Energy through bankruptcy, just collected an estimated $15 million stock bonus. John Eaves at Arch Coal, another recently bankrupt coal giant, got an award valued at $10 million. The view from the coal pits is far less rosy. An analysis of recent government data shows that the wage gap between the coal industry’s top executives and average coal workers has expanded, while low-end pay has stagnated. From 2004 to 2016, the average annual wage for chief executives in the coal industry grew as much as five times faster than those of lower-paying jobs in the industry, like construction or truck and tractor operator jobs. Executive pay averaged $200,000, up 60 percent from $125,000, while paychecks for truck and tractor operators rose just 15 percent, to $43,770 from $38,060. Pay for construction jobs in mining rose just 11 percent, to $35,080 from $31,470. Pay for chief executives in the coal industry also grew much faster, on average, than that of their counterparts across the wider economy, while the average pay for coal industry construction workers failed to keep up with similar jobs in other fields. The data excludes bonuses, share options and other perks, which often inflate executive compensation — and the pay gap — many times more. Mr. Kellow’s stock options in the last year, for example, are worth almost 350 times what a typical coal truck and tractor operator makes in a year. 

Coal-rich, but job-hungry, Appalachia waits for Donald Trump to deliver - - Coal employment also has fallen, across all of Ohio. In 2013, there were nearly 3,000 coal miners in Ohio, according to the Ohio Department of Natural Resources. By 2015, there were about 2,352. People here blame coal's demise and the region's overall industrial decline on government "over-regulation," which they blame on Democrats. They say: Federal subsidies for wind and solar farms are wrong-headed and not pro-job. Climate change is a distant issue. Good-paying jobs are the issue. "Forty years ago, you could get a job almost anywhere. The Valley was home to steel, coal and the chemical industry," said Dave Humphreys, Sr., a former coal employee who founded a metal fabricating company, Lion Industries, 22 years ago in nearby Bellaire, Ohio. Lion supplies coal mines with stamped steel parts. In recent years, Humphreys has had to lay off workers for the first time ever, as power plants began closing and coal production slowed across the region. "What people don't understand is that the economy here has been based on coal. Obama said he would regulate coal out of business. He practically did. I don't think politicians really understand the effect of regulations on business and on people. We need sensible regulations." Energy market analysts, however, say coal has suffered mostly because other forms of electrical generation, including wind and solar, are cheaper than coal. Natural gas has been especially cheap in the Ohio-Pennsylvania-West Virginia region, and, like coal, it can power plants around the clock.

Door to fracking in Ohio state parks could be re-opening - The Columbus Dispatch - For more than five years, Ohio Gov. John Kasich in effect has enforced a moratorium on fracking and other drilling in Ohio’s state parks. That could soon change. House Republicans have added a little-noticed provision into the state budget slated for passage today that would give the legislature, not the governor, the power to pick the members of a key commission. The General Assembly approved fracking in Ohio’s parks in 2011, and Kasich signed the bill. Under that law, a newly created Oil and Gas Commission was given the responsibility of approving potential drillers after completion of environmental and geological studies, determining the potential impact on visitors, seeking public input and meeting other requirements. But Kasich had a change of heart on allowing drilling on public lands. Even though the drilling law gave him until November 2011 to appoint commission, which then had until June 2012 to come up with rules, to this day he has not chosen a single member — meaning that nobody could get an OK to drill in parks. However, if the legislature gives itself the authority to pick the commission, the process toward fracking in Ohio’s parks presumably could get underway again. “This amendment is an effort to grant more legislative authority for filling the commission, with the goal of spearheading public discussion on these issues,” said Brad Miller, spokesman for Republicans who control the House 66-33. “The intention is not to steer the committee in any particular direction, but rather to fulfill a commission that was created by the General Assembly years ago.” A similar attempt was thwarted two years ago, when GOP lawmakers gave up on an attempt to remove the commission from the decision-making process, which also would have ended Kasich’s unofficial moratorium. A spokeswoman says Kasich still opposes fracking in Ohio parks. Before he changed positions, Kasich’s staffers and leaders of the Ohio Department of Natural Resources had prepared a detailed marketing plan to sell fracking in state parks to Ohioans.

Ohio House moves to bypass Gov. Kasich to OK drilling in state parks - Defying Gov. John Kasich, Ohio legislators took a key step Tuesday toward bringing fracking to state parks. House Republicans added a little-noticed provision to the state budget that would give the legislature, not the governor, the power to pick members of the state Oil and Gas Commission.That’s important because for more than five years, Kasich has effectively imposed a moratorium on fracking and other drilling in Ohio’s state parks by refusing to put anyone on the commission.The legislature approved fracking in Ohio’s parks shortly after Kasich took office in 2011, and the new governor signed the bill. Under that law, the Oil and Gas Commission was given the responsibility of approving potential drillers after completion of environmental and geological studies, determining the potential impact on visitors, seeking public input and meeting other requirements.But Kasich had a change of heart on allowing drilling on public lands. Even though the drilling lawgave him until November 2011 to appoint members of the commission, which then had until June 2012 to come up with rules, he has never chosen a member.  The upshot is that no one could get an OK to drill in parks. However, if the legislature gives itself the authority to pick the commission, the process to permit fracking in Ohio’s parks could resume.“This amendment is an effort to grant more legislative authority for filling the commission, with the goal of spearheading public discussion on these issues,” said Brad Miller, the spokesman for House Republicans, who control the chamber 66-33.  “The intention is not to steer the committee in any particular direction, but rather to fulfill a commission that was created by the General Assembly years ago.”

Ohio lawmakers add budget provision that could open state parks to fracking | Reuters: - legislators took a step toward allowing fracking in state parks, adding a provision in a pending budget that would strip the governor of the ability to control the issuing of licenses for the oil and gas drilling practice that has raised environmental concerns. The provision, added on Tuesday by the Republican-controlled House, would allow the state legislature instead of the governor to control appointments to the Oil and Gas Commission responsible for issuing drilling licenses for state lands. Governor John Kasich, a Republican, has not named any members to the four-member commission since signing the bill that created the group in 2011. This has effectively halted any fracking in parks. Fracking opponents complained that the legislature was now trying to find a way to allow fracking without the proper safeguards to ensure public safety. “It is an end run by Republicans in the legislature to facilitate more fracking and drilling in Ohio state parks,” David Leland, a Democratic state representative from Columbus who voted against the budget partly due to the measure, said on Wednesday.Proponents of the provision said it would not necessarily result in widespread drilling and fracking in state parks. “The provision is simply an attempt to fill that committee,” Ben Miller, spokesman for the Ohio House Republicans, said on Wednesday. Separately, four conservation groups have sued the U.S. Forest Service and Bureau of Land Management in an attempt to halt fracking plans in Ohio's only national forest. Nearly a fifth of Ohio has geographical potential for shale gas drilling, said Nathan Johnson, public director of the Ohio Environmental Council, an environmental group. The proposed budget must be approved by the Republican-controlled state senate by July 1. 

Ohio City Plans Lawsuit to Stop Nexus Pipeline – EcoWatch - The battle over the controversial Nexus pipeline is heating up. Following a city council vote on Tuesday, the city of Green in Ohio will be spending $100,000 to hire an environmental law firm in Cleveland to stop its construction, the Associated Press reports. Canadian pipeline operator Enbridge and Detroit's DTE Energy plan to build the high pressure, 36-inch natural gas transmission line through 8 miles of the middle-class community. But the city of Green, located in northeast Ohio between Akron and Canton, has been working hard to stop the project. Just a few weeks ago, city council donated $10,000 to another group preparing its own lawsuit over the Nexus pipeline. According to Green's Planning Department, the pipeline encounters a large wetland as it enters the city, crosses nearly three streams for every mile and would be in close proximity to homes. The route would also cross a large agricultural farm that is being considered for future residential development.An analysis from Cleveland State University calculated that Green stands to lose $52 million over the course of 50 years due to the project, mostly due to a loss of income tax.The route also travels near or crosses several of Green's 10 city parks. Mayor Gerard Neugebauer told the AP that he could not allow families to use parks inside the estimated 1,500-foot blast zone a pipeline explosion could create. The city previously proposed an alternate route that would move the pipeline south into farmland but the Federal Energy Regulatory Commission (FERC) ruled against the plan in its final environmental impact statement. The proposed 255-mile Nexus pipeline will carry about 1.5 billion cubic feet of Appalachian shale gas per day from through Ohio and Michigan before ending at a hub in Ontario, Canada owned by Enbridge.  Neugebauer told the AP that the Canadian company should not be allowed to take property from U.S. landowners.

Mayor Stands Up to Gas Pipeline Build - Green City, Ohio sits midway between Akron and Canton, has a population around 26,000, and has been named a Best Places by Sperlings website. The city also has Mayor Gerard Neugebauer who is taking on Big Energy by filing a lawsuit to stop Nexus Gas Transmission from burying 8 miles of pipeline in the middle-class community of Green .Neugebauer told The Associated Press that he will exhaust all options to stop Nexus Gas Transmission from burying 8 miles of pipeline in the middle-class community of Green . He said the pipeline could cost the city millions of dollars annually in tax revenues from lost economic development opportunities, lead to the abandonment of city parks and harm environmentally fragile wetlands.Neugebauer has the backing of the Green City council who authorized $100,000 this week to hire a Cleveland firm that specializes in environmental law.The high pressure natural gas pipeline proposed by Nexus Gas Transmission would be 255 miles long and would carry up to 1.5 billion cubic feet of gas per day from the Utica and Marcellus shale areas to the company's Dawn Hub in Ontario, Canada.Nexus Gas Transmission is a partnership of Canadian Enbridge and Detroit's DTE Energy . Enbridge merged this year with Houston -based Spectra Energy, DTE's original partner.Pipeline opponents argue that a Canadian company like Enbridge shouldn't be allowed to take property from U.S. landowners. An unknown number of property owners have refused to allow surveyors onto their property or negotiate easements for the pipeline and construction period. "I don't have animosity toward foreign companies," Neugebauer said. "But our government shouldn't be giving a foreign company more rights to property than the people who own the property."

Conservationists Sue to Halt Fracking in Ohio's Only National Forest - (Reuters) - Four conservation groups on Tuesday sued the U.S. Forest Service and Bureau of Land Management in an attempt to halt fracking plans in a portion of Ohio's only national forest. The suit, filed in U.S. District Court in Columbus, argues that the federal agencies failed to sufficiently analyze risks to watersheds, public health, climate and endangered species, including Indiana bats, before auctioning 670 acres (270 hectares) in December of the Wayne National Forest in Southeast Ohio for eventual hydraulic fracturing, or fracking, of underground shale. The groups are seeking an injunction to halt oil and gas leasing and development until a new assessment can be made. Fracking involves injecting water, sand and chemicals into wells to fracture shale and release natural gas and oil. U.S. Forest Service spokeswoman Babete Anderson declined to comment, citing pending litigation. Bureau of Land Management officials could not be reached immediately for comment. The Ohio Oil and Gas Association declined to immediately comment on the suit, but argued in a recent post on its website that fracking does not harm groundwater and increased natural gas use across, driven partly by fracking, has helped reduce air pollution. The portion for forest in question, known as the Marietta Unit, is located near Ohio's border with West Virginia along the Ohio River. The Bureau of Land Management's environmental assessment previously found no significant impact in opening leasing to gas and oil companies. Conservation groups who filed the suit, including the Ohio Sierra Club and the Ohio Environmental Council, argued fracking would bring roads, well pads and gas lines into the state's only national forest, destroy Indiana bat habitat and other threatened species and pollute watersheds and water supplies.

Ohio Environmental Council challenges fracking at Wayne National Forest | WSYX: The Ohio Environmental Council (OEC) announced they have filed a lawsuit against the U.S. Forest Service (USFS) and the U.S. Bureau of Land Management (BLM) over plans to frack the Wayne National Forest, the only national forest in Ohio. lawsuit was filed in federal district court in Columbus. “The Wayne is a public forest owned by every Ohioan and every American. The OEC is bringing this lawsuit because we want our children and grandchildren to know a Wayne that’s full of towering trees and thriving wildlife, not one that’s scarred by frack pads and pipelines,” said Nathan Johnson, Attorney and Public Lands Director for the Ohio Environmental Council. Johnson said he believes the law is on the OEC's side. “The agencies are required to closely review the environmental consequences of their leasing decisions, and they didn’t do their required homework," he added. "They refused to even acknowledge that oil and gas pipelines will be a major disruptive presence in the forest. We’re looking at a textbook legal failure on their part.” According to OEC, the BLM's stated intention is to lease off 40,000 acres of the Wayne National Forest’s Marietta Unit to oil and gas operators. They said this sets up approximately two-thirds of the Unit to be auctioned off in upcoming quarterly BLM lease sales. The Ohio Environmental Council said they are a not-for-profit, 501(c)(3) conservation organization whose mission is to secure healthy air, land, and water for all who call Ohio home. 

Enviros Fight Fracking in Ohio National Forest - Courthouse News Service (CN) – Four environmental groups sued the U.S. Forest Service and Bureau of Land Management over their authorization of oil and gas leases that allow fracking of shale formations in Ohio’s only national forest.  The Center for Biological Diversity, Sierra Club, Ohio Environmental Council and regional environmental organization Heartwood filed a lawsuit Tuesday in Columbus federal court challenging the legality of the new leases.  The conservation groups say the Bureau of Land Management, or BLM, approved a plan to lease oil and gas companies 40,000 acres of federal land inside Wayne National Forest without taking a “hard look” at the consequences, environmental impacts and adverse effects of its actions.  According to the lawsuit, BLM and Forest Service relied on an outdated, decade-old land and resource management plan – as well as a 2012 supplemental information report that was never subject to public notice and comment – when they authorized the new oil and gas leases in October. The conservation groups also claim BLM rushed the preparation of a 2015 environmental assessment and then determined that the plan would “not significantly affect the quality of the human environment” without properly analyzing threats to watersheds, public health, climate and endangered species like Indiana bats. The groups argue that hydraulic fracturing, or fracking, will industrialize Ohio’s only national forest with roads, well pads and gas lines. Such infrastructure, they say, would destroy animal habitats and pollute water supplies. “Both humans and wildlife species such as the endangered Indiana bat, river otter, bobcat, and Cerulean warbler, rely on the Wayne National Forest’s undeveloped woods, streams and rivers, and peace and quiet,” the lawsuit states. They’re also concerned about contamination from fracking chemicals and wastewater transported by trucks and pipelines. In their complaint, the groups highlight four times within the last three years that fracking activity near Wayne National Forest has contaminated streams and harmed wildlife.

 Study Finds Fracking Is Strongly Related to Increased Infant Mortality: A new study of Pennsylvania counties published this week in the Journal of Environmental Protection shows for the first time that contamination from fracking kills babies. The Marcellus shale area of Pennsylvania was one of the first regions where novel gas drilling involving hydraulic fracturing of sub-surface rock, now termed 'fracking', was carried out. The epidemiological study by Christopher Busby and Joseph Mangano examines early infant deaths 0-28 days before and after the drilling of fracking wells, using official data from the US Centre for Disease Control to compare the immediate post-fracking four-year period 2007-2010 with the pre-fracking four-year period 2003-2006Results showed a statistically significant 29% excess risk of dying age 0-28 days in the ten heavily fracked counties of Pennsylvania during the four-year period following the development of fracking gas wells. Over the same period, the State rate declined by 2%. They conclude:"There were about 50 more babies died in these 10 counties than would have been predicted if the rate had been the same over the period as all of Pennsylvania, where the incidence rate fell over the same period."

US gas producer Consol lifts production guidance for 2017, 2018 -- US Appalachian gas producer Consol Energy raised its 2017 and 2018 production guidance Tuesday, with company executives saying it is poised for a two-year period of output growth as it reaps the benefits of improved drilling operations and cycle times, among other factors. Consol now expects production of approximately 420-440 Bcf of natural gas equivalent for 2017 and 490-520 Bcfe for 2018, company officials said during a first-quarter results conference call. This compares with the previous guidance of 415 Bcfe for 2017 and 485 Bcfe for 2018. The company reported strong natural gas production growth from its operations in the Marcellus Shale, where Q1 output jumped 17.3% year on year to 52.9 Bcf (588,000 Mcf/d). But production in the dry Utica Shale segment disappointed, falling 34.5% to 11.6 Bcf (129,000 Mcf/d) versus 17.7 Bcf (197,000 Mcf/d) in the year-ago quarter.Total oil, gas and natural gas liquids production produced for sales in Q1 fell 2.6% to 95 Bcfe (1.06 Bcfe/d), compared with the 97.5 Bcfe (1.08 Bcfe/d) in the same period of last year. Consol said this overall decline was driven primarily from the output drop in the dry Utica Shale segment.

Southwestern Energy, Ohio County Jostle Over Fire Service Fee - Wheeling Intelligencer — Accidents at Marcellus and Utica shale drilling pads can put a strain on the small volunteer fire departments assigned to cover the countryside. Although Ohio County has seen no large-scale problems at its several well sites, its Commission and Fire Board in 2015 voted to impose an annual fire service fee of $5,000 per well pad, regardless of how many wells are on the pad in question. Therefore, the county sent a $145,000 bill to Southwestern Energy Co. — the only company with active horizontal drilling and fracking operations in the county — for 2016. Instead of paying the bill, however, Southwestern officials hired legal counsel to challenge the county’s right to impose such a fee. The Houston, Texas-based firm is questioning whether the county met the state-imposed threshold for the required number of signatures to impose the fee, while also calling the fee “arbitrary and excessive.”  The legal battle is now set in Ohio County Circuit Court, although there have not yet been any hearings scheduled. “Southwestern Energy supports local first responders.. We are supportive of an equitable and reasonable fire fee, but as it is written, natural gas producers are not being treated fairly,” company spokeswoman Christina Fowler said. “The industry has been singled out and charged an arbitrary and excessive fee.  In 2014, Southwestern paid $5 billion to acquire the West Virginia assets of Chesapeake Energy. County officials in 2010 signed a lease agreement for several hundred acres in the vicinity of The Highlands with Chesapeake, while the Wheeling Park Commission and city of Wheeling also leased the mineral rights under Oglebay Park to Chesapeake.

Daily Mail editorial: Fracking not the problem some make it out to be - Hydraulic fracturing of natural gas wells has not contaminated groundwater in northwestern West Virginia, according to a study by Duke University scientists released this month. But accidental spills of fracking wastewater may pose a threat to surface water in the region, the scientists said.The three-year study, funded by the National Science Foundation and the Natural Resources Defense Council, concluded what many in the natural gas industry have been saying for years: The extreme risks opponents claim fracking poses aren’t true.That’s not to say the industry shouldn’t continue to be careful and deliberate in its fracturing process. And gas drillers and their associates must learn to be more careful when handling fracking wastewater, which comes back out of the gas well after the hydraulic fracturing procedure and must be disposed of in permitted facilities.   While natural gas and oil wells have been fractured for generations, the technology of hydraulic fracturing to access huge gas reserves in the much more compact Marcellus, Utica and other shales came into use in the late 2000s.  Fear combined with considerable misinformation has caused a subculture of hysteria about fracking, yet study after study has shown problems with fracking during drilling are minimal.  “Currently there is no scientific data that demonstrates that hydraulic fracturing is intrinsically unsafe compared to other oil and gas wells,” said Timothy Carr, professor of geology at West Virginia University in December 2014. At that time, he called for more research, which the Duke study has provided.“Based on consistent evidence from comprehensive testing, we found no indication of groundwater contamination over the three-year course of our study,” said Avner Vengosh, professor of geochemistry and water quality at Duke’s Nicholas School of the Environment in a news release. “However, we did find that spill water associated with fracked wells and their wastewater has an impact on the quality of streams in areas of intense shale gas development.” “The bottom-line assessment,” he said, “is that groundwater is so far not being impacted, but surface water is more readily contaminated because of the frequency of spills.”

More Rigs Don't Mean More U.S. Gas - U.S. natural gas producers are running hard to stand still. The number of rigs drilling for gas has almost doubled since August, but output continues to fall. Even accounting for a lag between the start of drilling and first production, the drop in output is striking -- a well in the Marcellus Shale, America’s most prolific reservoir of the fuel, is producing about half of what it yielded a year ago, according to Bloomberg Intelligence. Companies are struggling to overcome steep decline rates -- the natural decrease in production -- from shale formations that were the source of huge added supplies in years past. The slowdown could signal an end to a glut that’s sent prices down 12 percent since the beginning of the year, making gas one of the worst performers in the Bloomberg Commodity Index. Hedge funds have boosted bullish bets that output will fall short of demand as cheap U.S. supplies head to Mexico and overseas production has been “pretty abysmal,” Tom Ward, chief executive officer of Mach Resources LLC and co-founder of Chesapeake Energy Corp., said in an interview Wednesday with Bloomberg Television. Unless prices rise enough to boost output, “we’re going to be short gas going into the winter.” Producers have to drill at a breakneck pace just to keep output stable -- a phenomenon known as the Red Queen, after the character in Lewis Carroll’s “Through the Looking-Glass” who tells Alice, “It takes all the running you can do, to keep in the same place.” While the number of gas rigs has climbed 90 percent over the past year, output of the fuel in the lower-48 states is down 1.1 percent, data from Bloomberg and Baker Hughes Inc. show. “The life cycle of the wells that have been drilled are coming to an end,” said John Borruso, director of natural gas trading at Consolidated Edison Inc.’s Con Edison Energy in Valhalla, New York. “I see production coming online slowly.” For gas wells brought online since 2014 in the Marcellus, located primarily in Pennsylvania and West Virginia, the average 12-month decline rate is 51 percent, said Will Foiles, an analyst with Bloomberg Intelligence in New York. That means that a well in the reservoir that started producing a year ago at 10 million cubic feet a day is now yielding only 4.9 million.  

What if Fracking the Marcellus Shale Doesn't Pan Out? -- For the gas industry and some utilities that are racing to build as much gas infrastructure as possible, there's a lot riding on a shale gas "play" known as the Marcellus.   U.S. shale gas production (i.e. from hydraulically fractured wells) has grown steeply over the past 17 years and is now 67 percent of total U.S. natural gas.  Gas prices have historically been extremely volatile, but gas companies and utilities are saying that it will stay low for a long time—almost indefinitely—and they base much of that argument on the Marcellus, the largest source of fracked gas in the U.S.  The chart below shows the volatility of natural gas since 1997. The two biggest spikes are Hurricane Katrina (August 2005) and the run-up in oil and gas costs which peaked in July 2008 with oil at $147/barrel and natural gas at $13/MMBtu. Despite the extreme ups and downs of natural gas pricing, the U.S. Energy Information Administration's (EIA) 2017 Annual Energy Outlook projects that the cost of natural gas will remain at bargain-basement levels from 2030 to 2040 at $5.00 per MMBtu. This is 20 percent below what EIA forecast in its 2015 Annual Energy Outlook price forecast over the 2015-2040 period.  While the increase in U.S. shale gas production is stunning, so are the decline rates for individual wells, which average 75-85 percent decline over the first three years. As geoscientist David Hughes points out, a steep decline rate for each well means that 30-45 percent of a play's production must be replaced each year by more drilling. In some areas of the U.S., spacing of gas wells has dropped from 1 well pad per 240 acres to 1 well pad per 10 acres.  A good example is the Haynesville shale play, which started at nearly zero in 2006 and shot up quickly until peaking in early 2012. As of 2017, the Haynesville is down by 52 percent. Despite the obvious decline in production, the EIA recently predicted an ever-higher output from the Haynesville, so that it will nearly double its 2012 peak and continue producing gas past 2040.  The Marcellus shale play currently provides over a third of total U.S. shale gas produced and is mainly in Pennsylvania but also includes eastern Ohio, northern West Virginia and southern New York state. The top five shale-producing counties in Pennsylvania have accounted for 65 percent of cumulative production from the Marcellus play, demonstrating the fact that most gas is produced from a few "sweet spots." The EIA's overblown estimate of future gas supplies is higher for the Marcellus shale than any other play.

U.S. lower 48 natgas output up by most in nearly 3 years in February: EIA | Reuters: U.S. gross natural gas output in the lower 48 states jumped by the most in almost three years to 80.2 billion cubic feet per day in February, the U.S. Energy Information Administration (EIA) said on Friday in its monthly 914 production report. The 1.8 bcfd increase in February over January was the biggest monthly increase since April 2014 and the first monthly increase in three months. Gross production in February climbed to its highest since August 2016. That compares with the record 82.6 bcfd hit in February 2016. Output increased in all three of the biggest lower 48 producing states - Texas, Pennsylvania and Oklahoma. In Texas, the largest gas-producing state, output in February increased for the first month in 10, up 0.7 bcfd to 21.3 bcfd. That was the biggest monthly increase in the state since March 2011. In Pennsylvania, output rose by 0.3 bcfd to a monthly record high of 15.2 bcfd in February. That was the fourth monthly increase in a row. Production in Oklahoma increased by 0.2 bcfd to 6.5 bcfd in February. That was its biggest monthly increase since March 2015.EIA also reported dry gas production for February, but did not break out individual states. U.S. dry production, including Alaska, increased to 72.1 bcfd in February from 70.7 bcfd in January. Monthly dry gas production peaked in April 2015 at 75.0 bcfd. Gas production declined in 2016 for the first time since the start of the shale revolution a decade ago as low energy prices reduced drilling activity. Next-day gas prices at the Henry Hub benchmark in Louisiana averaged $2.49 per million British thermal units in 2016, the lowest annual average since 1999. Prices averaged $2.61 in 2015, which before last year was also the lowest since 1999. 

Natural Gas Prices In Peril, As Production Rises Most In Three Years - The U.S. Energy Information Administration (EIA) announced the biggest jump in the natural gas output rate for the lower 48 states in three years on Thursday in the agency’s monthly production report. Production stood at 80.2 billion cubic feet per day (bcfd) in February, up 1.8 bcfd from January. Gross gas production figures for February stood at their highest since August 2016, but February 2016 still holds the record for most production at 82.6 bcfd.Texas, Pennsylvania, and Oklahoma – the three most prolific gas-producing states – all saw new gas production, the latest numbers show.Texas gas figures jumped by the first time in 10 months, marking the biggest increase since March 2011. Pennsylvania saw the fourth month of production spikes in a row and Oklahoma witnessed the largest output increase since March 2015.While natural gas production declined in 2016, the agency said in its April Short Term Energy Outlook report that it expects this trend to be reversed in 2017, with natural gas production increasing by 0.8 billion cubic feet per day. The forecast for 2018 predicts an additional increase of 4 bcf/d. Higher prices in natural gas, expected to rise from the March level of $2.88 to an average of $3.10 in 2017, with a further increase to $3.45 in 2018, will likely contribute to a decline in the share of electricity supplied by natural gas in the coming years, as gas loses its competitive edge. Surprisingly, the EIA predicts that natural gas’ share will fall from 34 percent to 32 percent by 2018, while that of coal will increase from 30 percent to 31 percent. Non-hydropower renewable energy (solar and wind) will see a modest increase from 9 percent to 10 percent, the STEO added.

The Northeast Desperately Needs More Pipelines – IER - In a new report, the Chamber of Commerce quantified the economic and job losses arising from limiting natural gas infrastructure development in the U.S. Northeast where several states, including Massachusetts, Connecticut, and New York, have denied construction of natural gas pipelines. According to the report, if no new pipelines are built, it would cost the region over 78,000 jobs and $7.6 billion in GDP by the year 2020,[i] and the displacement of over $4.4 billion in labor income.[ii] In New York, Governor Cuomo’s Administration denied permits to natural gas pipelines, after banning hydraulic fracturing in the state. His state could be drilling its own natural gas if it were not for the ban on hydraulic fracturing. Now, the state’s Department of Environmental Conservation has denied certification to the proposed Northern Access pipeline and water permits sought by the Constitution Pipeline.[iii] Cuomo has also fought the Algonquin Pipeline expansion and has been dawdling on an 8-mile spur to a new power plant in Wawayanda.[iv]  In Massachusetts, the Supreme Judicial Court ruled against energy companies having electricity consumers pay for the costs of new natural gas pipelines.[v]Without additional pipelines, New England will be importing higher cost liquefied natural gas (LNG) to its terminal on the Mystic River in Boston Harbor. That terminal is the only LNG facility in the United States importing LNG; the others are being converted to export facilities. New England is over 50 percent dependent on natural gas for its electricity as coal and nuclear plants have been shuttered.Specifically, the Massachusetts ruling blocks a financing plan for a $3 billion regional gas pipeline, the Access Northeast pipeline project, which was intended to expand the existing Algonquin gas pipeline in Massachusetts, Rhode Island, and Connecticut. Access Northeast was expected to save New Englanders approximately $1 billion a year. This is the second project to be blocked. Kinder Morgan, the nation’s biggest energy infrastructure company, dropped its plan for the Northeast Energy Direct project because of a lack of assurances that electricity ratepayers would pay for the $3.3 billion pipeline. The Northeast Energy Direct plan would have included a spur line into Connecticut to bring natural gas from the Marcellus shale regions of Pennsylvania.[vi]

Va. climate protesters say Dominion gas pipeline requires ‘mountaintop removal’ -  Bill and Lynn Limpert rallied outside Gov. Terry McAuliffe’s Capitol Square offices Thursday with a poster-sized photo of themselves back home in rural Bath County, standing at the foot of a massive sugar maple.  Measuring 12 feet around, the tree is part of an old-growth forest that the Limperts said would be removed — along with 38 miles of mountaintop — if Dominion Power is allowed to build a natural gas pipeline through rural Virginia. The two retirees were part of an environmental protest that claimed Dominion’s proposed Atlantic Coast Pipeline will require “mountaintop removal” — something the company says is not true.The environmental group Chesapeake Climate Action Network organized the protest to draw attention to a new study it conducted. It concluded that Dominion would have to “decapitate” some mountains along the pipeline’s 600-mile route, which would begin in north-central West Virginia, cross through western and southern Virginia, and end at the southernmost end of North Carolina.“Dominion Resources intends to blast away, excavate, and partially remove entire ridge tops along 38 miles of Appalachian Mountains as part of the construction of the Atlantic Coast Pipeline,” the study said.Aaron Ruby, media relations manager for Dominion Energy, said the group is wrong. “The claims that Chesapeake Climate Action Network has made about mountaintop removal are just totally false,” he said. “It’s a total mischaracterization of how we build pipelines on ridge tops.” The demonstration came at an awkward time for McAuliffe (D) and the Democrat he would like to succeed him, Lt. Gov. Ralph Northam. Both have said they would support the pipeline if it can meet tough environmental standards. Northam’s rival in the June 13 Democratic primary, former congressman Tom Perriello, opposes the project and has been trying to use his stance to woo liberal voters.

An LNG export terminal on the Chesapeake Bay -- The contiguous U.S. natural gas market is on its way to having its second major LNG export terminal and a new source of demand in the Northeast region by the end of the year. Dominion’s Cove Point liquefaction project, located on the Chesapeake Bay in Calvert County, Maryland, last month received approval from the Federal Energy Regulatory Commission (FERC) to introduce fuel gas, signaling the start of commissioning activities, a precursor to start-up activities for the liquefaction train itself. Dominion also last November applied for permission from the Department of Energy to export up to 250 Bcf of LNG during pre-commercial operations starting as early as fourth-quarter 2017, and is awaiting a response. Once operational, the facility, which is located within just a few hundred miles of the Marcellus/Utica shales — will have access to one of the primary southbound pipeline corridors for Marcellus/Utica takeaway capacity and add nearly 0.8 Bcf/d of demand to the Northeast gas market. Today we provide a detailed look at the Cove Point LNG facility.   Cove Point’s liquefaction project — a single-train facility with a nameplate capacity of 5.25-million ton per annum (MTPA) — is poised to be the second LNG export terminal to come online in the contiguous United States, following Cheniere Energy’s Sabine Pass LNG, which first began exporting cargoes in February 2016. Cove Point also will be the first export train on the East Coast. Like Sabine Pass, the Cove Point liquefaction project is a brownfield project, meaning it is being built at an existing facility with a long history of LNG import and regasification. The terminal was originally designed to regasify imported LNG and move it into the U.S. gas pipeline system to serve regional demand. Figure 1 shows a map of the existing LNG facility and interconnecting pipelines. The import terminal itself, the green diamond in Figure 1, comprises seven storage tanks totaling 14.6 Bcf, six electric generation units and a tunnel that connects the onshore facilities with an offshore pier, which can receive and offload LNG cargoes carrying as much as 267,000 cubic meters of LNG per ship. The peak send-out of Cove Point (i.e., east to west flows) is 1.8 Bcf/d.

Trump admin's push for gas exports faces market glut — The Trump administration is moving to make the United States the world’s leading exporter of natural gas as a central component of both energy and trade policy. But whether global markets, currently awash with gas, will play along remains a long shot over the next several years. Any breakdown of talks to remodel the North American Free Trade Agreement, which set the regulatory framework that allowed gas exports to Mexico to triple over the last six years, could also get in the way. The administration’s ambitions were explained emphatically last month by Gary D. Cohn, director of the National Economic Council, and they were followed up by the Energy Department’s authorization last Tuesday for a Texas export terminal that Exxon Mobil and Qatar Petroleum have pursued for years. Other administration plans include opening the way for more gas exports from Oregon to serve Asia.  In recent years, there was strong domestic opposition to the exports, from manufacturers and others, out of fear that domestic gas prices would rise, and the Obama administration moved cautiously before increasing the pace of export terminal permit approvals during its second term. With supplies appearing bountiful, and other countries aiming to increase their own production, opposition has mostly abated, except in pockets of the East Coast and Pacific Northwest. There remains enthusiastic support along the gulf coasts of Louisiana and Texas, where there is substantial room for more growth.  For the Trump administration, the economic benefits of gas export infrastructure are paramount. Each natural gas export terminal can require an investment of $10 billion or more, produce thousands of construction jobs and consume millions of pounds of steel. Then there is the additional drilling and production of gas, which is then cooled to minus 260 degrees, condensing it to a liquid known as liquefied natural gas, or L.N.G., to be shipped on giant tankers to Asian, European and Latin American markets.  The recent expansion of the Panama Canal has quickened the route to growing markets in Japan, South Korea and elsewhere in Asia, making American gas more competitive. “Exporting L.N.G. meets many objectives, including helping to address the trade imbalance,” said Daniel Yergin, the energy historian and vice chairman of IHS Markit, a consultancy. “This supports jobs, this supports investment in energy, this supports exports, a whole host of administration objectives.”

Panama Canal to see daily LNG carrier transits within 4 years, says CEO - The number of LNG carrier transiting the Panama Canal could average one a day by 2021 as more US supply comes on stream and targets demand in North Asia, according to Panama Canal Authority CEO Jorge L. Quijano. "During the past nine months of operation of the Panama Canal we have seen LNG flows that we never expected a few years back," Quijano said on the sidelines of the Sea Asia Conference, held in conjunction with the Singapore Maritime Week 2017 last week. The initial projection was for one LNG ship a week but this had already reached three to four ships, he said. Much of the future traffic will be driven by emerging LNG exports from the US, of which some will pass through the canal, he said. Cheniere has three fully operational LNG trains at Sabine Pass on the US Gulf Coast, with a fourth train undergoing commissioning expected to reach substantial completion in second half 2017, the company said in April. Train five is currently under construction and slated to become operational in 2019, and train six fully permitted and being commercialized, it added. Cheniere also has two trains under construction at its liquefaction project near Corpus Christi in Texas, with operations at both trains expected to begin in 2019, the company said. Other US LNG projects slated to start production in the near future include Freeport LNG, Cameron LNG in Louisiana and Cove Point LNG. "The prospects are really good for LNG transits for us and as you have more LNG and more fracking, there will be more LPG as well," Quijano said.

Texas economy could boom with Gulf Coast LNG export projects, group says | MDU Message Board Posts: LNG export projects planned for Texas' coast could have a total economic impact of about $145 billion of dollars and create thousands of jobs if approved by federal regulators, according to an industry group courting support for the proposed ventures. Texans for Natural Gas said in a report that seven LNG export projects proposed or under construction in the state could raise $20 billion or more in tax revenue, create more than 135,000 jobs and have a total economic impact of roughly $145 billion. In addition to regional benefits, projects like the Freeport LNG export expansion could slightly reduce the U.S. trade deficit, the group said. Roughly a third of U.S. LNG export projects are planned for Texas, which along with Louisiana has a natural gas pipeline network that can feed liquefaction and export terminals along the Gulf Coast. Freeport LNG Development LP's Freeport and Cheniere Energy Inc.'s Corpus Christi LNG export projects are both under construction, and the Exxon Mobil Corp.-linked Golden Pass project recently received the last of its major regulatory permits. Three export projects for Brownsville, Texas, are in review at the Federal Energy Regulatory Commission, as is the Port Arthur LNG export terminal proposed to be constructed along the Sabine-Neches Waterway. The Trump administration has latched onto LNG export terminals as a way to fuel job creation and economic growth. Energy Secretary Rick Perry touted Golden Pass as a way to bolster the economy while making the U.S. "an energy dominant force."

 Chemical industry split about the case for more US plants - The surge in investment into the US petrochemicals industry over the past seven years has been one of the biggest spending booms in a developed country this century. A series of giant new plants that will make chemicals used to produce plastics, from companies including Dow Chemical and ExxonMobil, are about to come online. A second wave of projects is now being proposed, as some chemicals producers become increasingly confident that the cheap gas feedstock that makes their spending possible will last for a long time. But the industry is split, with some companies questioning whether the market is strong enough to justify a fresh investment surge. A decade ago, the US petrochemicals industry seemed doomed to long-term decline, eclipsed by rivals in the Middle East, which had cheap oil and gas for feedstock, and in Asia, where the market growth was strongest. The US shale revolution transformed that outlook, unleashing a flood of cheap natural gas liquids such as ethane and propane, which are key chemical feedstocks. Since 2010 $85bn worth of petrochemicals projects have been completed or started construction, with about a further $100bn proposed, according to the American Chemistry Council. Together, these plants would employ more than 60,000 people when in service, the industry group has estimated. “We are the low-cost producer.” The biggest new opportunity in the US has been for ethylene “crackers”: plants that take ethane and convert it into ethylene, a building block for plastics. Dow, Exxon, Sasol of South Africa, and CP Chem, the joint venture of Chevron and Phillips 66, have built large crackers along the US Gulf of Mexico coast that will be starting up in 2017 and 2018. US ethylene production is set to rise from 25.8m tonnes last year to 34.2m tonnes next year, an increase of 33 per cent, says S&P Global Platts. Most of the additional output will go for export, typically after being converted to polyethylene pellets. As emerging economies adopt the habits of developed countries, their demand for plastics is growing 1.5 to 2 times as fast as their gross domestic product.

After DAPL, Pipeline Fight Moves to Louisiana - The next big pipeline battle is shaping up in the marshes of southwestern Louisiana.   The 162-mile Bayou Bridge Pipeline is the last of a network of oilfield arteries that includes DAPL. The project would run from southeastern Texas to a Mississippi River terminal in St. James Parish, west of New Orleans, after crossing the Atchafalaya River basin—a 1.4 million-acre swath of cypress marsh and wetland forest that's a key rest stop for birds moving north and south along the Mississippi Flyway.  "It's the largest swamp left in North America and it's historically the most critical habitat for migratory birds in the entire hemisphere," said Dean Wilson, executive director of Atchafalaya Basinkeeper . The murky waters of the Atchafalaya are teeming with fish, crawfish and crabs, making them a rich source of food for animals and people alike. Wilson's organization is part of a coalition of Louisiana environmentalists seeking to block the pipeline, which includes the Sierra Club's Delta Chapter . They're trying to prevent further injury to a state where the oil industry puts food on many tables, but also has inflicted deep and dramatic losses on the landscape. The Atchafalaya watershed is already crisscrossed with thousands of miles of pipe; one more "is one too many," said Darryl Malek-Wiley, a Sierra Club organizer in New Orleans. "As an ecosystem, it's actually more productive than the Everglades, as far as food value," Malek-Wiley said. "It's time to focus in on this and move forward in a positive way to protect the area, rather than to put more pipelines across it, which cause sediment backup and disturb the water flow through the basin." As an offshoot of the Mississippi River, the Atchafalaya is a major part of southern Louisiana's flood protection system. In 2011, when rising waters threatened Baton Rouge and New Orleans, the Army Corps of Engineers opened spillways that diverted some of that flow through the basin. It's also the only part of coastal Louisiana that gained land area over the past several decades, as a combination of sinking land, sea-level rise and erosion accelerated by industrial canals eats away at the rest of the state's shoreline. And it's not just the watershed that would be affected. Opponents say the 24-inch-diameter line would cross about 700 bodies of water, from bayous to backyard wells.

US' Mars heard at narrowest discount to cash WTI since Sept 2015: trade - The US Gulf of Mexico medium sour crude Mars traded Wednesday afternoon at its highest value relative to domestic benchmark West Texas Intermediate since fall 2015, a reflection of the global shortage for medium sours brought on by OPEC and non-OPEC production cuts. June-delivered Mars was heard to have traded at June cash WTI minus $1.10/b and minus $1.05/b after the NYMEX 1:30 pm CT close. Prior to the close, Mars was last heard to have traded at June cash WTI minus $1.15/b, equaling the April 6 and April 7 high values. The last time Mars was higher than cash WTI minus $1.05/b was September 1-2, 2015, when it traded at a roughly 75-cent discount to cash WTI, Platts data show. Mars hit a low of minus $5.40/b shortly after, in October 2015, and over 2016 averaged a $3.20 discount to cash WTI. Differentials generally trended higher with the overall crude market last year.

Little fanfare, but Gulf of Mexico oil still growing steadily | Reuters: As rapid growth in U.S. shale production grabs headlines and threatens to upend attempts by OPEC to balance oil markets, a more unsung sector of the U.S. industry is also hitting new output highs - the offshore Gulf of Mexico. While attention and investment is focused on shale, the Gulf is the among the most prolific oil source in the United States, producing more than Alaska, the West Coast and Rocky Mountains combined. The region churned out a record 1.76 million barrels per day of crude in January, trailing only Texas onshore production, which includes the growing Permian Basin. “The business can compete with tight onshore oil any day,” said Richard Morrison, regional president for the Gulf of Mexico for BP Plc (BP.L) speaking at the annual Offshore Technology Conference in Houston, where nearly 70,000 people from 120 countries are attending. The Gulf region is expected to add another 190,000 bpd before the end of the year, according to the U.S. Energy Information Administration. Growth should continue, according to consultancy RBN Energy, which expects production to rise by 300,000 bpd in 2018 from current levels. To get similar 2017 growth in Texas's Permian Basin, for example, drillers would need to double the current rig count from the current 342, according to a Reuters analysis of U.S. EIA data. Even if that were possible, incrementally added rigs might not be as productive as those currently drilling, as prime locations have already been claimed. Unlike shale, where price immediately governs production, Gulf production has proved relatively resistant to fluctuations in prices, fueled by projects approved before oil lost 80 percent of its value in less than two years.For production to ramp up further in the Gulf, however, producers will have to reckon with the idea that the more active shale region - where time horizons are shorter - might keep crude oil prices overall lower for longer, with little chance to break out of the $45 to $55 per barrel range. 

Interior secretary starts process for offshore drilling expansion plan | TheHill: Interior Secretary Ryan Zinke officially began the process Monday to expand offshore drilling for oil and natural gas. At an industry conference in Houston, Zinke signed a secretarial order for the Bureau of Ocean Energy Management (BOEM) to start formulating a new five-year plan for drilling rights sales. Following on President Trump’s executive order Friday on the same topic, Zinke is asking BOEM specifically to consider allowing new offshore drilling in the Arctic Ocean, the mid- and south-Atlantic Coast and the entire Gulf of Mexico. BOEM is instructed to give expedited consideration of companies’ applications for seismic testing on the outer continental shelf, to study where and how much oil and natural gas exists in those areas. The agency will also review numerous regulations on the industry, including safety rules instituted after the 2010 BP Deepwater Horizon disaster, for potential changes or repeal. “You should be excited,” Zinke told the attendees at an event hosted by the industry-based Consumer Energy Alliance during the Offshore Technology Conference. “If you’re in the oil and gas and energy segment in this society … the stars are lined up,” he said. “We’re going to make jobs, we’re going to bring the economy ahead.” He said producing more offshore oil and gas is good for the economy, national security and even the environment, since the United States has strong safeguards for drilling.

Oil lobby pushes for offshore drilling in the eastern Gulf of Mexico -- The nation’s top oil group wants the Trump administration to allow offshore drilling in the eastern Gulf of Mexico. Bolstered by last week’s offshore drilling order from President Trump, the American Petroleum Institute (API) said Monday it wants regulators to consider allowing drilling in new tracts of the oil-rich Gulf of Mexico. “The eastern Gulf is in close proximity to existing production and infrastructure, and opening it would spur investment and economic activity that could create thousands of jobs and provide billions of dollars in government revenue,” Erik Milito, API’s upstream and industry operations group director, said during a conference call with reporters. Federal law prohibits oil drilling in the Gulf within 125 miles of the coast of Florida. That moratorium is due to expire in 2022, the same year the federal government is scheduled to finalize a new five-year drilling plan, though Milito said he expects Trump’s Interior Department to release a new drilling blueprint before then. Trump’s order, signed Friday, instructs the Interior Department to reconsider the offshore drilling restrictions the Obama administration put in place on Arctic and Atlantic drilling. It does not explicitly list the eastern Gulf of Mexico as an area where regulators should consider allowing drilling, but Milito said API hopes the administration will consider the region in its review. “We’re optimistic — we think that it would be essential, from an energy security standpoint, both for national security reasons and for the continuing demand for oil and gas that we’re going to see for a long time, for Interior to take a serious look at the eastern Gulf of Mexico," he said.

 Pentagon wants offshore drilling ban maintained in eastern Gulf - The Pentagon wants to continue a ban on offshore drilling in the eastern Gulf of Mexico that’s set to expire in five years. A.M. Kurta, the acting under secretary of Defense for personnel and readiness, told a Florida lawmaker in a letter publicly released Monday that military training and related exercises in the eastern Gulf, which borders Florida, necessitate a continuation of Congress’s ban on drilling. The letter Kurta wrote to Rep. Matt Gaetz (R-Fla.) adds a new wrinkle to the Trump administration’s drive to dramatically increase offshore oil and natural gas drilling. Trump ordered the Interior Department to write a new plan for offshore drilling rights sales and to consider areas currently off-limits to drilling. An order signed Monday by Interior Secretary Ryan Zinke says the department will look at the entire Gulf of Mexico for potential drilling. And the oil industry is gunning for the eastern Gulf, telling reporters yesterday that drilling there could create thousands of new jobs and billions of dollars in new investment. But the Pentagon is pushing back against drilling in the eastern Gulf, near Florida. “The moratorium … ensures that these vital military readiness activities may be conducted without interference and is critical to their continuation,” Kurta wrote to Gaetz in response to a letter inquiring about the drilling ban. “Emerging technologies such as hypersonics, autonomous systems, and advanced sub-surface systems will require enlarged testing and training footprints, and increased DoD reliance on the Gulf of Mexico Energy Security Act’s moratorium beyond 2022. The moratorium is essential for developing and sustaining our nation’s future combat capabilities.”

Will Trump Spark An Offshore Drilling Boom? --- In a bid to fend off criticism over a dearth of achievements in his first 100 days in office, President Trump plans to sign a flurry of executive orders this week.Among them is an executive order intended to open up new areas of offshore oil and gas drilling. "This builds on previous executive actions that have cleared the way for job-creating pipelines, innovations in energy production, and reduced unnecessary burden on energy producers," a White House official told the Reuters earlier this week.The order calls for a “review of the locations available for offshore oil and gas exploration and of certain regulations governing offshore oil and gas exploration.”Specifically, the Trump administration is hoping to open up new areas to drill in the Gulf of Mexico, plus areas in the Atlantic and Arctic Oceans. The Obama administration had previously designated the Atlantic and the Arctic off limits, and did so in such a way as to make it legally very difficult for subsequent administration’s to reverse.The road to new drilling in the Arctic and Atlantic Oceans will be long and bumpy, for several reasons. First, any attempt to open up the Arctic and Atlantic Oceans will be met with tough litigation. The President’s authority to reverse the Obama administration’s move is debatable. Second, the Interior Department will have to include tracts of drilling in its Five-Year plan, and putting acreage into the plan requires extensive environmental analysis that could span several years, especially for the Atlantic Ocean, where no drilling has taken place yet. On top of that, even if the administration succeeds in leasing offshore acreage – which will be years from now at the earliest – who will be interested? Royal Dutch Shell already had a crack at the Arctic, spending $8 billion and almost a decade of work with nothing to show for it. In 2015, after completing one well in the Chukchi Sea with disappointing results, Shell abandoned the Arctic and wrote down its assets. Shell’s Arctic program came to a halt because of low oil prices and poor prospects in the Chukchi – President Obama shut down the Arctic only after Shell had given up on it. It was a colossal failure for a region that has routinely been hyped as the next big thing in oil exploration.

Trump’s reckless ocean drilling order imperils coastlines - The Trump administration will begin the process of allowing drilling off the Atlantic, Pacific and Arctic coasts, according to reports. The executive order will allow Interior Secretary Ryan Zinke to roll back protections on drilling for fossil fuels. The order could allow new oil drilling off the Pacific coast for the first time since the 1980s. Marcie Keever, Friends of the Earth Oceans and Vessels Program Director, issued the following statement: Trump’s effort to look busy on his 100th day in office by giving away our oceans to Big Oil is yet another example of how out of touch he is with the American people. From the 1969 Santa Barbara oil platform blowout, to the 1989 Exxon Valdez spill and the Deepwater Horizon disaster in 2010, we know that oil spills happen, and can never be fully cleaned up.The next oil spill is inevitable and will wreak havoc on our oceans, local economies and the lives of people who live on our coasts. Over and over again, oil companies have been irresponsible and reckless, endangering the livelihoods of people living near the ocean. The American people deserve an energy future that protects our oceans and our land, not one that devastates it. New federal offshore drilling leases have not been granted for the Pacific Ocean since the early 1980s, but that didn’t stop Trump and Zinke from turning back the clock today on decades of environmental protections. We will stand with communities in the Pacific, Atlantic and Arctic to fight against this giveaway of our oceans to Big Oil.

Environmental groups sue Trump administration over offshore drilling - A coalition of environmental groups on Wednesday sued the Trump administration over its efforts to expand offshore drilling, arguing the move violates the president’s legal authority, threatens a multitude of wildlife and could harm the fishing and tourism industries.The lawsuit, filed in a federal court in Alaska, comes days after President Trump signed an executive order aimed at jump-starting offshore drilling in the Arctic and Atlantic oceans, as well as assessing whether energy exploration can take place in marine sanctuaries in the Pacific and Atlantic. The policy could open millions of acres of federal waters for oil and gas leasing, just months after President Barack Obama withdrew the areas from possible development.At a signing Friday in the Roosevelt Room, Trump emphasized that the United States has abundant offshore oil and gas reserves and made clear his intention to tap them if possible. “We’re opening it up,” he said.Wednesday’s lawsuit argues that Trump’s executive order exceeds his constitutional and statutory authority. It notes that Obama used his authority under the Outer Continental Shelf Lands Acts to permanently end drilling in much of the Arctic and key parts of the Atlantic but says that no president has ever undone or reversed such a decision and that the law “does not authorize the president to reopen withdrawn areas.” “The permanent protections President Obama established for the Arctic and Atlantic Oceans were won with years of research, lobbying and organizing,” Gene Karpinski, president of the League of Conservation Voters, said in a statement. Until Wednesday, his group had never filed a legal challenge. “Offshore drilling and the associated threat of devastating oil spills puts coastal economies and ways of life at risk while worsening the consequences of climate change. Now, President Trump is trying to erase all the environmental progress we’ve made, and we aren’t about to go down without a fight.”

Trump's U.S. Looks Past Energy Independence to Global Dominance -- The U.S. is in the position to be energy-dominant, not just independent, thanks to fracking and plans to loosen drilling regulations, Interior Secretary Ryan Zinke said Monday. Oil production across the U.S. may increase by 17 percent to a record 10.24 million barrels a day by the end of next year as companies cut costs and become more efficient in drilling, especially in areas such as West Texas and North Dakota. Domestic output hasn’t surpassed 10 million barrels a day since 1970. At a time when OPEC and other producers are cutting output, U.S. exports surged above 1 million barrels a day for the first time. “In 1983, I was told we’re going be out of oil and fossil fuels definitively in 2003. That’s not true,” Zinke said at the Offshore Technology Conference in Houston. “And, you know, I always say God’s got a sense of humor -- he gave us fracking. And fracking is a game-changer -- certainly a global game-changer.” Zinke is pushing forward President Donald Trump’s plans to expand oil and natural gas drilling and reconsider regulations that might limit development of U.S. natural resources. Trump on Friday ordered Zinke to revise a five-year schedule for auctioning offshore drilling rights with the aim of potentially including territory left out by former President Barack Obama. “My task is to look at it look at where we’re going to make changes, recommendations across the board,” Zinke said. “The stars have lined up so we can create energy jobs." 

 The World Is Buying American Diesel as Fast as Refiners Can Make It - The international market has a message for American refiners: Stay calm and keep turning crude into diesel.While a global glut has pushed crude prices down to five-month lows, manufacturers of middle distillates can’t make enough to satisfy demand. A combination of seasonal events is giving refiners on both the Atlantic and Gulf coasts a chance to boost exports to Europe and South America.“Everybody is freaking out about high refinery rates” in the U.S., said Robert Campbell, head of oil products research for Energy Aspects in New York, as plants in the U.S. processed record levels of crude into refined products last month. Domestic demand for gasoline may be slipping in the U.S., but there’s no reason to panic when it comes to distillate.Argentine diesel demand peaks in the second quarter, and Brazil’s buying strengthened after late April when Petroleo Brasileiro SA raised wholesale prices 4.3 percent, Campbell said. Meanwhile, maintenance in Russia, the Middle East and Algeria has kept Atlantic Coast refiners busy sending diesel cargoes to Europe. Preliminary weekly data from the Energy Information Administration show that exports of distillate advanced to a record in mid-April. U.S. refiners were shipping 1.42 million barrels a day, or roughly five medium-sized tankers, abroad, mostly from the Gulf Coast. These shipments are run-of-the-mill for facilities in Texas and Louisiana, but it’s less common to see deliveries leave from the Atlantic Coast, which sent at least 1.55 million barrels to Europe and Algeria since April, Bloomberg shipping analysis shows. The surge in overseas demand is helping clear a domestic glut for middle distillates, a category that includes diesel and heating oil. U.S. diesel days of supply fell in April to 34.6, the lowest level since November 2015 and down from a 52-week high of 49.3 in January. There’s “no incentive” now to ship the middle distillate fuels from Houston to New York on their typical route along the Colonial Pipeline, Campbell said. And at least four more distillate tankers are booked to haul Atlantic Coast diesel to Europe in the next week, according to preliminary shipping fixture reports.

Saudis complete takeover of largest US refinery  -- The Saudi national oil company Aramco took full ownership Monday of the largest U.S. oil refinery in the country at Port Arthur, Texas. Aramco and Shell founded the 50-50 joint venture called Motiva over two decades ago to build and operate the giant refinery, and had been in intense talks about dissolving the venture since last year. The deal was completed Monday with Aramco taking full ownership of the refinery, considered the crown jewel of the Gulf Coast, through its wholly-owned subsidiary Saudi Refining. The deal came two weeks after Trump administration officials met with a Saudi business delegation in Washington hosted by Secretary of State Rex Tillerson. The delegation was led by the Saudi foreign ministry to discuss U.S. investment opportunities in the Gulf kingdom as part of a plan to restructure the Saudi economy by 2030, including privatizing Aramco in 2018. Aramco said in a statement that the Saudi oil giant, the largest oil company in the world, owns the entire Motiva complex and its 24 fuel terminals. It also owns the rights to exclusively sell Shell-branded gasoline and diesel in Georgia, North Carolina, South Carolina, Virginia, Maryland, Washington, D.C., the eastern half of Texas and most of Florida, it said in a statement.

Looming Takeaway Constraints Out of the Hottest Shale Play -  The highly attractive production economics of the Permian’s multistacked, hydrocarbon-packed Delaware and Midland basins all but guarantee that the region’s output of crude oil, natural gas and natural gas liquids will continue rising—possibly at an even faster rate than what we’ve seen lately. That raises an all-important question: Will there be sufficient pipeline takeaway capacity in place to keep pace with all that growth? If there isn’t, some Permian producers will suffer from downward pressure on local prices—and that may cause them to have second thoughts about the big bucks they paid to gain access to the best Permian acreage in the first place. A production-growth forecast and a deep-dive assessment of existing and planned pipeline takeaway capacity are at the heart of RBN’s new Drill Down Report on the Permian. Today we provide highlights from the new report. All you’ve heard is true: The Permian is back, bigger and badder than ever. Producer economics in the play’s Delaware and Midland basins are the best in the U.S., and half of all rigs drilling for crude oil in the U.S. are in the region. Put simply, the Permian, which covers parts of West Texas and southeastern New Mexico, has been the engine that has propelled U.S. crude oil production upward. As shown in the left graph in Figure 1, total production from all of the other major shale/tight oil basins—Eagle Ford, SCOOP/STACK, Niobrara, Bakken and Offshore Gulf of Mexico—is down from about 5 MMb/d in 2015 to about 4.3 MMb/d today. The number has been flat for the past six months.  But there are potential problems looming on the Permian horizon. There is simply not enough midstream infrastructure to accommodate this astronomical growth. Even though almost 100 years of oil and gas production have supported the development of thousands of miles of crude, gas and NGL pipelines that crisscross the region, midstream developers are having a hard time keeping up with today’s incredible rate of production increases.

Once again, Permian producers fear takeaway constraints, price hits - Crude oil production in the Permian’s Midland and Delaware basins continues to rise, and producers in the red-hot shale play are hoping there will be enough pipeline takeaway capacity to handle all that growth. This is serious stuff—the Permian’s success the next few years will depend to a considerable degree on whether producers and the midstream sector can avoid the major constraint-driven price differentials between the Midland, TX hub, and destination markets like the Gulf Coast and Cushing, OK, that already have hit the Permian twice this decade. Today we discuss the prospects for another round of takeaway/price-differential trouble in the Permian as soon as late 2017/early 2018 and again in 2020-21. In our new Drill Down Report, “With a Permian Well, They Cried More, More, More,” we said that the Permian for the past two years has been the engine that has propelled U.S. crude oil production upward. As we’ve seen in fast-growing plays in the past, though—including the Permian itself—production growth sometimes outpaces the ability of takeaway pipelines to transport hydrocarbons to market, resulting in price differentials between the local hub and other, destination hubs that (1) hurt producers and (2) spur them to rein in output gains until enough incremental pipeline capacity comes online to bring production and takeaway capacity into balance. Fortunately for today’s Permian producers, the region has been a significant producer of crude oil (and natural gas and natural gas liquids—NGLs—for decades), and therefore had significant pipeline takeaway capacity in place before the play entered the current period of renewed growth. Conventional drilling in the Permian peaked in the mid-1970s at just over 2.0 MMb/d and then started a long, steady decline that accelerated when oil prices collapsed in 1986; by the mid-2000s, Permian crude oil production was down to less than 900 Mb/d. But then in 2010, the first significant use of the newly developed techniques—a combination of horizontal drilling and hydraulic fracturing—to produce hydrocarbons from previously unrecoverable formations started to show results. By the end of that year, Permian production was back over 1.0 MMb/d, and over the next six-plus years, volumes more than doubled. Today the Permian is producing more than 2.2 MMb/d—an all-time record—with more than 200 Mb/d in growth in the last six months alone.

In a Twist, Snow Is Keeping Natural Gas Prices Down in Texas --  Natural gas in balmy Texas is feeling the chill of California’s snowy peaks 1,200 miles away. West Coast power producers are ditching gas in favor of cheap, plentiful hydroelectric power, which is surging after the wettest year ever across the Northern Sierra Nevada range. Much of that moisture fell as snow which is now melting, soaking fields, filling reservoirs and, to the consternation of the Texas gas market, furiously spinning turbines. All that has left gas backed up in Western Texas with nowhere to go. Flows along Kinder Morgan Inc.’s El Paso pipeline, the main shipper of Texas gas to California, are down 28 percent since the start of the year. As California enjoys its bounty of water, Texas gas prices are sinking. “The snow pack in the middle to lower elevations is melting quite rapidly in the last two weeks,” “It’s a pretty good situation for hydro power.” Since the start of the year, California gas demand has plummeted 34 percent while hydro generation in the state is up 93 percent, according to data compiled by Bloomberg. Gas prices May 1 at the Waha Hub in West Texas fell to a discount of 42 cents per million British thermal units to benchmark Henry Hub gas in Louisiana, the biggest spread since March 2014, based on Intercontinental Exchange data as of Wednesday. The past winter left twice as much snow on the ground in parts of the Sierra Nevada as normal. Snow is like water in the bank and as temperatures reach into the 70’s and 80’s Fahrenheit, nature is making withdrawals. "California solar, and in this case, California hydro are starting to ramp up generation levels, which is starting to eat into gas demand in California," said Jacob Fericy, analyst at Bloomberg New Energy Finance. In the last two weeks, satellite measurements show that the equivalent of about 16 to 20 inches (41 to 51 centimeters) of rain has melted off the snow pack at elevations of 6,000 to 7,000 feet, or about the same level as Lake Tahoe, according to Molotch who is in California watching the progress. There’s about one inch of rain locked up in every 10 inches of fresh snow. 

Lower Cleveland play grows along Oklahoma-Texas line - Oil & Gas Journal: Operators have reported 28 horizontal completions in southern Ellis County, Okla., in the past 18 months in a low permeability play for oil and gas in the lower member of the Pennsylvanian Cleveland formation. The 28 completions, some reported as Marmaton in regulatory filings, have averaged an initial 514 b/d of oil and 1.3 MMcfd of gas. Exploration and production companies have drilled more than 1,070 horizontal wells in the Cleveland reservoir in the Texas Panhandle and western Oklahoma since 1995, but most of the wells have been drilled and completed in the Upper Cleveland reservoir. Participants in the Lower Cleveland play include EOG Resources Inc., Chesapeake Energy Corp., Mewbourne Oil Co., Primary Natural Resources III LLC, and Plano Petroleum LLC. The Lower Cleveland sand at an average depth of 9,400 ft is 50-120 ft thick. It produces at higher average oil rates than the Upper Cleveland, and there is no depletion risk from prior production, said Plano Petroleum, a private Plano, Tex., independent. Geologic limits of the Lower Cleveland sand have yet to be defined by drilling, but mapping from deeper subsurface control indicates the best quality Lower Cleveland sand appears to be centered in southern Ellis and northern Roger Mills counties, Okla. Strong results have been reported with open-hole, packer-type completions and cemented completions. Plano Petroleum started a five-well horizontal program in mid-2011 and has completed two Lower Cleveland horizontal wells and one horizontal well in the shallower Tonkawa reservoir. The company has spudded two more Cleveland wells. The company’s first Lower Cleveland well, Nelwyn 1H-7 in 7-17n-24w, Ellis County, had an initial flow rate of 570 b/d and 1.7 MMcfd and recovered 31,315 bbl of oil, 10,727 bbl of natural gas liquids, and 69 MMCF of dry gas in its first 90 days on production.

Oklahoma's Largest Earthquake Linked to Oil and Gas Industry Actions 3 Years Earlier -- The strongest earthquake in Oklahoma's history likely was caused by oil and gas operators injecting vastly increased amounts of toxic wastewater underground three years before it struck, a new study suggests. Scientists from the U.S. Geological Survey analyzed injection data from the most active disposal wells in the area where the 5.8-magnitude earthquake hit last September. They found that there had been a sudden and dramatic increase in the amount of wastewater injected in the first half of 2013 at some of the wells. That contributed "a fair amount of stress on the fault and would have accelerated the natural faulting process significantly," said Andrew Barbour, a USGS geophysicist who led the study. The research was published Tuesday in a special edition of the journal Seismological Research Letters that focused on the earthquake, which struck the town of Pawnee on Sept. 3, damaging dozens of buildings. The findings expand on the growing consensus among scientists that the earthquake spike rattling America's midsection is linked to the oil and gas drilling boom. The research suggests that even years after heightened activity takes place, the risk of a big earthquake can remain.

Hundreds show up to take stand on Keystone XL  - The five-member Nebraska Public Service Commission limited testimony to five minutes per person and as many people as could be heard in 10 hours, which turned out to be 135. Each person was allowed to speak only once. Commission member Tim Schram chaired the proceedings, calling each person forward to give testimony. Their words were recorded by Lincoln-based Latimer Reporting and now are part of the record that the commission will use in deciding whether the proposed route for TransCanada's pipeline through Nebraska is in the public interest. The approval process breaks new ground for Nebraska. It's the first time it has been used since the 2011 Major Oil Pipeline Siting Act gave oversight of routes to the Public Service Commission. Testimony proceeded orderly but at times drew out emotion, as landowners choked back tears while speaking of the generations who have farmed the fields that the $8 billion pipeline project would cross to connect Canadian oil to refiners on the U.S. Gulf coast. Pipeline opposition groups and labor unions both rallied large turnouts and had people lined up to testify on either side of the project. Bold Nebraska and the Sierra Club’s Nebraska chapter chartered buses that brought people from Omaha, Lincoln and the Atkinson area.

10-Hour Keystone XL Hearing Gets Huge Turnout --  Hundreds of people filled a Nebraska Public Service Commission hearing Wednesday to both support and defend construction of the Keystone XL pipeline in the state. Local landowners and farmers concerned about the terms of use of their land for the pipeline's construction were a prominent voice of criticism, while labor union members, environmental activists, politicians and businesspeople also testified at the 10-hour hearing. Nebraska was a major opposition ground for the KXL protests during the Obama administration, and the hearing marks the first signs of a renewed fight in the state as the Trump administration encourages the project forward. The Nebraska PSC is expected to issue a decision on the pipeline later this year. According to the Washington Times , "Union members cited the boon to job creation, the economy and the tax base, but landowner Art Tanderup drew cheers by insisting that the state 'will be lucky to have one, just one, permanent job if Keystone XL is built.'" "It is not in Nebraska's public interest to allow a foreign corporation to use eminent domain for their corporate greed," said Tanderup.

Ethanol fight complicates push to repeal Obama drilling rule | TheHill: A handful of GOP senators have said they might hold up legislation to repeal an Obama administration oil and natural gas drilling rule to secure a vote on an ethanol policy change. The group, led by Sens. Chuck Grassley (R-Iowa) and John Thune(R-N.D.), have long pushed legislation to overturn federal policy that effectively prevents sales of gasoline with 15 percent ethanol — known as E15 — during the summer months due to volatility concerns. Now they want to trade a Senate vote on that bill for a vote on a resolution that would overturn limits on methane emissions from oil and natural gas drilling on federal land. = Thune said Wednesday that he and his allies tried and failed to get the provision into the omnibus spending bill that was unveiled Sunday and will get a vote this week. Since the methane legislation is a Congressional Review Act (CRA) resolution, it cannot be combined into a single bill with the ethanol policy change. “We tried to get it included in the omni, unsuccessfully. So we’re looking now for other vehicles and seeing … how methane fits into that picture,” Thune said. Lobbyists familiar with the discussions say that Thune, Grassley, Sen. Joni Ernst (R-Iowa) and Sen. Deb Fischer Deb Fischer (R-Neb.) are leading the charge for the ethanol vote. 

Boulder County's moratorium ends; opponents continue to want fracking ban - Boulder Daily Camera -- With the expiration of more than five years of Boulder County oil and gas moratoriums only a few hours away, opponents of oil and gas development gathered on the Boulder County Courthouse plaza on Monday to repeat their demands for county government to continue to prohibit fracking.About 50 people showed up for the noon-hour rally organized by Frack Free Colorado, chanting and carrying signs — many of which focused on their alarms at the process of hydraulic fracturing that's used to free up underground oil and gas deposits."We will, we will protect this place! It violates our rights to frack on open space!" went one of the chants.Boulder County has had a series of consecutive moratoriums in place since February 2012 against accepting and processing new applications for oil and gas development in unincorporated parts of the county. The latest one ended at the conclusion of the workday on Monday."We're here," Frack Free Colorado's Suzanne Spiegel told the crowd at the start of the rally, "because Boulder County commissioners are leaving us in a position where we're not protected from fracking." Spiegel said her organization and other anti-fracking groups are preparing to push what she said will be a legal strategy to prevent oil and gas development in Boulder County, particularly on county-owned open space lands.

FRACTURED: Showdown in Boulder County - The Colorado Independent - This morning, Boulder County’s five-year ban on new oil and gas development officially expired. In its place, new rules governing oil and gas development in the county will take effect, which county commissioners say are the “strongest set of regulations on oil and gas development in the State of Colorado.”Oil and gas industry officials have already vowed to challenge the new rules, saying they are essentially a ban by another name.Meanwhile, “fracktivists” in Colorado’s most politically progressive county say that lifting the ban defies the will of the people who live here, and are planning everything from civil disobedience to mass meditation to prevent new drilling. Conflicts over oil and gas development in Colorado have escalated over the past decade, generating discord even in much less liberal strongholds such as Broomfield, Battlement Mesa, Greeley, Ft. Collins, and Colorado Springs. The rapid implementation of horizontal drilling technologies and hydraulic fracturing, or “fracking,” has propelled an increase in industrial activity closer to where people have been flocking to live. At the same time, as the recent fatal house fire in Firestone demonstrates — investigators are still searching for the cause, including examining a possible link to an older well about 170 feet from the explosion — there has also been a huge increase in housing developments sprouting near existing oil and gas development. A single modern drilling pad can launch dozens of horizontally drilled wells, with associated compressors, truck traffic, drilling rigs, separators, condensate tanks, noise, and other industrial activity. The result over the past decade, in Colorado and around the country, is a gusher of new wells and an almost unfathomable flow of money into energy industry coffers. Exxon and Chevron just reported a combined profit of $6.68 billion for the first quarter of 2017. There are more than 54,000 active wells in Colorado today, compared to about 22,500 in 2002, according to the Colorado Oil and Gas Conservation Commission (COGCC), Each successful well can produce millions of dollars of profit for a company. The resulting tax revenue and jobs have garnered substantial support for the industry at the statehouse and Gov. John Hickenlooper’s office. This gush of money has also fueled what some people see as asymmetrical warfare in the political sphere, as the industry wields its substantial clout and resists change even as its impacts have generated deep – and widening – resistance.

Colorado OKs deal for comprehensive development of controversial Boulder County oil field --Crestone Peak Resources and two of its competitors, Anadarko Petroleum Corporation and Extraction Oil and Gas, reached a last-minute deal Sunday night that will allow Crestone to move forward with plans to develop a 12-square-mile oil field in eastern Boulder County.The Colorado Oil and Gas Conservation Commission signed off on the agreement Monday morning, paving the way for the first-ever use of a new planning tool created by state regulators in 2008 to encourage oil companies to include communities in oil and gas planning.The approval means Denver-based Crestone Peak Resources, which hopes to develop a 12-square-mile oil field in east Boulder County near Erie, will have nine months to come up with a Comprehensive Development Plan. The idea is to ensure community participants — including Boulder County, the Colorado Department of Public Health and Environment, landowners and others — have a say in how wells are spaced and operated, among other things, before the plan is approved. The proposal, unveiled by Crestone in March, had been deadlocked because Crestone had asked the state to OK a "stand still" agreement that bars other oil companies in the area — in this case, Anadarko Petroleum Corporation and Extraction Oil and Gas — from applying to drill in the region while Crestone crafted its plan. Anadarko and Extraction Oil and Gas had protested the move, but agreed to it in a last-minute deal reached Sunday night, according to COGCC Executive Director Matt Lepore. Crestone has proposed up to 216 wells for the area. The move comes amid heightened scrutiny of oil and gas operations after a devastating house explosion in Firestone killed two people and injured two others April 17. An oil well located less than 170 feet from the home is being examined as part of the investigation into what caused the explosion.

Controlling radicals in Boulder County want to stop fracking … They call it the "People's Republic of Boulder" as a joke aimed at the perpetual shenanigans of the most liberal city and county in Colorado. But Boulder County and the city of Boulder, for all their leftist leanings, are still political subdivisions of the state of Colorado and the United States of America and are subject to all the laws and regulations thereof. East Boulder County United and Boulder County Protectors on the other hand aren't government agencies; they are anti-fracking groups whose spokesperson Cliff Willmeng said, "We do not recognize the authority of this body, we do not recognize the authority of those industries to override the free people of Boulder County. We will not be allowing a single well in Boulder County" at a May 1 meeting of the Colorado Oil and Gas Commission. The members of the COGC tolerated Willmeng's tirade with stone-faced bemusement and then went on about their state-authorized business of regulating the extraction of oil and gas statewide. Willmeng is a radical activist who was the driving force behind the attempt to pass an ordinance in Lafayette that would have made physical attacks and obstruction against oil and gas employees and operations legal, an absurdity fronted by his mother, Lafayette City Councilperson Merrily Mazza. That unconstitutional ordinance was defanged by more rational voices on the City Council back in January, just as Boulder County's five-year moratorium on oil and gas development was overturned by the courts and expired on May 1. Groups like East Boulder County United and Boulder County Protectors aren't really all that concerned about fracking itself. Fracking is being used as a propagandistic buzzword and stalking-horse for an anti-technological Luddite return-to-primitivism effort to completely stop the extraction of fossil fuels. Now Willmeng is once again trying to forward the fiction that Boulder County is a sovereign nation not subject to American law. Engaging in a bit of bald-faced cultural misappropriation Willmeng and his fellow radicals invoke a mish-mash of Native American theology and socialist ideology as justification for their plan to balkanize Boulder County to "create democracy in our municipalities and counties within the State of Colorado." Their manifesto claims "our communities are under siege from a structure of law that has bestowed greater rights on corporations than on the communities in which they operate." What they actually mean is that private property rights, in this case the rights of those who own the oil and gas are an impediment to their socialist desire to turn Boulder County into Venezuela. They want to amend the state constitution to dispose of private property rights by making "local laws that elevate the rights for Colorado residents and communities above the rights of the State of Colorado, including legal rights for the natural environment." To socialists, when individual rights conflict with their collectivist ideology, those individual rights must be discarded in the name of social democracy.

Colorado gas blast idles second company -- All natural gas lines within 250 feet of occupied buildings in parts of Colorado are closed while investigations into a fatal blast continue, a company said.Great Western Oil & Gas Co. follows Anadarko Petroleum with a response to a blast in late April in Firestone, Colo., that left two people dead. Anadarko said last week it closed more than 3,000 wells in response to the incident in Weld County.Anadarko operated the well in connection to the incident, which was situated about 200 feet away from the home tied to the fatalities. The original well was drilled by a previous operator in 1993. Local authorities said the cause of the incident was under investigation, but there was no immediate threat to the community.Great Western Oil & Gas Co. said the integrity of its gas lines in Colorado routinely passed inspections by Colorado authorities."While we are confident our operations do not present a danger to the public, we are proactively taking the necessary steps to ensure the public that our facilities continue to be safe," the company said in a statement. "Even though an oil and gas well flowline has not been determined to be the cause of the Firestone incident, in an abundance of caution, Great Western has inventoried all well gas lines within approximately 250 feet of occupied buildings and identified 61 gas lines within that distance." All of those operations were closed as of Thursday.

Pipeline Leak Caused Deadly Colorado House Explosion -- The deadly April 17 explosion in the town of Firestone, Colorado, was caused by a leak from a small, abandoned pipeline that was still connected to a natural gas well owned by Anadarko Petroleum , investigators announced Tuesday. The 1-inch, underground pipeline had been cut about 10 feet from the recently built home on Twilight Avenue where two men died and one woman was severely injured, Frederick-Firestone fire department officials said. Why the flow line was cut off, left uncapped and still connected to the producing well is currently unclear. Frederick-Firestone Fire Protection District chief Ted Poszywak said at a Tuesday press conference that the pre-refined gas was not odorized for safety as it seeped from the cut-off line into the home through French drains and a sump pit.  "Those inside the home would not have smelled it," he said. Mark Martinez and his brother-in-law Joseph William Irwin III, both 42, were killed in the explosion. Mark's wife, Erin Martinez, was injured as well her 11-year-old son. The Anadarko well was less than 200 feet from the home. The well was drilled in 1993 and had previous owners. It was in place before the Twilight home was built. Poszywak stressed that it was not the well's proximity to the home that caused the explosion, rather it was the pipeline leading to the well head that caused the buildup of methane that led to the explosion. He said no adjacent homes are in any danger as a result of the severed line. According to the Associated Press , Colorado Oil and Gas Conservation Commission director Matt Lepore said that the flow line was cleanly cut, meaning it could have been severed by construction equipment while the neighborhood was being built.  Lepore said that a line taken out of service should be disconnected and sealed at both ends and all flammable gas is supposed to be removed.

North Dakota Plagued by Oil Spills: 745 in One Year --Energy companies say that pipelines are the safest way to transport oil, but a number of recent spills plague the now-completed Dakota Access Pipeline (DAPL), which could start service as soon as May 14. KCET environment editor Chris Clarke calculated that in the year ending on May 1, 2017, North Dakota's oil and gas industry reported 745 involved oil spills—that averages to a spill every 11 hours and 45 minutes. The figure was based on data from North Dakota's Department of Health. The spills range in size, from smaller 20-gallons spills to ones that are much larger. Just two weeks ago , a Continental Resources pipeline in western North Dakota spilled an estimated 756 gallons of oil and 294 gallons of saltwater, a drilling byproduct, into a tributary of the Little Missouri River. Continental Resources, the largest operator in the Bakken shale formation, leads North Dakota in active wells, spills of all kinds, and wastewater or brine spills. And in December, a ruptured Belle Fourche pipeline spilled 529,830 gallons of oil , contaminating a hillside and Ash Coulee Creek which empties into the Little Missouri River. The break was significant because it happened less than 200 miles away from the Oceti Sakowin Camp, where the Standing Rock Sioux and fellow Water Protectors were protesting the DAPL. In 2014, the New York Times reported on the energy industry's increasing number of spills in North Dakota as a result of the area's fracking boom: "Over all, more than 18.4 million gallons of oils and chemicals spilled, leaked or misted into the air, soil and waters of North Dakota from 2006 through early October 2014. (In addition, the oil industry reported spilling 5.2 million gallons of nontoxic substances, mostly fresh water, which can alter the environment and carry contaminants.)"

Minnesota Republicans attempt to skirt environmental review of new tar sands pipelines -  Late last year, Canada’s prime minister, noted internet bae and progressive cabinet-appointer Justin Trudeau, approved two new tar sands oil pipelines. Not only did the move complicate the country’s efforts to reduce its greenhouse gas footprint, but it also paved the way for a pipeline project through northern Minnesota, through native treaty land, and through some of the only wild rice waters in the world. Now, a rider on an energy omnibus bill, which must be signed to continue funding the state government, calls for circumventing Minnesota’s regulatory body and unilaterally approving a replacement project for Enbridge Energy’s Line 3—connecting one of the Canadian pipelines to U.S. refineries. Many say the rider, and a slew of others like it, are the Republican-controlled legislature’s attempt to do an end-run around the environmental review process, and environmentalists want to know why, amid a troubled oil industry outlook, lawmakers would seek to prop up an oil transmission project. Over two years ago, Enbridge applied to the Minnesota Public Utility Commission (PUC) for a permit to relocate and expand Line 3, which runs from the Canadian border to refineries and a pipeline hub near Superior, Wisconsin. The expansion will allow Enbridge to transport more than twice as much oil through “Line 3.”   The 60-year-old existing pipeline is on its last legs. Enbridge was directed years ago to reduce pressure on the line, so it no longer operates at full capacity. And the company’s own records show 900 integrity “anomalies” — such as corrosion and seam cracking — on the old line. To help move things along, state representative Pat Garofalo (R) recently attached a rider to the state’s omnibus energy bill that would immediately authorize the pipeline project, without approval from the PUC, and would allow Enbridge to start construction as soon as July. Opponents to the pipeline say Garofalo’s rider violates the state constitution and that it is an inappropriate use of the budgetary process. The state constitution holds that it is illegal to make laws “granting to any private corporation, association, or individual any special or exclusive privilege.” Garofalo’s rider specifically names the PUC docket number he wants approved.

Do Socially Responsible Investors Have It All Wrong? - Fossil fuels divestment is a widely debated topic at many college campuses, including my own. The push, often led by students, to divest from fossil fuels companies is an example of the socially responsible investing (SRI) movement. SRI strategies seek to promote goals like environmental stewardship, diversity, and human rights through portfolio management, including the screening of companies involved with objectionable products or behaviors. It seems intuitive that the endowment of a foundation of educational institution should not invest in a firm whose activities oppose the foundation's mission. Why would a charity that fights lung cancer invest in tobacco, for example? But in a recent Federal Reserve Board working paper, "Divest, Disregard, or Double Down?", Brigitte Roth Tran suggests that intuition may be exactly backwards. She explains that "if firm returns increase with activities the endowment combats, doubling down on the investment increases expected utility by aligning funding availability with need. I call this 'mission hedging.'" Tran uses the Capital Asset Pricing Model to show that this mission hedging strategy "increases expected utility when endowment managers boost portfolio weights on firms whose returns correlate with activities the foundation seeks to reduce." More specifically, "foundations that do not account for covariance between idiosyncratic risk and marginal utility of assets will generally under-invest in high covariance assets. Because objectionable firms are more likely to have such covariance, firewall foundations will underinvest in these firms by disregarding the mission in the investment process. SRI foundations will tend to underinvest in these firms even more by avoiding them altogether."

Surge Seen In Crude By Rail To U.S. Gulf From 2017-2021 - Growing Canadian heavy production, coupled with a shortage of pipeline capacity, offers a window of opportunity for crude by rail from Western Canada to the Gulf of Mexico from now until about 2021, a Canadian crude oil conference heard Tuesday. Youll see a big surge and then by the end of the surge there will still be some crude by rail into niche markets similar to what is happening today, Terry Doherty, director of rail strategy and commercial development for Genesis Energy, told the Argus Canadian crude summit. Depending upon pipeline capacity out of Canada until new pipelines come onstream, crude-by-rail could increase to probably eight, or perhaps 12, unit trains from two to three trains today, he said. We believe that Keystone [XL] will get built but we dont think that Keystone and Energy East will get built. Genesis estimates that another 835,000 bbls a day of production will be coming onto the market over the next five years. Pipelines will get built but we definitely will have delays so dont count on a lot of pipelines by 2019, said Doherty. He also believes there currently is enough rail terminal capacity in Canada to accommodate the growth in unit trains and that any future expansions will be developed by companies already in the business. The Gulf Coast has 18 rail unloading terminals, mainly in the eastern Gulf, with the ability on paper to unload 1.7 million bbls a day of crude oil, Sandy Fielden, director, oil and products research, for Morningstar Commodities and Energy Ltd., told the conference. Most were built since 2012 in response to the need to get stranded and discounted Bakken light crude to market. Fielden said there has been a 50 per cent increase in crude oil storage in the Gulf to 291 million bbls from 192 million bbls because much of the new shale production needs to be blended ” it is too light to run through a refinery on its own. Canadian crude imports into the Gulf increased to 352,000 bbls a day in 2016 from 144,000 bbls per day in 2010 with the increased pipeline capacity to the Gulf ” most of those bbls were heavy crudes. 

Shale investments surge by $100 billion - Ever since OPEC began cutting oil production, drilling in the United States has surged. Norwegian consultancy Rystad Energy estimates $100 billion in investment funds has flowed into the U.S. shale industry over the past year, propping up domestic drilling by 60 percent. So-called completion activity – procedures like hydraulic fracturing that stimulate shale wells – has gone up 30 percent, Rystad said. And there’s no sign things will slow down. Shale investments could climb another 50 percent this year, Rystad analyst Espen Erlingsen said in a written statement. Rystad believes daily U.S. oil production could jump from 8.9 million barrels in November to 9.3 million barrels next month, getting ever closer to the nation’s recent peak of 9.6 million barrels in mid-2015.

Oil's Big American Glut Is Resting Elsewhere -- Excess crude oil inventories in the U.S. are finally and clearly in retreat as OPEC's output agreement nears the end of its fourth month. But those oil bulls looking for higher prices shouldn't get too excited just yet -- the surplus may just be moving elsewhere. True, the crude stockpile fell in each of the first three weeks of April, and the 3.64 million-barrel decline in the last of those was the biggest weekly drop of the year, according to the Energy Information Administration. Over the period, inventories were drawn down at an average rate of 326,000 barrels a day, and a further 63,000 barrels a day have been drawn from the Strategic Petroleum Reserve (SPR) as part of a program of sales put in place last year. This is far from spectacular, but it does buck the seasonal trend. U.S. crude oil inventories typically rise during the first four months of the year, so the draw this year has begun about a month earlier than usual. U.S. refineries are helping to drain the glut. The amount they processed has soared as plants have come back into operation after normal seasonal maintenance. Volumes have climbed to 17.285 million barrels a day, the highest in data that goes back 35 years. Rates could climb even further in the weeks ahead -- expansions at several plants across the country have boosted capacity to 18.62 million barrels a day, up by around 300,000 barrels over the same time last year.  In the most recent week's data, the volume of gasoline and middle distillates in storage rose, more than offsetting the draw down in crude stockpiles. Gasoline stores have been increasing for the last two weeks, bucking seasonal trends. Excluding the SPR, total U.S. oil inventories, including crude and refined products, rose by more than 6.6 million barrels in last week's data -- their biggest increase since early February. Hardly evidence of a rebalancing. In order to really clear the glut, crude must first be processed into products and then those products need to be consumed. But the early surge in U.S. oil use seems to be waning. Although four-week-average gasoline deliveries -- a proxy for demand -- soared in February and March, they have plateaued at around 9.3 million barrels a day since late March, down around 100,000 barrels a day year on year.

Are Gasoline Prices About To Crash? Glut Moves Downstream -- U.S. crude oil inventories have finally started to decline, a potentially momentous turning point in the three-year market downturn. Oil storage levels have been climbing relentlessly since the end of last summer, but inventories have been dropping ever so slightly since early April. That should be cause for celebration. Surely the end of one of the biggest headaches for oil markets should spark an oil price rally? While the data seems to be encouraging, there are growing fears that the glut could simply be shifting from upstream to downstream.The U.S. refining industry has ramped up processing over the past month, boosting processing by more than 1 million barrels per day (mb/d). For the week ending on April 21, U.S. refineries churned out an average of 17.285 mb/d, “a record for any time of year and coming well in advance of the summer driving season,” as Reuters recently described it. Maintenance season has come to a close and refineries are operating full tilt, sucking crude oil out of storage and spinning it into gasoline and diesel at a record pace. That has helped bring crude inventories down from an all-time high of 535 million barrels at the end of March, falling to 528.7 million barrels as of April 21, a small but meaningful decline. Oil traders have been anxiously awaiting such declines in storage, a key metric supporting the theory that the supply glut is coming to an end. But what if the extraordinary surge in refining is merely shifting the supply surplus downstream? For evidence of that, gasoline inventories (as opposed to crude oil inventories) started rising again in April – after months of declines – just as refiners started ramping up. Total gasoline stocks jumped from 236 million barrels in early April to 241 million barrels two weeks later. Gasoline stocks had been converging comfortably back into the five-year average range, but in April they began to climb once again.

Oil explorer plans first test of fracking potential on North Slope -  - An oil explorer hoping to bring the Lower 48's fracking revolution to Alaska will take a big step this week when it launches an effort to determine the production potential of crude oil locked in North Slope shale. The process is expected to start Wednesday, when Accumulate Energy Alaska begins drilling an exploration well along the Dalton Highway about 40 miles south of Prudhoe Bay. In June, it plans to hydraulically fracture that vertical well, using water, chemicals and sand to crack and hold open rock so oil flows from the shale. A production test to determine how the well oil flows is also expected this summer. Paul Decker, a state petroleum geologist, said this will be the first test of its kind on the North Slope. Accumulate Energy will target residual oil and gas that never migrated out of rocks that are considered one of the sources for the crude oil at the giant Prudhoe Bay oil field. Similar efforts, using long-distance horizontal wells and hydraulic fracturing, have sharply boosted oil and gas production from shale in Texas and other states. Alaska officials, facing a future of falling oil production and revenues, have waited years for a similar turnaround on the North Slope. Sen. Bill Wielechowski, D-Anchorage, said he's been hoping for unconventional shale production to take off in Alaska since exploration company Great Bear Petroleum told lawmakers about six years ago that shale oil could boost daily oil production by hundreds of thousands of barrels. Great Bear, which holds large chunks of land, is now targeting more economic, conventional oil prospects at its leases. The company hopes those prospects can help foot the bill for the costlier shale-oil extraction that requires multiple wells.

Petronas Subsidiary Built Unauthorized Dams For Fracking - A subsidiary of the Malaysian oil giant and LNG proponent Petronas has been building unauthorized dams to trap water for mega-fracking that has triggered unprecedented seismic activity in northeastern British Columbia. Progress Energy has built at least 16 unauthorized dams in the Montney basin, says a report by journalist Ben Parfitt for the Canadian Centre for Policy Alternatives. The structures are among “dozens” of unauthorized dams built by industry in the region, the report found. Two of the earth dams constructed by Progress Energy are higher than a five-storey building, the report says. Due to their size and water-holding capacity, the report says, these dams should have triggered an automatic review by the province’s Environmental Assessment Office (EAO) prior to construction. But Parfitt found there was no review before the dams were built. Only now is the office investigating the unauthorized dams.  Progress Energy built the dams between 2012 and 2014 on Treaty 8 land north of Fort St John in order to store surface water to supply its extensive hydraulic fracturing operations in the Montney basin gas fields.The controversial fracking technology injects a high-pressure mix of water, chemicals, gases and sand into the ground to fracture rock so it can release methane and natural gas and associated liquids.Fracking has triggered more than a thousand earthquakes in the region since 2008 and changed seismic patterns so dramatically that experts are increasingly concerned about the safety of dams in the region.“Either the regulator knew these dams were being built and didn’t do anything or they didn’t know and didn’t do anything. In either case we are experiencing a meltdown in regulatory oversight,” Parfitt told The Tyee. Progress Energy issued a statement saying the dams complied with BC Oil and Gas Commission requirements when built.

Canadian Oil Patch Shrugs Off Trumps Trade War Threat | Despite the recent flight of investment from the west Canadian tar sands, Canada hasn’t deviated from its course and continues to embrace major energy projects, particularly the ones designed to facilitate exports to the United States. And while U.S. President Donald Trump slaps tariffs on imported Canadian wood and threatens economic warfare with the single largest U.S. trade partner, energy links between the United States and Canada are solidifying. According to an EIA report, owners of the Alliance pipeline, a 2400-mile natural gas line carrying unprocessed natural gas from production sites in Alberta and British Columbia to extraction and fractionation plants near Chicago, are planning an expansion. They hope to add 0.5 bcf/d of capacity to the line, which at the moment has a capacity of 1.6 bcf/d, for a total throughput of over 2 bcf/d by November 2020. The demand for natural gas plant liquids (NGPL) derived from wet natural gas is low in Western Canada, particularly now that tar sands activity looks to be falling off, so Alliance is betting on greater demand in the United States. From its plants near Chicago, Alliance can send products to the Alliance Chicago Exchange and thence to other pipelines accessing other markets. If interest from investors is sufficient for the pipeline expansion, Alliance will accept bids in fall 2017, though it is not yet known how much the project will cost.On April 20, Calgary-based electricity provider TransAlta announced it would be phasing out eight coal-fired power centers and converting six of them to natural gas by 2023. The transition would cost around $CA300 million and cut emission between 30 and 40 percent per megawatt hour, but the principal reasons for the transition are economic and political. Alberta announced a mandatory phase-out of coal-fired power plants in 2015, mandating the existing plants would be shut down or transitioned by 2030. Coal has also become uncompetitive compared to natural gas and renewables, further encouraging the transition. A significant amount of Canada’s natural gas production, roughly one-third by one estimate, is used to produce oil from the tar sands. That sector has seen its fortunes dip in recent years, as high costs and low prices push out major companies. In the last year, five major companies have sold off assets worth $25 billion, with ConocoPhillips joining the exodus in March: the company sold off $13.3 billion in assets to Cenovus. Now BP is considering a departure, as it shifts money away from non-core businesses. The British energy company owns stakes in three different tar sands plays and is considering shifting its attention towards more profitable areas, such as the Permian Basin in the U.S., according to Reuters. Consequently, the re-investment rate into tar sands projects has fallen to nearly 50 percent, though optimists see signs of a resurgence ahead. Tar sands oil production has come under more intense political pressure in Canada, as environmental concerns and public discomfort with major investments into energy production has caused support for the project to dwindle. That, combined with the high cost of tar sands production relative to other North American areas, particularly the Permian Basin, has fueled the recent exodus. 

CNR's Alberta oil sands output 13% above capacity, but bottlenecks ahead -- Canadian Natural Resources' Horizon facility in Alberta is sustaining output at 205,000 b/d of synthetic crude oil -- nearly 13% above its nameplate capacity -- with a further surge in production expected later this year that could result in a bottleneck in pipeline takeaway capacity from the province, CEO Steve Laut said Thursday. Horizon output in the first quarter was 192,491 b/d, still above its nameplate of 182,000 b/d, primarily due to operational efficiencies that also led to a lowering of operating costs to C$22.08/b ($16.06/b) of SCO, he said on an earnings webcast. Output from the facility is set to increase further by 80,000 b/d by the fourth quarter, as CNR plans to complete a third-phase expansion and target an operating cost of less than C$20/b, Laut said. "In today's oil price environment, transition to a low-risk and long-life asset is important," he said. "And along with our planned acquisition of the AOSP facility, Horizon and Albian projects will be very competitive as oil sands assets." CNR is due to close in the summer a C$12.74 billion acquisition of Shell's 60% interest in the Athabasca Oil Sands Project, or AOSP, which comprises of the Albian oil sands mining facility of capacity 250,000 b/d. "With the [closure of AOSP] deal, we will be taking another significant step upwards. For our oil sands operations, we will be able to use size and scale of operations to further lower our operating cost," he said without giving a figure. Along with the phase 3 expansion, CNR is also planning a debottlenecking of the facility that could add 5,000 b/d of 15,000 b/d of new capacity, COO Tim McKay said on the same webcast. He did not indicate a timeline to add the new capacity, but said the focus is now on a full engineering study targeted to be complete by the second quarter. The study examine optimizing output from the fractionation tower, which includes taking a closer look at naphtha distillate, gas oil, natural gas and coke output, McKay said. Besides oil sands, CNR also has a portfolio of heavy oil projects in Western Canada that utilize the steam, water and polymer flooding technologies to produce a total of 174,989 b/d in the first quarter.

Canada's missing barrels - This era of lower-for-longer oil prices has raised a thorny question for Canada's oil sands producers: at what point does oil in the ground cease to exist on the balance sheet? The answer is when the US Securities Exchange Commission(SEC) says so.  The question became more acute after ExxonMobil was forced to write off 3.5bn barrels of its oil sands reserves in its annual 10-K filing. It amounts to the entire booked reserve base of its Kearl oil sands mine that was commissioned in 2013 at a cost of C$12.9bn ($9.81bn) and another 200m barrels of bitumen at its Cold Lake in situ project. The oil sands writedown slashed ExxonMobil's proved reserves by around 20%.ConocoPhillips followed suit, cutting its proved oil sands reserves by half, effectively eliminating 1.3bn barrels of oil sands and another 1bn barrels of bitumen resources. These barrels have disappeared from the accounting ledger without a trace. All told, it amounts to about 3% of Canada's entire proved reserves, which has been touted as the third largest in the world after Saudi Arabia and Venezuela.The writedowns, however, don't mean that Exxon and ConocoPhilips are packing up and going home. Exxon's Kearl oil sands mine—operated by its Canadian subsidiary Imperial Oil—continues to produce unabated at 170,000 barrels a day. And Exxon insisted in the wake of the writedowns that it is forging ahead, and expects to bring those reserves back onto its books eventually. The problem is how the SEC requires companies to tally up their reserves. The accounting rules are complex, but essentially say that companies have to use the average price for each month in the previous full year to determine the economic viability of a resource ever being developed. If that price falls below the cost of production, companies must remove the reserves from the books. The price for 2016 after a brutal price crash in the first half of the year was $29.49 a barrel for Western Canadian Select. ExxonMobil reported average production costs for its Canadian synthetic oil projects at $33.64/b for 2016. This is not an easy decision to make for companies, because it essentially reduces the net asset value of the company. This has been a sticking point with the oil companies for years given that oil sands are capital-cost intensive and so developers would prefer to amortise those costs over the 25-30 years of the asset's producing life.

Does slow growth in oil sands output justify new pipeline capacity? --Production volumes in the Alberta oil sands continue to inch up as production expansion projects sanctioned in better times — almost all of the projects small in scale — come online. However, several major pipeline projects remain on the drawing board; taken together, they would appear to provide far more pipeline takeaway capacity than the oil sands will need. Which raises two questions: how much incremental pipeline capacity is needed, and which pipeline project or projects are most likely to advance? Today we continue our series on stagnating production growth in the world’s premier crude bitumen area, the odds for and against a rebound any time soon, and the need (or lack thereof) for more pipelines.  In Part 1, we started with a reminder that while the three oil sands areas in northern Alberta — the giant Athabasca deposits and the smaller Peace River and Cold Lake areas — contain proven reserves equivalent to more than 160 billion barrels of crude oil, simply having vast hydrocarbon reserves in the ground isn’t enough­­. Production costs and the cost of delivering product to market need to be competitive if an area is to continue drawing investment — at least over the long-term in the case of areas with higher upfront development costs like the oil sands and the Gulf of Mexico (see Don’t You Forget About Me). Oil sands producers have been especially hard-hit by the collapse in oil prices, in part because their hydrocarbon-extraction process is more complicated and costly than their shale-play counterparts, and because the oil sands are far away from most major refinery centers. And it’s not only a matter of having to transport product longer distances — oil sands producers also need to either add diluent to their bitumen to allow it to flow through pipelines, or transport high-viscosity bitumen in special, high-cost coil rail cars that can be heated before unloading, and none of that comes cheap. Then there’s the matter of takeaway capacity. When oil sands production took off in 2010-13, the midstream sector struggled to keep up, and when midstreamers couldn’t build new pipeline capacity quickly enough (or, more precisely, couldn’t win governmental approvals for big projects like TransCanada’s Keystone XL or Enbridge’s Northern Gateway), a couple of dozen crude-by-rail (CBR) facilities were constructed or upgraded to help move Alberta-sourced hydrocarbons to market — much like what occurred in the Bakken in North Dakota (see Slow Train Coming).

Mexico invites nominations for deepwater blocks to include in December auction -- Mexico is inviting domestic and international oil companies to submit nominations from among the 119 deepwater blocks available on its side of the Gulf of Mexico, some of which may be included in a bid round this December, the country's deputy energy secretary for hydrocarbons said Monday. The nomination process, which began in mid-March and will be open for three months, will help the state decide which and how many blocks to offer in the late-year auction, Aldo Flores Quiroga told an audience at the opening of the Offshore Technology Conference. Mexico's top energy officials from the Energy Ministry (SENER) and the National Hydrocarbons Commission (CNH) will reveal in June which blocks will be offered, Flores said, adding Mexico also plans a deepwater auction for October 2018. "We're offering a predictable calendar for tenders, and also on-demand seismic data," he said. All deepwater blocks will be 1,000 sq km, which is also part of the energy authorities' process that will standardize block sizes. Flores said that despite low oil prices -- currently teetering slightly under $50/b -- Mexico's deepwater offers an relatively attractive breakeven price under $60/b. Oil prices are widely expected to rise in the next year, and deepwater blocks awarded in 2017 would not likely be developed for at least five years and potentially longer.

ConocoPhillips Still Can't Dig Out of the Red - Heading into the first quarter, there was growing optimism that ConocoPhillips (NYSE:COP) would finally return to profitability. Unfortunately, that didn't happen as the company reported yet another adjusted loss, this time losing $19 million, or $0.02 per share. While that's a meaningful improvement from last year's $1.2 billion adjusted loss and last quarter's $318 million loss, it still wasn't the minuscule profit that analysts expected to see. That said, there were several positives in the quarter, and they do suggest that the company is heading in the right direction. Operationally, ConocoPhillips performed well during the quarter. Production, for example, was 1.584 million barrels of oil equivalent per day (BOE/D), which came in above the high end of the company's guidance range of 1.54 million to 1.57 million BOE/D. Driving that result: the ramp-up of several major projects, the impact of multiple development programs, and improved well performance. That helped the company more than offset a production curtailment at its Surmont joint venture in Canada with Total. That's after the companies had to cut production at the facility due to a fire at Suncor Energy's Syncrude facility, which impacted the partners' ability to transport oil produced at Surmont.In addition to that higher production, ConocoPhillips also benefited from an improvement in realized oil prices during the quarter, which jumped from $22.94 per BOE in the year-ago quarter to $36.18 per BOE in the first quarter. At the same time, the company continues to push down costs, evidenced by a 4% year-over-year decrease in production and operating expenses. These factors helped drive earnings within striking distance of profitability.

BP profits surge after rebound in oil prices -  BP almost tripled its profits in the first quarter, adding to signs of recovery among the world’s biggest oil producers after a two-year slump. Like its US peers ExxonMobil and Chevron last week, BP beat market expectations with first-quarter results that showed the benefits of sharply higher oil prices compared with the 12-year lows recorded in the same period of 2016. The UK group on Tuesday reported profits of $1.5bn on an underlying replacement cost basis, the main measure watched by analysts. This was up from $532m in the first three months of last year and higher than the $1.26bn consensus forecast by analysts. The results promised to reinforce investor confidence that BP was gradually escaping the financial shadow of the 2010 Deepwater Horizon oil spill in the US as it entered the final stages of paying off $62bn of associated clean-up and compensation costs. BP’s shares were up 1.6 per cent at £4.49 in London on Tuesday. “We’ve got a good quarter under our belts but it’s just one quarter and there’s no complacency,” said Brian Gilvary, BP chief financial officer. “We’ve still got a lot of work to do and major projects to bring on stream.” 

Oilfield services groups struggle outside the US - It would be easy to conclude from the first-quarter results of two of the world’s largest oilfield services companies that recovery is under way in their sector. Halliburton and Schlumberger in recent days both announced their first quarterly revenue growth since the oil market crash of 2014. Yet, the rebound is far from universal. Almost all the renewed growth in the oilfield services industry — activity which spans everything from drilling wells to maintaining production platforms — is coming from one place: onshore shale oil and gas developments in the US. Other parts of the sector, particularly the offshore element, remain mired in recession after exploration and production groups responded to the drop in oil prices by demanding big reductions in charges by service companies in relation to many existing developments, and by putting other projects on hold. “We are in the midst of a unique and challenging cycle with very different dynamics between the North American and international markets,” said Jeff Miller, Halliburton’s president, last week. This mixed picture is causing divergence between groups such as Halliburton with strong exposure to US shale drilling and other service companies more dependent on offshore or conventional onshore work elsewhere in the world. Saipem of Italy, one of the world’s biggest offshore engineers, in April revealed its weakest order intake since 2001 and its lowest work backlog since 2006 after first-quarter revenues and profits both fell by a fifth compared with a year ago. 

Global oil discoveries and new projects fell to historic lows in 2016 -- Global oil discoveries fell to a record low in 2016 as companies continued to cut spending and conventional oil projects sanctioned were at the lowest level in more than 70 years, according to the International Energy Agency, which warned that both trends could continue this year. Oil discoveries declined to 2.4 billion barrels in 2016, compared with an average of 9 billion barrels per year over the past 15 years. Meanwhile, the volume of conventional resources sanctioned for development last year fell to 4.7 billion barrels, 30% lower than the previous year as the number of projects that received a final investment decision dropped to the lowest level since the 1940s. This sharp slowdown in activity in the conventional oil sector was the result of reduced investment spending driven by low oil prices. It brings an additional cause of concern for global energy security at a time of heightened geopolitical risks in some major producer countries, such as Venezuela. With global demand expected to grow by 1.2 mb/d a year in the next five years, the IEA has repeatedly warned that an extended period of sharply lower oil investment could lead to a tightening in supplies. Exploration spending is expected to fall again in 2017 for the third year in a row to less than half 2014 levels, resulting in another year of low discoveries. The level of new sanctioned projects so far in 2017 remains depressed.

Oil Production Vital Statistics April 2017 - The oil price recovery to $56 (Brent) through the first half of April was short lived and it has since returned to $50. According to, Russia is now compliant with its 300,000 bpd production cut. OPEC production is now down 1.43 Mbpd compared with October 16 (including Libya and Nigeria) and the group is over-compliant with the agreed cuts and must be disappointed in the continuing weak oil price.IEA data shows Russia produced 11.6 Mbpd in October 2016 and 11.42 Mbpd in March 2017, a cut of 180,000 bpd. We must therefore assume that Russia has cut deeply during April. At end March, FSU production was up 30,000 bpd on October. If OPEC does not renew or expand production cuts in the second half of 2017 then the oil price is widely expected to collapse. OPEC drilling remains close to a cyclical high while US drilling continues to recover. Total US rigs were up 46 to 870 for the month to the end of April. Drilling remains stuck on a cyclical low everywhere else. According to PennEnergy Global oil discoveries and new projects fell to historic lows in 2016 and this will be storing trouble in the years ahead when a lack of investment eventually works through the system emerging as reduced production creating a new cycle of scarcity and a new price spike.The following totals compare March 2016 with March 2017:

  • World Total Liquids 96.11/95.96 -150,000 bpd
  • OPEC 12: 31.70/31.49 -210,000 bpd
  • Russia + FSU 14.19/14.36 +170,000 bpd
  • Europe OECD  3.59/3.58 -10,000
  • Asia 7.59/7.39 -200,000
  • North America 19.86/19.62 -240,000 bpd

The net YOY change for OPEC, Russia, Europe, Asia and N America is -480,000 bpd while world total liquids is only down -150,000 bpd. This is explained by a 420,000 bpd YOY rise in Brazilian production (Figure 21). The following totals compare October 2016 with March 2017 and monitor compliance with the OPEC + others production cuts.

NYMEX June gas dips 4.2 cents amid larger-than-expected storage injection - The NYMEX June natural gas futures contract fell Thursday as US Energy Information Administration storage data showed higher-than-expected injection numbers. The NYMEX June natural gas futures contract settled at $3.186/MMBtu, down 4.2 cents. EIA data released Thursday showed that US stocks grew 67 Bcf for the week ended April 28. That is 6 Bcf higher than the 61-Bcf injection expected by a consensus of analysts surveyed by S&P Global Platts. The build was higher than the five-year average of a 63-Bcf injection and 1 Bcf lower than the 68-Bcf injection reported at this time last year. Stocks grew in every region, with the largest gains occurring in the East and South Central. Total stocks reached 2.256 Tcf, down 13.7% from year-ago levels of 2.615 Tcf. Stocks are one of the main indicators under close watch as decreased production, increased exports to Mexico and LNG exports have tightened supply. Data from Platts Analytics' Bentek Energy showed a 1.8 Bcf/d decrease in dry production to date in 2017 compared with a year ago, but a year-on-year increase of 2.1 Bcf/d for exports to Mexico and LNG exports. Platts Analytics expects Thursday power burn to decrease 1.3 Bcf/d from Wednesday, with power burn demand decreasing in nearly every region, with most of the decline attributed to the Southeast and Texas. Conversely, with cooler-than-average temperatures forecast for the Northeast and Southwest on Thursday, Platts Analytics expects a 1 Bcf/d increase in demand from Wednesday.

Platts JKM: June LNG eases 5 cents to $5.70/MMBtu on returning supply -- S&P Global Platts JKM for LNG cargoes delivered in June slipped 5 cents week-on-week to close at $5.70/MMBtu on Friday, following returning supply from projects in the US and Australia. Spot prices were depressed by re-emerging supply from Train 2 of Australia's Gorgon project, as well as the resumption of output from Sabine Pass Train 3 in the US after a planned maintenance last week, sources said. All three trains at Gorgon are operational and running at over 85% of nameplate capacity in aggregate, a Chevron spokesman confirmed early in the week. The project is currently loading a ship about every two days and has shipped 67 cargoes to date, according to Chevron. Buying activity was limited in Asia with biggest buyers Japan and South Korea absent due to public holidays over most of the week. South Korea's Kogas awarded more than 10 cargoes to RasGas, Shell, Vitol, Marubeni, Petrobras, Engie and other sellers at prices from $5.70/MMBtu to around $5.85/MMBtu. Qatargas had been awarded one cargo for the most recent buy tender from Thailand's PTT, with prices reported at $5.75/MMBtu and below. In India, Gail issued a tender seeking one cargo a month for delivery in July, September and November. Bids into the tender are due by May 8, with submissions remaining valid until May 9. Submissions into the tender are to be made on a Brent-linked basis  

Australian government shocks the natural gas market - Share prices are crumbling, buyers are scrambling, and industry is raging after a shocking turnaround from the world’s largest exporting nation for liquefied natural gas (LNG).   Prime Minister Malcom Turnbull announced on public radio Thursday morning that his government will take the right to restrict LNG exports. As he explained, “It is unacceptable for Australia to become the world’s largest exporter of liquefied natural gas but not have enough domestic supply for Australian households and businesses.” The export restrictions will reportedly come in the form of a “gas security mechanism” to be enacted as of July 1. Under these rules, the federal government will have the right to block exports during times of high demand and rising prices at home. Few details were given beyond this — such as how producers might be compensated for lost revenue and broken contract commitments due to export restrictions. But the reaction from investors and industry was decidedly negative. With share prices of producers falling as much as 7.5% on the announcement — and oil and gas executives calling the new policy “unprecedented”, raising “sovereign risk”.

Aussies oppose fracking but govt wants it | SBS News: Most Australians support bans on new unconventional gas exploration but the federal government has told the states to "get off their backsides" and end them. More than twice as many Australians support moratoriums on fracking (56 per cent) than those who oppose them (20 per cent), according to an Australia Institute survey of 1420 people conducted over a week in March. That majority in favour of bans on new unconventional gas extractions including hydraulic fracturing (fracking) was evident across all states. And the opposition crossed party lines, with Labor, Liberal and minor party voters all expressing concern. But federal Resources Minister Matt Canavan was out again on Sunday morning blaming state policies for a looming gas shortage. The federal government last week announced export controls to protect domestic gas supplies. "Hopefully it's a wake-up call to the states and territories to get off their backsides and develop their own resources," he told Sky News on Sunday.He noted his criticism was bipartisan - calling the Victorian Labor government's ban on all gas exploration, even for conventional sources, "absurd" while telling off the NSW coalition government for too many delays in approval processes. Gas companies have also been quick to blame states hindering new developments for the shortage of supply on the domestic market while they prepare to export record amounts of the fuel. Australia Institute deputy director Ebony Bennett said industry demands to open more land to fracking were not about reducing energy prices but maximising profits. "The current gas crisis and high gas prices are not an unintended consequence, but the result of linking Australia to the international gas market," she said.

 Shell's realized natural gas price in Europe rises in Q1 to $5.08/Mcf - Shell saw its average realized gas price in Europe in the first quarter of 2017 edge up to $5.08/Mcf ($4.94/MMBtu) compared with the previous quarter, the company said in its Q1 earnings statement Thursday. The gas price increase was triggered by increased demand on cold weather across Europe in January and the early part of February, which saw wholesale gas prices surge. Its European realized price was $4.94/Mcf in Q4 2016. However, Shell's realized European price in Q1 was still below the spot price average in Q1. According to Platts assessments, the Dutch TTF spot price averaged $5.77/MMBtu in Q1, up from $5.41/MMBtu in Q4 2016, while the UK NBP spot price averaged $6.00/MMBtu in Q1 compared with $5.62/MMBtu in Q4 2016. Shell's European gas price boost helped push its global average realized gas price to $4.29/Mcf in the last quarter, up from $4.03/Mcf in Q4 last year. Europe accounts for a significant chunk of Shell's gas production -- it averaged 3.43 Bcf/d in Q1 out of a total of 10.94 Bcf/d.

Colombian president announces largest gas find in decades - Colombian President Juan Manuel Santos and state-controlled oil company Ecopetrol Wednesday announced the country's largest natural gas discovery in 28 years, but stopped short of quantifying the Caribbean deepwater find or declaring it to be a commercially viable. The discovery comes as Colombia is experiencing an ongoing decline in domestic gas reserves and output. Earlier this year, the country lost its self sufficiency in gas production and was forced for the first time to import an LNG cargo from Trinidad and Tobago to a new regasification facility in Cartagena in order to meet domestic gas demand. At a press conference in Bogota, Santos said the deepwater well Gorgon-1, drilled by Ecopeterol and its 50-50 operator partner Anadarko, had found natural gas at a depth of 2,316 meters. The gas-bearing sand layer was measured at between 260 and 360 feet of natural gas pay. In a release shortly before the president spoke, Ecopetrol said the well represents a continuation of the "geological train" of gas discovered previously in the adjacent Kronos deep water block in 2015 and Purple Angel deep water block in March of this year off Colombia's Caribbean coast. Both blocks are also owned by Ecopetrol and Anadarko.

Nigeria pays initial $400 mil owed foreign oil partners, eyes 2.5 mil b/d output by 2019 - Nigeria has made an initial payment of $400 million, out of the $5.1 billion debt owed to its foreign oil partners, as it kickstarted a new funding mechanism for upstream ventures aimed at boosting investment in the oil and gas sector, oil minister Emmanuel Kachikwu said Wednesday. In December 2016, the government signed a new funding arrangement with Shell, ExxonMobil, Chevron, Total and Eni, that would see Nigeria exit the system of contributing money to fund its average 57% equity in the ventures, known locally as cash call, and allow producers to independently source funds and control their own budgets. "The first payment of $400 million was paid last week to the IOCs [International Oil Companies]. The $400 million payment was part of cash call debt owed the IOCs in 2016," a statement Wednesday from the oil ministry quoted Kachikwu saying. "The sustainable funding of the [joint ventures] will lead to an increase in national production from the current 2.2 million b/d to 2.5 million b/d by 2019," the minister said. Nigerian oil production still remains sharply below its capacity of 2.2 million b/d, with the main export grade Forcados still shut in. Output has recovered gradually this year as militant attacks have fallen substantially since early January after the government stepped up peace talks in the key producing Niger Delta to end militancy in the region. Nigerian crude oil and condensate production is currently around 1.9 million b/d, with almost 350,000 b/d comprising condensates like Akpo, Agbami and Oso Condensate, according to S&P Global Platts estimates.

OPEC output cuts whet Asia's appetite for North Sea oil | Reuters: OPEC production cuts have created record Asian demand for European oil and made China the second biggest consumer of North Sea crude as flows from its usual Middle East suppliers dip. Rising Asian appetite for North Sea crude has largely been fueled by the falling premium charged for North Sea crude over rival Middle East oil and this demand could last beyond OPEC's supply cuts if that favorable pricing persists. Thomson Reuters Eikon data shows China imported almost 38 million barrels of North Sea crude from the start of the year until late April, compared with about 8 million barrels by the same point in 2016. China now lies second to Britain, the biggest consumer of North Sea crude, which had bought 49.7 million barrels by late April this year. In January to April 2016, China ranked seventh. The Organization of the Petroleum Exporting Countries, Russia and other non-OPEC producers agreed to cut output by 1.8 million barrels per day (bpd) in the first half of 2017 to lift prices and reduce global inventories. With stockpiles still bulging, Gulf producers and other producers say cuts could be extended to December, adding a further incentive for Asian buyers to look beyond their usual suppliers. "East of Suez, crude balances look like they will get progressively tighter year-on-year all the way through to the end of 2017," FGE analyst James Davis said. "We suspect there will be, from a supply perspective, a need for crude to move across to Asia from the North Sea," he said.

 Russian oil output declines, almost at global pact target | Reuters: Russian oil production edged down to 11.00 million barrels per day (bpd) in April from 11.05 million bpd in March, just short of full compliance with the targets of a global deal to cut oil output, Energy Ministry data showed on Tuesday. The Organization of the Petroleum Producing Countries with Russia and other leading oil producers agreed to cut oil production by almost 1.8 million bpd in the first six months of this year to tackle bloated inventories and prop up weak prices. Of that amount, Russia undertook to reduce its output by 300,000 bpd by the end of April to a target of 10.947 million bpd from a 30-year high of 11.247 million bpd in October. In April, its compliance with its target was 95.2 percent. In tonnes, oil output in April reached 45.002 million versus 46.739 million in March. Investors are now focusing on whether the OPEC and other producers will extend cuts into the second half of the year. OPEC states and others meet on May 25 to discuss the issue. Russia has yet to state publicly whether it backs an extension but has said it was studying the market and had held talks with some OPEC ministers to determine its position. Rosneft, Russia's largest oil producer, contributed the most to Moscow's cuts last month with a 1 percent reduction from March. Almost all other Russian majors, apart from Gazprom Neft, also curtailed output in April. Gazprom Neft, the oil arm of Russian gas giant Gazprom, ratcheted up oil production in April by 2.9 percent as it continued to pump more from its newly launched fields. Smaller producers cut output by 2.1 percent.

Extension of OPEC/non-OPEC crude oil production cut deal near certain: analysts --- The likelihood of OPEC and major non-OPEC producers agreeing to extend their ongoing crude oil output cut is near certain, two prominent analysts said Monday. OPEC producers are "100% certain" to extend their end of the output cut deal at a May 25 OPEC ministerial meeting in Vienna, Fereidun Fesharaki, chairman of consultants FGE, told the Middle East Petroleum and Gas Conference in Dubai. In December, OPEC teamed up with major producers such as Russia to cut production by nearly 1.8 million b/d compared with October 2016 levels starting January 1. While a six-month deal was initially envisaged, OPEC may need to keep a lid on its production until well into 2018, Fesharaki said, as work on trimming global crude inventories continues, or they risk oil prices dropping back to $40/b if stocks, particularly in the US, increase. "The cuts will have to be extended even beyond this year, to the middle or even the end of next year", he said. The market is watching carefully for signs of when the build up in inventories stops and drawdowns begin, he said. Oil prices of $50/b-$60/b could be sustainable, he added, but there was a risk that US production volumes could be higher than expected, pushing prices back as low as $40/b over the next 12 months.

Why the crude rally has fizzled, concluded: Market analysis series - The Barrel Blog: This is the third and final segment of a three-part look at why oil prices have failed to rally despite OPEC’s best efforts at managing supply cuts. Not only have prices failed to rally, both NYMEX WTI and ICE Brent have fallen around 9% over the past three weeks. In case you missed them, be sure to read part 1 and part 2.   Refiners do what is in their best interest, too. Bank of America Merrill Lynch analysts recently said that refiners the world over need to weigh capitalizing on current strong margins — and risk dumping products into an already glutted market — or forgo profits now in the hopes of rescuing global product prices. “Refiners need to be careful not to repeat last year’s mistake and raise production in response to high margins only to add to already high inventories,” the analysts said. “In a way, they face a big dilemma: be penny wise now and possibly look pound foolish later, essentially run harder now and suffer in six months, or run softer now and forgo profits.” The recent strength in refining margins across much of the world suggests refiners, like many of the world’s oil producers, will continue to do what is in their best interest: use cheap crude to make refined products for profit.So what is the current state of the global refined product market? While product cracks have kept refining margins profitable, it is more likely than not that they have already peaked at levels largely below those seen last year. European gasoline had strengthened on the seasonal pull from the US, but even this seems to have already dried up. In Asia, gasoline cracks could have peaked for the season at just over $10/b. In 2016, gasoline cracks peaked at just under $12/b in late-March. Distillate cracks the world over are better, but last year was a particularly bad year for distillate sellers. So, why are refiners continuing to churn out products? Because they’re getting a great deal on all this relatively cheap crude! With refining margins where they are right now, it’s little wonder product stocks can’t clear. It would help if forecast demand lived up to expectations, but so far, this has not happened. For crude prices specifically, hurdles remain. US, North Sea, West Africa and Latin crudes will continue to displace OPEC barrels for as long as freight stays cheap and the OPEC cuts themselves keep Dubai comparatively strong. In its latest crude oil market outlook, Platts Analytics’ Bentek Energy analysts acknowledged as much.

Oil production cuts: Fool me, make that any number of times -- The jawboning of oil prices by the Saudi Arabian/Russian tag team should be wearing off after more than a year of actions that don't measure up to the words. Oil prices slumped recently, dropping from around $54 per barrel to just below $50 as of Friday's close. As if on cue, the Russian energy minister announced Friday that Russia has now met its target of reducing oil production by 300,000 barrels per day. It only took four months to do something that should have taken just weeks. (The agreement came into force on January 1.) And, of course, we'll have to see if the Russians have actually done what they say they've done. Only a week earlier, the Saudi energy minister indicated that there is momentum growing in OPEC for extending production cuts beyond June for another six months. This announcement comes only six weeks after the same minister said that OPEC would NOT be considering extending the cuts. This is reminiscent of last year's run-up to the production agreement in which Russia and Saudi Arabia kept alternating in making often contradictory announcements to sow confusion about the possibility of a production agreement and keep markets on edge without actually having to do anything. The Saudis and the Russians want to appear to being "doing something" about low oil prices. But they and their fellow producers aren't really doing enough to push prices higher. And, that may suit the Saudis and the Russians just fine. Meanwhile, U.S. tight oil producers keep touting ever lower "breakeven" prices for their relatively expensive oil. But as petroleum consultant Art Berman has been pointing out for some time, these lower breakeven prices are almost completely the product of crashing oil service costs rather than technological miracles. And, they aren't limited to tight oil producers, but rather reflect conditions across the entire industry. One thing all this talk has done is fan speculative interest in the oil futures market where open interest has soared even as prices have traced out a mostly sideways pattern. Clearly, many speculators believe the hype about sharply higher oil prices. I believe they are going to wait quite a while longer--at least until Saudi Arabia and Russia are satisfied that the investment capital flowing to tight oil drillers in the United States has been largely shut down.

Hedge funds lose faith in OPEC: Kemp (Reuters) - Hedge funds are losing faith that OPEC can accelerate the rebalancing of the oil market even if the group agrees to extend output cuts when it meets later this month.Hedge funds and other money managers cut their combined net long position in the three main futures and options contracts linked to Brent and WTI by 139 million barrels in the week to April 25 ( reduction was one of the largest weekly falls on record, and reverses a cumulative increase of 140 million barrels over the previous three weeks, according to data from regulators and exchanges ( managers are now much less bullish about the outlook for crude oil prices than they were back at the start of the year.Bullish long positions outnumber bearish short positions by a ratio of 4:1, down from 7:1 at the start of the year and a peak of more than 10:1 in late February ( number of long positions has fallen to the lowest level since before OPEC announced its output agreement on Nov. 30 ( the same time, the number of short positions has been trending higher since late February, despite periodic short-covering rallies.Fund managers have become less bullish despite increasingly strong indications from OPEC that it will roll over production cuts for another six months.Traders no longer believe the cuts will be enough to rebalance the market in the second half of the year even if they are extended.In the three months from the end of November to the end of February, fund managers increasingly bet OPEC's output cuts would work.An informal understanding between OPEC and the hedge fund community helped boost prices and give oil producers an early payback. But the continued rise in reported crude stocks and the futures market's failure to switch from contango to backwardation has forced a reassessment. In addition, the continued rise in shale drilling has created concerns about a big increase in oil production from the United States later in the year. Since March, hedge fund managers have increasingly wagered OPEC's rebalancing effort will fail, weighing on prices. Hedge funds are now less bullish even though prices are lower, which shows how much confidence in the OPEC/non-OPEC accord has fallen.Simply announcing OPEC and non-OPEC compliance figures and an extension of the agreement is no longer enough. Traders and fund managers are demanding evidence the agreement is working in the form of a reduction in reported stockpiles and a cut in tanker exports.

Rising U.S. oil production knocks OPEC off course: Kemp | Reuters: U.S. crude production is surging, complicating OPEC’s efforts to rebalance the oil market. U.S. production rose by more than 450,000 barrels per day (bpd) in the five months ending in February, according to the U.S. Energy Information Administration (EIA) ( U.S. crude production has increased from a recent low of 8.567 million bpd in September to 9.031 million bpd in February (“Petroleum Supply Monthly”, EIA, April 28).Production continued rising in March and April, and now stands at over 9.2 million bpd, according to weekly estimates published by the agency (“Weekly Petroleum Status Report”, EIA, April 26).Weekly estimates are considered less reliable than the monthly numbers, but the two series have tended to follow one another closely, so there is no reason to doubt the continued growth in output ( crude production is increasing at an annual rate of more than 1 million bpd, comparable to the boom of 2012-2014 ( rapid recovery in U.S. output is one of the factors making market rebalancing slower than OPEC anticipated.Most of the increase so far has come from non-shale producers in the Gulf of Mexico and Alaska. But the massive increase in the number of rigs drilling onshore should ensure shale output rises substantially in the remainder of 2017. Gulf of Mexico output rose by 228,000 bpd in the five months to February, while onshore production from the lower 48 states increased by 175,000 bpd and Alaska’s output rose 61,000 bpd. U.S. production will continue increasing for at least the next few months as the lagged impact of earlier increases in the onshore rig count filter through.From a cycle low in May 2016, the number of rigs drilling for oil in the United States has risen by 380 or around 120 percent ( and production firms are still adding drilling rigs at an average of almost 10 per week, according to oilfield services company Baker Hughes ( counts generally affect production with a lag of about six months so the full impact of all those extra rigs has yet to be reflected in the production statistics. Crude output is already rising much faster than predicted by any of the major statistical agencies at the start of the year. EIA has already raised its year-end forecast from 9.22 million bpd in January to 9.64 million bpd in April (“Short-Term Energy Outlook”, EIA, Jan and Apr 2017). By the end of the year, production is predicted to have fully recovered from the slump and to surpass the previous peak set in April 2015.

 The Four Charts That Prompted An Oil Analyst To Declare The OPEC Deal A Failure -- As JPMorgan wrote back in February, while IEA estimated the OPEC crude oil production fell by 1mbd to 32.06mbd in January, suggesting an initial compliance of 90% with the output agreement reached end 2016, the latest oil supply details released by China customs today suggest a reduction of supplies was not yet seen by China, the world’s largest oil importer. Fast forward two months when Reuters analyst Clyde Russell looks at the same data and asks whether "it is time to call the crude oil output cuts by OPEC and its allies a failure?"  Echoing what we cautioned two months ago, Russell said that "certainly there is an increasing disconnect between the rhetoric of OPEC and other producers cutting output on the one hand and the reality of a well-supplied crude oil market and mixed signals on the level of global inventories on the other." The math is simple: for OPEC and its allies to achieve their aim of sustainable higher prices, both global supplies and inventories have to be reduced, the so-called market re-balancing. Yet "it's here that the main evidence of the failure of the OPEC agreement is to be found."\ As the charts below demonstrate, oil shipments by tanker around the globe were at a record high in April, according to vessel-tracking data compiled by Thomson Reuters Supply Chain and Commodity forecasts. As of last week, the data shows that an average 50.3 million barrels per day (bpd) of crude is being shipped in April, up from the previous record 46.1 million bpd in January. While the data excludes crude moved by pipelines, it's extremely unlikely that pipeline supplies have been cut by more than seaborne cargoes have increased.Worse, the data also show that Saudi Arabia, which undertook to make the largest output cut among those producers party to the November deal, is actually increasing tanker shipments in recent months, to levels well above those that prevailed late last year. In short, OPEC may be producing less - if only believes the OPEC-sourced data - but actual global deliveries of oil have never been higher!

Iraq's fuel oil exports soar despite OPEC supply cut | Reuters: Iraqi fuel oil exports have soared since January despite a reduction in the country's crude production in line with OPEC supply cuts, industry sources said, in what could be a way to boost output of refined products and maintain oil revenues. Iraq on average exported between 80,000 and 160,000 tonnes of fuel oil per month in 2016, data collected by Thomson Reuters Oil Research showed. But volumes sold to Asia have jumped this year, with Iraq's global exports of fuel oil reaching more than 500,000 tonnes in March alone, according to Reuters data. The soaring exports of high-quality straight-run fuel oil (SRFO) are an attempt to support revenues amid the OPEC cuts in which Iraq reluctantly agreed to participate, saying it would reduce crude output by 210,000 barrels per day (bpd). Iraq has processed more crude through its refineries, turning it into fuel oil for export, five industry sources with knowledge of the matter said. "The Iraqis have been processing more crude internally than exporting it, hence there are more fuel oil exports," said one Middle East-based industry source, speaking on condition of anonymity as he was not authorised to talk to the media. A manager at an Iraqi-headquartered energy trading company said: "The Iraqis have been working on optimising fuel oil exports ... in a move to compensate for the OPEC (crude) cuts." Other Middle East trade sources said Iraq had been blending the high-quality fuel oil it produces with either crude or naphtha before exporting it.The effect has been felt as far as Singapore, Asia's main oil-trading and storage hub. Trade data compiled by Reuters shows imports of Iraqi fuel oil at 0.94 million tonnes in the first quarter of 2017, nearly double the 0.48 million tonnes imported during the whole of 2016. 

Opec oil exports under scrutiny as crude price sags - As oil prices languish near $50 a barrel, energy traders are starting to point the finger at one previously overlooked culprit: exports. For all Opec’s self-imposed production restraint the group’s exports have fallen by less than their output cuts might imply. Morgan Stanley analysts say that while Opec has hit its target by cutting as much as 1.4m barrels a day of output to try and support the market, shipping data suggests the group’s exports have declined by less than 1m b/d since the start of the year. Consultancy Energy Aspects echo this view, arguing the discrepancy between the group’s production and exports risked being seen as “disingenuous” by a market that has been rapidly “losing faith” in the group. Analysts at Energy Aspects say tanker tracking data suggests Opec’s exports have fallen by as little as 800,000 b/d so far in 2017 as some members have supplanted oil lost to production cutbacks with crude from storage, or have freed up barrels for export as they carry out maintenance at domestic refineries. The relatively high export levels are likely to come under scrutiny when Opec ministers meet on May 25, when they will decide whether to extend the production deal for another six months. While a continuation of the deal appears close to being rubber-stamped, with Opec ministers and non-Opec participants such as Russia largely agreeing more needs to be done to tighten the market, the export levels may raise tensions between a group that has fought hard to maintain cohesiveness during a near three-year old oil slump. One Gulf Opec delegate said he remained confident the rebalancing the cartel is trying to achieve is “under way” but admitted “the impact of output cuts on exports will be lagged behind”.

All Eyes On Saudi Arabia As OPEC Begins To Unravel - Has OPEC failed? That’s the question analysts have begun to ask, approaching the group’s next meeting later this month. When the members gather at their headquarters in Vienna, it will likely be to agree on an extension of production cuts in place since January.Those cuts, originally intended to re-balance markets and boost prices, had an initial positive effect but their ultimate impact has been difficult to measure, as inventories have declined only gradually while global oil shipments have increased. New production from outside of OPEC, particularly in the United States, has kept global inventories high.It’s generally believed that OPEC members will recognize the need to extend cuts, with one observer calling it a “100 percent” probability. There is some speculation that Russia, a non-OPEC state whose cooperation is crucial to the overall success of OPEC’s strategy, may prove intransigent when it comes to cutting more production, but that skepticism was partly assuaged last week when Russia’s government indicated their compliance had neared one hundred percent.As far as major OPEC producers, such as Saudi Arabia, Iraq and Iran are concerned, an extension of the existing arrangement makes sense. Riyadh has been over-cutting and wants higher prices to support the partial IPO of Saudi Aramco next year. Iran and Iraq were both partly exempt from the production cuts, with Iran successfully recovering production to 3.8 million bpd. While it’s unlikely Iran or Iraq would agree to reducing production, there’s little reason for them to protest an extension of the deal, especially when they’ve been able to seize market share from others, like Saudi Arabia, who have had to cut more. Fears that oil could plunge below $40 a barrel if no extension is agreed upon have begun to percolate, putting pressure on OPEC to deliver an extension at their May meeting.

Oil Seen at or Below $40 If OPEC Doesn’t Extend Output Cuts -- Crude will probably drop to $40 a barrel or below unless OPEC and allied producers extend their collective cuts in output beyond June, according to analysts including the Abu Dhabi Investment Authority’s head of research. The six-month cuts that took effect in January have set a floor for prices, but an increasing supply of U.S. shale oil together with record-high inventories are keeping the per-barrel price of crude from rising beyond the upper $50s, Christof Ruehl said Wednesday at a conference in Dubai. “If OPEC and the coalition don’t extend the agreement to continue cuts, that price floor will go,” he said. “Without it, prices would fall, and there’s nothing to stop oil going below $40 a barrel.” “The market is looking for a direction right now and ending the production cuts would be a negative for oil prices,” said Edward Bell, a commodities analyst at Dubai-based bank Emirates NBD PJSC. “Without a deal, oil could certainly be pushed below $40.” A drop to $40 a barrel is “a clear option” should OPEC not agree to extend cuts next month, Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said Wednesday.

 Oil Tumbles To $48 Handle Again After Libyan Output Surge -- The dead cat bounce of early April is officially dead... again. Following headlines proclaiming Libyan crude output exceeding 760k barrels per day - the highest since Dec 2014 - WTI prices have broken back below $49 and erased the entire move post-OPEC deal last year...

Oil Prices Weighed Down by Libya's Output Resumption - Higher-than-expected production in Libya and soft manufacturing activities indicators in the US and China dented hopes of demand improvement. Trump's suggestion or raising gas tax to fund infrastructural spending has also vexed the market. The front-month WTI crude oil contract initially dropped to a 5-week low of 48.59 before ending the day at 48.84, down -0.99%. The Brent contract also slipped to as low as 51.22 before settling at 51.52, down -0.41%. Gasoline and heating oil prices plunged more than +1%. The RBOB gasoline contract extended weakness for 4 days in row, losing an aggregate -6%. With the European market closed on public holiday, the US equity market was mixed. Trumps' idea of breaking up large banks, separating commercial and investment banking operations triggered a short-lived selloff in the financials. In Wall Street, DJIA moved within a narrow range before adding +0.1% at close, while S&P 500 gained +0.2%.US Treasury prices dropped, sending yields higher, as traded lightened positions ahead of the FOMC meeting and the April employment report. The market also needs to digest the potential impacts of Trump's signal that he's considering breaking up the big banks. National Oil Corporation of Libya reported that the country's oil production has risen above 0.76M bpd, the highest since December 2014, due to the reopening of the major western field of Sharara last week. The field has the production capacity of more than 0.2M bpd. Disruption by pipeline blockades over the past two months has cut the country's total production to less than 0.5M bpd. Lifting of the blockade does not only resume production Sharara, but also helps resume production to resume at the nearby El Feel field, which can pump 0.08M bpd. Before the civil war in 2011, Libya was producing around 1.6M bpd. Note also that Libya is excluded from the OPEC agreement so it has not obligation to restrain production.

Oil up as OPEC, Russia cuts outweigh output elsewhere | Reuters: Oil prices rose on Tuesday on news of lower production by Russia and OPEC, and expectations that major exporters would extend output cuts into the second half of the year. Benchmark Brent crude oil LCOc1 was up 30 cents at $51.82 a barrel by 1230 GMT (8.30 a.m. ET). The futures contract hit a one-month low of $50.45 last week after the restart of two Libyan oilfields. U.S. light crude CLc1 was 20 cents higher at $49.04. The Organization of the Petroleum Exporting Countries and other producers including Russia have agreed to cut output by 1.8 million barrels per day (bpd) for the first half of 2017 to try to reduce a global glut. OPEC oil output fell for a fourth straight month in April, a Reuters survey showed on Tuesday, dropping to 31.97 million bpd as Nigeria and Libya pumped less crude. Russian oil production fell slightly last month to 11.00 million bpd, almost hitting its output target under the deal with OPEC, Energy Ministry data showed on Tuesday. OPEC and other producers plan to meet on May 25 and are widely expected to keep output limits for the rest of the year.

Oil Prices Fall As Hedge Funds Throw In The Towel    -- Oil prices dropped by another 1 percent on Monday, hitting fresh one-month lows. WTI dropped below $49 per barrel and Brent sank below $52. Things looked slightly better on Tuesday, as crude benchmarks added some small gains on a softer dollar and more OPEC production cuts. Another 9 oil rigs were deployed in America’s shale fields, a sign that the industry is undaunted by flagging oil prices. But the ability to produce profitably at $50 per barrel suggests downward pressure on prices, as more production is slated to come online later this year. “The U.S. rig count indicates that there is plenty more to come," analysts at JBC Energy said in a recent report.  First quarter earnings continue to show strong performances from the oil majors. ExxonMobil said its earnings doubled from a year earlier to $4 billion. Chevron saw its shares surge by 2 percent after it beat expectations by a large margin, posting earnings of $1.23 per share compared to consensus estimates of $0.86 per share. The $2.3 billion quarterly profit was up from a loss of $725 million a year earlier. BP (NYSE: BP) swung to a profit in the first quarter as well, taking in $1.4 billion compared to a loss of $485 million a year earlier. BP’s share price jumped by more than 2 percent on the news on Tuesday. Still, BP’s net debt rose sharply in the first quarter because of payments related to the 2010 Deepwater Horizon disaster. In an interview with CNBC, in which he was aggressively pressed to say that U.S. shale had “defeated” OPEC, Chevron CEO John Watson demurred, saying that while shale “can help,” it cannot supply the world for the long-term by itself. “[U]ltimately oil fields decline, and we're going to need all sources of supply, including the shales, but also deepwater and other sources around the world," Watson said. The comments echo the IEA and a growing number of other top voices in the industry, predicting a supply crunch towards the end of the decade.

OPEC oil output falls in April but compliance weakens - Reuters survey | Reuters: OPEC oil output fell for a fourth straight month in April, a Reuters survey found on Tuesday, as top exporter Saudi Arabia kept production below its target while maintenance and unrest cut production in exempt nations Nigeria and Libya. But more oil from Angola and higher UAE output than originally thought helped OPEC compliance with its production-cutting deal slip to 90 percent from a revised 92 percent in March, according to Reuters surveys. The Organization of the Petroleum Exporting Countries pledged to reduce output by about 1.2 million barrels per day (bpd) for six months from Jan. 1 - the first supply cut deal since 2008. Non-OPEC producers are cutting about half as much. OPEC wants to get rid of excess supply that is keeping oil LCOc1 below $52 a barrel, half the level of mid-2014. With the oversupply proving hard to shift, OPEC is expected to prolong the agreement. Compliance of 90 percent is still higher than OPEC achieved in its last cut in 2009, Reuters surveys show. Analysts including those at the International Energy Agency have put adherence in 2017 even higher, with the IEA calling it a record. April's biggest production gain came from Angola, which scheduled higher exports and where output started at the East Pole field in February. The increase brought Angolan compliance down to 91 percent, from above 100 earlier in the year. Other, small increases came from Kuwait and Saudi Arabia, the survey found, although their compliance was the second-highest and highest respectively in OPEC.

Market sentiment mixed after Saudi Aramco cuts June OSPs for Asia --Market sentiment was mixed on Tuesday, after Saudi Aramco cut the June official selling price differentials of its Asian-bound crude grades by 20-70 cents/b late Monday. Aramco lowered the price of its Asia-bound Arab Light crudes by 40 cents/b to a discount of 85 cents/b to the Platts Oman/Dubai average in June, it said in a statement late Monday. The OSP was the lowest since September 2016, when it was at a discount of $1.10/b, S&P Global Platts data showed. It also lowered the price of Arab Medium by 45 cents/b to a discount of $1.30/b to Oman/Dubai, the lowest since January this year. Aramco lowered the price of its Arab Super Light by 70 cents/b to a premium of $3.05/b to the Platts Oman/Dubai average in May, the lowest since the beginning of the year. It lowered the price of its Arab Extra Light by 60 cents/b to be equal to the Platts Oman/Dubai average in June, and the price of Arab Heavy crude by 20 cents/b from May to a discount of $2.80/b to the Platts Oman/Dubai average in June. Traders surveyed by S&P Global Platts last week said they expected Aramco to cut the June OSP differentials of its Asia-bound crudes by up to 40 cents/b from May. "[The June OSPs showed] much bigger cuts than I expected. I would say refiners should be pretty pleased," said a Singapore-based crude trader.

Oil prices end at multiweek lows -  Oil on Tuesday registered back-to-back declines as rising output in Libya and the U.S., and a survey showing a fall last month in compliance with the Organization of the Petroleum Exporting Countries’ production cut, sent futures to their lowest settlements in several weeks. Investors will also look to coming weekly data on U.S. crude and petroleum-product supplies, as well as talk from major oil producers ahead of a much-anticipated OPEC meeting late this month. June West Texas Intermediate crude fell $1.18, or 2.4%, to settle at $47.66 a barrel on the New York Mercantile Exchange. Based on the front-month contracts, that was the lowest front-month contract finish since March 21, according to data from Dow Jones. Based on the most-active contracts, however, it was the lowest since Nov. 29, according to FactSet data. July Brent on London’s ICE Futures exchange lost $1.06 cents, or 2.1%, to $50.46 a barrel. Brent prices settled at the lowest for a front-month and most-active contract since late November, FactSet data showed.  OPEC member compliance with the production-cut agreement that began on the first day of this year has seen a month-on-month decline, according to a Reuters survey published Tuesday. Member compliance was at 90% in April—a bit below a revised-down 92% in March. “Overall compliance remains high, especially relative to OPEC’s previous coordination efforts,” Robbie Fraser, commodity analyst at Schneider Electric, told MarketWatch. “The problem OPEC is facing is commitment levels haven’t really changed, but U.S. production has.”“Restoration of Libyan output” has also weighed on the market over the past week, he said in an earlier note.  Still, “an extension of the current OPEC production deal appears to have a high likelihood of success heading into the group’s formal meeting” set for May 25, Fraser said. “At the same time, the demand for refined crude products should see a steady seasonal rise over the weeks ahead, leading to more reliable stock draws.”

WTI/RBOB Pop After Biggest Crude Draw Since 2016, Surprise Gasoline Draw Following last week's surprise builds in Gasoline and Distillates, API reported a bigger than expected crude draw of 4mm barrels (which will be the biggest since 2016 if it holds for DOE). Furthermore,RBOB jumped after gasoline (and distillates) inventories fell (against expectations of a modest build). API:

  • Crude -4.158mm (-3.5mm exp) - biggest since 2016
  • Cushing -215k
  • Gasoline -1.93mm (+1mm exp)
  • Distillates -436k

Inventory draws across the board...

WTI/RBOB Tumble After Surprise Inventory Data, Production Rise -- Following API's surprisingly large drawdowns, DOE almost completely refuted it with an inventory build for gasoline and a very small draw for crude. WTI and RBOB prices dropped on the headlines, not helped by yet another increase in US crude production to cycle highs. API:

  • Crude -4.158mm (-3.5mm exp) - biggest since 2016
  • Cushing -215k
  • Gasoline -1.93mm (+1mm exp)
  • Distillates -436k


  • Crude -930k (-3mm exp)
  • Cushing -728k (-900k exp)
  • Gasoline +191k (+1mm exp)
  • Distillates -562k (+2mm exp)

3rd weekly build for gasoline and notably small draw for crude...

Shenanigans -- Oil Numbers -- May 3, 2017 -- Earlier this morning I posted this: The big question is: how did the crude oil market react to the news that there was a paltry drawdown in US crude oil storage this week? The price of WTI dropped below $48 yesterday. Traders are obviously seeing the same problem.  The bigger question is: when did traders get this information? Based on the time of the price move, it is clear to me that "inside" traders got this information yesterday; the rest of us got it today. The big move in WTI pricing was yesterday. Today, the price of WTI moved just one cent -- WTI is down $0.01 today (at this moment -- May 3, 2017; 12:35 p.m. CDT). Just saying.  The point is this: this morning I suggested that "inside" traders knew yesterday that the drawdown in US crude oil supplies that wold be reported today. Today we see further proof -- from Twitter: Yesterday afternoon, "inside" traders got the news. The "official" report was embargoed until today for the rest of us. 

Oil Prices Crash To Pre-OPEC Deal Levels --  Oil prices dropped on Thursday to their lowest level since last November, with Brent breaking below $50, amid concerns of rising global supply and still high inventories. At 11:22am EDT, WTI Crude was trading down 2.82 percent at $46.47, while Brent was down 2.62 percent at $49.46 -- with both WTI and Brent having effectively wiped out all the price gains since OPEC announced on 30 November 2016 the output cut deal aimed at reducing oversupply and propping up prices. On Wednesday, a day after the American Petroleum Institute (API) injected a bit of optimism among traders by reporting a crude oil inventory draw of 4.2 million barrels, the EIA once again poured cold water on the oil bulls by reporting a much smaller decline, of 900,000 barrels, against expectations for a decrease of 2.3 million barrels. While U.S. crude oil inventories have declined in the past couple of weeks, stocks are still at 527.8 million barrels, near the upper limit of the average range for this time of year. In addition, production from countries not signatories to the OPEC/NOPEC deal – most notably the U.S. – is on a continuous rise since that very same deal managed to lift oil prices and keep them steadier at above $50 for a few months. “At some point, the market should recognize OPEC isn't the most important player in the market any more. That is non-OPEC, and, above all, U.S. shale,” Commerzbank analyst Eugen Weinberg told Reuters. Comments and speculation ahead of OPEC’s meeting on May 25 would likely bring prices back to the $50s, according to Weinberg. “Still, the damage is there and I wouldn’t be surprised to see lower levels this summer after the meeting,” he noted. 

Brent Crude Drops Below $50 After Russian Comments, Sliding Demand Forecast -- For the first time since mid-March, Brent Crude prices tumbled below $50 after Russia said no decision had been made yet on extending the oil output cut production deal. This came after the 11th weekly rise in US crude production and concerns from JBC that oil demand is declining rapidly.Russia Says No Decision Yet on Extending Oil Output Cut W/ OPEC - Russia will make announcement if decision is taken, Kremlin spokesman Dmitry Peskov tells reporters on conference call.US Crude production rose once again to August 2015 highs...And demand forecasts are tumbling:And the result... Brent back below $50... A further decline to below $49.71/bbl would take Brent to lowest since Nov. 30, day of OPEC meeting where group decided on production cuts strategy. For WTI, a drop to below $47.01/bbl would take commodity to lowest since same date.

Oil prices have plunged 14% in 3 weeks -- Renewed fears about the oil supply glut have sent crude prices plunging 14.5% from their peak in mid-April to below $46 a barrel on Thursday. It's the weakest level for oil since November 30, the day OPEC finalized a deal to slash production in a bid to end the epic oil glut. The landmark OPEC agreement, the cartel's first cut since 2008, initially sent oil bulls into a frenzy. Crude prices spiked and many predicted a speedy return to $60-plus prices as excess supply would finally be drained. Flash forward five months and the epic supply glut continues to cast a shadow. A combination of resilient US shale output and surprisingly sluggish demand for gasoline from American drivers has led US stockpiles of oil to remain at historically-high levels. Oil prices plunged another 4% on Thursday, dragging energy stocks like ExxonMobil (XOM) even further into the red this year. "Today is a real scary day for the billions of dollars invested in higher oil prices," said Tom Kloza, global head of energy analysis at Oil Price Information Service. "We continue waiting for this slow-motion, almost glacial rebalancing of crude." The explosion in US shale oil output over the past decade has reshaped the global energy landscape, catapulting America to the upper echelon of the list of global producers. The glut in oil sent oil prices crashing in late 2015 and early 2016 and US shale production, especially in areas like the Bakken fields of North Dakota, took a hit. But shale is on the comeback trail now, aided by technological advances and leaner business models that have allowed companies to pump profitably at far lower prices than before. Just look at how the tally of US oil rigs has more than doubled from last year. 

Oil prices plunge 4% below $46 a barrel, dropping to a five-month low --Oil prices collapsed on Thursday to their lowest since late November as investor worries about the world's stubbornly persistent glut of crude erased most of the gains that followed last year's OPEC's output cut. The slide worsened after OPEC delegates downplayed the chance that their group and other producing countries would deepen their output cuts when they meet on May 25. They did say current output cuts were likely to be extended. Brent crude oil futures were down $2.31, or 4.6 percent, at $48.48 a barrel by 1:27 p.m. (1727 GMT). U.S. West Texas Intermediate (WTI) crude futures fell $2.25, or 4.7 percent, at $45.57 a barrel. Both contracts slid during the session to the lowest since Nov. 30, the day OPEC agreed to cut supply. They were on track for their biggest daily percentage declines March 8. Late last year, the Organization of the Petroleum Exporting Countries and other producing countries announced oil output cuts of 1.8 million barrels per day (bpd) for the first six months of this year. Even so, McGillian said, "We still have a near record overhang and signs of increasing production in areas of the world outside the producers that agreed to the cuts." Crude output has surged in the United States, with increasing rig counts for the past 11 months. Weekly U.S. government data on Wednesday showed crude stocks fell 930,000 barrels, less than half the 2.3 million barrel drop analysts had expected. Stocks stand just 7 million barrels off a record high. U.S. gasoline futures were down about 4 percent after the stockpile report indicated continued weakness in gas demand. They are have fallen more than 8 percent this year. 

Oil Tumbles Amid Oversupply Fears, Unlikelihood Of Deeper OPEC Cuts (Reuters) - Oil prices plunged to five-month lows on Thursday amid record trading volume in Brent crude, as OPEC and other producers appeared to rule out deeper supply cuts to reduce the world's persistent glut of crude. Closing prices, below $50 a barrel, were the lowest since Nov. 29, thereby erasing all the market gains that followed a late 2016 announcement by the Organization of the Petroleum Exporting Countries it would cut output. The slide steepened after the OPEC delegates downplayed the chance that their group and other producing countries would deepen their output cuts when they meet on May 25. They did say current output cuts were likely to be extended. But analysts say non-OPEC members may struggle to extend production cuts. U.S. crude ended the session 4.81 percent lower at $45.52 per barrel after falling as much as 5.29 percent to an intraday bottom of $45.29, the lowest since Nov. 29. Brent crude settled at $48.38, or 4.75 percent lower, after tumbling as much as 5.17 percent during the session. Front-month Brent crude trading volume rose to the highest on record with nearly 525,000 lots changing hands, according to Reuters data that extends back to 1988. Front-month WTI volume rose to more than 898,000 contracts, the highest in nearly two months. Commodity Trading Advisors were among those liquidating their contracts in the day, traders said. "While the cartel is expected to extend a self-imposed production cap by another six months, it will be a challenge to convince several non-OPEC members to follow suit," said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics. "Persistent growth in US oil production ... will also make extensions of the OPEC cap beyond 2017 unlikely.” There was also a sign of slowing energy demand in China, the world's second largest oil consumer, when a survey showed growth in that country's services sector in April was at its slowest in almost a year.

Oil prices drop as OPEC loses control of narrative: Kemp  - Oil traders have finally given up on an early rebalancing of the crude market, with flat prices and calendar spreads plunging to the lowest level since OPEC’s agreement was announced.OPEC has lost control of the oil market narrative, after successfully shaping it in an informal alliance with hedge funds in the last part of 2016 and the first few months of 2017.Controlling the narrative provides an important source of short-term influence over prices (“Narrative economics”, Presidential Address to the American Economic Association, Shiller, 2017).Senior OPEC and non-OPEC officials have dropped strong hints that current production cuts will be extended for a further six months, but oil traders seem increasingly sceptical about the effectiveness of prolonging the curbs until the end of 2017.Brent prices for the futures contract nearest delivery closed at $48.38 per barrel on Thursday, the lowest since Nov. 29, the day before OPEC’s last meeting (   Brent calendar spreads for the six months from July 2017 to January 2018 fell to $1.19 contango, which was also the lowest since Nov. 29 ( The informal understanding on market rebalancing between OPEC and some of the most important hedge funds reached late last year finally unravelled this week.OPEC committed to implement credible and transparent production cuts and to reduce global crude stocks while hedge funds responded by establishing long positions in both flat prices and calendar spreads.The initial results from the understanding were positive for both sides, with hedge funds establishing a record bullish position in crude by the middle of February and futures prices rallying.Brent’s flat price rose by around $10 per barrel, or more than 20 percent, and the market structure swung from contango into backwardation.But flat prices and spreads have been progressively softening since the second half of February (“Hedge fund confidence in OPEC starts to fray”, Reuters, April 20). Global crude inventories have not fallen as fast as OPEC or the hedge funds anticipated, putting the understanding under pressure. Market expectations for a normalisation of crude stockpiles have been pushed back from the first half of 2017 to the second half or even into 2018.

Why Are The Oil Markets Crashing? - WTI and Brent continued to tumble on Thursday, dropping to their lowest levels since the announcement of the OPEC deal back in November. Brent actually dipped below $49 per barrel, raising fears of another downturn. Both WTI and Brent were off by nearly 4 percent during midday trading on Thursday.Oil traders have been patient, hoping that despite the rapid rebound in U.S. shale production, the OPEC cuts would take a substantial volume of oil off the market and correct the supply/demand imbalance. But it has been a painful and protracted process.U.S. crude oil inventories hit a record high of 535 million barrels as recently as the end of March. Several consecutive weeks of drawdowns in April again raised hopes that the market is heading towards balance, but the most recent data release from the EIA on May 3 disappointed yet again, and it was apparently the last straw for some. Market analysts predicted a drop in oil inventories by about 2.3 million barrels, but the EIA said stocks only fell by 930,000 barrels. WTI sank to $46 per barrel and Brent fell into the $40s for the first time in 2017.Worse, gasoline stocks increased slightly, offering more evidence that motorists are not willing to burn through all the refined products that the downstream sector is producing. Even if refiners suck more crude out of storage, consumers won’t sufficiently burn through all of the additional refined product.But the most bearish part of the report came from the upstream figures, which once again showed dramatic growth in U.S. oil production. In the last week in April, the industry added another 28,000 bpd, taking U.S. output up to 9.293 million barrels per day (mb/d), up more than 200,000 bpd since the beginning of March, and up more than 450,000 bpd since the start of the year. Output is now the highest since the summer of 2015, and if current trends continue, the industry could break all-time production records before we know it.U.S. oil production “continues to grow hand over fist, and the market will remain well oversupplied given the lack of” demand for gasoline and diesel, Roberto Friedlander, head of energy trading at Seaport Global Securities, told CNBC. It is growing more difficult by the day to make the case that oil prices will post strong gains this year. A WSJ survey of 14 investment banks finds an average projected Brent oil prices for this year at $57 per barrel, an estimate that is starting to look a bit overly optimistic.

Oil price collapse is ‘permanent’; analyst says fossil fuel has had its day  - “I usually put a £5 bet on the oil price — and I’m collecting,” smiles Professor Dieter Helm. It’s not difficult to imagine his tally of modest wagers adding up. The highly regarded Oxford University economics professor is a long-time industry observer. Today, he is in central London after taking meetings with major oil executives. He is also a familiar face in Whitehall and Brussels, where he advises, both formally and informally, on the trends reshaping the global energy markets. Still, his stakes will be trillions of dollars lower than the energy leaders he advises. If Helm is to be believed the oil market downturn is only getting started. The latest collapse is the harbinger of a global energy revolution which could spell the end-game for fossil fuels. These theories were laughable less than a decade ago when oil prices grazed highs of more than $140 a barrel. But the burn out of the oil industry is approaching quicker than was first thought, and the most senior leaders within the industry are beginning to take note. In the past, the International Energy Agency (IEA) has faced down criticism that its global energy market forecasts have overestimated the role of oil and underplayed the boom in renewable energy sources. But last month the tone changed. The agency warned oil and gas companies that failing to adapt to the climate policy shift away from fossil fuels and towards cleaner energy would leave a total of $1 trillion in oil assets and $300bn in natural gas assets stranded. For oil companies who heed Helm’s advice, the route ahead is a ruthless harvest-and-exit strategy.This would mean an aggressive slashing of capital expenditure, pumping of remaining oil reserves while keeping costs to the floor and paying out very high dividends. “They’d never do it because no company board would contemplate running a smaller company tomorrow than today. It’s not in the zeitgeist of the corporate world we’re in, but that’s what they should do,” Helm says. 

OilPrice Intelligence Report: Crude Drawdowns Can’t Save Oil Prices - Oil prices crashed on Thursday, erasing all the gains made since the OPEC deal was announced, with WTI and Brent dropping to six-month lows. Fears over persistent oversupply, a renewed glut for refined fuels, and the inadequately slow pace of adjustment stemming from the OPEC cuts all forced a selloff. Major oil benchmarks lost 5 percent on Thursday, but have since seen a bounce back as hedge funds have now dumped all long positions. Although the drop in prices underscores the poor market fundamentals, the suddenness of the decline and quick recovery bears all the markers of a technical selloff.   Plunging oil prices are at least in part attributable to the selloff in the futures market from hedge funds and other money managers. Reuters reported that famed hedge fund manager Pierre Andurand, who has been bullish on crude, liquidated his long positions on crude over the past week. The move highlights the growing bearishness for crude oil.  It happened at the end of 2016 and into the early part of this year – and it’s happening again. Refiners are ramping up their processing, but there isn’t enough demand in the market for all the gasoline and diesel they are producing, leading to another strong buildup in refined product inventories. For diesel, at least, global demand is robust and American refiners will likely have an easy time finding buyers overseas. Preliminary data suggest U.S. exports of diesel hit a record high in April. However, it is the glut of gasoline that is worrying everyone else. The increase in gasoline inventories is especially troubling because this is a time of year in which gasoline stocks typically fall as motorists take to the roads.  Three OPEC sources told Reuters on Thursday that the group is likely to extend its cuts for another six months when it meets later this month. But the sharp selloff in crude prices this week raises questions about whether that will even be enough. Still, deeper cuts are unlikely.  Shale gets all of the attention, but production from the U.S. Gulf of Mexico is still on the rise. The Gulf of Mexico produced 1.76 million barrels per day in January and could add another 190,000 bpd by the end of the year. RBN Energy estimates that output will jump again next year by another 300,000 bpd. Offshore drilling is still a long-term, capital intensive proposition, but costs have come down with improved technology. Still, production gains are largely coming from projects planned years ago that are only now reaching fruition. 

Suddenly, Oil Below $40 a Barrel Doesn’t Seem So Far-Fetched -- It’s come to this for the beleaguered oil market: a big bet that prices are about to sink to their lowest level in more than a year.About $7 million worth of options changed hands Friday that will pay off if West Texas Intermediate crude falls beneath $39 a barrel by mid-July, according to data compiled by Bloomberg. WTI, which hovered around $46 Friday, hasn’t traded below $39 since April 2016, though it’s been dropping like a stone in recent weeks.More than 14,000 August $39 puts changed hands, almost 20 times the number of contracts previously outstanding for the bearish option.  The trade was a sign of the “crescendo of negativity" that’s washing over the oil market, said James Cordier, founder of investment firm in Tampa, Florida. Prices have plunged about 13 percent in the last three weeks, amid fears that OPEC-led production cuts aren’t doing enough to stem a global supply glut. For Friday’s bet to work, prices would have to match that drop in the next few weeks, during a time when summer driving typically pushes demand higher, Cordier said by telephone. “That’s just a huge speculative bet that tells me that the fear is at its heights and we’ll probably see oil recover," he said. “It’s a hell of a lottery ticket that the market’s going to keep falling."

16th Straight Build In Oil Rig Count Increases Pressure On Oil Prices - The number of active oil and gas rigs in the United States rose by 7 on Friday, according to oilfield services provider Baker Hughes, delivering a severe blow to oil prices, which were already down to new lows for 2017.The total oil and gas rig count in the US now stands at 877 rigs, or 462 above the count a year ago.  Oil rigs increased by 6, while gas rigs bumped up 2; a single miscellaneous rig was taken out of production. At 12:39pm EST, WTI was trading up 1.25 percent for the day at $46.09, while Brent Crude traded up 1.07 percent at $48.90—about a $3.00 per barrel loss from last Friday. Those prices reflect almost a total reversion to the price points prior to the OPEC agreement announcement on November 30, 2016. This week marks the sixteenth straight build for oil rigs (+181 or +34.7% since January 13). Gas rigs climbed 11 of the last sixteen weeks, for a total gain of 37 (+27.2%).  Some in the industry see this as a complete failure on OPEC’s part, who set out a monumental effort to stabilize the market through “rebalancing” the oil market in hopes of lifting prices. While OPEC—and its non-OPEC counterpart—has indeed shaved about 1.8 million barrels per day off their October 2016 production levels, it has done little, if anything, to oil inventories globally, and as of today, has done little, if anything, to boost prices.Meanwhile, U.S. shale is carrying on, after enjoying what was a temporary lift in oil prices during the last 4 months thanks to OPEC’s production cuts. Shortly after data release, WTI was trading at $46.29 +1.69% with Brent trading at $49.15, up 1.59%.

U.S. Oil Rig Count Climbs To 703 As Crude Falls 6.3% For Week -- The number of oil rigs operating in the U.S. rose by 6 to top 700 for the first time since April 2015, according to Baker Hughes (BHI), as prices recouped some of their steep losses this past week amid growing concerns over U.S. production gains. The count in Colorado's DJ Niobrara was flat at 25 rigs. Eagle Ford in south Texas saw rigs fall by one to 75. In the Permian Basin, oil rigs jumped by 7 to 349. The Cana Woodford formation in Oklahoma saw a decline to 51 from 55. U.S. crude, which tumbled just below $44 a barrel overnight, rose to close up 1.5% to $46.22. That followed Thursday's 4.8% dive to $45.52 to its lowest since the end of November, when OPEC and top non-OPEC producers agreed to a production cut that would remove 1.8 million barrels of oil from the market. Crude oil still fell 6.3% for the week.OPEC and other top non-member producers will meet on May 25 to discuss extending the output cuts. Saudi Arabia's OPEC Governor Adeeb Al-Aama told Reuters that "there's a growing conviction that a six-month extension may be needed to rebalance the market, but the length of the extension is not firm yet." While the cut is likely to be extended, producers won't take more barrels of oil off the market, sources told Reuters earlier this week. OPEC is feeling the squeeze as U.S. production continues to rise and as worries persist over slowing demand. On Wednesday, the Energy Information Administration said that U.S. crude production hit 9.29 million barrels a day last week. Output is on pace to exceed peak production levels in July and could hit 10 million barrels per day in August, according to analysts. Production projections are fueled by a growing rig deployment. The U.S. oil-rig count has risen for 15 straight weeks with only one down week so far this year. 

OPEC Apr output 31.85 million b/d, unchanged from Mar: Platts survey -- OPEC crude output in April averaged 31.85 million b/d, flat from March, an S&P Global Platts survey found, with the bloc still showing high compliance with its production cut agreement, as increases in Angola and Nigeria were offset by declines from Libya and Iraq. OPEC ministers will meet in Vienna on May 25 to review the agreement and potentially extend the cuts past their June expiry. Thus, the April production figures in the Platts survey and the five other secondary sources used by OPEC to monitor output will be some of the final data points that the organization considers at its meeting. OPEC's collective April output was some 80,000 b/d above its stated ceiling of 32.5 million b/d, when Indonesia, which typically produces about 730,000 b/d, is added in. Indonesia suspended its OPEC membership in November and is not included in the Platts survey estimates for 2017. OPEC's largest producer Saudi Arabia averaged 9.97 million b/d in April, according to the survey, below its quota under the deal of 10.058 million b/d. The kingdom is seen as a driver of OPEC's production cut deal, with energy minister Khalid al-Falih saying at a conference in Abu Dhabi last month that there appeared to be a growing consensus on a need to extend the cuts, as global inventories remain stubbornly high. Iraq, which has faced criticism for not fully complying with its required cut, produced 4.36 million b/d in April, the survey found, as the Taq Taq field in the Kurdistan Region of the country has seen output decline, while exports from Iraq's Persian Gulf terminal also fell during the month. The country's April output is 9,000 b/d above its quota under the deal, the closest it has been to compliance. Over the January through April period, however, its average remains 60,000 b/d above its quota, the highest among OPEC members. Iran, which is allowed a slight output increase under the deal, held production steady in April at 3.77 million b/d, the survey found, below its quota of 3.797 million b/d. The UAE, also under pressure from fellow OPEC members to come into compliance with its quota, lowered production slightly to 2.84 million b/d, down 10,000 b/d from March, the survey found.

Analysis: As prices fall, OPEC looks to Q3 for optimism - The price swoon of the last few weeks has no doubt disappointed -- if not frustrated -- OPEC's 13 members, who have seen their efforts to cut production to support prices seemingly thwarted by stubbornly high inventories. But all along, OPEC officials have maintained that their goal with the production cut deal can not and should not be measured by how the market reacts day to day, or even week to week. Their eyes are focused on the third quarter, when OPEC's own analysis, as laid out in its most recent monthly oil market report, estimates global demand for OPEC crude will rise to 33.13 million b/d, some 1.3 million b/d above current levels. OPEC will issue its newest monthly oil market report next Thursday. "The good news is that the market is moving towards rebalancing," Saudi Aramco CEO Amin Nasser said at the International Oil Summit in Paris last week. "There has also been a rapid drawdown of floating storage in the first quarter of this year. This is being driven by improving fundamentals and the OPEC deal." Iranian deputy oil minister Roknaddin Javadi added: "I am very optimistic that good days for the oil and gas industry are ahead." The deal, signed late last year, calls on OPEC to cut 1.2 million b/d from its October levels, while 11 non-OPEC countries led by Russia agreed to cut 558,000 b/d in concert. To be sure, OPEC had intended its production cuts to have brought down global oil stocks to their five-year average by mid-year. That has not been the case, particularly in the US, where bloated gasoline stocks, in particular, has given the market jitters.

OPEC likely to extend output pact, bigger oil cut unlikely: delegates | Reuters: OPEC and non-OPEC oil producers look likely to extend their agreement to limit supplies beyond its June expiry to help clear a glut, three OPEC delegates said on Thursday, downplaying the chance of additional steps such as a bigger cut. The Organization of the Petroleum Exporting Countries, Russia and other producers originally agreed to curb production by 1.8 million barrels per day (bpd) for six months from Jan. 1 to support the market. Oil prices have gained support but stockpiles are still high and production from non-participating countries such as the United States has been rising, keeping crude below the $60 level that OPEC kingpin Saudi Arabia would like to see. However, OPEC officials generally believe the agreement is helping to bring the market closer to balance between supply and demand and that it should be extended into the second half of the year with the same numbers. "The willingness to extend the current understanding is strong among OPEC and non-OPEC participants," an OPEC delegate said, declining to be identified by name. "I have doubts that more cuts will be discussed as the current agreement is yielding a positive outcome." Officials from the 13-country OPEC - which accounts for a third of global oil production - are in Vienna on Thursday and Friday to attend a meeting of the group's governing board. Such meetings provide an occasion to chat informally, but they deal with administrative matters and do not decide policy.

OPEC Deal Backfires: Saudis Lose Market Share To Iran, Iraq --Since the start of OPEC’s production cuts, oil market analysts and experts have been focusing on how U.S. shale would respond to the relatively higher and stable oil prices, possibly eating up some of the cartel’s global market share while the cuts last.The market share war is also going on a micro level within OPEC itself – a diverse group of producers, with each pushing and pursuing their own agenda in every meeting and collective decision. This time around it is no different.Saudi Arabia, OPEC’s biggest producer and de facto leader, is losing market share, while Iran and Iraq have so far emerged as winners of the cuts with in the cartel in a battle for market share, according to Christof Ruehl, former chief economist at BP who is currently Global Head of Research at the Abu Dhabi Investment Authority (ADIA).“If you’re talking about winners, you can count Iran and Iraq,” Ruehl said at a Dubai conference last week, as quoted by Bloomberg.The Saudis were aware that they would be ceding some market share with the OPEC deal, but opted for higher and more stable oil prices by signing up to a deal that allowed Iran to slightly lift its output, while others— especially Riyadh—would have to cut.  The lower-for-longer oil prices have led to a considerable deficit in Saudi Arabia’s budget, and the Kingdom had to draw from reserves and increase the issue of debt to finance the gaps in its oil-dependent government revenues.The Saudis now need higher oil prices if they want their oil giant Aramco to be valued in next year’s IPO anywhere in the vicinity of US$1 trillion, let alone the US$2-trillion valuation that Deputy Crown Prince Mohammed bin Salman has mentioned.The Saudi 2017 budget sees higher oil prices this year lifting oil revenues by 46 percent compared to the 2016 estimates.So, the Saudis entered the OPEC production cut deal knowing that Iran might use the leeway it was given to slightly raise its production, and Iraq might not fully comply with the cuts.

Do Saudi Arabia And Russia Really Want Higher Oil Prices? - The jawboning of oil prices by the Saudi Arabian/Russian tag team should be wearing off after more than a year of actions that don't measure up to the words. Oil prices slumped recently, dropping from around $54 per barrel to just below $50 as of Friday's close.As if on cue, the Russian energy minister announced Friday that Russia has now met its targetof reducing oil production by 300,000 barrels per day. It took four months to do something that should have taken just weeks. (The agreement came into force on January 1.) And, of course, we'll have to see if the Russians have actually done what they say they've done.Only a week earlier, the Saudi energy minister indicated that there is momentum growing in OPEC for extending production cuts beyond June for another six months. This announcement comes only six weeks after the same minister said that OPEC would NOT be considering extending the cuts. This is reminiscent of last year's run-up to the production agreement in which Russia and Saudi Arabia kept alternating in making often contradictory announcements to sow confusion about the possibility of a production agreement and keep markets on edge without actually having to do anything. I continue to question the sincerity of Saudi Arabia and Russia who I believe remain committed to undermining the production of tight oil (shale oil) in the United States.Despite the cuts agreed to for this year through June, the March numbers suggest substantial non-compliance among non-OPEC signers of the production agreement and a reminder that major producers Libya, Nigeria and Iran have been exempted from cuts. Do Saudi Arabia and Russia really want prices to rise enough to make tight oil profitable all across the United States (and not just sweet spots in the Permian Basin)? I'm not convinced. The Saudis and the Russians want to appear as though they are "doing something" about low oil prices. But they and their fellow producers simply aren't doing enough to push prices higher. And, that may actually suit the Saudis and the Russians just fine. Meanwhile, U.S. tight oil producers keep touting ever lower "breakeven" prices for their relatively expensive oil. But, as petroleum consultant Art Berman has been pointing out for some time, the lower breakeven prices are almost completely the product of crashing oil service costs rather than technological miracles. And they aren't limited to tight oil producers, but rather reflect conditions across the entire industry.

The smell of burnt rubber: Saudi Arabia’s young prince U-turns on reform | The Economist - In a kingdom which acts like a (heavily armed) charity doling out cradle-to-coffin welfare, few see a reason to upset the felafel stand. Two-thirds of Saudi Arabia’s 21m citizens are employed by the government and expect annual pay rises whether working or not. Confronted with vast deficits after the oil price collapsed in 2014, the king’s favoured son, Muhammad bin Salman (pictured centre), set out to change all that. The 31-year-old, who serves as deputy crown prince, defence minister and head of the committee that runs the economy, is widely considered to be Saudi Arabia’s de facto ruler, given the great age (81) of his father. His ministers called civil servants lazy and not only unveiled a transformation plan with austerity measures, but actually began implementing them. The slashing of housing, vacation and sickness allowances last September reduced some salaries by a third. Utility bills rose as subsidies fell.  This was not popular. If they had to tighten their belts, many muttered, why shouldn’t the prince himself, who reportedly paid half a billion dollars for a yacht in 2015? Activists on social media compared him to Gamal Mubarak, the ravenous son of the deposed Egyptian president. The prince’s primacy, already dented by the bloody mess that his intervention in next-door Yemen’s war has become, seemed in danger of being weakened. On April 22nd the government performed a screeching U-turn, restoring most of the perks and bonuses enjoyed by all those government employees. By reducing the grumbling, Prince Muhammad may hope to regain the middle-class support he needs to bolster his position against opposition from senior princes who would rather that the king’s nephew and crown prince, Muhammad bin Nayaf, succeeds Salman when the time comes.

Saudi Arabia says Trump visit to enhance cooperation in fighting extremism | Reuters: Saudi Arabia's foreign minister said on Thursday that an upcoming visit to the kingdom by U.S. President Donald Trump would enhance cooperation between the United States and Muslim countries in the fight against extremism. Speaking to reporters after the Trump administration said the president would visit Riyadh as well as Israel later this month, Adel al-Jubeir said Trump had a high probability of succeeding in his efforts to secure a peace deal with Israelis and Palestinians because of his "fresh" approach. Saudi Arabia, the birthplace of Islam, will be Trump's initial stop on his first international trip as president. The move signifies the new administration's intent to reinforce a relationship with a top ally in the Middle East, where the United States is leading a coalition against Islamic State and seeking to counter Iranian influence. Saudi Arabia is part of that coalition. Describing the visit as historic, Jubeir said Trump's visit to Saudi Arabia would include a bilateral summit, a meeting with Arab Gulf leaders and another with leaders of Arab and Muslim countries. "It’s a clear and powerful message that the U.S. harbors no ill will” toward the Arab and Muslim world, he said. "It also lays to rest the notion that America is anti-Muslim. ... It's a very clear message to the world that the U.S. and the Arab Muslim countries can form a partnership." The Republican president has been criticized for immigration policies that have been characterized as anti-Muslim. "It will lead to, we believe, enhanced cooperation between the U.S. and Arab and Islamic countries in combating terrorism and extremism, and it will change the conversation with regards to America's relationship with the Arab and Islamic world," Jubeir said.

Yemeni Al-Qaeda Leader: We’re Fighting Alongside US-Backed Forces --While the Pentagon often presents the war in Yemen as being against al-Qaeda by way of trying to justify ever deeper direct US involvement, al-Qaeda in the Arabian Peninsula (AQAP) leader Qasim al-Rimi was a bit more frank about the situation, noting AQAP forces regularly fight “alongside” the US-backed Sunni forces.  That’s an often unspoken reality of the Yemen War, of course, as Sunni tribal forces which are often presented as allies to the Saudis, supported by US-coordinated airstrikes, and “militias” loyal to the Saudi-backed government, regularly coordinate wtth AQAP in fighting against the Shi’ite Houthis. This is something the Saudis have preferred not to make a public fact, as the war is already sectarian enough in nature without having direct al-Qaeda involvement, but policy was established very early in the war to attack the Shi’ites wherever they could be found, and to look the other way when AQAP ended up taking over territory in the process. AQAP doesn’t see it as fighting alongside the US, of course, they see it as fighting with “fellow Muslims” against the Shi’ites,, who they consider heretics. With the Pentagon looking to get more deeply involved in a direct way in the war, however, they may find themselves with some uncomfortable allies.

Debunking the French Report on Syrian Chemical Weapons - The French government released a report blaming the Syrian government for this month’s chemical weapons incident. The report states: According  to  the  intelligence  obtained  by  the  French  services,  the  process  of  synthesizing  sarin,  developed  by  the  Scientific  Studies  and  Research  Centre  (SSRC)  and employed by the Syrian armed forces and security services, involves the use of hexamine as a stabilizer.  *** The  presence  of  the  same  chemical  compounds  in  the  environmental  samples collected  during  the  attacks  on  Khan  Sheikhoun  on  4 April 2017  and  on  Saraqib  on 29 April 2013  has  therefore  been  formally  confirmed  by  France.  The  sarin  present  in  the munitions used on 4 April was  produced using the same manufacturing process as that used during the sarin attack perpetrated by the Syrian regime in Saraqib. Moreover, the presence of  hexamine indicates  that  this  manufacturing  process  is  that  developed  by  the  Scientific Studies and Research Centre for the Syrian regime. Sounds convincing, right? But the report falls apart upon closer scrutiny … Specifically, the head of the United Nations’ team investigating the possible use of chemical warfare in Syria (Åke Sellström) wrote an email to MIT rocket scientist Ted Postol in 2014 stating:  Hexamine … is a product simple to get hold of and in no way conclusively points to the [Syrian] government. In addition, hexamine found in samples may be derived from other sources for example, explosives.  This week, Washington’s Blog wrote the following email to Dr.  Sellström seeking confirmation: However, my understanding is that it is easy to acquire hexamine, and  so the presence of the substance does not indicate state-sponsored manufacture.  I also understand that hexamine is a common byproduct from explosives.  Is that right?  Dr. Sellström responded:It is really a question of the meaning of the word indicating. The presence of hexamine could, indeed, indicate that the source is the government. Leaving out who actually used it. But it could also indicate a lot of other things, like someone using the same recipe for example.  I think the phrasing in the statement is clever.

The Flawed Chemical Analysis in the French Intelligence Report of April 26, 2017 Alleging a Syrian Government Sarin Nerve Agent Attack in Khan Sheikhoun of April 4, 2017  -- Theodore Postol, MIT - In this short note I describe why the chemical forensic analysis and logic described in the French Intelligence Report of April 26, 2017 (FIR) could lead to a high confidence conclusion that an indigenous nerve agent attack in Denver, Colorado was perpetrated by the Syrian government. Such an obviously flawed investigative finding would be a product of the same combination of irrational arguments and unsound scientific evidence that the FIR used as its basis to reach a conclusion that the Syrian government must have executed in nerve agent attack on April 4, 2017 in Khan Sheikhoun. We start from quoting directly from page 2 of the French intelligence report, which can be found in a PDF file at :

Turkey threatens to strike U.S. forces partnered with Kurds - The war of words between Washington and Ankara over the U.S. military’s partnership with Kurdish paramilitaries in Syria escalated Wednesday, when a senior aide to Turkish President Recep Tayyip Erdogan suggested American troops could be targeted alongside their Kurdish allies in the country’s ongoing air war against the militias. Senior presidential aide Ilnur Cevik said U.S. forces who are teamed up with members of the Kurdish People’s Protection Units, or YPG, were in danger of being hit by Turkish fighters patrolling the volatile border region with Syria. If YPG units and their American military advisers “go too far, our forces would not care if American armor is there, whether armored carriers are there,” Mr. Cevik said during an interview on Turkish radio station CRI TURK Wednesday. “All of a sudden, by accident, a few rockets can hit them,” he added, referring to partnered U.S. forces. When asked to clarify that U.S. advisers or artillery positions would be in danger from Turkish warplanes, if they continued to support YPG operations in northern Syria, Mr. Cevik replied bluntly that they would. Later, Mr. Cevik attempted to walk back his comments on social media, regarding U.S. forces working with Kurdish militias. “Turkey has never and will never hit its allies anywhere, and that includes the U.S. in Syria,” he said in a tweet posted shortly after Wednesday’s radio interview.

US-led coalition warplanes banned from Syria safe zones – Russian envoy - The four safe zones to be established in Syria will be closed for flights by US-led coalition warplanes, said the Russian envoy to the Astana peace talks, where the zones were agreed upon.  “As for [the coalition] actions in the de-escalation zones, starting from now those zones are closed for their flights,” Aleksandr Levrentyev told journalists in the Kazakh capital. He added that the flight ban was not part of the memorandum establishing the safe zones, but assured the coalition would not fly over them. “As guarantors we will be tracking all actions in that direction,” he remarked. “Absolutely no flights, especially by the international coalition, are allowed. With or without prior notification. The issue is closed.” He added that the US-led coalition would continue airstrikes near Raqqa, the Syrian stronghold of Islamic State (IS, formerly ISIS/ISIL), near some towns near the Euphrates River and close to the city of Deir ez-Zor. The Russian Foreign Ministry was less definitive on the alleged ban of US warplanes, stating that “these issues are being discussed at the military level.” On Thursday, a memorandum was signed in Astana establishing four “safe zones” in Syria, where so-called “moderate opposition” fighters are expected to stay safe from airstrikes and keep jihadist groups out. The zones are set in provinces of Idlib, Latakia and Homs, as well as parts of Aleppo. Russia, Iran and Turkey serve as guarantors of the arrangement, which carries hopes of deescalating violence in the war-torn country.

Marines Return to Helmand Province for a Job They Thought Was Done - NYT - Before the American flag was lowered, folded and retired and the last of the Marines left the Afghan province of Helmand in 2014, their commander offered some optimistic parting words. The commander, Brig. Gen. Daniel D. Yoo, said the Marines had done their job, one of the largest undertakings in the force’s history. At the peak of the war in southern Afghanistan, more than 20,000 Marines flooded the Taliban stronghold, pushing the insurgents out of several districts in Helmand. In their place, the Marines helped Afghan forces establish the combination of security and essential services that became known as a “government in a box.” Afghan forces would now be responsible for security in Helmand, General Yoo said, “and I am confident in their abilities to continue to succeed.” It did not quite turn out that way. Since 2014, resurgent Taliban militants have gained territory, and the Afghan security forces have lost men at such high rates that entire units have needed to be replenished. The local “government in a box” arrangements have mostly crumbled. So on Saturday, the Marines returned to Helmand with a force of 300; roughly half of them had previously served in the province. The same flag that was lowered in 2014 and then stored at the Pentagon office of the commandant of the Marine Corps was raised again at the 6,500-acre Camp Shorab, which the Marines will be sharing with the Afghan Army’s struggling 215th Maiwand Corps.

Why Muslims are the world’s fastest-growing religious group -- In the next half century or so, Christianity’s long reign as the world’s largest religion may come to an end, according to a just-released report that builds on Pew Research Center’s original population growth projections for religious groups. Indeed, Muslims will grow more than twice as fast as the overall world population between 2015 and 2060 and, in the second half of this century, will likely surpass Christians as the world’s largest religious group.While the world’s population is projected to grow 32% in the coming decades, the number of Muslims is expected to increase by 70% – from 1.8 billion in 2015 to nearly 3 billion in 2060. In 2015, Muslims made up 24.1% of the global population. Forty-five years later, they are expected to make up more than three-in-ten of the world’s people (31.1%). The main reasons for Islam’s growth ultimately involve simple demographics. To begin with, Muslims have more children than members of the seven other major religious groups analyzed in the study. Muslim women have an average of 2.9 children, significantly above the next-highest group (Christians at 2.6) and the average of all non-Muslims (2.2). In all major regions where there is a sizable Muslim population, Muslim fertility exceeds non-Muslim fertility.

Copper Is Crumbling After Stockpiles Surge --After reaching one month highs on Monday, copper futures prices have tumbled to near 3-week lows amid slowing China credit impulse-driven economic signals (PMIs weak) and a surge in LME stockpiles. And the market reacted... Additionally, as Bloomberg reports, There are also more signs of slack spot demand: immediate delivery copper’s discount to the three-month contract on the LME has widened 28 percent this week. Bigger inventories and the loosening of the copper price curve are at odds with forecasts that the copper market will move into deficit this year, Leon Westgate, an analyst at Levmet U.K. Ltd., said by phone.“Judging by the price action and the movement in the spreads, it looks like the market might have been anticipating these deliveries,” he said.As Guy Wolf, a London-based analyst at Marex Spectron Group, noted:“It is about whether the tide of liquidity is going in or out, not the latest anecdote about Chinese demand or comment from a Chilean union official.”“We think we’ll see a more sizable slowdown out of China,” says Edward Meir, an analyst at INTL FCStone in NY“We’re a little bearish on copper for May”

"On The Precipice Of A Spectacular Decline”: Axiom Warns Of A "Nightmarish Picture For Iron Ore Prices" --As noted earlier, while European stocks and US equity markets have ignored the commodity crash in China, which in addition to iron ore plunging limit down, also saw rubber tumble 7% lower, and steel rebar, coke, coking coal plunge over 6% ..... Axiom's Gordon Johnson warns (as we did a month ago) that the worst is yet to come, and in fact, the "backdrop of near-record/record iron ore inventories and aggressive domestic and seaborne iron ore supply, paints a nightmarish picture for iron ore prices over the coming months."Here are the choice excerpts from his overnight note "Why We Feel Iron Ore Prices Are Slated For a Sharp N-Term Fall (Even From Here) & Why Iron Ore Stocks (FMG; RIO; CLF; X) Are Attractive Shorts Right Now"With China’s April PMIs disappointing, suggesting China’s tight ening measures are beginning to take hold (i.e., demand for steel in China is now weakening), we expect steel supply in China to begin to moderate imminently; stated differently, this suggests iron ore demand is in the process of waning, which, against a backdrop of near-record/record iron ore inventories and aggressive domestic and seaborne iron ore supply, paints a nightmarish picture for iron ore prices over the coming months. On this trend, we would be adding to shorts in FMG, CLF, RIO, and X.We believe, when looking at the data, iron ore prices are on the precipice of a “spectacular decline”. As detailed below, iron ore imports into China were up 11.4% y/y to 95.6mt in March, and YTD were up 12.2% y/y to 271mt. In our view, due to what is expected to be a 1%-2%% fall in y/y crude steel production in China in 2017, which is below the +1.04% y/y growth seen in 2016, we believe elevated imports through March point to continued inventory build, as well as a lack of seaborne-supply-discipline to falling iron ore prices (iron ore prices fell 11.9% through March). Exhibit 1: Despite Waning Crude Steel Output in China, Import

U.S. fires new salvo in escalating aluminium trade dispute | Reuters: "This is not a China-phobic program, this has to do with a global problem." That was how U.S. Commerce Secretary Wilbur Ross described the latest investigation into his country's aluminium imports. This one has been launched under Section 232(b) of the Trade Expansion Act of 1962, which lets a president act against imports on national security grounds. It follows hot on the heels of a similar Section 232 probe into U.S. imports of steel. Although a Section 232 investigation is explicitly not supposed to be a substitute for trade complaints and despite Ross's assurances it's not about China, it's hard to see this latest maneuver as anything other than exactly that. Namely, another turn of the screw on the Chinese authorities to do something about the country's overcapacity and its exports. As such, it overlays the current specific investigation into imports of Chinese foil and intertwines with a broader generic complaint about alleged subsidies to the Chinese aluminium sector lodged by the Obama administration with the World Trade Organization (WTO). How China responds to this mounting pressure is fast becoming the single most important question in the global aluminium supply chain.

Chinese economy cools as key sectors continue to slow - China’s economy has shown more signs of cooling with key barometers from its manufacturing and services sectors dipping in April. The latest data comes as Beijing attempts to rein in a booming property market and rapid credit growth. Two surveys on Sunday suggested activity in the world’s second largest economy eased back in April. Manufacturing slowed more than expected as demand was hit by government moves to curb risks associated with a run of high borrowing in China. The National Bureau of Statistics’ official purchasing managers’ index (PMI) of factory activity fell to a six-month low of 51.2 in April from a multi-year high of 51.8 in March. That was above the 50-mark separating growth from contraction but missed forecasts for a reading of 51.6 in a poll of economists by Reuters. China’s official PMI report on its services sector also signalled a slowdown in April. That index slipped to 54.0 from 55.1 in March, showing the sector was still expanding at a solid pace as rising living standards continue to buoy consumer spending. The Chinese economy has defied expectations over the first three months of 2017, with GDP growing 6.9%, but economists expect the pace of expansion to ease during the rest of the year as the government continues its efforts to shift from an economic model based on debt-fuelled investment and exports towards a consumer-driven one. Economists are hopeful that the news on growth will remain positive enough so that Chinese authorities are not tempted to ease back on the pace of reform or reach for once-favoured ways of propping up the economy, such as spending on big infrastructure projects and relying on the booming property market.

Global recession risk rises as the US and China tighten into the storm: The Federal Reserve is determined to press ahead with rate rises under Janet Yellen, but the America and the world may not be as strong as they think. Equity investors across the world are positioned for the nirvana of synchronised and accelerating global expansion led by China and the US. What they may instead get is a synchronised Sino-American slap in the face. Analysts at UBS say the international credit impulse has already "collapsed". The two economic superpowers are both tightening policy into an approaching storm. The US bond market has been signaling for two months that the American economy is still uncomfortably close to a deflationary relapse, an implicit judgment that the US Federal Reserve is about to commit a policy error.

Is the Great China Crash Upon Us? -- While we, as well as the few bearish peers we have, have warned of a pending “credit event” in China for some time now – admittedly incorrectly (China has proved much more resilient than expected) – the more recent red flags are among the most profound we’ve seen in years – in short, we agree with fresh observations made by some of the world’s most famous iron ore bears. Thus, while it is nearly impossible to pinpoint exactly when the credit bubble will definitively pop in China, a number of recent events, in our view, suggest the threat level is currently at red/severe.  At the peak of the US subprime bubble (before the failure of Bear Stearns in Mar. ‘08, and subsequently Lehman Brothers in Sep. ’08, troubles in the US credit system emerged as early as Feb. ’07), the asset/liability mismatch was 2% when compared to the total banking system. However, in China, currently, there is a massive duration mismatch in wealth management products (“WMPs”). And, at $4tn in total WMPs outstanding, the asset/liability mismatch in China is now above 10% – China’s entire banking system is ~$34tn, which is a scary scenario. In our view, this is a very important dynamic to track given it foretells where a country is at in the credit cycle. In short, we see a number of signs that point to what could be the beginning of the “popping” of the credit bubble in China. More specifically: (1) interbank rates in China are spiking, meaning banks, increasingly, don’t trust each other – this is how any banking crisis begins (Exhibit 1), (2) China’s Minsheng Bank recently issued a ghost/fraudulent WMP (they raised $436mn in funds for a CDO-like asset that had no assets backing it [yes, you heard that right] – link), (2) Anbang, the Chinese conglomerate who has used WMP issuance as a means to buy a number of assets globally (including the Waldorf Astoria here in the US),  is now having issues gaining approval for incremental asset purchases (link), suggesting global investors may be getting weary of the way in which Anbang has “beefed up” its balance sheet, (3) China’s top insurance regulator, Xiang Junbo, chairman of the China Insurance Regulatory Commission, is currently under investigation for “severe” disciplinary violations (link), implying some/many of the “shadow” forms of transacting in China could become a bit harder to maneuver (which would manifest itself in higher rates, which his exactly what we are seeing today), and (4) as would be expected from all of this, as was revealed overnight in China, bank WMP issuance crashed 15% m/m in April to 10,038 from 11,823 in March, a strong indicator that faith in these products is indeed waning.

 China Demands "Immediate Halt" Of US Missile Shield Deployment In South Korea --As we pointed out earlier today, Reuters cited US military officials who said that the U.S. military's THAAD anti-missile defense system has "reached initial intercept capability" in South Korea, although they added that it would not be fully operational for some months. Just hours after the announcement, Beijing lashed out at DC and demanded an "immediate halt" to the controversial US missile shield. China's Foreign Ministry spokesperson Geng Shuang voiced the government’s position against the move during a briefing on Tuesday."We oppose the deployment of the US missile system to South Korea and call on all parties to immediately stop this process. We are ready to take necessary measures to protect our interests," he said according to AFP, adding that “China’s position on the THAAD issue has not changed."As Reuters noted earlier, the spokesperson didn’t specify what "necessary measures" China had in mind. However, responding to the THAAD installation, last week China announced on Thursday that it will stage live-fire exercises and test new weapons to protect its security.Curiously, while on one hand Beijing lashed out at the shield's deployment, on the other, the foreign ministry expressed support for US President Donald Trump's surprise comments that he would be "honored" to meet North Korean leader Kim Jong-Un under the right conditions.Asked about Trump's remarks, Geng said that China "has always believed that dialogue and consultation... is the only realistic and viable way to achieve denuclearisation.""We also said many times that the US and DPRK... should make political decisions at an early date, take action and show good faith so that we can create a better atmosphere for resuming the peace talks and settling the issue," he added.

Korea Times: "China Bracing For Emergency Situation Involving North Korea" - With the North Korean situation tense after Friday's latest failed missile attempt, the South Korea's Korea Times reports that a Chinese town near the border with North Korea is "urgently" recruiting Korean-Chinese interpreters, "stirring speculation that China is bracing for an emergency situation involving its nuclear-armed neighbor."The Korea Times cites The Oriental Daily, a Hong Kong-based news outlet, which reportedly published the story on Apr. 27, including a photo of a Chinese government document ordering the town of Dandong to recruit an unspecified number of Korean-Chinese interpreters to work at 10 departments in the town, including border security, public security, trade, customs and quarantine.The document did not specify the reason behind the unusual, large-scale recruiting. But experts and local citizens said the move indicated that China was bracing for a possible military clash between the United States and North Korea.The Korean outlet goes on to speculate that this "might trigger a huge exodus of North Koreans to border towns in China."Whether this dismal scenario will become a reality is largely up to North Korea's leader Kim Jong-un. U.S. President Donald Trump has repeatedly warned that the world's superpower will strike North Korea's nuclear facilities if Kim proceeds with a sixth nuclear test or test fires an intercontinental ballistic missile.

China Issues Unprecedented Warning To Citizens In North Korea: Return Home -- In an unprecedented move, the Chinese Embassy in North Korea has advised Korean-Chinese residents to return home amid concern that the North's military provocations may trigger a U.S. attack on the North. The Korea Times reports that the embassy began sending the message on Apr. 20, five days before the North celebrated the 85th anniversary of the Korean People's Armywith a show of military power, according to Radio Free Asia (a U.S.-based station specializes in North Korea). The station cited a Korean-Chinese living in the North's capital, who said he left for China late last month after the embassy contacted him. He said he has been visiting China every two to three months but, after being told he should "stay in China for a while," left North Korea a month early. "The embassy has never given such a warning. I was worried and left the country in a hurry," said the man, whose name was withheld. But he said that most Korean-Chinese residents in Pyongyang were ignoring the message. The city's "peaceful" atmosphere, despite the global crisis due to the state's threats involving missiles and nuclear tests, might have kept them unaware of the situation, he added. The embassy's warning indicates that China is worried that the saber-rattling North and U.S. moves to destabilize the Kim Jong-un regime might affect Chinese citizens abroad.

China Reportedly Issues Final Warning To North Korea -- With President Trump placing his faith in China's ability to keep its neighbor under control - through threats, promises, or oil embargoes - it appears, according to unconfirmed rumors spreading widely on Chinese social media Tuesday, that North Korea just got its final warning.  As Korea Times reports, Chinese news outlets have previously said Beijing could turn its back on Pyongyang if the latter conducted a sixth nuclear test. But the rumor that China has given North Korea a final warning has drawn particular interest from Weibo users.  China has sent a final warning to North Korea over its military provocations. The rumor cited the May issue of Hong Kong monthly news outlet Dong Xiang.It said a Chinese Ministry of Foreign Affairs junior minister invited Park Myung-ho, an official of North Korea, for a meeting. China's Foreign Minister Wang Yi attended the meeting and asked his junior to read aloud the warning to the North over the nuclear test. The memorandum mentioned that China will condemn strongly, pull back on all economic cooperation and even blockade North Korea if it conducted the test.  A Chinese netizen said: "Maybe the bond between the nations is not that strong as we thought. North Korea is completely surrounded by enemies now." The Chinese government did not provide any explanation or correction to the rumor, but this follows reports of China's embassy warning citizens in North Korea to "return home" as fears grow of escalation with the US.

The dog didn't bark: What pressure from China on Pyongyang? | Asia Times -- Under threat of military action from an unpredictable US President Donald Trump, China appears to be stepping up efforts to prevent North Korea from conducting a major military provocation. According to a US official familiar with intelligence reports, it is believed behind-the-scenes efforts by Beijing have so far staved off North Korea’s planned sixth underground nuclear test. Any Chinese strategy and tactics used to avert the test are not known. China was prepared for a test in mid-April. On April 14, the Environmental Protection Bureau for Dalian, a port city across the Yellow Sea from North Korea, published an internal government bulletin that warned of a coming nuclear test by Pyongyang. The bureau ordered a state of emergency over “the danger of a sudden North Korean nuclear or chemical emergency” affecting environmental safety or public health. The nuclear test did not occur that weekend as expected and instead a short range missile test was conducted. Trump tweeted then that “North Korea disrespected the wishes of China & its highly respected President when it launched, though unsuccessfully, a missile today. Bad!” Washington believes Chinese leaders, including those in the People’s Liberation Army – which has traditional ties to the North Korean military – warned North Korea that a nuclear event would trigger some type of US military intervention, such as an air strike or cruise missile attack on North Korean nuclear facilities that might set off another Korean War. North Korea has about 21 known or suspected nuclear facilities, according to the Nuclear Threat Initiative. These include several nuclear facilities, a high-explosive test site and an underground facility in the Pyongyang area, a uranium enrichment plant in the northern part of the country, and the nuclear testing facility in the northeast.

 Further North Korea Nuclear Testing May Goad China Into Oil Embargo - Chinese diplomatic analysts believe further nuclear tests by North Korea could push Beijing over the edge, prompting an oil embargo that would deal a devastating blow to Pyongyang’s stability.US Secretary of State Rex Tillerson told Fox News that he had been informed that “China would be taking sanctions actions on their own,” should Pyongyang conduct another nuclear test. “Crude oil is very likely to be included as part of new U.N. sanctions if North Korea continues with its provocative nuclear tests, and China will almost certainly endorse such an effort,” Sun Xingjie, an expert on North Korea from Jilin University said on the matter.International sanctions against North Korea have been in place for the past several years, with the most recent United Nations-backed round targeting the country’s shipping network. A Chinese oil embargo would likely debilitate Kin Jong-un’s government.“Instead of an oil embargo of just one or two months, which is unlikely to have a major impact on North Korea’s strategic oil reserves, we are talking about a halt in Chinese crude oil supplies for at least six months. That would be a real nightmare for Kim,” said Sun.The expert said Beijing would likely require a mandate from the U.N. to take new actions against Pyongyang absent further nuclear activity.Gasoline prices in North Korea jumped by as much as 83 percent this week on the back of reports that China is mulling over crude sanctions for the unruly neighbor.While China has historically supported—above all—the stability of the Pyongyang regime as a means of avoiding a refugee crisis should the political system there collapse, now it is putting equal weight on regime stability and the denuclearization of that same regime.

North Korea Threatens China With "Grave Consequences" Over "Betrayal" -- Earlier this morning we reported that according to Korea Times, China had allegedly sent North Korea what amount to a final warning over its military provocations. The rumor cited the May issue of Hong Kong monthly news outlet Dong Xiang. It said a Chinese Ministry of Foreign Affairs junior minister invited Park Myung-ho, an official of North Korea, for a meeting. China's Foreign Minister Wang Yi attended the meeting and asked his junior to read aloud the warning to the North over the nuclear test. The memorandum mentioned that China will condemn strongly, pull back on all economic cooperation and even blockade North Korea if it conducted the test. It didn't take Korea long to respond... In an almost unprecedented criticism of China on Wednesday, North Korea's state media said Chinese state media commentaries calling for tougher sanctions over Pyongyang's nuclear program were undermining relations with Beijing and worsening tensions. As Reuters reports, a commentary carried by the official Korean Central News Agency (KCNA) slammed China’s "insincerity and betrayal," referring to recent commentaries in China's People's Daily and Global Times newspapers, which it said were "widely known as media speaking for the official stand of the Chinese party and government."The response was terse and aggressive..."A string of absurd and reckless remarks are now heard from China every day only to render the present bad situation tenser.""China had better ponder over the grave consequences to be entailed by its re ckless act of chopping down the pillar of the DPRK-China relations,"

  U.S. THAAD in S. Korea “operational” amid protests, hunger strike (Xinhua) -- The U.S. Forces Korea (USFK) said Tuesday that the Terminal High Altitude Area Defense (THAAD) anti-missile system, which was deployed last week in southeast South Korea, is "operational."USFK spokesperson Rob Manning said that the USFK "confirms the THAAD system is operational."The installed THAAD system has the ability to "intercept missiles" from the Democratic People's Republic of Korea (DPRK) and "defend South Korea," according to the spokesperson.On Wednesday, about 20 U.S. trucks and trailers carried part of THAAD elements, including radar, to a golf course at Soseong-ri village in Seongju county, North Gyeongsang province. The golf course was designated as the THAAD site.The installed THAAD elements include two mobile launchers, an AN/TPY-2 radar and other equipments. A THAAD battery is composed of six mobile launchers, 48 interceptors, the radar and the fire and control unit.The deployment of THAAD in South Korea has been strongly opposed by regional countries, including China and Russia, as it breaks strategic balance in the region.Following the unexpected deployment, protests have been staged by the general public, residents and peace activists. Residents and peace activists, who had been on the guard right beside the entrance road, tussled with thousands of South Korean policemen on Sunday to block two U.S. oil tankers attempting to enter the golf course. On Monday, they blocked about 30 South Korean police buses attempting to pass the entrance road as they saw the higher-than-usual number of the buses as a sign of preparing for another attempt to allow additional THAAD elements to be transported to the golf course. Three Won Buddhist monks started a hunger strike at the Gwanghwamun square in central Seoul, a day after the deployment of part of the THAAD elements.

Philippines' Duterte says chat with Xi was at Trump's request | Reuters: Philippine President Rodrigo Duterte said on Thursday his telephone conversation this week with Chinese leader Xi Jinping to discuss the Korean peninsula crisis was at the behest of his U.S. counterpart Donald Trump. Duterte said he spoke with Xi on Wednesday to convince him to play a bigger role in defusing tension in the Korean peninsula after North Korea test fired another missile early on Saturday. Duterte discussed the North's test with Trump later on Saturday, at the end of a summit in Manila of the Association of South East Asian Nations (ASEAN), of which he is chairman this year. "So, I called President Xi Jinping, 'I am calling you at the behest of the president of the United States'," he said in a speech in his hometown in Davao City, "'We have all agreed in the ASEAN and even President Trump that you can do something. Actually, the biggest contribution of all other is your intervention'," he said, recalling the conversation. The United States has urged China, North Korea's only major ally, to do more to rein in the North's nuclear and missile programs, which have prompted an assertive response from the Trump administration, warning that an "era of strategic patience" is over. "Definitely they are getting the help of everybody here," Duterte said, referring to U.S. diplomatic efforts in Asia to contain North Korea. Xi and Duterte spoke for about 26 minutes, a source at the Philippine president's office told Reuters, and exchanged views about regional developments and how some concerns could be addressed.Duterte said if asked by Trump, he would happily relay what was discussed with Xi. The maverick and wildly outspoken Duterte has in the past week emerged as an unlikely collaborator in international efforts to prevent regional tension from escalating. 

Japan Labor Shortage Prompts Shift to Hiring Permanent Workers Japan’s tightest labor market in decades shows signs of reversing a long shift toward the hiring of temporary workers. The number of full-time, permanent workers is rising for the first time since the global financial crisis, outpacing growth in temporary jobs over the past two years. “The labor shortage has become so bad that companies can’t fill openings only with part-timers,” said Junko Sakuyama, Tokyo-based senior economist at Dai-ichi Life Research Institute. Japan’s 2.8 percent unemployment rate is the lowest since 1994 but most of the hiring over the past decade or so has been for temporary, often part-time positions, known as non-regular. A shift back toward permanent hiring could help sluggish consumer spending pick up. Economists say a decades-long move toward non-regular jobs is partly to blame for weak consumer demand. Non-regular workers now make up more than a third of the workforce. Many work part time, and all on average receive less pay, few benefits, little training and no real job security. It’s too early to declare a trend reversal, but the number of regular jobs grew by 260,000 in March from a year ago, while part-time, temporary and contract jobs rose by 170,000, the internal affairs ministry reported on Friday. Last year, 510,000 permanent jobs and 360,000 non-regular ones were added. The ratio of non-regular workers in the workforce stood at 37.5 percent in 2016, the highest on record dating to 2002, according to government data. It should decline as more women become regular employees in sectors with severe labor shortages such as retail and elderly care, Sakuyama said.

Japan's cash-based society increasingly vulnerable to crooks -- On two consecutive days, April 20 and 21, major robberies occurred in Fukuoka and Tokyo. Both involved individuals transporting large sums of cash from banks. Yukan Fuji (April 23) reports that in Fukuoka on April 20, a man who withdrew 380 million yen in cash from a bank, was attacked while carrying the funds to his rented car parked nearby. He told police he was planning to use the money to purchase gold bars. A day later in Tokyo, a 44-year-old self-employed man from Suginami Ward was robbed of 40 million yen on a Ginza street. According to the Tsukiji police station, the victim had been carrying 72 million yen in a tote bag when a man bumped into him on the street, grabbed at the bag and made off with 40 million yen, leaving behind the remainder. In both incidents, it was the large amount of stolen funds that made the news. In the past, transactions of such large amounts would normally have been conducted at banks. But recently it's become fairly commonplace for people to engage in sizeable transactions using cash. Yukan Fuji also notes that it's become increasingly common for people to stash large amounts of money in their home. The research arm of the Daiichi Insurance Company has estimated that as of the end of February 2017, the total amount of such funds -- called tansu yokin or savings in the chest of drawers -- was in the neighborhood of 43 trillion yen. Business journalist Hiroko Hagiwara told Yukan Fuji that one of the reasons why more people are keeping money in their homes is due to the negative interest policy in force.

India’s controversial national ID scheme leaks fraud-friendly data for 130,000,000 people - Aadhaar kicked off in 2009, linking each Indian resident's biometric data and sensitive personally identifying information to a unique 12-digit number.It's been controversial since its inception, with privacy advocates and cybersecurity experts warning that the system held the potential for terrible breaches with unimaginably ghastly consequences.Now, in a new report published yesterday by researchers from the Bangalore-based think-tank the Centre for Internet and Society, Amber Sinha and Srinivas Kodali comprehensively document the many ways in which Aadhaar is leaking, tracking the #aadhaarleaks hashtag, which has revealed potentially compromising information on more than 130,000,000 people, largely material that is intentionally available through official portals. In the last month, there have been various reports pointing out instances of leakages of Aadhaar number through various databases, accessible easily on Twitter under the hashtag #AadhaarLeaks. Most of these leaks reported contain personally identifiable information of beneficiaries or subjects of the leaked databases containing Aadhaar numbers of individuals along with other personal identifiers. All of these leaks are symptomatic of a significant and potentially irreversible privacy harm, however we wanted to point out another large fallout of these leaks, those that create a ripe opportunity for financial fraud. For this purpose, we identified benefits disbursement schemes which would require its databases to store financial information about its subjects. During our research, we encountered numerous instances of publicly available Aadhaar Numbers along with other PII of individuals on government websites. In this paper, we highlight four government projects run by various government departments with publicly available financial data and Aadhaar numbers. Our research is focussed largely on the data published by or pertaining to where Aadhaar data is linked with banking information. We chose major government programmes using Aadhaar for payments and banking transactions. We found sensitive and personal data and information very easily accessible on these portals.

Citizens don’t have ‘absolute’ right over their bodies, privacy complaint is ‘bogus’ - Indian govt - India’s government asserted to the country’s Supreme Court that citizens don’t have “absolute” rights over their bodies, and the privacy argument is “bogus.” They were discussing a controversial new system, allegedly used to fight fake IDs. The Aadhaar system involves biometric information such as blood and fingerprints stored in encrypted format, and initially, the government said it would only be voluntary. However, the court was hearing three petitions against Aadhaar on Tuesday, with the petitioners arguing that Section 139AA of the Income Tax Act, which was introduced via this year’s latest Budget and Finance Act, is unconstitutional. Section 139AA requires Indian citizens to cite their Aadhaar details or enrolment ID of their Aadhar application form in order to complete their income tax returns, as well as to apply for a PAN [Personal Account Number] starting from July 1. This makes it mandatory for citizens to get the unique identity number.The government argued that the measure serves to weed out fake PAN cards and identity theft in general, used for activities such as the circulation of ‘black’ money and terrorism funding. Aadhaar is a secure way to cope with the issues, the government said. “Today, you have black money which is being used in drug financing and terror financing. So it was decided to bring in a more robust system by which [the] identity of a person cannot be faked,” Attorney-General Mukul Rohatgi said, as cited by local media outlet First Post.

SE Asian summit ends in uncertainty over South China Sea stance | Reuters: Southeast Asian leaders wrapped up a summit on Saturday with no indication of an agreement on how to address Beijing's assertiveness in the South China Sea, a divisive issue in a region uncertain about its ties with the United States. Six hours after the Association of South East Asian Nations (ASEAN) summit officially ended in Manila, no customary joint statement had been issued and it was unclear whether there was agreement over including references to China's militarization and island-building in the hotly disputed waterway. ASEAN references to the South China Sea issue typically do not name China. Beijing is extremely sensitive to anything it perceives as a veiled reference to its expansion of its seven manmade islands in the Spratly archipelago, including with hangers, runways, radars and missiles. This year's summit comes at a time of uncertainty about U.S. interests in the region and whether it will maintain its maritime presence to counter Chinese assertiveness that has often put the region on edge. A spokesman for the Philippines foreign ministry said a statement would be issued on Saturday. Two ASEAN diplomatic sources earlier on Saturday told Reuters that Chinese embassy representatives in Manila had sought to influence the content of the communique. The sources said the Chinese officials had lobbied the Philippines to keep tacit references to Beijing's island-building and arming of artificial islands out of the statement.

China FinMin Unexpectedly Skips Asian Trade Summit To Attend "Emergency Meeting" -- Coming a time when traders and analysts are looking with growing concerns toward Beijing, riddled by deja vu memories of the China-induced near-bear market of 2016 when in a similar episode China's credit impulse tumbled - something which even Pimco highlighted earlier this week, when it reposted a chart first shown here in February.. ... worries that not all may be well in China - for the second time in two years - grew this morning after the country's Finance Minister, Xiao Jie, unexpectedly skipped a summit conference with his Japanese and South Korean peers on Friday to attend an "emergency domestic meeting", a senior Japanese finance ministry official said quoted by Reuters. The official told reporters during a ministry press briefing that Xiao's absence was not related to any diplomatic matters, adding that Xiao was expected to attend the Japan-China finance dialogue in Japan scheduled for Saturday. He did not elaborate on the nature of the minister's emergency meeting. "I don't think this is rude," the official said, when asked about Xiao's absence. "I heard an emergency meeting was called and the Chinese finance minister had to attend," he said. "We can understand the situation. We don't see any deeper diplomatic meaning to this." While of secondary importance, at the meeting of the finance leaders they agreed to resist all forms of protectionism, taking a stronger stand than G20 major economies against the protectionist policies advocated by Trump. The senior Japanese finance official said he did not see any diplomatic implications from Xiao's absence, saying the minister was likely to arrive in Yokohama Friday evening. With the US taking an increasingly hardline stance on free-trade, Asia's mega exporters among which China, Japan and South Korea have been seeking to ringfence themselves and promote regional trade agreements. More details from Reuters:Philippines' Duterte gives China free pass over sea row | Daily Mail Online: Philippine President Rodrigo Duterte failed to condemn China's push to control most of the disputed South China Sea on Sunday after hosting a regional summit, handing Beijing a political victory.A day after taking centre stage as host of an Association of Southeast Asian Nations leaders' meeting, Duterte released a bland chairman's statement that ignored last year's international ruling outlawing China's sweeping claims to the key waterway."We took note of concerns expressed by some leaders over recent developments in the area," said the 25-page statement without any mention of what these issues were, which countries were thought to be responsible, and which heads of state raised them.China has been turning reefs and shoals in areas of the sea claimed by the Philippines and other nations into artificial islands, and installing military facilities on them.ASEAN members Vietnam, Malaysia and Brunei also claim parts of the sea, but China insists it has sovereign rights over nearly all of it.Throughout the summit Duterte said the Philippines and other nations were helpless to stop the island building, so there was no point discussing it at diplomatic events such as Saturday's meeting.China is not a member of the 10-nation ASEAN, but its ambassador to Manila worked hard to influence the tenor and content of the chairman's statement, diplomats earlier told AFP.

Older workers expect to return with debt – -  Almost half of older working Australians expect to retire with credit card, mortgage and bill debt after helping their children. REST Industry Super research shows the "sandwich generation" are being squeezed financially by their children and parents. The survey of 1048 Australians aged over 35 found one in four expected to retire with credit card debt, one in five with a mortgage and one in 10 with unpaid bills after helping children with tuition fees, home deposits and other expenses. The Journey Begins report also showed those surveyed also are providing financial assistance to their parents with 14 per cent helping to fund medical or health expenses. The findings show of the $507 billion cost of support provided by Australians, $109 billion related to payment for children's or grandchildren's education. Everyday expenses made up the next biggest chunk of support at $93.1 billion, while $68.5 billion was forked out for home deposits. REST CEO Damian Hill said the high levels of intergenerational dependency and debt with which old working Australians are retiring on is of concern, with the pressures of housing and education costs particularly hitting home in Sydney and Melbourne. "As the majority of assets for older working Australians are locked up in the family home, carrying mortgage debt into retirement can be a cause of financial stress for retirees," Mr Hill said. 

The U.S. Military Moves Deeper into Africa -- Tomgram: Nick Turse - While the U.S. maintains a vast empire of military installations around the world, with huge -- and hard to miss -- complexes throughout Europe and Asia, bases in Africa have been far better hidden.  And if you listened only to AFRICOM officials, you might even assume that the U.S. military’s footprint in Africa will soon be eclipsed by that of the Chinese or the Russians.   Highly classified internal AFRICOM files offer a radically different picture.  A set of previously secret documents, obtained by TomDispatch via the Freedom of Information Act, offers clear evidence of a remarkable, far-ranging, and expanding network of outposts strung across the continent.  In official plans for operations in 2015 that were drafted and issued the year before, Africa Command lists 36 U.S. outposts scattered across 24 African countries.  These include low-profile locations -- from Kenya to South Sudan to a shadowy Libyan airfield -- that have never previously been mentioned in published reports.  Today, according to an AFRICOM spokesperson, the number of these sites has actually swelled to 46, including “15 enduring locations.”  The newly disclosed numbers and redacted documents contradict more than a decade’s worth of dissembling by U.S. Africa Command and shed new light on a constellation of bases integral to expanding U.S. military operations on the African continent and in the Middle East.

White South Africans Are Preparing For "Removal of All Whites Within Five Years" - Back in March, the President of South Africa made a shocking suggestion, which left many white landowners fearing that they may face a race war in the near future. In a speech, Jacob Zuma announced that he wanted the government to begin confiscating white owned lands, before redistributing them to black South Africans.Zuma wants a “pre-colonial land audit of land use and occupation patterns”to help decide which lands need to be taken, and has said that “We need to accept the reality that those who are in parliament where laws are made, particularly the black parties, should unite because we need a two-thirds majority to effect changes in the constitution.”It’s believed that Zuma is calling for this radical action in response to the rise of a rival political party known as the Economic Freedom Fighters, who have long called for the confiscation of white owned lands.  Obviously, this kind of talk doesn’t bode well for the future of South Africa. You have the leaders of the first and third most popular political parties, both of which promote socialist ideas, openly declaring that they want the government to steal from an entire racial group. Since these political parties wouldn’t be in power unless they had some degree of popular support, it’s clear that black South Africans are increasingly turning against their white neighbors. It’s a perfect recipe for genocide. It’s conditions like that which have spawned organizations like the Suidlanders; a massive civilian-run civil defense group that is dedicated to protecting Afrikaaners in the event of social collapse or civil war. They’re currently getting ready for the possibility of a government implemented genocide of white South Africans. One of their leaders recently spoke to Infowars, and explained how they plan to respond to that threat.

Yes, giving money to very poor people will make their lives better — just ask Ecuador --Is eradicating poverty, a goal the United Nations’ hopes to achieve by 2030, actually feasible? New research out of Ecuador says yes – if governments are willing to pay for it. According to a United Nations University (UNU) - Merit study of Ecuador’s Human Development Bonus (Bono de Desarrollo Humano, or BDH), direct cash transfers have definitively improved social mobility, or the ability of individuals or households to move between social strata. And it has helped poor families climb out of poverty, especially when complemented by other economic-inclusion programs.  Ecuador’s BDH is a cash transfer given to extremely poor families each month, as long as their children are regularly attending school and health clinics. Since 2003, each beneficiary household has received US$15 every month, irrespective of household size (Ecuador uses the US dollar). The amount was increased to US$30 in 2007, US$35 in 2009, and US$50 in 2013.It’s well known that cash transfers positively impact access to quality health and education services, as evidence from 30 developing countries shows. They are also proven to improve labour supply and familial asset accumulation, strengthen social networks and stimulate local markets.  But the literature is scarce when it comes to the long-term effects of such transfers. Preliminary results were released in a January 2017 working paper co-authored by Franziska Gassmann and myself. We showed that the BDH does have a positive long-term effect on individuals and families.  Between 2009 and 2014, households receiving the BDH increased their welfare index – meaning that their wealth grew, as did their ability to rise through the ranks of society, in both absolute and relative terms – by between 12% and 13.6%, compared to people who did not receive the cash transfer.

Violent Riots Break Out In Brazil As First General Strike In 21 Years Paralyzes Nation - Less than a year after former president Dilma Rouseff was impeached and ousted for corruption, Brazil's economy continues to deteriorate at an alarming pace, and on Friday Brazilian police tear-gassed demonstrators and rioters burned buses in the violent conclusion of a general strike - the first in 21 years - that shut down transport, schools and banks in protest against the government's austerity reforms. As Reuters reports, what started off as a peaceful protest by several thousand people in central Rio in the afternoon turned violent, with small groups smashing bank windows, erecting barricades and setting fires, including torching at least eight buses. The police responded with barrages of rubber bullets and tear gas, which covered Rio in a suffocating fog that reached all the way to the top floors of local office buildings. Tram lines blocked in centre of Rio de Janeiro. #BrasilEmgreve  Similar disturbances were observed in Sao Paulo, the country's economic powerhouse, where a crowd attempted to march to the private residence of President Michel Temer and clashed with police, who also fired rubber bullets and stun grenades. Protesters hurled rocks, set fires, smashed street lamps and threw concrete blocks into the center of the avenue. Rio de Janeiro: Na rua Primeiro de Março, um grupo de manifestantes ateia fogo em cadeiras e tapumes. #grevegeral #BrasilemGreve (@erickdau)   While earlier in the day, Brazil reported that labor market deteriorated further in March, with the unemployment rate surging to 13.7%, resulting in a record 14.2 million unemployed workers and up from 11.1mn a year ago...

Furious Bank Run Leaves Canada's Largest Alternative Mortgage Lender On Verge Of Collapse  -- After two years of recurring warnings (both on this website and elsewhere) that Canada's largest alternative (i.e., non-bank) mortgage lender is fundamentally insolvent, kept alive only courtesy of the Canadian housing bubble which until last week had managed to lift all boats, Home Capital Group suffered a spectacular spectacular implosion last week when its stock price crashed by the most on record after HCG revealed that it had taken out an emergency $2 billion line of credit from an unnamed counterparty with an effective rate as high as 22.5%, indicative of a business model on the verge of collapse . Or, as we put it, Canada just experienced its very own "New Century" moment.  One day later, it emerged that the lender behind HCG's (pre-petition) rescue loan was none other than the Healthcare of Ontario Pension Plan (HOOPP). As Bloomberg reported, the Toronto-based pension plan - which represented more than 321,000 healthcare workers in Ontario - gave the struggling Canadian mortgage lender the loan to shore up liquidity as it faces a run on deposits amid a probe by the provincial securities regulator. Home Capital had also retained RBC Capital Markets and BMO Capital Markets to advise on “strategic options” after it secured the loan.Why did HOOPP put itself, or rather its constituents in the precarious position of funding what is a very rapidly melting ice cube? The answer to that emerged when we learned that HOOPP President and CEO Jim Keohane also sits on Home Capital’s board and is also a shareholder. But how did regulators allow such a glaring conflict of interest? According to the Canadian press, Keohane had been a director of Home Capital until Thursday, but said he stepped away from the boardroom on Tuesday to remove the conflict of interest when it became clear HOOPP might step in as a lender. Keohane further clarified on Friday that he doesn’t view the Home Capital investment as risky because the pension plan will be provided with $2 worth of mortgages as collateral for every $1 it lends to Home Capital.

This Is What A Bank Run Looks Like: Home Capital Loses 70% Of Deposits In One Week -- In the beginning it was a slow pace, then it became a casual jog. Then, starting early last week, the jog morphed into a full-blown run, and - as of the past 3 days - the withdrawal of deposits at Home Capital Group's high interest savings accounts has mutated into a full blown mad dash not to be the last person to have their money at what is now an effectively insolvent alternative lender.According to HCG's latest press release this morning, the "less than prime" Canadian mortgage lender held HISA deposits of only $391 million as of Monday, May 1; this is down C$130 million from Friday, or a reduction in the total amount by 25%. It is also down 72% from the C$1.4 billion reported one week ago. For those who need to think all the way back to the third Greek bailout of 2015 to recall what a bank run looks like, here is what the deposit situation at HCG has looked like over the past month. There is some good news: a terminal bank run at the mortgage lender has already been largely factored in, and is largely covered courtesy of the recently announced $2 billion emergency loan from the Ontario Pension Plan - putting up to 321,000 retirees on the hook - which carries a pre-bankruptcy interest rate of as much as 20%. To this end, HCG announced today that its subsidiary, Home Trust, expects to receive the initial draw today of $1 billion from its $2 billion credit line. However, there is another problem: the company has another C$12.8 billion in Guaranteed Investment Certificate deposits, or GICS. As these 30- and 60-day deposits come due in the coming weeks, depleting HCG's already tapped out liquidity, and forcing even more emergency loans. Without a deposit base, Home Capital can’t fund new mortgages.

Canadian Bank Run Contagion Begins? -- Yves here. As we show in today’s Links, beleaguered Home Capital Group disclosed who its lender was (the Healthcare of Ontario Pension Plan), and that it has drawn down half of its C$2 billion credit line.  Via Bloomberg:Home Capital Group Inc. extended declines after the Canadian mortgage lender reported additional deposit withdrawals, prompting one of its biggest rivals to seek a C$2 billion ($1.5 billion) credit line to stem any contagion across the country’s financial markets.Home Capital fell 13 percent to C$6.96 in Toronto, bringing its two-week drop to about 69 percent, on concern that redemptions of guaranteed investment certificates by nervous investors would worsen a cash crunch. High-interest deposits have declined about C$1.6 billion, or 80 percent, over the past month to C$391 million, the company said Monday.“They could be at risk,” said Jaeme Gloyn, an analyst at National Bank Financial Inc. “If investors are pulling their high-interest savings accounts, it’s natural to think that other clients would also be looking to pull their GIC investments.”The selloff in Home Capital’s stock and bonds, sparked by allegations that it misled investors about its mortgage book, are raising concern that its funding woes may spread to other mortgage lenders. That could derail a red-hot housing market that’s been a key driver of growth for Canada’s economy, accounting for as much as a fifth of output.Equitable Group Inc., another alternative mortgage lender, said Monday it took out a credit line with a group of Canadian banks after it started seeing “an elevated but manageable” decrease in deposit balances. Customers withdrew an average C$75 million a day between Wednesday and Friday. The withdrawals represented 2.4 percent of the total deposit base. Liquid assets remained at roughly C$1 billion after the outflows.

Central Banks to Stay Looser Longer Than Markets Expect - This is a busy time for major central banks. The Bank of Japan and European Central Bank met last week, the Reserve Bank of Australia and the Federal Reserve meet this week, and the Bank of England meets next week. Although most major central banks are deciding not to make big changes to monetary policies, global interest-rate expectations among investors have shifted to a tightening bias driven almost entirely by the anticipation of expansionary fiscal policy. The reality is that central bank policy on average is likely to stay looser than generally assumed by markets. To understand why, you need to first consider the stark divergence between economic data that is based on sentiment and data that is based on actual activity. The sentiment-based, or “soft,” data has consistently surprised to the upside, creating a strong correlation with higher interest-rate expectations. The actual, or “hard,” data such as measures of gross domestic product or factory production has been relatively weak. This divergence may drive central bank policy expectations in opposite directions with consequences for different markets. One consequence is that inflation expectations as seen in the markets for bonds and derivatives are becoming increasingly volatile. Respondents to surveys suggest that they see faster inflation and some central banks, such as the European Central Bank and Bank of Japan, say they need to take a cautionary stance when it comes to inflation. But despite an uptick in actual inflation data, market based long-term inflation expectations suggest investors are skeptical central banks can meet their inflation targets. This difference isn’t likely to go away anytime soon, forcing central banks to maintain a bias toward tighter policies even if they don’t tighten. Also, financial conditions have begun to tighten in some critical places around the world as a result of geopolitical tensions on the Korean peninsula, election uncertainty in Europe, and challenges to U.S. domestic fiscal policy. The ability to tighten monetary policy based on financial conditions can really only be seen in the U.S., whereas those in Europe and Asia are too tight to remove policy accommodation. 

 Growing Inequality Under Global Capitalism --Income and wealth inequality has increased in recent decades, but recognition of the role of economic liberalization and globalization in exacerbating inequality has never been so widespread. The guardians of global capitalism are nervous, yet little has been done to check, let alone reverse the underlying forces. The World Economic Forum (WEF) has described severe income inequality as the biggest risk facing the world. WEF founder Klaus Schwab has observed, “We have too large a disparity in the world; we need more inclusiveness… If we continue to have un-inclusive growth and we continue with the unemployment situation, particularly youth unemployment, our global society is not sustainable.”Christine Lagarde, IMF Managing Director, told political and business leaders at the WEF, “in far too many countries the benefits of growth are being enjoyed by far too few people. This is not a recipe for stability and sustainability.” Similarly, World Bank President Jim Yong Kim has warned that failure to tackle inequality risked causing social unrest. “It’s going to erupt to a great extent because of these inequalities.” In the same vein, the influential US Council of Foreign Relations’ journal, Foreign Affairs, carried an article cautioning, “Inequality is indeed increasing almost everywhere in the post-industrial capitalist world…. if left unaddressed, rising inequality and economic insecurity can erode social order and generate a populist backlash against the capitalist system at large.”

“The Donald“ kills European right-wing Populism - The defeat of Geert Wilders during the Dutch elections was a first but significant indicator that the longer the right wing administration of Donald  Trump in the United States lasts the worse the chances of European right wing parties get. Norbert Hofer losing the Austrian presidential elections is another example for that ongoing trend. Why? Because Trump is the greatest indicator that right wing populism doesn’t work as government policy. Trump is too much for Europeans. By appearing close to surreal to us, Trump illustrates the stupidity of populism at an unseen scale. „The Donald“ puts a spotlight into the faces of Geert Wilders, Nigel Farage, HC Strache or Marine LePen and let even the angriest citizens among us see their true nature and the absurdity of their argument.During the first 100 days of the Trump presidency we saw unprecedented turmoil. The two-times failed travel ban that was blown away by federal judges. A healthcare bill that couldn’t even convince Republicans. The ongoing allegations of connections of the Trump’s campaign-team with Russia. The avoidance of a handshake with Germany’s chancellor Angela Merkel in front of cameras during her White House visit. The absurd lies about President Obama wiretapping Trump Tower. The obscene Twitter-tirades on California’s former governor and Trump’s successor at „The Apprentice“, Arnold Schwarzenegger. The American President intervening in the fashion dealings of his daughter Ivanca with Nordstrom publicly. And many, many more incidents, scandals or bold pure stupidity. Upon this development meanwhile the most angry and frightened Europeans realize what might sound good during a campaign-trail („Build a wall“, „Ban Muslims“, „Make Healthcare much better and cheaper“, etc.) looks much different (and maybe a little bit more complicated) when the idea once touches reality and campaigners are asked to deliver.

‘Death of the French left’: why voters are hesitating over Macron -- Emmanuel Macron is widely expected to beat Marine Le Pen in the second round of the French presidential election. Political figures from the mainstream left and right have rallied behind him in order to block the far-right Front National candidate, who they warn is a danger to French democracy.  But the hard-left Jean-Luc Mélenchon, who won 19% of the first-round vote, has not taken a firm position or directed his followers which way to vote. What they decide to do will be crucial to the final tally for Macron, a pro-business economic liberal. Macron topped the first-round poll with 23.8%, but Eurosceptic candidates including Mélenchon made their strongest gains ever, winning more than 46% of the vote. Almost half of voters supported candidates who criticised free-market global capitalism. We asked left-leaning voters how they feel about the remaining two candidates, and whether they’ll back Macron. Here’s what they said.

Le Pen Names Nationalist As Prime Minister In Last Minute Bid To Boost Votes -- With one week to go until the runoff round in the French presidential elections, Marine Le Pen - materially lagging her rival Macron according to daily polls - on Saturday chose defeated first-round candidate Nicolas Dupont-Aignan as her prime minister, in a last-minute attempt to court his voters and help her defeat her opponent. "As President of the Republic I will name Nicolas Dupont-Aignan Prime Minister, supported by a presidential majority and united by the national interest," she told a news conference in Paris at which the two politicians sat together. "We will form a government of national unity that brings together people chosen for their competence and their love of France," Le Pen told a Paris news conference, sitting side-by-side with her choice for premie. According to Reuters, Dupont-Aignan is a nationalist whose protectionist economic policies are close to those of the National Front's Le Pen and who, like her, is urging a reduction in the powers of EU institutions. In the first round, Dupont-Aignan received 4.7%, or roughly 1.7 million votes, and on Friday announced that he was backing Le Pen for the decisive May 7 second round.

France’s Le Pen on offensive with vote a week away The Local. With a week to go before France's presidential election runoff, far-right candidate Marine Le Pen stayed on the offensive against frontrunner Emmanuel Macron on Sunday, trying to close a 19-point gap in the polls. After a surprise visit to a controversial aluminium plant in the southern town of Gardanne, the 48-year-old Le Pen went on to lay a wreath at a World War 2 monument in the nearby port of Marseille. Hours later, Macron, who if elected would become France's youngest president at 39, paid his respects at Paris's Holocaust memorial, where he was greeted by France's grand rabbi, Haim Korsia. Eurosceptic leftist Jean-Luc Melenchon, who crashed out of the race in the first round, meanwhile, urged his supporters not to vote for Le Pen, saying that would be a "terrible error". "I say to anyone who is listening: do not make the terrible error of voting for the National Front because you would push the country towards a general conflagration and the ending to which no-one can predict," he said on the TF1 television channel.Since qualifying for the May 7 runoff a week ago, Le Pen has made a series of targeted campaign stops in a bid to broaden her appeal. 'Suddenly' green In Gardanne on Sunday Le Pen vowed to pursue a vision of "true ecology", saying she wanted to "make the link between the choice of economic model and environmental and health problems." The plant, with a workforce of some 400, is controversial for dumping toxic waste known as "red mud" into the Mediterranean for decades. Last year, after the plant stepped up its filtering process, the outgoing Socialist government gave it an additional six years to achieve full compliance with EU norms.

How Le Pen could win - Politico — Marine Le Pen needs a perfect political storm to help her win the French presidency on Sunday.She aims to provoke it by kicking up rage at her centrist rival, discouraging leftists from voting and winning over millions of disappointed conservatives by convincing them that her plans for the European Union are less worrying than they might think.Le Pen knows that victory remains a long shot. Six days before the final vote,polls show her trailing rival Macron by 15 to 20 percentage points, a wider gap than the one separating Donald Trump from Hillary Clinton at this stage in the U.S. race. Le Pen needs to win over millions of new votes to win, a tough sell for a lifetime outsider. Most of the French don’t see it happening: just 15 percent see Le Pen as “la présidente,” according to an Ifop poll last week.Whatever the odds, Le Pen will fight hard until the last minute. But she is also hoping for a nod from fate. One major chance for Le Pen to change the race’s dynamic is a live debate Wednesday when she plans to “expose” her rival as a banker working against France. Here is a guide to Le Pen’s strategy for the final days.

Mayday, mayday, France’s anti-Le Pen front is splintering - France 24: Monday’s separate May Day rallies in Paris mirrored the divisions within France’s labour movement, where traditional hostility to Marine Le Pen’s far right is struggling to translate into support for her opponent, Emmanuel Macron. It wasn’t so long ago that more than a million people marched on Labour Day, under the joint banners of France’s leading trade unions, to call for a massive vote against Jean-Marie Le Pen. Fifteen years on, another Le Pen is once again in the second round of the presidential election, but the alliance against the far right is fractured. On Monday, France’s leading trade unions held separate rallies in the French capital, having failed to agree on a common stance ahead of Sunday’s presidential run-off. The division reflected the dilemma that has gripped much of the French left, torn between its ingrained opposition to the National Front and its deep suspicion of Macron.Veteran unionists Jeanne Bolon and Annette Hazanavicius were both part of the million-strong march in 2002. But this time their CFDT union had to surrender the iconic Place de la République to the rival CGT, and move further north at Jaurès metro station, named after the left-wing hero and pacifist who was murdered by a nationalist on the eve of World War I. Bolon blamed the rift between unions on “tensions within the CGT”. She suggested the leftist union was too scared to endorse Macron, fearing it would upset members who dislike the former economy minister and are tempted by Le Pen’s overtures to the working class.

Is There a Case for Le Pen? -- EVERY surge of right-wing populism confronts voters with a different dilemma. In the Brexit referendum, the risk was the policy, not the politicians. Voting to leave the European Union was not a vote to make Nigel Farage prime minister; it was a vote for a leap into the unknown, but one supervised by mainstream Tory leaders. In the case of Donald Trump, there was risk in the policy, but the central question was always about the candidate himself: about his fitness for the office, his ability to execute its basic duties, the effect that his demagogy and self-dealing would have on civic norms. In the case of Marine Le Pen — presently facing off against Emmanuel Macron, the John Lindsay of the Eurocrats, for the presidency of France — the main risk is her party. To elevate her to the presidency is to empower the National Front, an organization that despite years of renovation and attempted purges — extending to Le Pen’s own father, Jean-Marie — still includes figures like her successor (briefly; he just resigned) as its leader, who appears to have done the “I’m just asking questions” thing about the gas chambers. Parties matter, their histories and undercurrents matter, and the Front’s Vichy taint is a good reason to prefer a world where a Le Pen never occupies the Élysée Palace. At the same time, individual personalities and their policies also matter — and there the case for #NeverLePen seems weaker in important ways than the case for #NeverTrump. To begin with, nobody seriously doubts Le Pen’s competence, her command of policy, her ability to serve as president without turning the office into a reality-TV thunderdome. Trump’s inability to master his own turbulent emotions is not an issue with his Gallic counterpart. Nor is there much evidence that Le Pen herself draws any personal inspiration from the Vichy right. However incomplete the project, she is the reason that her party has ejected Vichyites and disavowed anti-Semitism and moved toward the French mainstream on many issues.

 French central bank chief warns against parallel currencies | Reuters: France's central bank governor warned on Thursday against introducing two parallel currencies as suggested by far right presidential candidate Marine Le Pen, saying it would undermine confidence. "I hear proposals for a dual currency with the return of a national currency in parallel to a European currency. I must say that such suggestions would put confidence in the currency in danger," said Francois Villeroy de Galhau. Speaking at a monetary policy conference at the Bank of France, he added that the European Central Bank (ECB) had not modified its sovereign debt purchase programme in relation to France's presidential election. National Front candidate Le Pen has said she wanted to replace the EU single currency with another, looser type of co-operation in the form of the ECU basket of currencies that preceded the euro. That would exist alongside a national currency, which she said she hoped the French people would have in their pockets within two years if she won power. Opinion polls put centrist candidate Emmanuel Macron as likely to beat Le Pen in the decisive May 7, run-off vote.

French Prosecutors Open Probe After Allegations Macron Hid Offshore Bank Account -- As reported overnight, documents leaked online appeared to show that French Presidential Candidate Emmanuel Macron entered into an operating agreement for a Limited Liability Company (LLC) in the Caribbean island of Nevis, and that the company may have had a business relationship with a bank which has been previously involved in tax evasion cases in the Cayman Islands. The anonymously released PDF files purported to show corporate records of a company named La Providence LLC apparently created by Mr. Macron in Nevis, a noted offshore tax haven. La Providence is the name of Mr. Macron’s high school in his hometown of Amiens.In April, the establishment's favorite candidate denied that he was concealing assets or hiding offshore accounts or inheritances from French authorities, even as his opponent Francois Fillion became mired in similar allegations. If confirmed as authentic, the documents would prove these claims to be untrue and provide important clues as to where the hidden funds might be located. It could also have an impact on this weekend's election.And since the alleged documents appear to have caused quite a stir in France, this morning French prosecutors opened a probe into what the WSJ said was "a suspected attempt to tar presidential candidate Emmanuel Macron" after Marine Le Pen’s suggestion during Wednesday night’s live TV debate which echoed the contents of the leaked documents, saying that Emmanuel Macron had a hidden offshore bank account in the Bahamas. Macron said her suggestion was "defamation" and Le Pen's remark prompted Macron to later issue a vigorous denial and file a co mplaint with prosecutors against unknown persons over "the spreading of false information" and for attempting to manipulate the election. Prosectors said they opened their investigation in response to Mr. Macron’s complaint.

Macron seen winning French presidential runoff with 62 percent of votes: Poll: Centrist French presidential candidate Emmanuel Macron extended his lead in the polls over his far-right rival Marine Le Pen on Friday, the final day of a tumultuous election campaign that has turned the country's politics upside down. The election is seen as the most important in France for decades with two diametrically opposed views of Europe and France's place in the world at stake. The National Front's Le Pen would close borders and quit the euro currency, while independent Macron, who has never held elected office, wants closer European cooperation and an open economy. The candidates of France's two mainstream parties were both eliminated in the first round on April chapters Polls give Macron commanding lead ahead of Sunday’s vote 7 Hours Ago | 02:23 According to an Elabe poll for BFM TV and L'Express, Macron will get 62 percent of the votes in the second round compared to 38 percent for Le Pen, an increase of three points for the centrist candidate compared to his projected score in the last Elabe poll. The showing is Macron's best in a voting survey by a major polling organisation since nine other candidates were eliminated in the first round on April 23. The survey was carried out after a rancorous final televised debate between the two contenders on Wednesday, which Macron was seen by French viewers as having won, according to two polls

ECB steps up bond buying in France and Italy before key votes | Reuters: The European Central Bank bought more French and Italian bonds than its own rules allow last month, which probably helped keep financial markets calm in the tense run-up to the first round of France's presidential vote. The ECB bought 11.3 billion euros of public-sector bonds from France and 9.8 billion euros from Italy last month through their national central banks, ECB data showed. In both cases, that is more than a billion euros above the amounts dictated by the ECB's own rules, which are roughly based on the size of each country's economy, according to Reuters calculations. Purchases of German bonds were in line with the country's quota in April after climbing well above it in March, leading some to speculate the ECB was having trouble finding eligible German debt to buy. An ECB spokesman said the ECB will continue to deviate from the so called 'capital key' to ensure a "smooth implementation" of the Public Sector Purchase Programme (PSPP). "While the relative shares of monthly PSPP purchases will also continue to be adjusted in the future, the direction of adjustments cannot be anticipated," the spokesman said. "These adjustments reflect the programme’s inbuilt flexibility and our commitment to market neutrality with the aim of a continued smooth implementation of the PSPP." The ECB's 2.3 trillion-euro ($2.51 trillion) bond-buying scheme has been widely credited for supporting markets in the face of political uncertainty.

France starts probing ‘massive’ hack of emails and documents reported by Macron campaign -- The French campaign watchdog on Saturday began investigating the “massive and coordinated piracy action” that presidential candidate Emmanuel Macron reported just minutes before the official end of campaigning in the most heated election for the presidency that France has seen in decades. Late Friday, the Macron campaign said in a statement that it had been the victim of a major hacking operation that saw thousands of emails and other internal communications dumped into the public domain. At the end of a high-stakes race, the news quickly stoked fears of a targeted operation meant to destabilize the electoral process, especially after reports of Russian hacking in the U.S. presidential election. Macron, an independent centrist, is facing off against the far-right populist ­and National Front leader Marine Le Pen, who for years has benefitted from considerable Russian financial support and from favorable coverage in state-run Russian media. Voters are set to decide Sunday which candidate becomes France’s next president. “Intervening in the last hour of the official campaign, this operation is obviously a democratic destabilization, as has already been seen in the United States during the last presidential campaign,” the Macron campaign said. It was not immediately clear who was being blamed for the hacking, which the campaign said had led to the leaking of documents via social media networks. The campaign could not be reached for further comment late Friday.

ISIS Calls On "Muslims In France" To Launch Election Day Attacks - ISIS has called upon Muslims in France to "kill candidates" and "burn down polling stations" as the country prepares to vote in the second round of the presidential election this weekend.An article appearing in the French edition of the terror group’s monthly propaganda magazine “Rumiyah” addresses all Muslims in France stating: “Don't forget your duty as a Muslim. Choose a candidate to kill & polling station to burn.”Likening Western democracies to '?âghût' or idol worship, the Islamic State advises supporters to instead put their faith in Allah over a ‘false deity’ and not vote in this weekend’s crucial runoff between Centrist candidate Emmanuel Macron and his rival, Right-wing candidate Marine Le Pen in which Macron is widely expected to emerge the winner.Addressing the option of voting for one candidate over the other as the ‘lesser of the two evils’ (presumably a reference to Macron), the writer rejects the argument, because both candidates are '?âghût' or idolaters.Instead, the article advises supporters to not stand idly on the sidelines but instead to destroy ‘idolatrous’ voting booths, calling them “places of shirk” or sin.Seeking to draw inspiration from history, the writer references the Biblical Prophet Ibrahim (Abraham) who destroyed the idols of his father’s household.“Our father Ibrâhîm was thrown into the fire by his people after having destroyed and denigrated their idols,” notes the author, before concluding with a chilling message “Burn these places of shirk (sin), kill the candidates, the voters and the polling station staff. Spare no disbelievers.”

Pledging more austerity, Greece cuts deal with lenders | Reuters: Promising to cut pensions and give taxpayers fewer breaks, Greece has paved the way for the disbursement of further rescue funds from international lenders and possibly opened the door to reworking its massive debt. Officials from both sides reached agreement early on Tuesday on a package of bailout-mandated reforms, ending six months of staff-level haggling. Greek Finance Minister Euclid Tsakalotos announced it with a term associated with papal elections. "There was white smoke," he told reporters. Greece now needs to legislate the new measures, which also include opening up the energy market to competition. That vote is expected on May 16. Euro zone finance ministers would then discuss the disbursement of loans at the next scheduled Eurogroup meeting on May 22. Athens needs the funds urgently to repay 7.5 billion euro ($8.18 billion) in debt maturing in July. The Greek government is confident the measures will pass parliament, even though the main opposition party, New Democracy, said it would not support the deal. The government coalition has a small but firm majority. Spokesman Dimitris Tzanakopoulos said Athens now wants a "comprehensive" deal with its lenders on May 22 or a few days afterwards, including on medium-term debt relief. It was not clear whether the euro zone shared that deadline for the debt-relief portion, but it has in the past pledged to begin talks if various criteria are met.  Germany, one of the main lenders and a hard-liner in forcing Greek reforms, would only say that the deal was a step forward and that work was not yet complete.

Greece Agrees to Tighten Belt Again in Return for Further Bailout Funds— Greece and its international creditors said on Tuesday that they had reached a preliminary deal allowing the country to receive crucial bailout payments in exchange for promises to raise taxes and to further cut pensions and social spending. The agreement — the culmination of months of talks — paves the way for the transfer of more than 7 billion euros, or about $7.6 billion, of emergency funds to Athens. It also comes before a series of elections in France, Britain and Germany in the coming days and months, with European officials eager to avoid giving fuel to far-right parties. Under the terms of the agreement, which is subject to the approval of eurozone finance ministers and the Greek Parliament, Athens will make changes to its labor and energy markets, cut pension payouts, and increase taxes. The deal was a prerequisite for talks on easing Greece’s enormous debt burden, which is about €300 billion. The issue is a point of contention between the International Monetary Fund, which advocates debt relief for the country, and European Union members, notably Germany, which have taken a harder line against Athens. “There was white smoke,” Euclid Tsakalotos, the country’s finance minister, told reporters after 12 hours of talks in the Greek capital, alluding to the method the Vatican uses to signal when a new pope has been selected. “The negotiation has finished.” The talks focused on economic overhauls including further pensions cuts, tax increases and changes to the labor market. But they stalled at times as a result of disagreements between European officials and the International Monetary Fund over Greece’s economic prospects and its ability to meet budget targets. As part of the deal announced on Tuesday, Athens agreed to raise the equivalent of 2 percent of gross domestic product by cutting pensions further in 2019, and increasing tax receipts by reducing the income threshold at which taxes must be paid. Yielding to creditors’ demands to make the labor market more competitive, the deal also makes it easier for businesses to fire employees. 

Greece agrees bailout reforms deal with creditors – FT - Greece has wrapped up a deal with creditors on details of reforms to unlock the next disbursement from its €86bn bailout programme. The deal covers a wide range of fiscal and structural measures, from fresh cuts in pensions to liberalising Sunday trading. It cheered markets and potentially opens the door to talks on debt relief for Greece. Pierre Moscovici, the EU economics commissioner, suggested on Tuesday that progress was possible, saying the time had come to turn the page on “this long and difficult austerity chapter” for Greeks. “It is now for all partners to reach an understanding on the question of Greece’s debt in the coming weeks,” Mr Moscovici said. However, debt relief remains a divisive issue among the country’s creditors. Germany, the biggest European contributor to three Greek bailouts since 2010, insists the International Monetary Fund must be part of the programme but is hostile to the idea of a haircut on Greece’s debt. The IMF insists that it needs an agreement on debt relief for Greece before it can join the bailout, saying the country’s debt burden is unsustainable. The IMF last year compromised by agreeing that the final details and any actual debt relief could wait until the end of the bailout. But it wants a firm agreement on what form that debt relief will take and some tangible targets and is under pressure from its non-European shareholders to hold the line. “We need to assure our board . . . that we have a common understanding with our European partners of what kind of measures will be needed to deliver that debt relief,” Poul Thomsen, the head of the IMF’s European department, told reporters. “That is the discussion that we will have now.” Tuesday’s agreement follows months of wrangling between Greek finance ministry officials and bailout monitors from the EU and the IMF. “We have an agreement . . . There are some points that we’re happy with and others that we’re not so keen on,” said Euclid Tsakalotos, the Greek finance minister.

Survey Shows A Majority Of European Youth Would Participate In Uprising To Overthrow Status Quo- I see Trump as a fake populist. That said, there’s another ascendant populist movement happening on the other side of the ideological spectrum, and I expect it to take hold as the preeminent U.S. political force going forward.  The likely catalyst for this alternative populist vision to take hold will be a failure of Trumpisms to help average Americans improve their everyday lives. Although progressive populism is still somewhat nascent, it is quite popular amongst the youth, and will likely become increasingly so as issues of student debt and healthcare costs begin to dominate the conversation far more than they do today. The Bernie Sanders movement was merely a tremor in a much larger earthquake likely to sweep across the land in the years ahead.This sort of movement is precisely the sort which will cause the type of “revolution in politics” Mr. Grantham considers unexpected. Not only do I expect it, I think it might be much closer to affecting policy than he thinks (I think 2020-2030 could be dominated by this sort of politics). Moving along to the title of this post, disillusionment and despair are even father along the spectrum in parts of Europe than in the U.S., which can be evidenced by the following excerpts from Quartz:Around 580,000 respondents in 35 countries were asked the question: Would you actively participate in large-scale uprising against the generation in power if it happened in the next days or months? More than half of 18- to 34-year-olds said yes. The question was part of a European Union-sponsored survey, titled “Generation What?” The report went on to focus on respondents from 13 countries to better understand what young people are optimistic and frustrated about in Europe. Among these spotlighted countries, young people in Greece were particularly interested in joining a large-scale uprising against their government, with 67% answering yes to the question. Respondents in Greece were also more likely to believe politicians were corrupt and to have negative perceptions of the country’s financial sector. While some observers are hoping that the defeat of Geert Wilders in the Netherlands and the expected loss of Le Pen in France will herald the beginning of the end for populist momentum in the Western world, I have bad news for you. Not only will populism stay ascendant, we are merely in the very early stages of this ongoing political earthquake. I do not expect this trend to go away until the economic future for average citizens (especially the youth) starts to improve materially.

EU Seeks to Ward Off New Refugee Crisis  -- During a meeting with senior security officials in the Reichstag, Germany's parliament building, a week ago, Angela Merkel didn't mince words. While praising the Schengen zone for the border-free travel it has granted Europeans, the German chancellor also said that it could only work if the European Union's external borders were adequately protected. Schengen, she said, means that Germany's neighbors are no longer Austria or Poland, but Russia, Turkey and Libya. The 2015 refugee crisis, Merkel said, taught us "fundamental lessons," such as the fact that EU external border protection wasn't good enough. The situation has since improved dramatically, Merkel said, "but we haven't yet achieved everything that we need." The chancellor, unfortunately, is correct. Merkel has promised that the refugee crisis seen two years ago will not be repeated: Never again will Europe see an uncontrolled inflow of millions of people. The refugee deal with Turkey is working, we are repeatedly told, and the crisis is over. That, though, could turn out to be wrong. With German voters set to go to the polls on Sept. 24, Merkel's re-election campaign hinges on there not being a repeat of the refugee crisis, even if it's not as substantial as the 2015 influx. But west of the closed Balkan route, a new migrant stream has been growing since the beginning of the year. From Jan. 1 to April 23, 36,851 migrants have followed the central Mediterranean route from North Africa to Italy. That represents a 45 percent increase over the same period last year, when a record 181,000 people crossed the Mediterranean on the route. "The situation is worrisome," says Izabella Cooper, spokeswoman for the European border control agency Frontex.

Jean-Claude Juncker says Theresa May is ‘deluded’ in scathing call with Angela Merkel after Brexit talks Theresa May has dismissed reports of a fractious Downing Street meeting with Jean-Claude Juncker in Downing Street as "Brussels gossip" after claims of a bitter fall out. A German newspaper reported that after a dinner on Wednesday evening Mr Juncker accused Mrs May of being "deluded" and said it was "more likely than not" that Brexit talks would fail. According to the German newspaper Frankfurter Allgemeine Sonntagszeitung reported Mr Juncker told Mrs May "I'm leaving Downing Street 10 times more sceptical than I was before.” He reportedly claimed during the meeting that Brexit "cannot be a success" and threatened to end talks without a trade deal if Britain refuses to pay a "divorce" bill. However Mrs May said on Monday: "I have to say that from what I've seen of this account I think it's Brussels gossip. And just look at what the European Commission themselves said immediately after the dinner took place, which was that the talks had been constructive. "But it also shows that actually at times these negotiations are going to be tough. And in order to get the best deal for Britain we need to ensure we've got strong and stable leadership going into these negotiations. "As I say, every vote for me and my team will strengthen my hand in those negotiations. And when it comes to June the 8th, people have a clear choice. There'll be 27 European countries on one side of the table. Who do they want to see standing up for Britain on the other side of the table - me, or Jeremy Corbyn?"

EU calls May’s Brexit stance ‘completely unreal’ FT European leaders are warning Theresa May over her “completely unreal” expectations of a swift trade deal, as they gathered in Brussels to agree a tough opening stance on Brexit talks. After sitting down for lunch on Saturday, European leaders took just a few minutes to adopt their formal guidelines for Brexit talks, prompting spontaneous applause around the table. Relishing the show of unity, Jean-Claude Juncker joked it was “the first and last time” the bloc would take a decision so quickly. Donald Tusk, the European Council president, noted it was an unprecedented sign of common resolve at one of the most important summits of his “political life”. The confident mood belied increasing concern over the negotiating divide with London. Mr Juncker briefed an EU summit on Saturday on a recent dinner where the British prime minister said any Brexit payment would only be possible if tied to a full trade deal agreed before 2019. Her demands for a fully fledged agreement at unprecedented speed have alarmed some EU leaders, who had interpreted Mrs May’s letter starting the Article 50 process as only expecting a more preliminary deal on the “future framework” by the point of Brexit. These foresee no prospect of a trade deal with Britain before 2019 and lay down a “phased approach”, requiring progress on financial liabilities and citizen rights before talks on the shape of future relations can begin.

Revealed: How EU has been secretly plotting to block Theresa May over EU migrants for weeks - The EU has been plotting for weeks to thwart Theresa May’s plans to secure a deal for British expats in Europe and migrants in the UK, The Daily Telegraph has learnt. Jean-Claude Juncker, the European Commission president, is reported to have been “astonished” by Mrs May’s demand that an agreement be reached by the end of next month. But documents seen by this newspaper disclose that Mrs May made exactly the same demand to Donald Tusk, the European Council president, at a meeting three weeks earlier.  The EU had privately decided to block any deal, leaked documents show, but did not want to reveal such a move publicly.EU leaders were accused of playing a “stupid game” and being more concerned about securing a financial deal than securing the rights of EU and British citizens. The negotiating strategy emerged after a German newspaper reported leaked details of last week’s meeting between Mr Juncker and Mrs May. Mr Juncker is said to have left Downing Street saying he felt “10 times more sceptical” about a deal than before, and to have told Angela Merkel that the Prime Minister was “deluded”.

Brexit Negotiations: Why Bother? - Mish - I keep asking the same question on Brexit and keep coming up with the same answer: Why bother? There is absolutely no reason the UK should start a negotiation given the repeated EU demands. Once again, on Thursday, German Chancellor Angela Merkel repeated the EU’s “not reversible” position.  Please consider German Chancellor Rules Out Talk of Future EU-UK Relationship Before Clarified Brexit Conditions. In a statement to German federal parliament on Thursday, German Chancellor Angela Merkel said she supported the EU’s proposed line of negotiations to not address future rela