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

Saturday, October 22, 2016

week ending Oct 22

Fed's Yellen says 'high-pressure' policy may be only way back from crisis | Reuters: The Federal Reserve may need to run a "high-pressure economy" to reverse damage from the 2008-2009 crisis that depressed output, sidelined workers, and risks becoming a permanent scar, Fed Chair Janet Yellen said on Friday in a broad review of where the recovery may still fall short. Though not addressing interest rates or immediate policy concerns directly, Yellen laid out the deepening concern at the Fed that U.S. economic potential is slipping and aggressive steps may be needed to rebuild it. Yellen, in a lunch address to a conference of policymakers and top academics in Boston, said the question was whether that damage can be undone "by temporarily running a 'high-pressure economy,' with robust aggregate demand and a tight labor market." "One can certainly identify plausible ways in which this might occur," she said. Looking for policies that would lower unemployment further and boost consumption, even at the risk of higher inflation, could convince businesses to invest, improve confidence, and bring even more workers into the economy. Yellen's comments, while posed as questions that need more research, still add an important voice to an intensifying debate within the Fed over whether economic growth is close enough to normal to need steady interest rate increases, or whether it remains subpar and scarred, a theory pressed by Harvard economist and former U.S. Treasury Secretary, Lawrence Summers, among others.

Fed Watch: Are Yellen and Fischer Really Worlds Apart? -   This from Bloomberg surprised me: Michael Gapen, chief U.S. economist at Barclays Plc in New York, said Fischer’s comments “reflect an ongoing divergence of opinion” at the central bank. Fischer “doesn’t see much room for running the economy hot” while Yellen’s views “seem to provide a wide-open door to do that. You have a chair and a vice chair who see policy differently right now,” he said. I don't think there exists a yawning gap between Federal Reserve Vice-Chair Fischer and Federal Reserve Vice Chair Yellen. The perception of this gap stems in part from what I think was an aggressive reading of Yellen's speech last week. The line in question:If we assume that hysteresis is in fact present to some degree after deep recessions, the natural next question is to ask whether it might be possible to reverse these adverse supply-side effects by temporarily running a "high-pressure economy," with robust aggregate demand and a tight labor market.Is this a call for a "high-pressure economy"? My interpretation is somewhat more muted. Note that this was posed as a potential research question, along with three others, that macroeconomists should pursue in the wake of the Great Recession:  She does not actually say that the Fed should run a high pressure economy. Nor should this be seen as a defense of current policy because this is decidedly not a high pressure economy. Instead, Yellen argues we need more research on the topic to understand the costs and benefits of such a policy approach: More research is needed, however, to better understand the influence of movements in aggregate demand on aggregate supply. From a policy perspective, we of course need to bear in mind that an accommodative monetary stance, if maintained too long, could have costs that exceed the benefits by increasing the risk of financial instability or undermining price stability. More generally, the benefits and potential costs of pursuing such a strategy remain hard to quantify, and other policies might be better suited to address damage to the supply side of the economy.  Now, to be sure, she is willing to delay rate hikes to explore the possibility of drawing more supply from the labor market. 

 9 Regional Feds Ask For Rate-Hike - Same As Prior To Last December's Hike -- While the probability of a November rate-hike has collapsed to just 8.5% (as Dec holda round 65%) it appears regional Federal Reserves have a very different perspective of when Janet should hike. Nine of the Fed’s 12 regional banks sought a quarter-point increase in the discount rate in September, up from eight in August, based on minutes of their board meetings published by Fed. This is the same number as right before the December hike in 2015. As Bloomberg reports, The Atlanta Fed joined the calls for an increase in the discount rate, pushing the number of regional banks asking for a hike to its highest since December 2015. That month was the last time the Fed raised the federal funds rate, a separate interest rate that is its primary policy tool. Discount rate votes can be viewed as a signal of whether a bank’s president favors a change in the main rate. Atlanta joined banks seeking a 1.25% rate. Other banks supporting the hike were Boston, Cleveland, Dallas, Kansas City, Philadelphia, Richmond, St. Louis and San Francisco: Chicago, Minneapolis, New York wanted no change

 Large Scale Central Bank Asset Purchases, Versus Supply -- In earlier posts, Emma Smith and I added up central bank purchases of G-4 government bonds. This includes emerging market, Japanese and Swiss purchases for reserve accumulation and purchases by the Fed, Bank of Japan, European Central Bank and Bank of England during periods of quantitative easing (QE).In this post we compare our estimates of official demand for U.S., Japanese and European bonds with changes in the supply of safe assets—that is, purchases by central banks relative to net new issuance of government bonds.If central bank demand for a particular asset is lower than net new issuance, then private sector holdings of government bonds continue to grow but at a slower pace than would otherwise be the case. And if central bank demand for a particular asset exceeds net supply, then private sector investors—such as banks and pension funds—have to reduce their holdings of safe assets, and move into alternative assets.This is how the portfolio re-balancing transmission channel of asset purchases works: private investors sell to the central bank and are forced to find new places to park their money. Conceptually, it should not matter much if the central bank buying say U.S. assets is the People’s Bank of China or the Fed, at least so long as both are expected to hold on to their purchases for a long-time. When either buys, it reduces the stock of assets in private hands and forces investors to shift into other assets. Central bank asset purchases aren’t limited to government bonds of course, but, to simplify things, we limited our analysis to new issuance of government bonds. We know this over-simplifies. For example, a lot of “official” demand has gone into Agencies. Before the global crisis Agencies were a favorite of reserve managers globally. But adding in the Agencies to net supply takes a bit (ok, a lot) more work. The Fed also bought Agencies, but Fed holdings of Agencies and Treasuries are reported separately on their balance sheet. The numbers below only count the Fed’s Treasury portfolio.

What the Fed Really Needs to Know - Narayana Kocherlakota - The U.S. Federal Reserve faces a tough task in figuring out how best to respond to a highly unusual economic recovery. As chair Janet Yellen noted in a recent speech, it could use some help from academia. So what key questions should researchers be trying to answer? Let's start with what the Fed got right. Internal documents from 2009 and 2010 (now public) reveal that policy makers were largely aiming to return the unemployment rate to 5 percent by the end of 2015 (from nearly 10 percent at the end of 2010). The Fed’s staff expected that this would be associated with inflation rising slowly from near 1 percent to only about 1.5 percent by the end of 2015, before returning to the central bank's 2 percent target at some point thereafter. In terms of unemployment and inflation, the Fed basically got the recovery it wanted: The unemployment rate has been close to 5 percent for the past year, and the Fed’s preferred measure of inflationary pressures is at 1.7 percent. The Fed was surprised by two aspects of the recovery. The first is that it provided, and continues to provide, a lot more monetary stimulus -- in the form of low interest rates and asset purchases -- than it expected back in 2010. As Fed vice-chair Stan Fischer described in a recent speech, economists have yet to understand why, but that mystery hasn’t prevented the central bank from achieving its desired unemployment and inflation objectives. The second surprise is much more troubling: Growth over the past six or seven years has been much slower than the Fed expected. It’s important to emphasize that the slow growth doesn’t mean that monetary policy hasn't worked: Like I said, the Fed has met its inflation and unemployment objectives. What's strange is that success in achieving those goals has been associated with such slow growth. I’ve heard (at least) three explanations. One, preferred by most academics, is that demographic and technological changes -- which started before the 2008 financial crisis -- took the Fed by surprise. Another possibility, highlighted in Yellen's speech, is that the recovery engineered by the Fed was so slow that it did (possibly reversible) damage to the supply side -- for example, as long-term unemployment eroded the skills and motivation of workers. A third, popular among financial market participants, is that the Fed’s easy-money policies have stunted growth by encouraging people to make bad investments. I lean toward the second explanation. But I feel much more confident in saying that solving the growth conundrum should be a priority for researchers. In deciding what to do about a decidedly lackluster economy, the Fed needs the best evidence and thinking that it can get.

The Fed Has Made Another Massive Policy Error - John Mauldin - I would argue that the Great Recession was a result of a massive monetary policy error. The Fed kept rates too low for too long, which—when coupled with lax or no regulation in the mortgage markets—resulted in a housing bubble and a crash. This then bled over to global markets.I believe we are again suffering the effects of a massive monetary policy error. The error has already been committed, but we have just begun to endure the consequences. We are still living in a dream, but we’re nervous, much like we were in 2006. The Federal Reserve has repeated the mistakes of the last cycle. They have kept rates too low for too long. But this time, they’ve outdone themselves by clinging to the zero bound. In doing so, they have financialized the economy and made it hypersensitive to interest rate moves.Ben Bernanke made a big mistake by opting for QE 3. Arguably, if he had begun to normalize rates rather than create a “third mandate” for the Federal Reserve to support stock market prices during and after QE 3, we would not be in the situation we are in today. A situation where the very hint of normalizing rates sends the markets into a frenzy.Bernanke should have looked the stock market straight in the eye during the Taper Tantrum, summoned his inner Paul Volcker, and told the market, “I am not responsible for stock market prices.” The markets probably would have suffered a rather quick, sharp correction and moved on. And it might not even have been much of a correction. Markets often correct, as they did in 1987 or 1998, without becoming lasting bear markets if there is not a recession.

 Key Measures Show Inflation close to 2% in September -- The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning: According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.1% annualized rate) in September. The 16% trimmed-mean Consumer Price Index also rose 0.2% (2.1% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.  Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.3% (3.6% annualized rate) in September. The CPI less food and energy rose 0.1% (1.4% annualized rate) on a seasonally adjusted basis.  Note: The Cleveland Fed has the median CPI details for September here. Motor fuel was up 94% annualized in September!

US Real M0 Money Supply Contracts By The Most In 68 Years -- In a sign that the Federal Reserve is still on track to raise interest rates, real (inflation-adjusted) M0 money supply declined 8.8% in September vs. the year-earlier level—the steepest annual slide since 1948, based on monthly data.Red ink for the annual trend in real M0, also known as the monetary base and high-powered money, has persisted in every monthly update this year to date save February. Taken at face value, that’s an ominous sign for the business cycle, although the outlook may be different this time.  Historically, negative year-over-year changes for real M0 have been accompanied by recessions, including the 2008-2009 downturn. As the central bank tightens monetary policy, economic growth suffers. The question is whether the analysis applies this time?  One reason for thinking that the negative M0 trend isn’t the high-risk event that it has been in the past is the extraordinarily high growth rate for high-powered money that’s prevailed in recent years. In other words, the Fed is in the process of mopping up a degree of the excess liquidity that been pumped into the system as the economy has returned to something approximating normality. As a result, the negative trend in M0 this year—the longest consecutive run of red ink since 2007, which preceded the Great Recession—may not be a prelude to a new downturn this time, at least not for the immediate future. Why? Because negative M0 growth in the current climate still leaves a relatively high amount of liquidity in the system in the wake of the Fed’s unusually aggressive monetary policy in recent years.  That, at least, is the optimistic spin on interpreting the recent M0 data. The alternative narrative is that the contraction in the monetary base is a) premature as a policy decision; b) laying the groundwork for the next recession.

The Cashless Society Is a Creepy Fantasy -- It’s fun to imagine a world without cash. Liberated from the burden of physical currency, consumers could make purchases from the convenience of a mobile device. Every transaction would come equipped with fraud protection, reward points and a digital record of its time and location. Comprehensive tracking could help the Internal Revenue Service reclaim billions of tax dollars lost to unreported income, like the $80 I made selling a used refrigerator on Craigslist. Drug dealers, helpless without an anonymous medium of exchange, would acquire wholesome professions. El Chapo might become a claims adjuster. Such is the utopia recently described by Nathan Heller in the New Yorker and by a former chief economist of the International Monetary Fund, Kenneth Rogoff, in a new book, "The Curse of Cash." But this universe is missing one of the fundamental aspects of human civilization. A world without cash is a world without money. Money belongs to its current holder. It doesn’t matter if a banknote was lost or stolen at some point in the past. Money is current; that’s why it’s called currency! A bank deposit, however, grants custody of money to the bank. An account balance is not actually money, but a claim on money. This is an important distinction. A claim is only as good as its enforceability, and in a cashless society every transaction must pass through a financial gatekeeper. Banks, being private institutions, have the right to refuse transactions at their discretion. We can’t expect every payment to be given due process. This means that politically unpopular organizations could easily be deprived of economic access. Past attempts to curb money laundering have already inadvertently cut off financial services for legitimate individuals, businesses, and charities. The removal of paper currency would undoubtedly leave similar collateral damage.

 Fed's Beige Book: "Most Districts indicated a modest or moderate pace of expansion" --  Fed's Beige Book "Prepared at the Federal Reserve Bank of Dallas based on information collected on or before October 7, 2016. "  Reports from the twelve Federal Reserve Districts suggest national economic activity continued to expand during the reporting period from late August to early October. Most Districts indicated a modest or moderate pace of expansion; however, the New York District reported no change in overall activity. Compared with the previous report, the pace of growth improved in the St. Louis, Kansas City, and Dallas Districts. Outlooks were mostly positive, with growth expected to continue at a slight to moderate pace in several Districts. Labor market conditions remained tight, with modest employment and wage growth noted over the reporting period. Most Districts characterized input costs and/or output prices as fairly flat, but prices increased slightly on net.  Residential real estate activity expanded in most Districts since the prior report, and contacts in a few Districts expressed optimism about future growth. Homes sales fell markedly in the Kansas City District, while slight to moderate gains were reported by most of the other Districts. Demand for lower-priced homes was solid in Districts that commented on it, while sales of higher-priced homes slowed in the New York, Chicago, and Dallas Districts, and in Alaska according to San Francisco's report. Home inventories were generally reported to be low or declining and were restraining sales growth according to the Boston, Philadelphia, and Minneapolis Districts. Home prices continued to rise at a modest pace across much of the country, which contacts in some Districts attributed to tight inventories and labor constraints. Commercial real estate leasing activity generally improved, and outlooks were mostly optimistic, although contacts in a few Districts expressed concern about economic uncertainty surrounding the upcoming presidential elections. Commercial rents were flat to up, and vacancy rates were generally low and/or declined in reporting Districts, except in the Houston metro area where office vacancies increased further.

Conference Board Leading Economic Index Increased in September -- The Latest Conference Board Leading Economic Index (LEI) for September increased 0.2 percent to 124.4 from August's 124.1. The latest indicator value came in at the month-over-month percent forecast by Investing.com. Here is an overview from the LEI technical press release:  The Conference Board LEI for the U.S. increased in September, after declining in August. Large positive contributions from building permits, the yield spread and average initial claims for unemployment insurance (inverted) fueled September’s gain. In the six-month period ending September 2016, the leading economic index increased 1.1 percent (about a 2.3 percent annual rate), much faster than its growth of 0.3 percent (about a 0.7 percent annual rate) during the previous six months. In addition, the strengths among the leading indicators remain slightly more widespread than the weaknesses. [Full notes in PDF] Here is a log-scale chart of the LEI series with documented recessions as identified by the NBER. The use of a log scale gives us a better sense of the relative sizes of peaks and troughs than a more conventional linear scale.

Q3 GDP Forecasts -- The advance GDP report for Q3 GDP will be released next Friday. The consensus is real GDP increased at a 2.5% Seasonally Adjusted Annual Rate in Q3. From the Altanta Fed: GDPNow The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 2.0 percent on October 19, up from 1.9 percent on October 14.  From the NY Fed Nowcasting Report The FRBNY Staff Nowcast stands at 2.2% for 2016:Q3 and 1.4% for 2016:Q4. From Merrill Lynch:  We expect the first estimate of 3Q GDP to show growth of 2.5% qoq saar, an improvement from the 1.4% pace in 2Q and 0.8% gain in 1Q. Although consumer spending is expected to slow from the strong 4.3% increase in 2Q, we still expect a solid 2.6% increase in 3Q, owing to strong auto sales.CR Note: Looks like real GDP growth  was around 2.0% to 2.5% in Q3.

 Summers Urges U.S. to Spend 1% of GDP Annually on Infrastructure - Bloomberg: Former U.S. Treasury Secretary Lawrence Summers called for a $2.5 trillion infrastructure investment program over 10 years to energize the American economy and help it exit from “secular stagnation.” Speaking to a Sydney conference via live video on Tuesday, Summers cited one of his favorite examples in reiterating his call for new U.S. infrastructure. He got a large show of hands after asking how many in the Australian audience had been to New York’s Kennedy airport. He then asked how many thought the U.S. should be “really proud” of that airport as a gateway to America’s greatest city. The response: no hands, and a lot of laughter. “It is a no-brainer,” Summers said. “Because of what it means for job creation and demand in the short run; because of what it means for economic capacity in the medium run; because of what the growth means for the financial health of the government.” He highlighted historically low funding costs, "very low" materials costs and the employment needs of non-college-educated males in his call. Asked what it would take to get out of secular stagnation, where trend economic growth rates have been reduced, Summers nominated 1 percent of gross domestic product a year for a decade as "a reasonable target to do something substantial with infrastructure investment” that would have a meaningful impact. He said he didn’t think it would be a problem for the country’s fiscal health, representing “about $2.5 trillion over 10 years.” “Infrastructure investment as a share of GDP is lower than it’s been any time since 1947, and if you look at federal infrastructure investment, net of depreciation, net investment, it is rounded to the nearest integer: equal to zero,” he said.

China Holdings of U.S. Treasuries Drop to Almost Four-Year Low -- China’s holdings of U.S. Treasuries fell to the lowest level since November 2012, as the world’s second-largest economy draws down its foreign reserves to prop up the yuan. The biggest foreign holder of U.S. government debt had $1.19 trillion in bonds, notes and bills in August, down $33.7 billion from the prior month, the biggest drop since 2013, according to U.S. Treasury Department data released Tuesday in Washington and previous figures compiled by Bloomberg. The portfolio of Japan, the largest holder after China, fell for the first time in three months, down $10.6 billion to $1.14 trillion. Saudi Arabia’s holdings of Treasuries declined for a seventh straight month, to $93 billion. China sold an estimated $570 billion in foreign-exchange assets from August 2015 to August 2016 in an effort to keep the currency from plunging, according to an estimate by the U.S. Treasury released last week. It reiterated that China’s efforts to support the yuan were preventing a rapid depreciation that would hurt the global economy. China’s foreign-exchange reserves fell $16 billion to $3.19 trillion in August, and are down from a peak of close to $4 trillion in 2014. The reserves dropped another $19 billion in September to the lowest level since 2011. The report, which also contains data on international capital flows, showed net foreign buying of long-term securities totaling $48.3 billion in August. It showed a total cross-border inflow, including short-term securities such as Treasury bills and stock swaps, of $73.8 billion.

 Is the Federal Budget Deficit an Urgent Problem? -- The starting premise of the federal budget discussion during the final presidential debate was the idea from moderator Chris Wallace that deficits and government debt are urgent and ignored problems.  But some economists aren’t sold on the primacy of deficit reduction as a national goal when interest rates are historically low and show little sign of increasing.  Economists typically think the harm from budget deficits comes from “crowding out,” the idea that government debt soaks up investors’ funds that would otherwise be used for private investment, driving up interest rates.  With companies holding onto piles of cash, concerns about crowding out look off the mark, said Louise Sheiner of the Brookings Institution. In a paper with Doug Elmendorf, who headed the Congressional Budget Office from 2009 until 2015, they argued any boost in spending or tax cuts should go toward policies that raise slumping labor productivity to lift economic growth.“It was a reasonable bet five years ago that interest rates would rise a fair bit as the economy recovered. That has turned out to be wrong. We should take this new information seriously,” Mr. Elmendorf said. “This is a quite clear pattern now—in this country and around the world—that rates will be quite low for an extended period. That’s different from any previous point in my professional life.” The debates’ emphasis on deficits is “kind of out of touch with reality,” said Dean Baker of the liberal Center for Economic and Policy Research. “There are definitely limits. All I’m saying is we’re very far from those limits now.”

Russia Slams "Unprecedented, Insolent" US Cyber Threats, Vows Retaliation - In a striking report released on Friday night by NBC, the Obama administration was reportedly "contemplating an unprecedented cyber covert action" (it remains unclear how the action is covert if Biden announced it to the world via an interview with Chuck Todd), a "wide-ranging clandestine cyber operation designed to harass and "embarrass" the Kremlin leadership", in retaliation for alleged interference in the American presidential election, and has asked the CIA to draft plans for a "wide-ranging "clandestine" cyber operation designed to harass and "embarrass" the Kremlin leadership." As we reported last night, Vice President Joe Biden said that Washington is ready to respond to hack attacks allegedly conducted by Russia and designed to interfere with the upcoming US elections."Why haven’t we sent a message yet to Putin,” Chuck Todd, host of the “Meet the Press” show on NBC, asked Joe Biden.“We are sending a message [to Putin]… We have a capacity to do it, and…”"He’ll known it?” Todd interfered.“He’ll know it. It will be at the time of our choosing, and under the circumstances that will have the greatest impact,” the US vice president replied.The NBC sources did not elaborate on the exact measures the CIA was considering, but said the agency had already begun opening cyber doors, selecting targets and making other preparations for an operation. "Former intelligence officers told NBC News that the agency had gathered reams of documents that could expose unsavory tactics by Russian President Vladimir Putin", NBC added.

We’re Not in a New Cold War – It’s Far Worse -- naked capitalism Yves here. Readers have been discussing escalating tensions with Russia actively in the comments section. This Real News Network interview provides a sobering assessment of where things stand.  (video & transcript) In the past two weeks relations between Russia and the United States have dramatically deteriorated. First the US broke off talks with Russia over cessation of hostilities in the bombing campaign in Aleppo in Syria. Russia then disengaged from a critical nuclear armament negotiations related to a treaty that had been in place since 2000 as a part of a post-Cold War disarmament framework. Now more recently, White House Press Secretary Josh Ernest said that US is considering a response to alleged Russian hacking of US political groups such as the DNC. Here’s a clip of John Kerry, Secretary of State, alleging that Russia has been engaged in war crimes in Syria, truly escalating things.

Did Hillary Expose Nuclear National Secret In Last Night's Debate? -- Hillary's comments in last night's debate about nuclear response times caught a lot of people off-guard.  Here's what she said:  "The bottom line on nuclear weapons is when the President gives the order it must be followed.  There's about 4 minutes between the order being given and the people responsible for launching nuclear weapons to do so.  And that's why 10 people who have had that awesome responsibility have come out and, in an unprecedented way, said they would not trust Donald Trump with the nuclear codes or to have his finger on the nuclear button." To summarize, Hillary Clinton just told any potential enemy out there A) how close they need to be to the target to launch their nuclear weapons (submarine, bomber) at current delivery system speeds and B) how fast future delivery systems need to travel in order to provide enough standoff while negating any retaliatory action by the President of the United States.

Jill Stein Slams Hillary Clinton's Foreign Policy As "Scarier Than Trump's" --- The Green Party nominee for president of the United States, Jill Stein, has begun matter-of-factly speaking out against the foreign policy agenda of one of her political opponents, Hillary Clinton. Dr. Stein, who has strongly advocated for a more peaceful approach to U.S. relations in the Middle East — as well as throughout the world — recently took to her Twitter account to boldly state what may come as a shock to many Americans: “Hillary Clinton’s foreign policy is much scarier than Donald Trump’s.”  The presidential candidate also tweeted the words of her running mate, Ajamu Baraka, who said, “It should [be] clear to everyone that a vote for Hillary Clinton is a vote for war.”Dr. Stein elaborated on her social media statements when asked by a reporter in Texas this week what she felt a Hillary Clinton presidency would look like.“Well, we know what kind of Secretary of State she was,” Stein said in her response. “[Hillary] is in incredible service to Wall Street and to the war profiteers. She led the way in Libya and she’s trying to start an air war with Russia over Syria, which means, if Hillary gets elected, we’re kinda going to war with Russia, folks…a nuclear-armed power.”

The World’s Most Dangerous Systemic Risks for the Week Ending October 14 -- There are presently two paramount foreground dangers and a third that is moving closer to the foreground. We are currently experiencing the biggest, global-scale, financial bubble in history (the “mother of all bubbles” or MOB) and this is not a one-dimensional bubble like the “Crash of 1929”, the 2000 dot com bubble or the 2008 housing bubble: the MOB is simultaneously present in all asset classes: stocks, bonds, and real estate. Because of these properties, the MOB is both quantitatively and qualitatively in a different category than any previous bubble. The driver behind this enormous bubble is central bank intervention that has been sustained since 2008 on an unprecedented scale when viewed by the aggregate activity of the world’s central banks: the US Federal Reserve, the European Central Bank (ECB), the Bank of Japan (BOJ), the Bank of England (BOE) and the Swiss National Bank (SNB). What also makes the MOB categorically different, besides its size and ubiquity, is its vulnerability to a massive implosion due to inherent structural defects:The second dominant foreground danger is also a trigger for the MOB’s collapse: a military escalation in the Syrian Conflict between the US and Russia. Americans are unaware of the dangers brewing in Syria because Western major media has not been forthcoming of the mounting perils. Understand: The Syrian Conflict is not just “another war against terror” like Iraq or Afghanistan. The primary danger is a US-Russian war, not a war against ISIS. Given recent events and decisions made by both alpha belligerents, we are moving rapidly in the direction of increased risk of direct conflict between nuclear superpowers for the first time since the Cuban Missile Crisis:

  • Russia’s foreign policy on the use of a tactical nuclear response includes attack by foreign powers on strategic assets such as those at the Syrian airbase in Latakia and the naval base at Tartus, both of which have Russian air and missile defense systems, personnel, facilities and naval ships or military aircraft;
  • an attempt to prosecute a no-fly zone by US/NATO air forces will result in losses of aircraft caused by Russia’s state-of-the-art air defense systems with immanent escalation and retaliation by the US/NATO that will invoke Russian foreign policy measures;
  • Russia has used major media to advise the Russian population of a risk of war with the West including possible nuclear engagement;
  • Russia has repeatedly warned the US of the grave consequences of attacking Syrian or Russian assets;

Trump, Clinton, Obama and the TPP -- The Trans-Pacific Partnership (TPP) agreement between the US and eleven other Pacific Rim countries was under negotiation for the first seven years of the Obama presidency. For the first four years, Hilary Clinton was the Secretary of State, directly supervising the negotiations. Even after she quit her cabinet position to launch for her second presidential bid, she continued to tout it in superlative terms. Yet, by early 2016, most presidential aspirants, including Mrs. Clinton, had disowned the TPP. No new information about the TPP had come to light to prompt this volte face. Nor had the then new Secretary of State John Kerry added anything radically new to the proposals she was associated with during her tenure. While largely in the interests of corporate America, the TPP is not in the interests of the US economy or the public at large. While it is in the interest of US transnational corporations (TNCs) to source manufactures and services from low-wage Asian economies for the US market, by doing so, they are likely to displace those previously producing those goods, increasing US unemployment. This, in turn, reduces aggregate demand and increases the current account deficit in the US balance of payments. The TPP will promote US corporate interests by institutionalizing new arrangements which undermine the sovereignty of TPP countries, including the US itself. For instance, the TPPA’s patent and copyright provisions are stronger and for longer durations. This would strengthen corporate monopolies, especially of US TNCs, raising the prices of goods, especially pharmaceutical drugs, in all TPP countries. Thus, while US TNCs stand to profit greatly, consumers in all TPP countries, including the US, would be worse off. The TPP’s investor-state dispute settlement (ISDS) provisions will mean that foreign investors can sue TPP governments more easily in special tribunals. Such disputes will not be settled by national judiciaries or in accordance with host country laws. Thus, private corporations will be less subject to the national laws and governments of the countries where they invest; even US laws would be less binding on all TNCs. Despite being a nation-state itself, the US is setting up supranational institutions that would serve TNCs, when needed, while not being subject to them, when convenient. Thus, the White House appears to be standing with big business against its own national economic interests, especially of its own working class, referred to as its middle class in better times.

  Posting New Secret Trade Docs, Wikileaks Further Exposes Corporate Plot - 'Despite its importance both the US Presidential candidates Hillary Clinton and Donald Trump have thus far given no position on the TISA Agreement.' - Even as it continued to post new batches of emails from Clinton campaign chairman John Podesta, Wikileaks on Friday also published new draft chapters of the Trade in Services Agreement (TISA) which shed new light on the pending deal that critics say puts global economies at further risk from powerful banks, financial institutions, and corporate greed."People want to live in a democracy; they want quality, accessible public services; a well-regulated financial sector; and decent jobs for all ― the opposite agenda of the deregulation, locked-in privatization, and antidevelopment fundamentals of the secret proposed TISA, according to today’s explosive leak." —Deborah James, CEPRThe latest release follows a series of others by the pro-tranparency publication and comes just days ahead of the next round of TISA negotiations set to begin Monday in Washington, DC. The leaked documents included in Friday's release include three draft chapters from the agreement—covering "Financial Services," "Localization Provisions," and "Bilateral Market Access." The chapters are from June of this year and bring the number of documents related to the TISA negotiations published by Wikileaks up to 70 total. Along with the Trans Pacific Partnership (TPP) and the TransAtlantic Trade and Investement Partnership (TTIP), TISA is actually the largest of the "Three Big T's" of pending international agreements that seek to further shape the global economic and legal systems in favor of major corporations and elite interests. TISA is the largest of the three deals, and according to World Bank figures cited by Wikileaks, services that would be covered by the massive agreement comprise around 75% of the EU economy, 80% of the US economy and the majority of economies of most countries. However, notes Wikileaks, "despite its importance both the US Presidential candidates Hillary Clinton and Donald Trump have thus far given no position on the TISA Agreement."

Tobacco Carve-Out From ISDS Starts To Spread: Another Nail In The Coffin Of Corporate Sovereignty -- One of the last pieces of horse-trading that went on in order to conclude the TPP deal involved corporate sovereignty, aka investor-state dispute settlement (ISDS), and tobacco. As we reported a year ago, a "carve-out" for tobacco was agreed, which was designed to assuage fears that tobacco companies would use TPP's ISDS mechanism to challenge health measures like plain packs -- something that Philip Morris attempted against both Australia and Uruguay. Now, it looks like the idea is spreading, as Simon Lester points out on the International Economic Law and Policy Blog:  Whether or not the TPP ever gets ratified, the idea for a tobacco carveout seems to have taken hold. Via Tania Voon on twitter, I see that Australia and Singapore have agreed to amend their FTA to include a tobacco carveout. The wording itself, inserted into the section on corporate sovereignty, is pretty simple (pdf):  ARTICLE 22: No claim may be brought under this Section in respect of a tobacco control measure of a Party It's worth noting that this is not just another carve-out, but a retrospective one, which creates an interesting precedent that might be followed elsewhere. After all, once the principle that tobacco companies should not be allowed to use ISDS to interfere with health programs is established, there's no reason not to apply it more widely, to both future and existing trade and investment deals.

Every Trade Deal Needs a Referee - Tyler Cohen -While the economic arguments for freer trade are strong, many people remain skittish about proposed trade deals involving the U.S., Asia and Europe. In particular, critics are focusing on provisions of these deals that set up tribunals to rule on disputes between governments and companies. The critics charge that these Investor-State Dispute Settlement panels would have too much power to elevate corporate interests over the democratic will under the pretext of enforcing trade rules, and would allow companies to unjustly sue governments. A closer look, however, shows that the core features of this dispute-settlement system, embedded in the Trans-Pacific Partnership of 12 Pacific-Rim nations and the Transatlantic Trade and Investment Partnership between the U.S. and European Union, have been a largely unobjectionable part of the status quo for some time. One criticism is that the tribunals could force governments to pay compensatory “takings” to foreign companies that incur costs as a result of safety or environmental regulations. But it has long been standard practice for trade treaties to protect foreign companies, for example by limiting the nationalization of foreign investment. Investors don’t always trust the courts of the nations they are investing in, and indeed from 1990 to 2013, at least 150 foreign-owned firms were nationalized, typically in emerging economies, or otherwise subjected to confiscation of value. Agreeing to refrain from such practices can attract more foreign investment and raise living standards. Nonetheless, investor-state settlement clauses are growing more controversial, in part because the symbolism of a foreign company suing a domestic government is bound to occasion opposition. It therefore may make tactical sense to leave the clauses out. That said, ISDS clauses, when present, are not sufficient reason to oppose trade treaties. More generally, there are now more than 2,000 bilateral investment treaties worldwide, 41 with the U.S. at last measurement, and they typically have some form of investor-state dispute resolution. So does the 1994 North American Free Trade Agreement between the U.S., Mexico and Canada. Over this same period, trade and investment have brought global living standards to unprecedented heights. National sovereignty has not exactly disappeared. Trade treaties typically recognize that governments have a legitimate interest in regulating safety and the environment, and most of the world’s trading nations have made good progress in those areas.

Trump’s new trade world -- Donald Trump and Hillary Clinton took a few jabs at each other over trade during Wednesday night’s debate, but most notable was the New York billionaire’s claim that there would be more free trade under his administration than there is under President Barack Obama. “We’re going to negotiate trade deals. We’re going to have a lot of free trade. More free trade than we have right now. But we have horrible deals,” said Trump, who moved on to his usual slam of NAFTA. He also repeated claims that he would recruit the brightest minds in U.S. business to negotiate trade deals rather than the “political hacks” that the U.S. always uses and who are chosen because of their campaign contributions.  Clinton rebuffed Trump’s accusation that she would “sign” the TPP, repeating her opposition to the deal after the election and if she’s elected president. She quickly pivoted to attack Trump’s own business endeavors that have outsourced production to foreign countries. She also hit the Republican candidate for crying “crocodile tears” for the plight of American worker while using Chinese-made steel in his construction projects (that claim was explained in a recent report in Newsweek).

Is Trans-Pacific Partnership trade deal really as dead as Trump and Clinton say it is? | South China Morning Post: Hillary Clinton and Donald Trump squared off on a host of issues in their presidential debates but there was one – the fate of the Trans-Pacific Partnership (TPP) free-trade agreement signed by the US government early this year – on which they appeared to agree. Both US presidential candidates have repeatedly claimed they oppose the landmark deal, which is aimed at promoting economic growth and slashing tariffs on trade among 12 Pacific Rim nations, with the notable exclusion of China.  Despite all the anti-TPP election rhetoric, many analysts still say the next US president is likely to adopt the pact, albeit under a different name and with possible alterations. “I think being candidates and being presidents are two very different things. We’ve had a lot of examples in the past,” said Elizabeth Economy, director for Asia studies at the New York-based Council on Foreign Relations. “People who say they’re going to do one thing when they’re campaigning end up doing the exact opposite once they’re sitting in the White House.” Scott Kennedy, deputy director of the Freeman chair in China studies and director of the Chinese business and political economy project at the Washington-based Centre for Strategic and International Studies, said that if she was elected, Clinton would seek renegotiation of the TPP, perhaps calling it something else, and change some of the United States’ starting positions on certain issues. “Given that Hillary Clinton helped initiate the negotiations over the TPP and probably agrees with 95 per cent of what’s in TPP, she might prefer that TPP be adopted before she comes in, rather than force her to make a choice once she’s in the office,” he said. ;

The Case for the TPP: Responding to the Critics | U.S. Chamber of Commerce -- What is the Trans-Pacific Partnership (TPP) all about? With debate over this 12-nation trade agreement now underway, the U.S. Chamber is publishing this series of posts making the case for the TPP’s approval. This installment responds to several of the most common criticisms of the agreement.  Like other supporters of the TPP, the Chamber has argued at length and in detail that the agreement will spur economic growth and job creation across the United States—benefitting workers, farmers, and businesses of all sizes.

The truth about trade – Jeff Sachs -  The DEBATE over global trade and investment has played a central role throughout the 2016 campaign, as it did in the 1992 election. Back then, third-party candidate Ross Perot claimed that the proposed North American Free Trade Act with Canada and Mexico would cause a “giant sucking sound” of jobs out of the United States to low-wage Mexico. Now the debate is over two similar negotiations, the Trans-Pacific Partnership with Asian countries and the Trans-Atlantic Trade and Investment Partnership with Europe.I am a believer in expanded international trade, but I am an opponent of TPP and TTIP. This isn’t a contradiction, but a reflection of two important realities. First, the proposed treaties are more than trade agreements. They would also establish many important rules of the economy beyond trade, and in fact would give far too much power to large multinational companies, the corporations whose lobbyists have helped to draft the agreements. Second, trade policy should not be crafted in isolation from related budget measures that would ensure the fairness of economic outcomes. Open trade is broadly beneficial only when combined with smart and fair budget policies. Alas, the United States does not yet have in place the fiscal policies that are needed to make new trade agreements broadly beneficial across the society.To keep a scorecard on TPP, TTIP, and other related trade policy measures, it’s important to keep track of four components of international economics. The first is trade in goods and services, when the US exports or imports merchandise (like coffee) or services (like shipping). The second is the movement of foreign capital, such as when General Motors opens a subsidiary to manufacture parts in Mexico. The third is offshoring of jobs, such as when Apple contracts with the Taiwanese company Foxconn to assemble iPhones in China. And the fourth are global regulatory policies such as the terms of patents and copyrights. Modern trade agreements are not just about trade; they include all four parts of the international economic system.

The Encryption Wars - Although the Federal Bureau of Investigation’s (FBI) dispute with Apple dominated the news for months this spring, the real encryption war may only now be simmering, as states battle the federal government over the right to regulate encryption.  Recently, some states have proposed legislation that aims to require decryption, while members of Congress have started to propose federal solutions that would directly oppose such state legislation. Manufacturers encrypt products to shield consumers from hackers that want access to personal devices, vehicles, and even bank accounts. Some argue that weakened encryption would create new vulnerabilities that hackers can exploit, ultimately compromising security.  Yet, responding to encouragement by state district attorneys and the National District Attorney’s Association, representatives in California and New York have introduced bills that prohibit the sale of encrypted phones. Bills in both states would require companies to comply with court orders requested by law enforcement to decrypt phones. The California bill imposes a fine that begins in 2017 for the sale of encrypted phones, while New York’s bill warns that manufacturers may be subject to actions by the New York Attorney General and District Attorney’s offices for sale of encrypted phones. However, recent proposals in the House appear responsive to the legislative movements in both New York and California. Representative Ted Lieu (D-CA), along with Representative Blake Farenthold (R-TX), have introduced a federal solution to encryption disputes, proposing the Ensuing National Constitutional Rights for Your Private Telecommunications Act, or the ENCRYPT Act of 2016. As proposed, the Act would override any state law mandating that companies decrypt their products when under court order or in compliance with law enforcement. The ENCRYPT Act would also prohibit mandated alterations to security infrastructure tailored to government surveillance of encrypted consumer devices.

Hillary Clinton Says Her Tax Plans Won’t Diminish Growth. Experts Say Otherwise – WSJ - Hillary Clinton has an ambitious, multilayered economic program that involves lots of new taxes on the rich to finance expanded social transfers, education and infrastructure. “We are going to ask the wealthy and corporations to pay their fair share,” she said at Wednesday’s debate. “And there is no evidence whatsoever that that will slow down or diminish our growth.” Well, not really. Two independent analyses conclude that by raising taxes so dramatically on the wealthy, her program will crimp investment and economic growth, though they disagree on how much. Much of the debate over the plans of Mrs. Clinton and Republican nominee Donald Trump revolves around their effects on the deficits. Mr. Trump’s tax cuts would dramatically raise deficits under all credible independent scenarios. Mrs. Clinton’s overall plan would do so only trivially. The effect on growth is more complicated. Virtually all economists agree that lower taxes on corporate profits, capital gains and dividends bolster investment and higher taxes depress it, but they disagree on how much. More than 90% of Mrs. Clinton’s tax increases fall on the top 1%, who by virtue of their wealth do much of the country’s investing. The Tax Foundation, a conservative think tank, concludes that Mrs. Clinton’s plan will leave gross domestic product 2.6% smaller after 10 years, primarily because her taxes, which include a 30% minimum “Buffett” rule tax on incomes over $1 million and less generous treatment of capital gains, reduce the incentive to save and invest. This means that even low-income households, which benefit from tax provisions such as a more generous child tax credit, end up with lower after-tax income after incorporating lower growth. The Tax Foundation says Mr. Trump’s plan will expand the economy by cutting tax rates. But that rests crucially on the assumption that Mr. Trump’s deficits don’t raise interest rates. Other economists, and Congress’s own budget scorekeepers, think deficits do raise interest rates, which crowds out private investment and neutralizes the benefit of lower tax rates. The Tax Policy Center, a center-left think tank, thinks Mr. Trump’s plan would eventually leave the economy 4% smaller because his deficits crowd out private investment. By contrast, Mrs. Clinton’s plan leaves the economy 0.5% larger after 20 years, according to the Tax Policy Center, which used a model developed by economists at the University of Pennsylvania’s Wharton School. But that’s because it evaluated only her tax increases, which reduce the deficit and thus interest rates. Her offsetting spending boosts, the center said, “would tend to negate” that benefit.

The Tax Code for the Ultra-Rich vs. the One for Everyone Else - James Kwak -The revelation of details from Donald Trump’s 1995 state tax returns created exactly the political firestorm that it merited. When it comes to tax policy, however, Trump’s tax returns are a distraction that crowds out more important issues. In The New York Times, the columnist James Stewart outlined how to prevent Trump’s particular form of tax avoidance: Shorten the period in which losses can be used to offset income, limit the deduction for depreciation, and so on. These are perfectly good solutions—to a minor issue. The poster child for the problems of the tax code isn’t Donald Trump; it’s Warren Buffett. Buffett is in many ways the anti-Trump. He really is a vastly successful businessman, really is donating the vast majority of his fortune to charity, and really does have ideas about how to make the tax code fairer. What he and Trump have in common is that both take advantage of the tax code where they can. Buffett’s tax benefits, however, dwarf Trump’s.  In 2015, Buffett’s adjusted gross income was about $11 million (on which he paid roughly $2 million in income taxes); that’s certainly a lot of money, butmore than 10,000 households reported more income than he did. In an economic sense, however, Buffett’s annual income is actually measured in the billions. His net worth rises and falls based on the price of the stock he owns in his company, Berkshire Hathaway, but in the past five years its value has increased from $39 billion to $65.5 billion, according to Forbes. That’s more than $5 billion per year, even as Buffett was giving away billions of dollars. According to the tax code, however, that $5 billion per year might as well not exist: When stock goes up in value, the increase does not count as income until the stock is sold. This allows Buffett and other extremely rich investors to defer paying taxes on stock appreciation, effectively reducing their tax rates. In addition, they can donate stock to charity and claim a tax deduction for the full amount of the gift without ever having to pay taxes on the stock’s increased value. By continually deferring capital-gains taxes, ultra-wealthy families can pay virtually no income tax for generation after generation. And when they do decide to sell stock, their capital gains are taxed at a much lower rate than income from working—about 24 percent instead of 43 percent—which on its own costs the federal government about $90 billion per year. Unsurprisingly, of the four largest family fortunes in America today, three—the Waltons, the Kochs, and the Marses—were inherited from earlier generations.’

The US tax man might be coming for offshore corporate income - Goldman Sachs Group analysts say there could be some semblance of a bipartisan effort to rework the way multinational US companies are taxed during the next presidential term. They estimate there's a 50-per-cent chance the corporate tax code will be reworked next year. (In short, the voters have spoken, and they want Big Business to pay.)  The US taxes corporate income at the highest rate of any OECD country, at 39 per cent. (This is what you get when you combine the headline 35 per cent federal tax rate with the typical state and local corporate tax rate.) And unlike any other G7 country, it taxes companies’ income earned abroad, though it gives credits for taxes paid to foreign governments. All of this would be onerous, except the taxes aren’t due until foreign income is brought back onshore. Which might be never. That gives companies a big incentive to keep their foreign income offshore, reinvest it in financial markets, and pay lower dividend and capital-gains tax rates instead.And, hey, look, that’s what they’ve done! S&P 500 companies pay a median tax rate of 28 per cent, according to Goldman Sachs’s analysis:  That’s closer to the OECD average, of 25 per cent. Since people like big numbers, here’s a chart of a rolling four-quarter sum of foreign profits reinvested abroad. The total figure is closer to $2.9trn, and $2.4trn for S&P 500 companies, according to the analysts: So why hasn’t the corporate tax code already been reformed, either to tax offshore profits or to get rid of global taxation altogether? You could blame political gridlock — the Obama Administration first put forward a plan for corporate tax reform in 2012. You could also argue that a big, looming deferred tax bill encourages companies to cooperate with a government’s agenda — so it serves as an effective mechanism for moral suasion (or suasion for immoral purposes, which is a troubling possibility). Still, Goldman Sachs says the political will is shifting in favour of reform:

Saudi Arabia hires 10th lobby firm - The government of Saudi Arabia is now employing 10 lobbying firms in Washington as it grapples with a new law that would allow families of victims of the 9/11 terrorist attacks to sue the country. The Saudis have hired King & Spalding to provide “advocacy and legal services” related to the Justice Against Sponsors of Terrorism Act, according to a contract filed with the Justice Department. It’s the fifth firm to be hired by the country in recent weeks.Congress handed President Obama his first veto override, turning the 9/11 bill into law. But top Republican lawmakers are already discussing rewriting the law to address some of the unintended consequences.    Saudi Arabia hired four other firms at the end of September, right before the White House issued its veto. Heavyweights Squire Patton Boggs, Brownstein Hyatt Farber Schreck and Glover Park Group, along with Sphere Consulting, were added to the payroll.  Unlike the other firms, King & Spalding inked its contract through Saudi Arabia’s Ministry of Commerce and Investment. The agreement does not discuss fees or the duration of the work, saying those details were still being worked out. A review of disclosures by The Hill shows that Saudi Arabia is now paying upward of $1.3 million in lobbying fees per month — including payments to its other firms, Hogan Lovells, MSLGroup, DLA Piper, Podesta Group and BGR Group. Targeted Victory, a Republican ad firm, is working through a subcontract with MSLGroup. Earlier this year, Saudi Arabia threatened to sell off hundreds of billions of dollars of American assets should the Justice Against Sponsors of Terrorism Act become law. Obama has warned that the law allowing Americans to sue countries or individuals suspected of sponsoring terrorism could also ultimately open up Americans to lawsuits by foreign governments.  Companies like Boeing, Dow Chemical, General Electric and Chevron also pressed lawmakers not to vote for the override, according to Politico.

Wikileaks Releases Another 850 Podesta Emails In Part 8 Of Data Dump; Total Is Now 11,019 -- Another day, another data dump. In what has become a daily routine, one which forces the Clinton campaign to bring up ever starker (most sexual) scandals involving Trump to provide a media distraction, moments ago Wikileaks released yet another roughly 1,150 emails in Part 8 of its ongoing Podesta Email dump, which brings the total number of released emails to 10,169.  RELEASE: The Podesta Emails Part 8 https://t.co/pE4OgvEowo #HillaryClinton#imWithHer #PodestaEmails #PodestaEmails8 pic.twitter.com/ifTC48TAUu — WikiLeaks (@wikileaks) October 15, 2016

Wikileaks Releases Another 1,054 Podesta Emails In Part 9 Of Data Dump; Total Is Now 12,073 -- Another day, another data dump. In a now familiar daily routine, one which forces the Clinton campaign to bring up ever starker sexual scandals involving Trump to provide a media distraction, moments ago Wikileaks released yet another roughly 1,054 emails in Part 9 of its ongoing Podesta Email dump, which brings the total number of released emails to 12,073. As a reminder among yesterday's releases were the three much anticipated transcripts from Hillary Clinton's speeches delivered to Goldman Sachs, first profiled here, and which as the WSJ explained "Reveal Hillary Clinton’s Sympathy for Wall Street" RELEASE: The Podesta Emails Part 9 https://t.co/pE4OgvEowo#HillaryClinton#imWithHer #PodestaEmails #PodestaEmails9 pic.twitter.com/Cg28qJXL9v — WikiLeaks (@wikileaks) October 16, 2016

Goldman Sachs paid speeches - Wikileaks - The 3 (I misspoke about 5 earlier) speeches to Goldman are attached with some parts highlighted. Below are some of the more noteworthy quotes. *Speaking About Financial Regulations, Clinton Said “The People That Know The Industry Better Than Anybody Are The People Who Work In The Industry.” *“There's nothing magic about regulations, too much is bad, too little is bad. How do you get to the golden key, how do we figure out what works? And the people that know the industry better than anybody are the people who work in the industry.” [GS2, 10/24/13] *Clinton Said “I Represented All Of You For Eight Years. I Had Great Relations And Worked So Close Together After 9/11 To Rebuild Downtown.” *“I represented all of you for eight years. I had great relations and worked so close together after 9/11 to rebuild downtown, and a lot of respect for the work you do and the people who do it, but I do -- I think that when we talk about the regulators and the politicians, the economic consequences of bad decisions back in '08, you know, were devastating, and they had repercussions throughout the world.” [GS2, 10/24/13] *Clinton Said “Banks Are Not Doing What They Need To Do Because They're Scared Of Regulations, They're Scared Of The Other Shoe Dropping.” *“I mean, right now, there are so many places in our country where the banks are not doing what they need to do because they're scared of regulations, they're scared of the other shoe dropping, they're just plain scared, so credit is not flowing the way it needs to to restart economic growth. So people are, you know, a little -- they're still uncertain, and they're uncertain both because they don't know what might come next in terms of regulations, but they're also uncertain because of changes in a global economy that we're only beginning to take hold of.” [GS2, 10/24/13]

Aide Planted Anti-Bank Comments in One Paid Clinton Speech to Throw Reporters Off the Scent -- A top aide calculatingly inserted a passage critical of the financial industry into one of Hillary Clinton’s many highly-paid speeches to big banks, “precisely for the purpose of having something we could show people if ever asked what she was saying behind closed doors for two years to all those fat cats,” he wrote in an email  posted by Wikileaks.  In late November 2015, campaign speechwriter Dan Schwerin wrote an email to other top aides floating the idea of leaking that passage, which had come in a speech Clinton gave to Deutsche Bank in October 2014 in return for $260,000.  “I wrote her a long riff about economic fairness and how the financial industry has lost its way,” for that purpose, Schwerin wrote. “Perhaps at some point there will be value in sharing this with a reporter and getting a story written. Upside would be that when people say she’s too close to Wall Street and has taken too much money from bankers, we can point to evidence that she wasn’t afraid to speak truth to power.”  Another email, from among the thousands posted by Wikileaks over the past week from Hillary Clinton Campaign Chairman John Podesta’s Gmail account, shows how panicked members of the Clinton campaign intervened at the last minute to cancel a paid Bill Clinton speech to Morgan Stanley because it was timed too close to the launch of her campaign — against the initial wishes of the candidate herself.

The Clinton Goldman Speeches: No Smoking Guns, but a Munitions Dump Instead --naked capitalism - Lambert Strether -As readers know, WikiLeaks has released transcripts of the three speeches to Goldman Sachs that Clinton gave in 2013, and for which she was paid the eyewatering sum of $675,000. (The link is to an email dated January 23, 2016, from Cllinton staffer Tony Carrk, Clinton’s research director, which pulls out “noteworthy quotes” from the speeches. The speeches themselves are attachments to that email.) Readers, I read them. All three of them. What surprises — and when I tell you I had to take a little nap about halfway through, I’m not making it up! — is the utter mediocrity of Clinton’s thought and mode of expression[1]. Perhaps that explains Clinton’s otherwise inexplicable refusal to release them. And perhaps my sang froid is preternatural, but I don’t see a “smoking gun,” unless forking over $675,000 for interminable volumes of shopworn conventional wisdom be, in itself, such a gun. What can Goldman Sachs possibly have thought they were paying for?   Wikileaks has, however, done voters a favor — in these speeches, and in the DNC and Podesta email releases generally — by giving us a foretaste of what a Clinton administration will be like, once in power, not merely on policy (the “first 100 days”), but on how they will make decisions. I call the speeches a “munitions dump,” because the views she expresses in these speeches are bombs that can be expected to explode as the Clinton administration progresses. With that, let’s contextualize and comment upon some quotes from the speeches…

Wikileaks Releases Another 3,183 Podesta Emails In Part 10 Of Data Dump; Total Is Now 15,256 - We wondered if Wikileaks would take a break after the FBI released 100 pages of 302s earlier today, to avoid thinning the focus on its own releases. The answer, it turns out, was no. In a now familiar daily routine, one which forces the Clinton campaign to bring up ever starker sexual scandals involving Trump to provide a media distraction, moments ago Wikileaks released yet another roughly 3,183 emails in Part 10 of its ongoing Podesta Email dump, which brings the total number of released emails to 15,256.

 Wikileaks Releases Another 1,894 Podesta Emails In Part 11 Of Data Dump; Total Is Now 17,150 --The daily dump continues.  In the now traditional daily routine, one which forces the Clinton campaign to resort to ever more stark sexual scandals involving Trump to provide a media distraction, moments ago Wikileaks released yet another 1,894 emails in Part 11 of its ongoing Podesta Email dump, which brings the total number of released emails to 17,150.RELEASE: The Podesta Emails Part 11 https://t.co/wzxeh70oUm #HillaryClinton#imWithHer #PodestaEmails #PodestaEmails11 pic.twitter.com/jufiR7stMZ — WikiLeaks (@wikileaks) October 18, 2016

Wikileaks Releases Another 1,803 Podesta Emails In Part 12 Of Data Dump; Total Is Now 18,953 --The daily dump continues.  In the now traditional daily routine, one which forces the Clinton campaign to resort to ever more stark sexual scandals involving Trump to provide a media distraction, moments ago Wikileaks released yet another 1,803 emails in Part 12 of its ongoing Podesta Email dump, which brings the total number of released emails to 18,953. RELEASE: The Podesta Emails Part 12 https://t.co/wzxeh70oUm #HillaryClinton#imWithHer #PodestaEmails #PodestaEmails12 pic.twitter.com/druf7WQXD5 — WikiLeaks (@wikileaks) October 19, 2016

'Russian Hacker' Arrested In Prague Last Week, Announcement "Tactically Delayed" Until Day Of US Debate -- Two days before the Obama administration formally accused the Russian government of hacking Democrats, NYTimes reports that a man identified as a "Russian hacker suspected of pursuing targets in the United States" was arrested in the Czech Republic. While the arrest was made on Oct 5th, officials stated that "we postponed the announcement for tactical reasons," which makes one wonder whether this is the debate-day-distraction Hillary needs?  The United States director of national intelligence, James R. Clapper Jr., said in a statement on Oct. 7 that high-level Russian officials were trying to interfere with American elections.“The recent disclosures of alleged hacked emails on sites like DCLeaks.com and WikiLeaks and by the Guccifer 2.0 online persona are consistent with the methods and motivations of Russian-directed efforts,” Mr. Clapper said. “These thefts and disclosures are intended to interfere with the U.S. election process.” Mr. Clapper said that “such activity is not new to Moscow,” and he accused Russia of using similar tactics across Europe to influence public opinion.

Wikileaks Releases Another 4,470 Podesta Emails In Part 13 Of Data Dump; Total Is Now 23,423 - The third and final debate may have come and gone, but the daily Wiki Podesta dump continues.  In the now traditional daily routine moments ago Wikileaks released yet another 4,470 emails in Part 13 of its ongoing Podesta Email dump, which brings the total number of released emails to 23,423  RELEASE: The Podesta Emails Part 13 https://t.co/wzxeh7hZLU #HillaryClinton#imWithHer #PodestaEmails #PodestaEmails13 — WikiLeaks (@wikileaks) October 20, 2016    Among yesterday's most dramatic revelations were more confirmations of collusion and coordination with the media, a never before seen 2008 memo between Fed governor Tarullo and president-elect Obama discussing the AIG bailout, a shocking revelation into the conflicts of interest at Bill Clinton's charity project, and the missing link of Hillary's email deletions, confirming she had instructed the deletion of emails from the start, refuting her previous testimony.  Developing story. 

Wikileaks Releases First Batch Of Emails Sent Via President Barack Obama's Secret Email Address - Just when it seemed we could not get any more email leak excitement, here comes Wikileaks with what it claims is the first batch of emails obtained from a secret address used by president Barack Obama (bobama@ameritech.com). WikiLeaks reveals first batch of US president Barack Obama emails sent via secret address bobama@ameritech.com https://t.co/Ni95WAl8a6 — WikiLeaks (@wikileaks) October 20, 2016  The emails appear to all have been released previously, however Wikileaks has filtered the set of emails which have the "bobama" term in the email address.Here are some of the emails in the initial bucket

WikiLeaks: Citigroup Exec Gave Obama Recommendation of Hillary for State, Eric Holder for DOJ –   Pam Martens - If there is any truth to the allegation that Russia is behind the hacking of emails being released by WikiLeaks, then the American public owes Russia a huge debt of gratitude. At a time when the American people are sharply focused on how the leader of the free world is chosen, WikiLeaks is giving us an unprecedented, historical opportunity to understand how corporate money in politics has corrupted everything we believe in as a democracy.  This week, for example, emails from WikiLeaks show that President Obama, using the email address of bobama@ameritech.net, was communicating directly with Michael Froman of Citigroup in 2008, who fed Obama lists of recommended appointments to his cabinet. In an email from Froman dated October 6, 2008, with Froman using his Citigroup email address of fromanm@citi.com, Hillary Clinton shows up on Froman’s list for Secretary of State or head of the U.S. Department of  Health and Human Services (HHS). In a separate list attached to the email, Eric Holder was recommended for U.S. Attorney General at the Department of Justice or as White House Counsel. (See the email and the attachments here.)  In less than a month after Obama’s election as President on November 4, 2008, Obama had nominated Clinton to be his Secretary of State and Holder as his Attorney General. Despite the unprecedented corruption rooted out on Wall Street by regulators, Holder failed to prosecute any of Wall Street’s top executives for the crimes that led to the greatest financial crash since the Great Depression. Froman had served as Chief of Staff to Robert Rubin when Rubin was Secretary of the Treasury in the Bill Clinton administration. Rubin led the effort to repeal the Glass-Steagall Act, which barred investment banks and brokerage firms on Wall Street from merging with commercial banks that held FDIC insured deposits for savers. Rubin left the Treasury Department and promptly took a job at Citigroup, the primary beneficiary of the repeal in 1999. Over the next decade, as Citigroup was serially charged by its regulators for abusing the public trust, Rubin collected compensation of $126 million. Froman followed Rubin to Citigroup where he served as Chief Operating Officer of Citi Alternative Investments and later as Managing Director of Citi Infrastructure Investors, a unit of Citi Alternative Investments. The latter is the division that blew up the bank in the same month that Obama was elected President. Froman had been a major bundler for Obama, raising funds that USA Today placed at $200,000 to $500,000.

Wikileaks Releases Part 14 Of Podesta Emails Bringing Total To 25,000; Exposes Soros' Contact Info -- Wikileaks just does not stop. One day after dumping over 3,000 emails in its 13th release, WikiLeaks has just released a new batch of emails from Hillary Clinton campaign chair John Podesta.  The latest tranche amounts to 1,577 mails, bringing the total released so far to 25,000, or half of the total amount Wikileaks has vowed to release through the election.

State releases new batch of Clinton emails - The State Department on Friday released 112 of the 15,000 Hillary Clinton emails uncovered by the FBI during its investigation into the former secretary of State’s personal email server. Many of the documents — comprising about 240 pages — are “near duplicates” of documents Clinton provided to the State Department in 2014 and have already been made public, according to the agency. A “near duplicate,” according to the agency, would include emails identical to previously released chains that were forwarded from Clinton to aides with the note, “Please print,” for example. The newly released documents are records of emails sent or received by Clinton directly in her official capacity as secretary of State and were expected to largely concern scheduling matters.The conservative watchdog group Judicial Watch has been pushing for all of the documents to be released before the Democratic presidential nominee faces voters on Nov. 8A federal judge last month ordered the State Department to review approximately 1,000 pages of the documents before Nov. 8, releasing in batches those that are subject to the Freedom of Information Act (FOIA) request that is driving their release.Friday’s is the second batch. The Department made public 75 emails, or around 270 pages, on Oct. 7, many of which were also “near duplicates” and contained little new information. Each batch is the result of a review of 350 pages ordered by U.S. District Judge James Boasberg. Clinton deleted about 30,000 emails from the private server setup she used while serving as secretary of State, saying they were not work-related, before turning over thousands more to the government. But while examining her machines, the FBI recovered some additional emails that could be relevant to the FOIA lawsuit.

Russia Wants To Monitor "Rigged" US Presidential Elections -- In what can only be described as an epic attempt to troll both Obama and Hillary, and an apparent move to embarrass the United States over Trump's claims of that the upcoming presidential election will be "rigged", Russia has asked to send monitors to US polling stations for the Nov. 8 vote, according to reports by Russian media. However the US State Department was not amused, and promptly rebuffed the request with one state election official threatening criminal action if Russian monitors showed up, according to state-controlled Izvestia daily and broadcaster RT.

Clinton Aide Asks If Hillary "Should Return The Money" To Banks If She Loses Badly -- In the latest, 13th daily Podesta email release, one particular email sticks out: on February 2, 2016 Neera Tanden, a close confidante of Hillary Clinton and according to many one of the key organizers of her presidential campaign asks John Podesta a question which may be interpreted that banker money received by Hillary can be deemed equivalent to a bribe. Specifically, Tanden asks Podesta that "speaking at the banks... don't shoot me but if we lose badly maybe she should just return the money." To which she then adds "say she gets the anger and moves on. Feels a little like an open wound." The exchange may be one of the more clear indications of a tentative "quid-pro-quo" arrangement, in which cash is provided in exchange for 'services' which naturally would not be rendered if Hillary were to "lose badly."

Clinton Foundation Insider Makes Stunning Admission: "Bill Is Far More Conflicted Every Single Day" -- For several days now we have been posting about the tensions between Doug Band and Chelsea Clinton (see here, here and here). The whole dispute between the two seemingly started when Chelsea raised concerns over potential conflicts of interest related to Band's firm, Teneo, which she thought had sought favors from the State Department on behalf of clients, including MF Global. But, in the latest batch of WikiLeaks emails, Band escalates the situation to a whole new level by rattling off a litany of other Clinton Foundation conflicts including with Bill Clinton who he says is "far more conflicted every single day in what he does" than Teneo. Justin Cooper then decides to pile on by also highlighting Bill's many conflicts.  Per the email below, Cooper expresses frustration that nothing in the proposed conflicts resolution memo addresses "how wjc's activities interface with each other or how this structure resolves his own conflicts."

Paul Ryan Blasts FBI: "Mishandling Bears All The Signs Of A Cover-Up" --Yesterday we noted a potential "quid pro quo" arrangement between the FBI and State Department whereby Patrick Kennedy, a senior executive at the State Department, offered "additional slots for the FBI at missions overseas" in return of "altering the classification" of certain Hillary Clinton emails (see "Lawmakers Find "Quid Pro Quo" Between FBI And State Over Altered 'Classified' Clinton Emails").  Now, House Speaker Paul Ryan released the following statement saying that efforts of the State Department to pressure the FBI "bears all the signs of a cover-up" which, he says, is exactly why he called on the Director of National Intelligence to deny Hillary access to classified information. House Speaker Paul Ryan (R-WI) today responded to new documents released under a Freedom of Information Act request related to the FBI investigation of former Secretary of State Hillary Clinton’s private email server: “These documents further demonstrate Secretary Clinton’s complete disregard for properly handling classified information. This is exactly why I called on DNI Clapper to deny her access to classified information. Moreover, a senior State Department official’s attempt to pressure the FBI to hide the extent of this mishandling bears all the signs of a cover-up. This is why our aggressive oversight work in the House is so important, and it will continue.”

 ACLU Wants 23 Secret Surveillance Laws Made Public -- The ACLU has identified 23 legal opinions that contain new or significant interpretations of surveillance law — affecting the government’s use of malware, its attempts to compel technology companies to circumvent encryption, and the CIA’s bulk collection of financial records under the Patriot Act — all of which remain secret to this day, despite an ostensible push for greater transparency following Edward Snowden’s disclosures. The opinions were written by the Foreign Intelligence Surveillance Court. On Wednesday, the ACLU and the Yale Law School Media Freedom Clinic filed a motion with the court requesting that those opinions be released. “The people of this country can’t hold the government accountable for its surveillance activities unless they know what our laws allow,” said Patrick Toomey, a staff attorney with the ACLU’s National Security Project. “These secret court opinions define the limits of the government’s spying powers. Their disclosure is essential for meaningful public oversight in our democracy.” Some of the opinions identified by the ACLU offer interpretations of Section 702 of the Foreign Intelligence Surveillance Act, a controversial provision that allows the government to conduct mass surveillance on American’s transnational communications. The authority is set to expire in December 2017. Disclosure of the opinions would shed light on how the government understands the boundaries of its spying power. Earlier this month, for example, after Reuters reported that Yahoo is secretly scanning every customer’s incoming email, anonymous officials told the New York Times that that action was based on an individualized order from the secret court. Disclosure of the order would offer insight into why the government thinks that is legal. Yahoo, for its part, on Wednesday urged the Director of National Intelligence to release and explain the court order in question.

 SEC fines Ernst & Young for not spotting client’s earnings manipulation -  The Securities and Exchange Commission on Tuesday held auditor Ernst & Young, and two of its partners accountable for missing for more than four years what it said was a “major accounting fraud.” The SEC said that if EY and its partners had followed auditing standards they would have likely uncovered the fraudulent scheme at Weatherford International as early as 2007. The lead EY audit partner at Weatherford, Craig Fronckiewicz, and former tax partner Sarah Adams, have also been suspended from practicing as public accountants. Ernst & Young, Fronckiewicz, and Adams consented to the SEC’s order without admitting or denying the allegations. Ernst & Young, one of the Big 4 global audit firms with PwC, KPMG and Deloitte, was ordered Tuesday to pay $11.8 million—$1 million fines and $10.8 million in audit fee give-backs plus interest. EY paid total fines of $9.3 million to the SEC in September for audit partners that got too close to key clients at two public companies, the SEC alleged. It’s a sizeable fine for an accounting firm. Last year, Grant Thornton was fined $3 million by the SEC and gave back $1.5 million in fees for ignoring red flags and fraud risks while conducting deficient audits of two publicly traded companies.

SEC preparing large-scale review of exchange traded fund industry - FT - The US Securities and Exchange Commission is gearing up for a root-and-branch review of the rapidly growing exchange traded fund industry amid concerns massive flows into ETFs may be exacerbating volatility in financial markets.  In the US alone, ETF assets stand at $2.4tn, and globally they hold $3.3tn, according to ETFGI, a data provider. They account for about 30 per cent of the value of all US shares traded, according to an estimate from Credit Suisse.  ETFs were at the centre of wild equity trading in August 2015. In one session, more than 1,000 securities were suspended from trading for sharp moves and some ETFs veered sharply from their net asset values. The chaotic trading highlighted how interconnected ETFs are with the underlying stocks as well as the futures market. But the SEC is expected to examine every aspect of the industry and the consequences of its growth. These range from issues such as the implications of an ever-greater share of the US stock market being dictated by ETF flows, to structural concerns around such instruments tracking bonds.The SEC has done “bits and pieces,” but is now “laying the groundwork for a bigger review”, said a person briefed on the matter. “ETFs are growing like bunnies. It’s a great success story, but as a forward-looking regulator the SEC has to be on top of any potential issues that may arise in the future.” A working group of at least a dozen people from across the SEC’s divisions was formed about a year ago to examine ETF products, said another person briefed on the matter.  Growing disenchantment with the underperformance and high fees of traditional mutual funds has accelerated the seismic shift towards passive investment products like ETFs, which track a specific index or prices of an asset class.  Most ETFs only seek to replicate the return of a market, like US stocks, corporate bonds or oil, but newer incarnations such as “smart beta” — ETFs that splice and dice various investment factors — are also growing in popularity.  The rapid expansion of ETFs has been a great boon to many investors, who can make bets in a variety of markets ever more cheaply, but the industry’s increasing size, complexity and influence has raised concerns.

 Goldman Sachs Top Lawyer Is Part of a Secret Banking Cabal as CEO Blankfein Denies One Exists – Pam Martens - There’s a new mantra making the rounds of Washington and Wall Street. No matter how big the lie you’re caught in, no matter how much documented evidence exists against you, just deny, deny, deny. That’s how Democratic National Committee Interim Chair Donna Brazile handled the email released by WikiLeaks showing that she leaked a debate question to Hillary Clinton; that’s how Hillary Clinton handled revelations about sending classified government material over an unclassified server in the basement of her home; and that’s how Goldman Sachs CEO Lloyd Blankfein is handling the widespread public perception that there’s a banking cabal meeting in secret to plot its continued dominance over the interests of the average U.S. citizen.  Yesterday, CNBC’s David Faber interviewed Blankfein and asked about the suggestion that Donald Trump had made on October 13 in a speech in West Palm Beach, Florida that there is an international banking conspiracy undermining the sovereignty of the United States. Faber asked Blankfein: “So am I to take it that you weren’t meeting in secret with international banks and Hillary Clinton to plot the destruction of U.S. sovereignty?” Blankfein responded: “We could parse that clause by clause, but to every clause, the answer is no, we weren’t doing it. We weren’t meeting in secret and we certainly weren’t plotting destruction.” The first half of Blankfein’s answer is flatly false and he knows it. The big Wall Street banks do meet in secret and have been doing it for decades. His own General Counsel, Gregory Palm, part of the Management Committee at Goldman Sachs, is part of the secret cabal. Just five days before Blankfein made his false denial, Bloomberg News’ reporters Greg Farrell and Keri Geiger had landed the bombshell report that the top lawyers of the biggest Wall Street banks had been meeting secretly for two decades with their counterparts at international banks. At this year’s secret May meeting at a posh hotel in Versailles, the following were among the big bank lawyers in addition to Palm according to the Bloomberg report: Stephen Cutler of JPMorgan (a former Director of Enforcement at the SEC); Gary Lynch of Bank of America (also a former Director of Enforcement at the SEC); Morgan Stanley’s Eric Grossman; Citigroup’s Rohan Weerasinghe; Markus Diethelm of UBS Group AG; Richard Walker of Deutsche Bank (again, a former Director of Enforcement at the SEC); Robert Hoyt of Barclays; Romeo Cerutti of Credit Suisse Group AG; David Fein of Standard Chartered; Stuart Levey of HSBC Holdings; and Georges Dirani of BNP Paribas SA. The Bloomberg report indicates that the meetings are secret and that this is the first time their existence has been reported to the public. But this is hardly the first time there have been reports of Wall Street banks huddling in secret.

What Differentiates White-Collar Criminals From Other Executives? A Q&A With Eugene Soltes - What drives white-collar criminals? Often, these are successful people who possess great wealth, have impeccable education, and hold much influence within their respective industries, yet they risk it all by breaking the law.  Harvard Business School professor Eugene Soltes spent the last seven years speaking to and corresponding with nearly 50 prominent executives convicted of financial crimes, among them convicted Ponzi fraudsters Bernie Madoff and Allen Stanford, in attempt to answer this very question. He has spent years emailing, corresponding, and speaking to his subjects, visiting some of them in prison, even meeting them and their families, all in attempt to understand what separates honest, hardworking executives from those who choose to commit fraud or other white-collar crimes. The result of Soltes’ many frank conversations with white-collar criminals is the book Why They Do It: Inside the Mind of the White-Collar Criminal. Originally an idea that came to him nearly a decade ago, while still a PhD student at the University of Chicago Booth School of Business, the book provides an intimate peek into the mind of some of the most infamous financial criminals of their generation. It also allows Soltes to posit his own arguments regarding what drives white-collar criminals to break the law.White-collar crime, Soltes argues, is not necessarily different than other forms of criminality. Much of it has to do with the environment in which white-collar criminals operate, and the incentives they are given. Decisions to engage in criminality are made just like any other decision: as a result of pressure, intuition, and failure to see the harm. Incentives specifically play a big role in fostering white-collar crime, according to Soltes, especially when financial managers are pressured to succeed and have to make rapid decisions one after the other, their potential victims far from view. “I was doing exactly what I was incentivized to do. We wouldn’t have gone through all this trouble if we just wanted to cheat,” says Enron CFO Andrew Fastow in the book.

   Who Is Buying? Another $5 Billion Pulled From US Equity Funds, Outflows In 6 Of Past 7 Weeks - It may come as a surprise to some that as the S&P500 has remained in a tight trading range over the past month, investors continued to withdraw substantial amounts of cash. According to the latest EPFR weekly data, global equities saw another $3.9bn outflows (comprised of $6.2bn in mutual fund outflows vs $2.3bn ETF inflows), which brings the number of weekly outflows to 5 in the past 6 weeks. Of note here is that while Europe has now suffered a record record 37 straight weeks of outflows, the US has been comparably pressured, with outflows in 6 of the past 7 weeks.On a global basis, a whopping $146 billion has now been pulled across equity funds, with $79 billion in ETF inflows offsetting $225 billion in mutual fund outflows. As money was leaving equities it entered bonds, which saw not only $2.7bn inflows in the latest week, but inflows in 15 of past 16 weeks. Precious metals, the "forgotten category" benefited from $0.5bn in inflows in the last week, making that 4 straight weeks of money being allocated to PMs.

 Goldman says U.S. bondholders risk a $1.1-trillion hit if rates spike - A Goldman Sachs Group Inc. analysis says investors could be mired in a world of pain if yields on long-dated assets snap higher. Just a modest backup in rates could inflict outsized losses on bond portfolios – a sobering prospect in light of the recent jump in longer-dated bond yields that’s already eating into bondholders’ capital returns. A 1-per-cent increase in interest rates could inflict a $1.1-trillion (U.S.) loss to the Bloomberg Barclays U.S. aggregate index, analysts at Goldman calculate, representing a larger loss for bondholders than at any other point in history. With the bank predicting the sell-off in bonds has further to run, that remains “far from a tail scenario,” its analysts write. Bets on longer-maturity obligations had paid off handsomely for most of the year amid a global bond rally triggered by expectations that weak economic activity will persuade central banks in advanced economies to postpone tightening monetary policy. Asset purchases by the Bank of Japan, Bank of England and the European Central Bank helped the average maturity of new U.S. corporate bonds climb to a peak of 11.3 years in August. With average bond maturities worldwide now more than double the inflation-adjusted level of 2009, and three times that of 1994, Goldman says there’s an elevated risk of losses if rates spike higher. “We see potential for the rates market to continue to sell off, and the notional amount of duration dollars at risk is unprecedentedly large,” Goldman fixed-income analysts, led by Marty Young, wrote in the report on Monday. The effective average duration of the global bond market, as measured by the Bloomberg Barclays global aggregate index, has risen to 6.98 years, as of mid-October, compared with 6.60 years in January. Goldman’s $1-trillion estimate reflects potential losses on U.S. dollar-denominated investment-grade cash bonds and therefore may form a conservative estimate of the risks facing money markets.

Financial Repression Is Now "In Play" - The Central Bankers have clearly painted themselves into a corner as a result of their self-inflicted, extended period of “cheap money”.  Their policies have fostered malinvestment , excessive leverage and a speculative casino approach to investments. Investors forced to take on excess risk for yield  and scalp speculative investment returns, must operate in an unstable financial environment ripe for a  major correction.  A correction because of the  high degree of market correlation that likely would be instantaneously contagious across all global financial markets. Any correction more than 10% must be stopped. As a result of the level of instability, even a 10% corrective consolidation could get quickly out of control, so any correction becomes a major risk. What the central bankers are acutely aware of is:

  • If Collateral Values were to fall with the excess financial leverage currently in place, it would create a domino effect of margin calls, counter-party risk and immediate withdrawals and flight to areas of perceived safety.
  • The already massively underfunded pension sector (which is now beginning to experience the onslaught of baby boomers retiring) would see their remaining assets impaired. This could lead to social and political pressures that would be simply unmanageable for our policy leaders.
  • A falling stock market is the surest way of alarming consumers and signalling that things are not as “OK” as the media mantra  has continuously brain washed them into believing. In a 70% consumption economy, a worried consumer almost guarantees a further  economic slowdown and a potential recession.

As our western society continues to consume more than it produces, productivity is not increasing at the rate that justifies the developed nations standard of living as well as the current levels of equity markets. A possible corrective draw-down to the degree shown in this chart is simply “out of the question”!  The central bankers acutely aware of this.

 Lack of new blood casts doubt over Wells Fargo's change plan | Reuters: Wells Fargo & Co's decision not to introduce new names onto its board or into the ranks of its senior management in the wake of a sales scandal has raised questions about whether it can truly fix the culture which caused its problems. The United States' third-largest bank by assets has been plunged into crisis by revelations that its branch staff created as many as 2 million accounts without customers' knowledge in order to meet internal sales targets. John Stumpf, the bank's chairman and chief executive, left last week in response to a public outcry and the bank put Tim Sloan, a 29-year Wells Fargo veteran and Stumpf's heir apparent, into the CEO role. Once viewed as an unambiguous asset, Sloan's long tenure at the bank is now prompting questions about whether he has the necessary critical distance to overhaul an aggressive sales culture that allowed the misconduct to fester for years. "There's something wrong with Wells on a cultural basis and you'd think they'd need to bring in an outsider to fix it," said Paul Miller, an analyst with FBR Capital Markets. Wells Fargo declined comment.

California Investigates Whether Wells Fargo Committed Criminal Identity Theft -- California Attorney General Kamala Harris has launched an investigation into allegations that Wells Fargo & Co. engaged in criminal identity theft when the bank created millions of accounts without customer consent, according to the Los Angeles Times. The report is based on a search warrant, served on Oct. 5 and first obtained by the Times, in which Harris' office demands the identities and account information of California customers who had "any accounts, credit cards, life insurance, or other product or service" created without the customer's authorization.The warrant also demands the names of bank employees who opened the unauthorized accounts and the identities of the employees' managers, including "any and all communications, including email referencing" the bogus accounts.Harris' office is seeking the same information for Wells Fargo customers who do not live in California. A spokeswoman for the attorney general, Kristen Ford, said her office had no comment on an ongoing investigation. A spokesperson for Wells Fargo said the bank is "cooperating in providing the requested information." In a 14-page affidavit filed with the search warrant, California investigators indicate that they are looking into potential violations of state law banning the impersonation of another and the unauthorized use of personal information, the Times reports. Both offenses are considered felonies.

California Attorney General Launches Criminal Probe Into Wells Fargo Over Identity Theft --John Stumpf is now gone from Wells Fargo, but his - and the bank's - problems may be just starting.According to a report by the LA Times, California Department of Justice is investigating Wells Fargo on allegations of criminal identity theft over its creation of millions of unauthorized accounts, according to a search warrant  sent to the bank’s San Francisco headquarters this month. The warrant and related documents, served Oct. 5 and obtained by The Times through a FOIA request, confirm that California AG Kamala Harris, in the final weeks of a run for U.S. Senate, has joined the growing list of public officials and agencies investigating the bank in connection with the accounts scandal.  As Reuters adds, the AG warrant seeks to seize documents at Wells, and cites probable cause that felonies were committed at the bank. Harris’ office demanded the bank turn over a trove of information, including the identities of California customers who had unauthorized accounts opened in their names, information about fees related to those accounts, the names of the Wells Fargo employees who opened the accounts, the names of those employees’ managers and emails or other communication related to those accounts.  Her office is also requesting the same information about accounts opened by Wells Fargo workers in California for customers in other states.

Wells Fargo Fiasco Lays Bare a Broken Identity System -- Jon Corzine taught us we can't trust people with our money. Marissa Mayer showed we can't trust others with our emails. John Stumpf and Carrie Tolstedt have now demonstrated we can't trust anyone with our identities. See what I did there? I personalized the problem. I bet it hooked you in, but it's a nasty trick that can lead to scapegoating and witch hunts without finding any lasting solutions. The people aren't the problem here.  Let's start over: The Wells Fargo scandal is an example of what happens when a system requires you to effectively hand over the keys to your identity to strangers as if you were giving them your car keys. News broke Wednesday that California's attorney general, Kamala Harris, is investigating Wells Fargo on allegations of criminal identify theft. It's unclear how strong a legal case Harris may have. But even if she's grandstanding, she's made an important connection. As most readers know, more than 5,000 branch employees created roughly 2 million sham accounts under the watch of former Chief Executive Stumpf and former retail chief Tolstedt. Regardless of whether that conduct met a legal definition of identity theft, it clearly involved the unauthorized use of personal information. (A spokesman for Wells Fargo would say only that the bank is cooperating with the request for information,) To be clear, I'm not making an argument for prosecuting anyone. This isn't another post about who should be fired or whose pay should get clawed back or "ZOMG why hasn't anyone gone to jail yet?" Leave that to the tarantulas. Harsh punishment might deter banker misbehavior. And properly aligned sales incentives would surely go a long way in preventing debacles like this. But a fundamental vulnerability remains: We have no control over our personally identifiable information. We have to trust countless third parties to protect it and not to abuse it. And when someone attempts to misuse our data, whether it's a cyberthief or a bank employee desperate to meet sales quotas, we don't find out until after the fact, if at all.  That's a broken system.

The Wells question is popping up on other banks’ 3Q calls -- It's the question bank executives should be ready to answer this earnings season.  Apart from fielding the usual queries about prospects for loan growth and strategies for controlling costs, senior executives are already being grilled on how their banks compensate front-line employees. Citigroup and JPMorgan executives were asked to address their pay practices on their third-quarter earnings calls with reporters and analysts Friday, and First Republic Bank leaders fielded similar questions on a call with analysts Thursday. Compensation has become a hot topic since news broke last month that retail bankers at Wells Fargo opened as many as 2 million phony checking and credit card accounts in order to meet sales targets. The scandal cost the bank $185 million in fines, led to the resignation of Chairman and CEO John Stumpf and made Wells Fargo the butt of jokes on late-night television.  Wells has responded by eliminating sales goals in its branches, but its reputation is so tarnished that many consumers are taking their business elsewhere. The bank said Friday that the number of new checking accounts it opened in September was down 30% from the previous month and 25% from September 2015. Credit card applications were also down 30% from just a month earlier. What worries investors and analysts is that Wells may not be the only bank where employees have bent the rules in an effort to pad their pay.  Over the past five years, the Consumer Financial Protection Bureau has received more than 30,000 complaints from consumers who claimed that their banks opened accounts in their names without authorization, according to several news reports. Since the Wells scandal broke last month, employees at several large banks have gone public with stories of being pressured by management to enter false information or even set up phony accounts in order to meet monthly sales targets.

J.P. Morgan's CFO says bank has found 'a couple of cross-selling' issues -  J.P. Morgan Chase's CFO on Friday said the bank has identified a few instances of problems with its employees' cross-selling practices, but added that the problems discovered weren't "systemic." J.P. Morgan's financial chief, Marianne Lake, during a call to discuss its quarterly results with the media, said the bank conducted a "deep dive" into its sales practice in the aftermath of a fake-account scandal that resulted in Wells Fargo & Co.'s CEO John Stumpf retiring on Wednesday. For J.P. Morgan's part, the bank conducts regular reviews of its sales tactics but acknowledged that a recent look into its employee-incentive programs and sales techniques was a direct response to the public uproar over Wells Fargo scandal. She said J.P. Morgan's issues didn't rise to the level where the bank would be concerned about widespread problems at its retail bank branches. "We can't have zero defects...if we find someone who's abusing our code of conduct we will take action," she said. Wells Fargo WFC, +0.49% faces federal and state probes after it agreed last month to pay a $185 million fine to settle charges that its employees opened as many as 2 million unauthorized accounts, often using fake names to meet sale goals. The San Francisco bank, and its new CEO Tim Sloan, are expected to offer more details on its strategy to restore its reputation when it conducts an earnings call with analyst at 10 a.m. Eastern Time Friday. But its sales practices have brought to light concerns about banks' high-pressure sales practices, which offer richer bonuses to staff who have sold the highest number of products and services to clients.

How 401(k) Plans Stack the Deck to Get Chump Investors to Sign Up for Doggy Sponsor Funds - naked capitalism - Yves here. The Harvard Law School Forum on Corporate Governance and Financial Regulation flagged an important recent paper that describes yet another way that 401(k) plans fleece investors. This new ruse it exposes should give members of the public cause for pause as Wall Street denizens like Blackstone’s Tony James, who is a leading adviser of Hillary Clinton, prepare to insert a big tube directly in veins of all American workers to suck money into mandatory retirement accounts. As we discussed in a post earlier this week, this scheme is a two-fer: a stealthy way to displace Social Security over time, and immediately enrich the purveyors of high-fee strategies with poor recent performance and/or dubious prospects, namely hedge and private equity funds. We’ve embedded the paper, It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) Plans, at the end of this post. It looks into whether 401 (k) plans engage in an abuse that occurs on a widespread basis at brokerage firms: having salesmen (induced by bonus sales credits) put customers into inferior in-house mutual funds over better performing outside products or index funds. Bear in mind that the rise of “wrap accounts” was to prevent retail broker churning of accounts that invested in individual securities, and for mutual fund accounts, to reward the firm well enough to as to remove the incentive to taking advantage of their discretionary authority. But the howling from brokers and other purveyors of retail investment services over the Administration’s plan to impose a fiduciary duty on brokers managing retirement assets says that there is still a yawning chasm between retail firms’ claims about how they put customer interests first versus reality.  This is why the article by Veronika Pool, Clemens Sialm, and Irina Stefanescu shows yet another way that financial firms prey on unsophisticated investors.  Mutual funds manage nearly half of 401 (k) assets. Many operators of fund families (think Fidelity) are in a conflict-of-interest position by being the plan administrator. That means they are in the catbird seat of determining which funds are on the menu presented to plan participants. The author created a large custom data set to investigate whether plan investors were stuffees by virtue of being presented with inferior choices, specifically, adding funds from the administrator’s in-house roster and not removing them even when they proved to be dogs.  Now in theory, investors might be vigilant enough to recognize that their interests are not being well served and will avoid the lousy funds from the administrator’s fund families. But not surprisingly, these fund operators persist in these bad practices because they work.

Enough Already. Money-Market Funds Aren't Shadow Banks | Bank Think -  In July 2014, the U.S. Securities and Exchange Commission enacted sweeping new rules for money-market funds, setting an aggressive implementation deadline: Oct. 14, 2016. Though the rules required significant operational changes, money-market funds have met the new requirements on time. As a result, today's money-market funds are very different products than their precrisis predecessors. The reforms, which are meant to prevent a repeat of the heavy redemptions from money-funds brought on by the banking crisis of 2008, have added layers of transparency and redundant safeguards that more than adequately address any risks that may have existed. Moreover, the reforms have prompted a large shift in assets from prime to government money market funds. Yet with all of these new rules, some still clamor for further regulation, using disparaging terms like “shadow banking” to spark fear in the minds of regulators and investors alike.  Enough already. Money-market funds are not shadow banks. They are fully transparent, regulated investment vehicles that have been a reliable cash management tool for millions of individuals and institutions for decades. Calls for additional layers of burdensome regulation over this industry are not only premature, but unwarranted.  Though sweeping in scope, the new rules are actually just the latest in a series of SEC regulations that have been designed to reduce risk in money-market funds following the financial downturn of 2008.The latest rules add to an earlier, comprehensive rulemaking in 2010, which set a number of new standards — including liquidity requirements and stress tests — to enhance the resiliency of money-market funds. These reforms were tested and proven in 2011, when Europe's sovereign debt crisis and the federal debt-ceiling crisis rattled markets, and showed their value again after the Brexit vote in the United Kingdom.

Is A Fintech Charter On the Horizon? - The most interesting statistic I heard last week at the Association’s annual Northeast Economic Forum was that 48% of new mortgages last year were originated by nonbanks. Technology has come to mortgage lending and the companies that emphasize electronic mortgage applications and processing are beating the pants off lenders that rely on having people apply at their brick-and-mortar branches. I was thinking about this factoid this morning as I read an interview with the OCC’s General Counsel, Amy Friend, in the American Banker.  The OCC is rolling out plans for creating a special charter for fintech companies. Now here is a regulator that sees the writing on the wall and wants to remain relevant.Why would companies want to be regulated by the OCC? The OCC says that the idea has appeal to a lot of  companies that don’t want to be regulated by fifty different state regulators.  Anyone who has taken a look at New York’s proposed cybersecurity regulations can understand why.She explains that “We can provide a single charter with some uniformity, and that makes it very appealing. But, we also take that authority very seriously, and understand its implications. The comptroller has made it clear that if we decide to grant a national charter in this area, the institution that receives the charter will be held to the same high standards of safety, soundness and fairness that other federally chartered institutions must meet.” She further explains that institutions might want to get both a traditional bank charter and take deposits in which case they will also need to be regulated by the FDIC. Why not the NCUA as well?The plan is still in the conceptual stages but in March the OCC released a white paper on supporting financial innovation in the banking system  and last month it p roposed regulations clarifying its  authority to wind-down bankrupt  non-depository financial institutions  that are not insured by the Federal Deposit Insurance Corporation . The regulation is seen as a first step in explaining how the OCC could oversee bankrupt Fintech charters.

Towards a national fintech charter: OCC proposes receivership rule for uninsured banks - On September 13 2016 the Office of the Comptroller of the Currency (OCC) published(1) a notice of proposed rulemaking and a request for public comment introducing a regulatory regime to govern the receivership of national banks that are not insured by the Federal Deposit Insurance Corporation (FDIC). While the proposed rule would apply to the existing pool of 52 uninsured national trust banks,(2) its broader impact would be to establish a receivership regime that supports the creation of new forms of limited purpose, uninsured banks for the financial technology (fintech) industry.While the OCC has not previously acted to formalise that authority through regulation, its consideration of limited purpose, uninsured charters for fintech companies has led it to consider the receivership framework for such entities in greater detail. As the OCC says in the proposed rule: "As part of the agency's initiative on responsible innovation in the Federal banking system, the OCC is considering how best to implement a regulatory framework that is receptive to responsible innovation, such as advances in financial technology. In conjunction with this effort, the OCC is considering whether a special purpose charter could be an appropriate entity for the delivery of banking services in new ways. For this reason, the OCC requests comment on the utility of the receivership structure in the proposed rule for receivership of such a special purpose bank."(4) The proposed rule is brief. The OCC's grounds for appointing a receiver, which could be the OCC or another governmental entity or third party, would parallel the FDIC's with respect to an insured bank(5) and would require public notice of the receiver's appointment. Unlike an FDIC receivership, however, the administrative claims process would not be exclusive – claimants could submit their claims for judicial review in addition to, or as an alternative to, filing a claim with the OCC. Claims disallowed by the OCC could be brought to a court for de novo review. This potential for dual tracking creates some significant practical challenges for managing such a receivership

OCC Fintech Charter: Will Other Regulators Play Ball? | American Banker: Such a charter comes with a bevy of legal and policy questions to resolve, including whether parent companies of firms that obtain a fintech charter would have to subject themselves to oversight by the Federal Reserve Board. State regulators, meanwhile, fear a new charter could erode their ability to regulate firms within their jurisdictions. "In applying the framework, we will collaborate with other regulators," Comptroller of the Currency Thomas Curry said in a speech on fintech last month.

The Case Against a Federal Fintech Charter - How do you define fintech?

  • Is it back-office technology that supports normal business operations?
  • Is it electronic money transmission or new types of currency?
  • Is it a third-party service provider that can fulfill bank functions?
  • Is it a new business model that disintermediates existing players?

The answer to all of these questions is "yes." A definition so broad and all-encompassing presents a challenge: how are state financial regulators — those on the front lines of a wide range of financial services — supervising fintech? At the Illinois Department of Financial and Professional Regulation, our regulatory approach has been to focus on business activity, not technology. To do the reverse would be like the tail wagging the dog.   In using this approach, we have found that most fintech firms can be placed in the context of existing law. For instance, if online companies are engaged in moving money from account A to account B — think PayPal — we apply money transmission laws. If other online companies are offering home loans — think Quicken Loans — we apply mortgage lending laws. And so on. States routinely examine their toolkit — existing laws and regulations — and determine whether new tools are needed. For example, the state of North Carolina recently approved a virtual currency bill whereby customer balances should be held in "like kind." In other words, rather than holding the present value of bitcoin in cash — a difficult currency transfer calculation — customer balances can be held in bitcoin. As regulators, we embrace technology to simplify the state licensing process. Financial firms can submit licensing information one time to multiple states through the Nationwide Multistate Licensing System, a form of "regtech" operated by the Conference of State Bank Supervisors. Consumers, in turn, can use the NMLS consumer access website to view the licensed entities and any regulatory actions against the financial providers that are licensed to do business in one or more states. All of this reflects the value of the state regulatory system: we experiment; we see what works; we replicate the model in other states; and then we standardize the model nationwide. The progression is always the same: as business models mature, so do regulatory regimes. Lately, there is a lot of discussion on whether or not a regulatory regime for fintech should include a new federal business charter. Federal charters confer significant advantages, expectations and risks. Historically, these charters have been the exception, not the rule.

Will Bots Save or Create Work for Banks? Yes | American Banker: Large banks all over the world are piloting the use of robotic process automation, also known as bots, and getting results. But the efficiency gains have come at a cost. Bots are small pieces of code designed to do one task formerly done by a human, such as opening an application, capturing data, and entering that data in another application. Financial institutions are using them in account opening, operations, anti-money laundering compliance, customer service, and elsewhere. Bankers on three continents report faster booking of transactions, expense savings, improved risk controls and better management of the workforce. "The technology works," said Dean Mazboudi, cofounder of Deutsche Bank Labs, the bank's innovation arm. His company has been doing proofs of concept with robotic process automation for a while, mostly in the back office. "In every case we experimented with, we saw positive results," Mazboudi said. "We saw pure improvements in the process by virtue of putting better controls around a process." (The bank is using WorkFusion's software.)  The bot experiments come at a time when banks are starting to use various other kinds of artificial intelligence to improve fraud detection, to identify cybercrime, to handle compliance chores,  and to make lending decisions. This new technology comes with unique implementation and deployment challenges. Bots raise security concerns, for instance. They also require a computing environment in which they can be programmed and tested and need to be designed precisely and be able to address exceptions. And bankers can't do this alone — they'll need help from operations, IT, and outside experts.

CFPB Denounces 'Wrongly Decided' PHH Ruling | American Banker: The Consumer Financial Protection Bureau decried an appeals court ruling last week that found its single-director structure unconstitutional, saying the opinion was "wrongly decided" and had "no basis in the text of the Constitution or in Supreme Court case law." In a brief filed October 14 in an unrelated case, CFPB v. Intercept Corp., the agency said that a motion by the defendant to dismiss charges based on last week's ruling by the U.S. Court of Appeals for the DC Circuit should be ignored because that ruling was erroneous and will be overturned on appeal. The ruling in PHH v. CFPB, the agency argued, relied on a novel and heretofore unconsidered reading of the Constitution that determined that independent commissions may not be headed by a single director. "This principle has no basis in the text of the Constitution or in Supreme Court case law," the CFPB said in its Intercept brief. "The panel decision was wrongly decided and is not likely to withstand further review." The agency said even if the PHH decision had more merit, it would not have bearing in the Intercept case since the CFPB has not yet had an opportunity to prepare an appeal to the D.C. Circuit en banc. Further, the case would not apply to the eighth circuit, where the Intercept case is being heard. The CFPB has thus far not made any public statements about whether it intends to appeal the PHH decision. During a public appearance in Philadelphia on Tuesday, CFPB Deputy Director of Enforcement Jeffrey Ehrlich reportedly declined to say whether the agency would appeal, saying the agency would make no advance notice of its decision. Nonetheless, the agency is widely expected to challenge the opinion, and the brief in the Intercept case appears to signal that such a move is all but inevitable.

Consumers Need Protection from the CFPB | Bank Think -- A new paternalism is on the rise.  Agencies like the Consumer Financial Protection Bureau seek to identify perceived shortcomings on the part of the consumer rather than address shortcomings in the marketplace. In other words, consumers are now being regulated because they are considered to be less attentive to detail — and therefore more likely to make harmful choices — than government officials.. According to some experts, consumers tend to save less than they should. They tend to overestimate their future ability to pay the bills and underestimate the debt obligations they place on themselves when taking advantage of credit opportunities.   One of the latest targets of such regulators is payday lending. Payday lenders usually offer a two-week loan, with the interest plus fees of that loan amounting to around $15 for every $100 borrowed. The loans are typically paid back in full around the time of the borrower's next payday.  Nonetheless, the CFPB has released a 1,300-page statement excoriating this industry for what is seen as predatory lending that takes advantage of the average borrower's low cognitive ability. The policy response is yet to be defined but it will likely include measures like limiting the number of rollovers. In reality, the profile of a typical payday loan customer is someone who has low income and lacks access to more mainstream credit products like credit cards and home equity lines. Their cognitive abilities seem fairly consistent with other credit users; only their economic circumstances differ. In effect, the alternatives available to payday lending customers do not include the type of credit products regulators enjoy. Rather, they include a series of less desirable credit products, such as overdraft fees, credit card cash advances, pawnshops or selling off their possessions. Removing one or more of these sources of credit doesn't fix the problem; it only forces customers into a less preferred alternative.

Deutsche Bank Reported to Mull Partial U.S. Retreat to Cut Costs - Bloomberg: Deutsche Bank AG, Germany’s biggest bank, is considering options such as scaling back U.S. operations as part of a wider overhaul to lower costs, according to several media reports. A U.S. pullback was already discussed by the supervisory board and would be more likely than a sale of the asset-management business, Sueddeutsche Zeitung reported, citing an undisclosed person familiar with the matter. No decision has been taken, according to the German newspaper. Deutsche Bank doesn’t plan a full U.S. retreat, according to Reuters. Renee Calabro, a spokeswoman for Deutsche Bank in New York, declined to comment. Chief Executive Officer John Cryan is under pressure to lower cost further as mounting legal expenses threaten to undermine profitability. While a sell-off in the shares accelerated last month, when the U.S. Justice Department requested $14 billion to settle a probe tied to residential mortgage-backed securities, Cryan has said he doesn’t plan to raise capital and expects U.S. authorities to scale back their initial demand. The shares closed at 12.24 euros on Friday, up 2.04 percent on the day. The company has lost about 46 percent of its market value this year, making it the fourth-worst performer on the Bloomberg Europe Banks and Financial Services Index, which slipped 22 percent. A report by Germany’s Die Welt am Sonntag that Deutsche Bank may be forced to shrink its U.S. activities as part of a deal with the Department of Justice was disputed by one person briefed on the matter. The person, who asked not to be identified because the matter is private, said the lender is reviewing its U.S. operations and capital requirements but no decision is imminent. Deutsche Bank had 10,842 employees in North America at the end of 2015, about 10 percent of the 101,104 it employs worldwide. Under Cryan’s restructuring plans announced last year, the lender is seeking to eliminate 9,000 jobs, including 4,000 positions in its home market.

Deutsche Bank Forced To Shrink US Operations As Part Of DOJ Settlement - Back in 2008, when the business cycle was sharply turning, leading to a dramatic shortage of business for the major US investment banks which in the preceding years had gone on a hiring spree, one solution was to "eliminate" a key competitor. This, according to some, was the underlying motive behind the elimination of the "outsider" banks, first Bear Stearns and then fixed income giant Lehman Brothers. Of course, their failure unleashed a series of unprecedented events (or as some have also dubbed them, "fringe benefits" for the banking sector), which involved a highly unpopular multi-trillion taxpayer bailout, and as a result the elimination of competitors - even with the government's blessing - is now generally frowned upon. However, merely crippling them... now that's another story.And being crippled is what may soon happen to Deutsche Bank, whose next chapter in its melodramatic saga will involve the bank exiting most if not all US operations. According to a report in German newspaper Welt am Sonntag, Deutsche Bank may be "forced" to shrink its U.S. activities as part of the settlement deal with the DOJ.Die Welt, sourcing unidentified people in the banking industry, said that radical changes to the business model are typical requirements in settlement arrangements with the U.S. government. Deutsche Bank “must clarify one or two things” before an agreement can be struck, the person said, cited by Bloomberg. Germany’s largest bank will probably give up part of its U.S. investment banking business, the newspaper cited unidentified people in the banking industry as saying. As Reuters adds, while abandoning the United States, its most important market, altogether was very likely out of the question for the bank, it could consider scaling down its activities, so as to focus more on the needs of German corporate clients overseas. A U.S. pullback is among options that were discussed by the supervisory board and would be more likely than a sale of the asset-management business, German daily Sueddeutsche Zeitung reported Friday.

Community Banks to Elizabeth Warren: We Need Your Help - Sen. Warren recently received the media's focus as she questioned a member of the United States banking sector. During this questioning, she was passionate, inquisitive and forceful in her line of questioning. Our industry condemns dishonest or unethical practices at any FDIC-insured bank, anywhere, anytime. Trust is the very foundation of the banking profession. I know that firsthand as an immigrant to the United States because I saw how bankers helped and guided my Spanish-speaking parents in this new land. My immigrant parents eventually became homeowners because of their trusted advisor at an FDIC-insured bank. That happens each and every day in our country. We are experiencing significantly weak economic recovery and growth by historical standards. Community banks play a pivotal role in their state and national economies. They make 50% of the small-business loans made in America. While the small-business sector is the heart and soul of our economy, small businesses are down by 25% over the last six years and many community banks have merged or been acquired. Fewer community banks may mean fewer small businesses. Is there perhaps correlation? Could it all be related to the avalanche of Dodd-Frank rules? During Warren's tenure in the Senate, she has questioned our nation's larger banks, but what has she done to help our community banks? Between 1995 and 2007, our country averaged 125 startup community banks per year, a period that included both good times and bad. That was before President Obama and the 2010 Congress enacted the Dodd-Frank Act. Since the law's passage, we have had only three new community banks chartered in the U.S. The banking industry has been advocating for a tailored regulatory banking system for more than five years. Community and regional banks have been calling for Dodd-Frank regulatory relief on Capitol Hill. However, Congress and President Obama have failed to act on those requests. Larger banks have also pushed for relief for community and regional banks. How do I know this? As president of the Florida Bankers Association, an association that represents institutions of all sizes, I have seen our larger bank members walk the hallways of Congress advocating for our community and regional banks. With community banks playing such a pivotal role in business startups, why hasn't Warren pushed to achieve regulatory relief for our community banks? Why hasn't she pushed for a tailored banking regulatory system that creates tiers based on a bank's activity?

 Banks adopt blockchain for mortgage valuation system - FT -- Bank of China and HSBC are among a group of lenders aiming to launch mortgage services in Hong Kong using blockchain — the decentralised database technology behind the digital currency bitcoin. So far, Bank of China (Hong Kong) has led tests on a property valuation system for home loans based on blockchain technology, according to Duncan Wong, vice-president of financial technologies at Astri, the government-backed research institute working on the system. He said the bank plans to go live with it next month. It will use the secure database capabilities of blockchain to provide quick property valuations for mortgage applicants in Hong Kong. At present, when customers apply for mortgages, the banks hire surveyors to value the property being bought. But as different customers shop around for mortgages, the same survey work is often conducted multiple times on the same property. Now, blockchain can be used to create a decentralised network of banks and surveyors through which the latest valuations can be listed, verified and shared — in a matter of seconds. “To the best of our knowledge, this will be the first production-grade [blockchain] mortgage system to integrate with a bank,” Mr Wong explained. HSBC and several other banks in the city have also “aligned the data requirements to be posted in blockchain”, according to one person involved in the project, although they are yet to finalise plans for joining the system. Adopting blockchain for banking products such as mortgages represents a major step in the use of new technology for traditional banking businesses. Until now, banks have talked up the potential uses of blockchain but have also kept it at arm’s length, fearing repercussions from regulators.

Nonbank Lenders Fearful of Privatized Common Securitization Platform - If the Common Securitization Platform is turned over to a private, nonprofit entity, it could be used to give large banks control over the real estate finance process, warned an industry trade group. In 2015, Sen. Richard Shelby, R-Ala., introduced a bill that included language calling on the Federal Housing Finance Agency to transition the CSP to private ownership. That measure died, but the provision was later included in the Senate's version of a Treasury appropriations bill, before being stripped out of the final version. The CSP is jointly owned by Fannie Mae and Freddie Mac and will serve as a standard mechanism for mortgage-backed securities issued by the government-sponsored enterprises. Both Senate bills called on the potential new owner to expand the CSP by allowing private companies to issue their own MBS. The Community Home Lenders Association supports the creation of the CSP, but not its privatization out of concerns that it would make it more difficult for small and midsize mortgage companies to compete with large banks.With a privatized CSP, the big banks will use "their securitization muscle and expertise to control the GSE origination market" and cut out the independent mortgage banker, said Scott Olson, the CHLA's executive director. Olson is concerned that Congress may include similar language in one of the catch-all bills that typically get passed at the end of a session. The CHLA and other organizations, including the NAACP, sent a letter to Congress on Sept. 19, expressing their concerns.Fitch Monitoring Nearly $11B in CMBS Following Hurricane: Fitch Ratings has identified more than 1,000 properties in commercial mortgage-backed securities transactions that had exposure to Hurricane Matthew. The 1,345 properties carry an aggregate loan balance of $10.65 billion and are located across 347 Fitch-rated CMBS deals. By property type, retail and multifamily represented the largest shares of the potentially affected properties, with 31% and 29%, respectively. Another 16% of the properties are hotels, while 11% are office properties. North Carolina had the largest number of properties and share of the aggregate loan balance that was exposed to the hurricane, with 402 properties that had 34% of the loan balance. South Carolina followed with 304 properties and 23% of the loan balance. Next was Virginia with 19% of the loan balance and 251 properties. Florida and Georgia had 232 properties and 156 properties with exposure to the storm, respectively, representing 29% of the loan balance altogether.

National Mortgage News - Mortgage Industry Divided Over GSE Risk-Sharing Deals: The mortgage industry remains deeply uneasy with efforts by Fannie Mae, Freddie Mac and their regulator to experiment with front-end credit risk transfers. Six trade groups sent a letter recently to the Federal Housing Finance Agency, backing its efforts to test various credit risk transfers, which are designed to attract private capital into the mortgage market and reduce taxpayer’s potential exposure to losses. The groups, including the American Bankers Association, Mortgage Bankers Association and the Financial Services Roundtable, argue that FHFA should continue to experiment with both front-end and back-end deals. "It is not yet the time and may never be the time to pick a winner," the Oct. 13 letter says. Yet individual members within that group, like the ABA, expressed reservations about front-end deals, which is made before the loans are originated or securitized. While some see front-end deals as a better way to price the risk of default for loans, community banks and other small lenders fear they will be left behind. They are concerned that large originators will cut sweetheart deals with the government-sponsored enterprises while they do not receive a discount. ABA is particularly skeptical of front-end risk-transfer deals that are coupled with deeper mortgage insurance. Such transactions can involve reductions in guarantee fees paid by originators or other concessions. It would "likely create the conditions for large lenders to effectively benefit from volume discounts, which have proven troublesome in the past and which have been remedied through the conservatorship by FHFA," said Joseph Pigg, senior vice president at ABA, in an Oct. 13 comment letter to FHFA.

Fannie to Offer Day 1 Rep & Warranty Relief: Fannie Mae is preparing to offer immediate representation and warranty relief to lenders that use its suite of automated quality-assurance technology. The benefit will be unveiled as part of a marketing campaign dubbed "Day 1 Certainty." That name will serve as an umbrella brand for a variety of Fannie Mae tools, including Desktop Underwriter, Collateral Underwriter and EarlyCheck, according to sources familiar with the initiative. The government-sponsored enterprise filed applications to register the service marks "Day 1 Certainty" and "Day One Certainty" with the U.S. Patent and Trademark Office in July. The filings describe "desktop computer software in the field of mortgages, namely, for use in providing a waiver or an end to a representation or warranty obligation in an electronic mortgage loan system." In addition, the website domains Day1Certainty.com and DayOneCertainty.com were registered this month by advertising agency Bloomfield Knoble. The Dallas firm's previous work for Fannie Mae includes KnowYourOptions.com, a website for distressed borrowers; the Home by Fannie Mae mobile app; and the redesign and rebranding of HomePath.com, Fannie's real estate owned property sales website. The circumstances under which representation and warranty waivers will be granted are not completely clear. Some aspects of the loan file that lenders currently warranty may be eligible for immediate waivers, while others may not. The Federal Housing Finance Agency is said to have approved the plan only this week, and an official announcement is expected next week during the Mortgage Bankers Association's Annual Convention in Boston.

How to Keep Fraud Out of 3% Down Mortgages: As lenders expand their low-down-payment mortgage programs, they must be vigilant about loan application fraud risk. Since the second quarter of 2013, mortgage application fraud risk on purchase loans with a loan-to-value ratio over 80% has increased almost 29%, according to CoreLogic. Going forward, the fraud risk will grow as an increased amount of higher LTV purchase loans come into the pipeline and underwriting criteria loosens, said Bridget Berg, senior director of fraud solutions strategy at CoreLogic. But the risk this data exposes should be treated as a warning, not a stop sign. "It is not meant to be an alarming, 'Oh my gosh, we need to not do low down payment loans.' [Lenders] need to have enough monitors in place so they know how to do them safely and don't get into some of the situations that caused the housing crisis," she said. The government-sponsored enterprises reintroduced conventional 3% down payment mortgages in late 2014, but those programs have been slow to gain significant volume. So both Fannie Mae and Freddie Mac have worked with banks on creating programs looking to expand the market. Bank of America, in conjunction with Self Help Credit Union and Freddie Mac, introduced the Affordable Loan Solution back in February. In May, Wells Fargo came out with its yourFirst Mortgage, a variation on Fannie Mae's HomeReady loan. Alterra Home Loans and New American Funding are working with Freddie Mac on a pilot program called Your Path. It is prudent of Freddie Mac to run multiple tests in a controlled environment with different lenders to assess the performance risk of these loans and to assess how well they work to provide liquidity

Ohio foreclosures down sharply in September -- A steep decline in the number of foreclosure filings in Ohio last month helped drive down U.S. foreclosure activity to its lowest level in more than a decade, according to figures released today by housing market tracker, RealtyTrac. There were 3,801 Ohio properties with foreclosure filings in September — down 22 percent from August, and down 36 percent from the same month a year ago, according to RealtyTrac’s latest foreclosure report released Thursday. That meant one in every 1,351 Ohio households had some sort of foreclosure filing last month, such as a default notice, scheduled auction or bank repossession, ranking the state No. 11 on the list of states with the highest foreclosure rates. Still, the current foreclosure rate in Ohio represents a stark contrast to peak of the housing crisis in 2010 when about one in 99 households statewide had at least one foreclosure filing, ranking the state among the top three states for foreclosures in the country, according to RealtyTrac.

 Public Housing Isn't Wasted on the Poor - Noah Smith - In the 1930s, when U.S. started to build public housing, it was focused in the inner cities, because that’s where lots of poor people lived and worked. In recent decades, public housing is more about giving poor people vouchers, which allows them to move into the suburbs. As a result, poverty in the U.S. is no longer mainly an urban phenomenon.But some people label public housing a failure. Is that true? Does building places for poor people to live actually hurt them by concentrating poverty and allowing social ills such as drugs and crime to proliferate? There’s reason to believe that the latter could happen. Many social problems have so-called network effects.  Since poor people are more likely to be victimized by gangs, burglars and extortionists, as well as other nefarious characters, this means that concentrating poverty makes victimization that much easier. Also, poor people probably don’t provide the best role models for other poor people -- if they lived around middle-class people, poor folks might be inspired to climb into the middle class, or might better understand how to achieve upward mobility. That’s the thinking behind initiatives like the Moving to Opportunity program, which gives incentives for poor people to relocate to higher-income neighborhoods. Research shows that Moving to Opportunity has had some success -- kids who participate in the program grow up less poor. It turns out that poverty isn’t just a function of individual characteristics like natural ability or personal preferences -- your likelihood of staying poor depends on who your neighbors are. Network effects matter.

 It s Time to Get Real About the Home Affordability Crisis: Buying a home is becoming less and less affordable. While wage gains managed to outpace home price appreciation earlier this year, in recent months the tide has shifted against affordability, according to Attom Data Solutions. "The big takeaway is that affordability is worsening," said Daren Blomquist, an Attom senior vice president. The real estate data company's affordability index was below normal in 25% of all counties nationwide, the highest level of unaffordable markets recorded since the third quarter of 2009. And this shift away from affordability isn't just happening in the country's most expensive ZIP codes. "It's not just the San Francisco's and Brooklyn's of the world that are having this affordability issue," Blomquist said, listing Denver, Dallas and even some parts of the Detroit metropolitan area as regions where affordability has dropped below normal. Consequently, lenders need to learn how to read this data properly to better gear their strategy to the prevailing economic trends. Affordability will pose a challenge to lenders, Blomquist said, because it's going to mean a weakening in demand for purchase loans. On the other hand, home equity line of credit originations are spiking, which presents an opportunity for lenders who can get into this business, he said. Another opportunity that presents itself based on the data is lending to investors, who are making up much of the purchase demand in the more affordable markets across the country."We're in a new world where homeownership rates are staying pretty low and not budging up very much, so a much bigger piece of the market is investors who are buying homes as investment properties or rentals," Blomquist said.

MBA: "Mortgage Applications Slightly Increase in Latest Weekly Survey" -- From the MBA: Mortgage Applications Slightly Increase in Latest MBA Weekly Survey Mortgage applications increased 0.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 14, 2016. This week’s results included an adjustment for the Columbus Day holiday. ... The Refinance Index decreased 1 percent from the previous week. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index decreased 7 percent compared with the previous week and was 13 percent higher than the same week one year ago.  ...  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to its highest level since June 2016, 3.73 percent, from 3.68 percent, with points increasing to 0.36 from 0.35 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.  The first graph shows the refinance index since 1990.  Refinance activity has increased this year since rates have declined.  Since rates are up a little recently, refinance activity has declined a little.  The second graph shows the MBA mortgage purchase index.  The purchase index was "13 percent higher than the same week one year ago".

New Home Purchase Apps Rise in September: MBA: Loan applications for new home purchases rose 3% in September over the previous year, but continued year-over-year growth could be subdued for the rest of 2016, according to the Mortgage Bankers Association. New single-family home sales occurred at an estimated seasonally adjusted annual rate of 593,000 units in September, a 1.3% dip from August, the MBA's Builder Application Survey released on Thursday said. When compared with August, applications for new home purchase loans declined 7%, but that change is not seasonally adjusted. "The monthly decline in mortgage applications in September is largely attributable to typical declines in building activity this time of year," Lynn Fisher, the MBA's vice president of research and economics, said in a news release. "That said, builders are facing headwinds from rising labor costs. Looking forward, year-over-year growth in applications is likely to remain muted for the balance of 2016." Conventional loans made up 68.8% of these applications, while Federal Housing Administration loans represented a 17.5% share. Additionally, USDA loans composed 0.9% of applications and VA loans 12.7%.

 FNC: Residential Property Values increased 5.7% year-over-year in August -- FNC released their August 2016 index data.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 0.5% from July to August (Composite 100 index, not seasonally adjusted).   The 10 city MSA increased 0.6% (NSA), the 20-MSA RPI increased 0.5%, and the 30-MSA RPI also increased 0.5% in August. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).  Notes: In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data. The index is still down 9.6% from the peak in 2006 (not inflation adjusted). This graph shows the year-over-year change based on the FNC index (four composites) through August 2016. The FNC indexes are hedonic price indexes using a blend of sold homes and real-time appraisals. Most of the other indexes are also showing the year-over-year change in the mid single digit range.

Existing Home Sales increased in September to 5.47 million SAAR -From the NAR: First-time Buyers Steer Existing-Home Sales Higher in September --Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, hiked 3.2 percent to a seasonally adjusted annual rate of 5.47 million in September from a downwardly revised 5.30 million in August. After last month's gain, sales are at their highest pace since June (5.57 million) and are 0.6 percent above a year ago (5.44 million)....  Total housing inventory at the end of September rose 1.5 percent to 2.04 million existing homes available for sale, but is still 6.8 percent lower than a year ago (2.19 million) and has now fallen year-over-year for 16 straight months. Unsold inventory is at a 4.5-month supply at the current sales pace, which is down from 4.6 months in August. This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993. Sales in September (5.47 million SAAR) were 3.2% higher than last month, and were 0.6% above the September 2015 rate. The second graph shows nationwide inventory for existing homes. According to the NAR, inventory increased to 2.04 million in September from 2.01 million in August. Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory. Inventory decreased 6.8% year-over-year in September compared to September 2015. Months of supply was at 4.5 months in September. This was above consensus expectations. For existing home sales, a key number is inventory - and inventory is still low.

Existing-Home Sales Increased in September Due to First Home Buyers --  DShort -- This morning's release of the September Existing-Home Sales increased from the previous month to a seasonally adjusted annual rate of 5.47 million units from a downwardly revised 5.30 million in August. The Investing.com consensus was for 5.35 million. The latest number represents a 3.2% increase from the previous month and a 0.6% increase year-over-year. Here is an excerpt from today's report from the National Association of Realtors. Lawrence Yun, NAR chief economist, says the two-month slump in existing sales reversed course convincingly in September. "The home search over the past several months for a lot of prospective buyers, and especially for first-time buyers, took longer than usual because of the competition for the minimal amount of homes for sale," he said. "Most families and move-up buyers look to close before the new school year starts. Their diminishing presence from the market towards the end of summer created more opportunities for aspiring first-time homeowners to buy last month." "Inventory has been extremely tight all year and is unlikely to improve now that the seasonal decline in listings is about to kick in," added Yun. "Unfortunately, there won't be much relief from new home construction, which continues to be grossly inadequate in relation to demand." [Full Report] For a longer-term perspective, here is a snapshot of the data series, which comes from the National Association of Realtors. The data since January 1999 was previously available in the St. Louis Fed's FRED repository and is now only available from January 2013. It can be found here.

A Few Comments on September Existing Home Sales -- Inventory remains a key issue. I expected some increase in inventory last year, but that didn't happened.  Inventory is still very low and falling year-over-year (down 6.8% year-over-year in September). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases. Two of the key reasons inventory is low: 1) A large number of single family home and condos were converted to rental units. Last year, housing economist Tom Lawler estimated there were 17.5 million renter occupied single family homes in the U.S., up from 10.7 million in 2000. Many of these houses were purchased by investors, and rents have increased substantially, and the investors are not selling (even though prices have increased too). Most of these rental conversions were at the lower end, and that is limiting the supply for first time buyers. 2) Baby boomers are aging in place (people tend to downsize when they are 75 or 80, in another 10 to 20 years for the boomers). Instead we are seeing a surge in home improvement spending, and this is also limiting supply. Of course low inventory keeps potential move-up buyers from selling too.  If someone looks around for another home, and inventory is lean, they may decide to just stay and upgrade.   Some areas are seeing more inventory.   For example, there is more inventory in some coastal areas of California, in New York city and for high rise condos in Miami. I'd consider any existing home sales rate in the 5 to 5.5 million range solid based on the normal historical turnover of the existing stock. As always, it is important to remember that new home sales are more important for jobs and the economy than existing home sales. Since existing sales are existing stock, the only direct contribution to GDP is the broker's commission. There is usually some additional spending with an existing home purchase - new furniture, etc - but overall the economic impact is small compared to a new home sale.   The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Housing Starts decreased to 1.047 Million Annual Rate in September -- From the Census Bureau: Permits, Starts and CompletionsPrivately-owned housing starts in September were at a seasonally adjusted annual rate of 1,047,000. This is 9.0 percent below the revised August estimate of 1,150,000 and is 11.9 percent (±11.9%) below the September 2015 rate of 1,189,000. Single-family housing starts in September were at a rate of 783,000; this is 8.1 percent above the revised August figure of 724,000. The September rate for units in buildings with five units or more was 250,000. Privately-owned housing units authorized by building permits in September were at a seasonally adjusted annual rate of 1,225,000. This is 6.3 percent above the revised August rate of 1,152,000 and is 8.5 percent above the September 2015 estimate of 1,129,000. Single-family authorizations in September were at a rate of 739,000; this is 0.4 percent above the revised August figure of 736,000. Authorizations of units in buildings with five units or more were at a rate of 449,000 in September. The first graph shows single and multi-family housing starts for the last several years. Multi-family starts (red, 2+ units) decreased significantly in September compared to August. Multi-family starts are down sharply year-over-year. Multi-family is volatile, and permits are up - so I expect multi-family starts to bounce back in October. Single-family starts (blue) increased in September, and are up 5.4% year-over-year. The second graph shows total and single unit starts since 1968. The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low), Total housing starts in September were below expectations - due to the decline in multi-family starts - however combined starts for July and August were revised up. 

New Residential Housing Starts in September Disappoint Expectations - The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for September new residential housing starts.  The latest reading of 1.047M was below the Investing.com forecast of 1.175M. The August count was revised upward by 8K.  Here is the opening of this morning's monthly report:  Privately-owned housing starts in September were at a seasonally adjusted annual rate of 1,047,000. This is 9.0 percent (±9.2%)* below the revised August estimate of 1,150,000 and is 11.9 percent (±11.9%) below the September 2015 rate of 1,189,000.  Single-family housing starts in September were at a rate of 783,000; this is 8.1 percent (±7.4%) above the revised August figure of 724,000. The September rate for units in buildings with five units or more was 250,000. [link to report]  Here is the historical series for total privately-owned housing starts, which dates from 1959. Because of the extreme volatility of the monthly data points, a 6-month moving average has been included.

Housing Starts Crash Most In 5 Years To 18-Month Lows - Following August's disappointing dump in Housing Starts (and Permits), September data is an utter disaster. Against expectations of a 2.9% rise, Housing Starts plunged 9.0% in September to 1.047mm - the weakest since March 2015. Year-over-year, Starts have crashed almost 12% - the most since April 2011. Permits offered some hope for the future (although current starts suggests historical permits were a weak indicator).For the first time since June 2014, Housing Starts fell for 2 months in a row, crashing 12% YoY...Single-family starts rose 8.1% on the month and 5.4% on the year as multi-family collapsed 38% MoM and 40.8% YoY. So the silver lining of more single-family homes leaves more pressure on renter nation which is helped, perhaps, by a 16.8% MoM rise in Multifamily housing permits.

Comments on September Housing Starts --The housing starts report this morning was unusual because of the sharp decline in multi-family starts. However multi-family permits were solid in September, so multi-family starts will probably rebound in October. Meanwhile single family starts were up, and there were upward revisions to the prior two months. No worries! This first graph shows the month to month comparison between 2015 (blue) and 2016 (red). Click on graph for larger image. Year-to-date starts are up 3.7% compared to the same period in 2015. My guess was starts would increase 4% to 8% in 2016, and that still looks about right. Multi-family starts are down 5.6% year-to-date, and single-family starts are up 8.6% year-to-date. Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment). These graphs use a 12 month rolling total for NSA starts and completions. The blue line is for multifamily starts and the red line is for multifamily completions. The rolling 12 month total for starts (blue line) increased steadily over the last few years, and completions (red line) have lagged behind - but completions have been catching up (more deliveries, although this has dipped lately). Completions lag starts by about 12 months. Both multi-family starts and completions declined in September, but both will probably bounce back in October. I think most of the growth in multi-family starts is probably behind us - in fact multi-family starts probably peaked in June 2015 (at 510 thousand SAAR) - although I expect solid multi-family starts for a few more years (based on demographics).

New Residential Building Permits: September Above Expectations - The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for September new residential building permits. The latest reading of 1.225M was an increase over a revised 1.152M in August and above the Investing.com forecast of 1.165M. Here is the opening of this morning's monthly report: Privately-owned housing units authorized by building permits in September were at a seasonally adjusted annual rate of 1,225,000. This is 6.3 percent (±1.9%) above the revised August rate of 1,152,000 and is 8.5 percent (±2.4%) above the September 2015 estimate of 1,129,000. Single-family authorizations in September were at a rate of 739,000; this is 0.4 percent (±1.6%)* above the revised August figure of 736,000. Authorizations of units in buildings with five units or more were at a rate of 449,000 in September. [link to report] Here is the complete historical series, which dates from 1960. Because of the extreme volatility of the monthly data points, a 6-month moving average has been included

September 2016 Residential Building Sector Paints A Mixed Picture - The building permits improved year-over-year, but construction starts contracted. One can spin the overall residential building sector both good and bad, but I see it more positive. Analyst Opinion of Residential Building The backward revisions this month were not significant. However, the unadjusted data is somewhat better then the soft headline data. The nature of this industry normally has large variations from month to month so the rolling averages are the best way to view this series - and it shows permits improving and housing starts / completions decelerating Looking at residential construction employment, the year-over-year growth of employment is slightly BELOW the growth of housing starts. This is easily explained with the poor growth in housing starts. There was a big jump this month in multifamily permits.

  • The unadjusted rate of annual growth for building permits in the last 12 months has been around 10% - it is a +10.7 % this month.
  • Construction completions are lower than permits this month for the 21th month in a row (when permits exceed completions - this sector should be expanding).
  • Unadjusted 3 month rolling averages for permits (comparing the current averages to the averages one year ago) is +5.2 % (permits) and +2.8 % (construction completions):
  • Building permits growth decelerated 0.8 % month-over-month, and is up 10.7 % year-over-year.
  • Single family building permits improved 9.5 % year-over-year.
  • Construction completions decelerated 13.2 % month-over-month, down 6.5 % year-over-year.

AIA: Architecture Billings Index declines in September --Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment. From the AIA: Further Contraction in Architecture Billings Index For the first time since the summer of 2012, the Architecture Billings Index (ABI) posted consecutive months of a decline in demand for design services. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the September ABI score was 48.4, down from the mark of 49.7 in the previous month. This score reflects a decrease in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.4, down from a reading of 61.8 the previous month. “This recent backslide should act as a warning signal,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “But this drop-off in demand could be continued hesitancy in the marketplace to move forward on projects until the presidential election is decided. The fact that new work coming into architecture continues to slowly increase suggests that billings will resume their growth in the coming months
• Regional averages: South (53.4), Midwest (50.1), West (49.5), Northeast (44.0)
• Sector index breakdown:commercial/industrial (50.4), mixed practice (49.8), institutional (49.0), multi-family residential (48.8)
This graph shows the Architecture Billings Index since 1996. The index was at 48.4 in September, down from 49.7 in August. Anything below 50 indicates contraction in demand for architects' services. This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions. According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction.  This index was positive in 8 of the last 12 months, suggesting a further increase in CRE investment through mid-2017.  However if this drop-off continues, CRE investment could slow in the 2nd half of 2017.

 NAHB: Builder Confidence at 63 in October -- The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 63 in October, down from 65 in September. Any number above 50 indicates that more builders view sales conditions as good than poor. From the NAHB: Builder Confidence Remains Solid in October:  Builder confidence in the market for newly constructed single-family homes remained on firm ground in October, down two points to a level of 63 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI)....“The October reading represents a mild pullback from a jump in September, and indicates that the housing market continues to make slow and steady gains,” said NAHB Chief Economist Robert Dietz. “Moreover, mortgage rates remain low and the HMI index measuring future sales expectations has been over 70 for the past two months. These factors will sustain continued growth in the single-family market in the months ahead.” ...Two of the three HMI components posted losses in October. The component gauging current sales conditions dropped two points to 69 and the index charting buyer traffic fell one point to 46. Meanwhile, the index measuring sales expectations in the next six months rose one point to 72. Looking at the three-month moving averages for regional HMI scores, the West increased two points to 75 while the Northeast, Midwest and South each posted one-point gains to 43, 56 and 65, respectively.

Many HELOC Borrowers Don t Know When Draw Period Ends: Many home equity line of credit borrowers don't know when their draw period ends, and many do not have plans in place to handle that transition, according to a study from TD Bank. TD Bank reported that 27% of HELOC borrowers are unaware of their draw period end date, while 23% have not put a financial plan in place for when that time comes. But based on TD's data, many homeowners nationwide would be affected by a HELOC reset. The study found that 43% of homeowners will feel the effects of a HELOC reset, and not many of them understand what the implications of a reset are. Just 19% of respondents understood that a reset would increase their monthly payment, as opposed to 34% who believe that their payments will drop. The survey polled 812 people in late August and early September.

NMHC: Apartment Market Tightness Index remained negative in October Survey -- From the National Multifamily Housing Council (NMHC): Apartment Markets Retreat in the October NMHC Quarterly Survey Apartment markets softened across all four indexes in the October 2016 National Multifamily Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions. The Market Tightness (28), Sales Volume (42), Equity Financing (33) and Debt Financing (38) Indexes all landed below the breakeven level of 50 – showing weaker conditions from the previous quarter. “The growing supply of new apartments, primarily in the Class A space, appears to have finally reached a level to slow the historically high rent growth. Additionally, debt and equity markets are more discerning in terms of what deals they are ready to take on, including the continued slowing of available construction loans,”  said Mark Obrinsky, NMHC’s Senior Vice President of Research and Chief Economist. “Despite the softening due to the new development focus on Class A apartments, the overall fundamentals for apartments remain stable, indicated by the strong demand for Class B and C properties.” The Market Tightness Index fell to 28, the lowest since July 2009 and the fourth quarter in a row showing declining conditions. Almost half of respondents (49 percent) reported looser conditions than three months ago. Likewise, only six percent noted tighter conditions. The remaining 45 percent reported no change at all.

Signs of Recession - Kevin Erdmann - Bill McBride notices a cool down in the apartment market.  All four measures of market tightness from NMHC fell sharply in the 3rd quarter.  He seems to see this in real terms, as a trend shift in supply and demand, where supply has finally caught up to demand.  Multi-unit building has been relatively strong compared to the previous highly constrained couple of decades.  But, of course, housing starts in general are very low.  There is no way that the supply of homes has caught up to demand. Here is the chart from Calculated Risk.  Rent inflation remains high, and appears to still be climbing, although the CPI rent measure can lag somewhat.  Mortgages outstanding are just barely growing and homeownership is still dropping, so there is no sign that the single family market is capturing any extra housing demand. Maybe rent inflation will begin to wane.  But, if it does, I think this will be a sign of generally nominal contraction. Notice that this level of looseness in the apartment market has previously been associated with the beginning of recessions.  I don't think this has as much to do with real housing supply as it has to do with money.  We are at the beginning of a nominal downshift, and this is one sign of it.  There is no lack of demand for housing.  There is a nascent decline in nominal activity. Here, it may be worth revisiting BEA statistics on housing expenditures.  Nominal housing expenditures have run pretty close to 18% of PCE for 35 years.  It spiked in 2008-2010, because housing expenditures are sticky and nominal incomes dropped faster than households could adjust.  Consider this long-term flat trend.  Also, note that there was absolutely no rise in this measure from 2002-2006, during the supposed housing bubble, when Americans were recklessly overbuilding homes, as the story goes.   Basically, what the data tells us is that, in an economy burdened with Closed Access housing markets, where housing is perpetually undersupplied, residential investment is a freebie.  It simply transforms inflationary housing expenditures into real housing expenditures.  Oversimplifying a bit, it means that households live in 2,400 square foot homes instead of 2,000 square foot homes, but their expenditures remain the same.  There is nothing unsustainable about that.

Will the US Become a Nation of Renters? -  The United States has long been a nation of homeowners, but in the aftermath of the housing bubble and the Great Recession, the rate of homeownership has been falling. Are we headed toward becoming a nation of renters. Cityscape, which is published three times each year by the US Department of Housing and Urban Development, asked four groups of experts to argue for or against this claim in its first issue of 2016: “By 2050, the U.S. homeownership rate, currently about 64 percent of households, will have fallen by at least 20 percentage points.”  The short answer to the question is that an additional fall of 10 percentage points in rates of US homeownership is plausible, according to some projections, but a fall of 20 percentage points seems quite unlikely. But let's put that answer in context. Here's the homeownership rate in the US since 1980. The housing boom and corresponding fall are clear. But is the recent decline just part of a cycle, or a sign of what is to come in the next few decades? Answering this question means trying to look past the recent housing bubble and to consider what might affect homeownership in the longer term. Arthur C. Nelson writes "On the Plausibility of a 53-Percent Homeownership Rate by 2050." He points out that the homeownership rate for white non-Hispanic was 72.5% in 2015, while the homeownership rate for everyone else, who Nelson calls the "New Majority" because this group is expanding as a share of the US population, is 47.1%. Details of his projections are in the paper, but here's the upshot : "I estimate that, by 2050, America’s homeownership rate may be 53.5 percent or roughly what Germany’s rate was in 2015." Nelson also points out that the US homeownership rate was at about 53% back in the 1950s, so such a rate is clearly not unprecedented in US experience.

U.S. mall investors set to lose billions as retail gloom deepens | Reuters  - The dramatic shift to online shopping that has crushed U.S. department stores in recent years now threatens the investors who a decade ago funded the vast expanse of brick and mortar emporiums that many Americans no longer visit. Weak September core retail sales, which strip out auto and gasoline sales, provide a window into the pain the holders of mall debt face in coming months as retailers with a physical presence keep discounting to stave off lagging sales. Some $128 billion of commercial real estate loans - more than one-quarter of which went to finance malls a decade ago - are due to refinance between now and the end of 2017, according to Morningstar Credit Ratings. Wells Fargo estimates that about $38 billion of these loans were taken out by retailers, bundled into commercial mortgage-backed securities (CMBS) and sold to institutional investors. Morgan Stanley, Deutsche Bank and other underwriters now reckon about half of all CMBS maturing in 2017 could struggle to get financing on current terms. Commercial mortgage debt often only pays off the interest and the principal must be refinanced. The blame lies with online shopping and widespread discounting, which have shrunk profit margins and increased store closures, such as Aeropostale's bankruptcy filing in May, making it harder for mall operators to meet their debt obligations. Between the end of 2009 and this July e-commerce doubled its share of the retail pie and while overall sales have risen a cumulative 31 percent, department store sales have plunged 17 percent, according to Commerce Department data.

CPI increased 0.3% in September ---From the BLSThe Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.5 percent before seasonal adjustment.  Increases in the shelter and gasoline indexes were the main causes of the rise in the all items index. The gasoline index rose 5.8 percent in September and accounted for more than half of the all items increase. The shelter index increased 0.4 percent, its largest increase since May. The energy index increased 2.9 percent, its largest advance since April. Along with the gasoline index, other energy component indexes also rose. The index for food, in contrast, was unchanged for the third consecutive month, as the food at home index continued to decline. The index for all items less food and energy rose 0.1 percent in September after a 0.3-percent increase in August. ... The index for all items less food and energy rose 2.2 percent for the 12 months ending September.

September 2016 CPI: Year-over-Year Inflation Rate Now 1.5%: According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate was 1.5 % - significantly higher than last month's 1.1 %. The year-over-year core inflation (excludes energy and food) rate declined 0.1 % to 2.2 %, and remains slightly above the target set by the Federal Reserve. Core inflation actually moderated year-over-year, but those nasty energy prices caused the spike in the headline CPI, This is the highest rate of inflation seen in over one year.As a generalization - inflation accelerates as the economy heats up, while inflation rate falling could be an indicator that the economy is cooling. However, inflation does not correlate well to the economy - and cannot be used as a economic indicator. The major influence on the CPI was energy prices. The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.5 percent before seasonal adjustment. Increases in the shelter and gasoline indexes were the main causes of the rise in the all items index. The gasoline index rose 5.8 percent in September and accounted for more than half of the all items increase. The shelter index increased 0.4 percent, its largest increase since May. The energy index increased 2.9 percent, its largest advance since April. Along with the gasoline index, other energy component indexes also rose. The index for food, in contrast, was unchanged for the third consecutive month, as the food at home index continued to decline. The index for all items less food and energy rose 0.1 percent in September after a 0.3-percent increase in August. Along with the shelter index, the indexes for medical care, motor vehicle insurance, and personal care all increased in September, as did the indexes for education, alcoholic beverages, airline fares, and tobacco. The indexes for communication, apparel, used cars and trucks, recreation, and new vehicles all declined. Historically, the CPI-U general index tends to correlate over time with the CPI-U's food index. The current situation is putting an upward pressure on the CPI.

 Consumer Price Index: Inflation Rises on Gas and Shelter - The Bureau of Labor Statistics released the September CPI data this morning. The year-over-year nonseasonally adjusted Headline CPI came in at 1.46%, up from 1.06% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.21%, down slightly from the previous month's 2.32%. Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data: The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.5 percent before seasonal adjustment. Increases in the shelter and gasoline indexes were the main causes of the rise in the all items index. The gasoline index rose 5.8 percent in September and accounted for more than half of the all items increase. The shelter index increased 0.4 percent, its largest increase since May. The energy index increased 2.9 percent, its largest advance since April. Along with the gasoline index, other energy component indexes also rose. The index for food, in contrast, was unchanged for the third consecutive month, as the food at home index continued to decline. [More…] Investing.com was looking for a 0.3% increase MoM in seasonally adjusted Headline CPI and 0.2% in Core CPI. Year-over-year forecasts were 1.5% for Headline and 2.3% for Core. The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumptions Expenditures (PCE) price index.

Inflation Increases As Gas Prices and Shelter Costs Rise - Robert Oak - The Consumer Price Index showed a September 0.3% increase.  The culprits were shelter, which soared up 0.4% for the month and gasoline, which rose 5.8% for the month.  Food inflation had no change.  Inflation with food and energy price changes removed increased 0.1% as shelter and medical costs are part of core inflation.  From a year ago overall CPI has now risen 1.5%, the highest annual increase in 23 months.  Without energy and food considered, prices have increased 2.2% for the year.   CPI measures inflation, or price increases.   Yearly overall inflation is shown in the below graph and we can see the 1.5% uptick.  Core inflation, or CPI with all food and energy items removed from the index, has increased 2.2% for the last year.  For the past decade the annualized inflation rate has been 1.9%.  Core inflation is the figure the Federal Reserve considers for interest rate increase decisions. Core CPI's monthly percentage change is graphed below.  This month core inflation increased 0.1%.  Within core inflation, shelter increased 0.4%, with monthly rental costs increasing 0.3% and home ownership increased 0.4%.  Shelter overall is up 3.4% for the year with rent increasing 3.7% annually.  Car insurance increased 0.4% and has been rising, now 6.4% for the year.  Apparel declined by -0.7% and is down -0.1% for the year.  The energy index is down only -2.9% from a year ago.   The BLS separates out all energy costs and puts them together into one index.  For the year, gasoline has declined -6.4%,as has fuel oil.  Graphed below is the overall CPI energy index.  Graphed below is the CPI gasoline index and for the month gasoline prices increased 5.8%.  Graphed below is the rent price index which has been soaring for some time and is up 3.7% for the year. Food prices had no change for the month.  Food and beverages have now decreased by -0.3% from a year ago.  Groceries, (called food at home by the BLS), slid -0.1% for the month, and are down -2.2% for the year.  Rice fell by -2.4%. for the month. Meats dropped by -0.7%.  Dairy increased 0.1% for the month.   Eating out, or food away from home increased 0.2% for the month and is up 2.4% for the year. Graphed below are grocery prices, otherwise known as the food at home index.   The Medical care index rose 0.2% and this is the smallest monthly increase since March.  Prescription drugs increased 0.8% while hospital services prices did not change. .  Graphed below is the overall medical care index, which increased 0.5% for the month and is up 4.9% from a year ago. Below is a graph of the medical commodities index, which is mostly prescription drug prices.  Real hourly earnings decreased by -0.1% for all employees.  Real means wages adjusted for inflation.  CPI increased 0.3% while wages only increased by 0.2%  For the year real hourly earnings have increased 1.0%, which isn't that much of an improvement.  The average real hourly wage is now $10.70 and the average wage, not adjusted for inflation is $25.79  Weekly real earnings increased 0.2% as hours rose a tenth of a percentage point.  Real weekly earnings now stand at $369.12.  Average weekly hours increased 0.3% and weekly wages increased 0.5%.  The work week is now 34.4 hours.  There is a separate category for production and nonsupervisory employees and their real hourly earnings decreased by -0.1% to $9.23 and their real weekly earnings also decreased -0.1% to $309.07.

Watching aggregate sales and payrolls: Way back in the depths of the Great Recession in 2009, I used to hear a lot of comments like, “How can people buy anything, when they don’t have jobs?!?” But the truth is, as I pointed out at the time, that sales lead jobs. This was true at the bottom, and it is generally true at the top too. With this morning’s release of consumer prices, up +0.3% for September, let’s take an updated look at sales and jobs. Let’s start with real aggregate payrolls for nonsupervisory workers. This is the grand total, in real terms, of wages being paid to average Americans, which I believe is the best measure of how well the jobs market is or isn’t delivering. To make it easier to see, I am dividing the data into two 25 year intervals: Note that in the last 50 years, real aggregate payrolls have always peaked 6 to 12 months before the onset of a recession, usually declining but occasionally just going sideways for an extended period. These last made a peak 2 months ago. Now let’s add on real retail sales (green and red in the graphs below), likewise divided into two 25 year periods (the predecessor series and the current series ran concurrently during the 1990s):Like aggregate payrolls, real retail sales also peaked (or at very lest went sideways) for an extended period of time, typically nearly 12 months, before the onset of recessions. Further, with the exception of the 1982 and 1990 recessions, real retails sales always peaked significantly before aggregate employment. The bottom line is that we should expect both real sales and real aggregate payrolls to peak well before the onset of the next recession, and we should look for sales to peak first. With that in mind, let’s zoom in on the last year. Here are real retail sales and real retail sales per capita (per capita sales tend to peak even earlier): The big increase in September nominal sales was still not quite enough to make a new high in either series, which last occurred two months ago. There is no cause for any immediate concern. But we definitely want to keep a close eye on the long leading indicators as the late cycle of the expansion continues

AGA winter outlook sees consumer gas prices rising 9-11% -  The American Gas Association is projecting that residential consumers could see a 9-11% increase in natural gas heating bills this winter, compared with the 2015-2016 heating season, although it stressed that those prices will still likely be about the fourth lowest in the last 10 years. The trade association Wednesday released its winter heating season outlook, based on a survey of its member distribution companies as well as weather projections, gas prices and member comments about the forecast. About 62% of AGA members responding to the survey expected normalized residential heating bills would be higher this winter compared with last, while about 38% did not. In the survey for the prior winter, 82% thought prices would likely go down. On average, surveyed members predicted a 9.6% rise in bills, and a 6.6% boost in throughput, with those estimates representing averages weighted by a number of customers, AGA said. The survey results reflect views of about one-third of the gas market or about 20 million customers, according to AGA. "In general, we're still seeing natural gas as being the cheapest low-cost option for homes to heat this winter," said Brendan O'Brien, senior energy analyst at AGA. Winter heating bills still are likely to be about 28% below the 10-year high set during the winter of 2008-2009, he said.

Internet Attack Spreads, Disrupting Major Websites — Major websites were inaccessible to people across wide swaths of the United States on Friday after a company that manages crucial parts of the internet’s infrastructure said it was under attack. Users reported sporadic problems reaching several websites, includingTwitter, Netflix, Spotify, Airbnb, Reddit, Etsy, SoundCloud and The New York Times.The company, Dyn, whose servers monitor and reroute internet traffic, said it began experiencing what security experts called a distributed denial-of-service attack just after 7 a.m. Reports that many sites were inaccessible started on the East Coast, but spread westward in three waves as the day wore on and into the evening.And in a troubling development, the attack appears to have relied on hundreds of thousands of internet-connected devices like cameras, baby monitors and home routers that have been infected — without their owners’ knowledge — with software that allows hackers to command them to flood a target with overwhelming traffic. A spokeswoman said the Federal Bureau of Investigation and the Department of Homeland Security were looking into the incident and all potential causes, including criminal activity and a nation-state attack. Kyle York, Dyn’s chief strategist, said his company and others that host the core parts of the internet’s infrastructure were targets for a growing number of more powerful attacks. “The number and types of attacks, the duration of attacks and the complexity of these attacks are all on the rise,” Mr. York said. Security researchers have long warned that the increasing number of devices being hooked up to the internet, the so-called Internet of Things, would present an enormous security issue. And the assault on Friday, security researchers say, is only a glimpse of how those devices can be used for online attacks. Dyn, based in Manchester, N.H., said it had fended off the assault by 9:30 a.m. But by 11:52 a.m., Dyn said it was again under attack. After fending off the second wave of attacks, Dyn said at 5 p.m. that it was again facing a flood of traffic.  In a recent report, Verisign, a registrar for many internet sites that has a unique perspective into this type of attack activity, reported a 75 percent increase in such attacks from April through June of this year, compared with the same period last year. The attacks were not only more frequent, they were bigger and more sophisticated. The typical attack more than doubled in size. What is more, the attackers were simultaneously using different methods to attack the company’s servers, making them harder to stop.

Today's Brutal DDoS Attack Is the Beginning of a Bleak Future - This morning a ton of websites and services, including Spotify and Twitter, were unreachable because of a distributed denial of service (DDoS) attack on Dyn, a major DNS provider. Details of how the attack happened remain vague, but one thing seems certain. Our internet is frightfully fragile in the face of increasingly sophisticated hacks. Some think the attack was a political conspiracy, like an attempt to take down the internet so that people wouldn’t be able to read the leaked Clinton emails on Wikileaks. Others think it’s the usual Russian assault. No matter who did it, we should expect incidents like this to get worse in the future. While DDoS attacks used to be a pretty weak threat, we’re entering a new era.  DDoS attacks, at the most basic level, work like this. An attacker sends a flurry of packets, essentially just garbage data, to an intended recipient. In this case, the recipient was Dyn’s DNS servers. The server is overwhelmed with the garbage packets, and can’t handle the incoming connections, eventually slowing down significantly or totally shutting down. In the case of Dyn, it was probably a little more complex than this. Dyn almost certainly has advanced systems for DDoS mitigation, and the people who attacked Dyn (whoever they are) were probably using something more advanced than a PC in their mom’s basement.  Recently, we’ve entered into a new DDoS paradigm. As security blogger Brian Krebs notes, the newfound ability to highjack insecure internet of things devices and turn them into a massive DDoS army has contributed to an uptick in the size and scale of recent DDoS attacks. (We’re not sure if an IoT botnet was what took down Dyn this morning, but it would be a pretty good guess.)We are nevertheless getting a taste of what the new era of DDoS attacks look like, however. As security expert Bruce Schneier explained in a blog post:Over the past year or two, someone has been probing the defenses of the companies that run critical pieces of the Internet. These probes take the form of precisely calibrated attacks designed to determine exactly how well these companies can defend themselves, and what would be required to take them down. We don’t know who is doing this, but it feels like a large nation state. China or Russia would be my first guesses. This sort of attack is deeply different than the headline-grabbing DDoS attacks of years past. In 2011, hacker collective Anonymous rose to fame with DDoS attacks that pale in comparison to today’s attack on Dyn. Instead of taking out an individual website for short periods of time, hackers were able to take down a major piece of the internet backbone for an entire morning—not once but twice. That’s huge.

 Cass Freight Index Takes Another Dive Killing August's "False Hope" -Heading into the Christmas shopping season, the Cass Freight Index shows shipments sank 0.4% for the month and are down 3.1% from shipments a year ago. It’s difficult to make a case for a great holiday sales season or robust third quarter GDP, based not only on shipments, but also on many other factors discussed below.After offering a glimmer of ‘less bad’ hope in August (only down 1.1% YoY and up 0.4% sequentially), the Cass Freight Index shipments data in September disappointed, providing hindsight that August only gave us ‘false hope.’ September data is once again signaling that overall shipment volumes (and pricing) continued to be weak in most modes, with increased levels of volatility as all levels of the supply chain (manufacturing, wholesale, retail) continue to try and work down inventory levels. (graphs) Cass Freight Shipment Index: Shipments are lower than in 2015, 2014, and 2013. Cass Freight Expenditures Index: Expenditures are lower than in 2015, 2014, and 2013. Rail Volume: Rail volumes are lower in 2016 than 2015 and 2014.

Rail Week Ending 15 October 2016 Paints A Negative Economic View: Week 41 of 2016 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. The weekly data at first glance was better than last week. We review this data set to understand the economy. If coal and grain are removed from the analysis, rail has recently been declining around 5% - but this week was -6.6%. The contractions are across the board except grain and "other". Rail is telling the Federal Reserve the REAL economy sucks and is not improving (as implied in this week's Beige Book). It does appear that the downward slide in the one year rolling averages will pause shortly as the rate of increase in the rate of decline is continuing to be smaller. But this movement is like watching snails race. Based on the current trends - rail year-over-year rate of contraction should start improving by year end. The contraction in rail counts began over one year ago, and now rail movements are being compared against weaker 2015 data - and this is the cause periodic acceleration in the short term rolling averages. Still, rail is weak to very week compared to previous years.A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 531,936 carloads and intermodal units, down 4.2 percent compared with the same week last year. Total carloads for the week ending October 15 were 262,702 carloads, down 6.1 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 269,234 containers and trailers, down 2.2 percent compared to 2015. Two of the 10 carload commodity groups posted an increase compared with the same week in 2015. They were miscellaneous carloads, up 8.7 percent to 10,034 carloads; and grain, up 7.5 percent to 27,300 carloads. Commodity groups that posted decreases compared with the same week in 2015 included petroleum and petroleum products, down 23.9 percent to 10,492 carloads; forest products, down 16.1 percent to 8,744 carloads; and metallic ores and metals, down 12.2 percent to 18,849 carloads. For the first 41 weeks of 2016, U.S. railroads reported cumulative volume of 10,264,083 carloads, down 10.3 percent from the same point last year; and 10,610,470 intermodal units, down 3.3 percent from last year. Total combined U.S. traffic for the first 41 weeks of 2016 was 20,874,553 carloads and intermodal units, a decrease of 6.8 percent compared to last year.

LA area Port Traffic: Exports up Year-over-year in September -- From Port of Long Beach: September Cargo Weighed Down by Hanjin Bankruptcy Port of Long Beach container volumes declined 16.6 percent year-over-year in September, as the effects of the Hanjin bankruptcy reached West Coast ports. Longshore workers moved 546,805 twenty-foot equivalent units last month. This included 282,945 TEUs in imports, down 15 percent from September 2015, a month which capped off the Port’s best quarter ever. Exports dropped to 120,383 TEUs, a decrease of 4.2 percent. Empties were 27.2 percent lower at 143,476 TEUs. Port officials said the number of containers handled during September was impacted not only by reduced calls by Hanjin-operated ships, but also by the absence of Hanjin containers on vessels operated by fellow CKYHE Alliance members. Hanjin Shipping containers account for approximately 12.3 percent of the Port’s total containerized volume. Now that the expansion to the Panama Canal has been completed, some of the traffic that used the ports of Los Angeles and Long Beach will eventually go through the canal. This could impact TEUs on the West Coast in the future. Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).  To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Why America can run trade deficits forever -- Here's the Financial Times: China's provision of development finance to the emerging world has always been about much more than building infrastructure to reap a commercial return. It has also been about changing destinies. Beijing selected countries that it aimed to lift from poverty, while forging political alliances and creating markets for Chinese goods. The defining characteristic of China's power projection is its ability to get things done.  Thus, a mounting economic crisis in Venezuela comes as a big blow. Caracas is the biggest client of China's state-orchestrated development lending, accepting some $65bn in loans since 2007 for projects such as oil refineries, gold mines and railways. But in May this year, Venezuela engineered a default under which it has deferred paying the principal -- and only honours the interest -- on outstanding debts estimated at $20bn-$24bn. Worse may be yet to come. Venezuelan inflation is running at about 800 per cent and a chronic shortage of US dollars is preventing Caracas from paying some of the contractors that keep its oil supplies flowing. Since China's loans are secured against this dwindling output of oil, pulses are racing in Beijing. In addition, some of the projects undertaken with Chinese money, including a partly built high-speed railway, have been vandalised and abandoned.  The US has been running large current account deficits for many decades. Commenters often suggest that this means we are becoming a debtor nation, living beyond our means. This is not true.  The US earns more from our foreign investments overseas that foreigners earn on their investments in the US. China earns $65 billion selling goods to the US, and fritters the money away in loans to places like Venezuela. Meanwhile our multinational corporations make shrewd investments overseas, which bring lots of money back to the US economy.  The international accounts balance out perfectly, once you include trade in goods, services, and assets. The overall balance of payments deficit is precisely zero, if measured properly.

Industrial Production October 17, 2016: Flat is the best word to describe the factory sector right now. The latest evidence is the industrial production report which inched up only 0.1 percent in September with August revised 1 tenth lower to minus 0.5 percent. These two months follow, however, solid 0.5 percent gains in June and July which, when averaged all altogether however, extend what has been a flat two years for the industrial economy. Manufacturing production did rise a nearly respectable 0.2 percent but follows a downwardly revised 0.5 percent decline in the prior month. Motor vehicle production, which was strong during the summer, was flat in September, up 0.1 percent. High-tech production bounced 0.6 percent higher to help drive the overall gain for manufacturing. A negative, however, is a second straight decline in business equipment, down 0.2 percent and 0.5 percent the last two reports. Mining is a positive in the report, up 0.4 percent though following a 1.0 percent decline in August. Year-on-year, mining production is down 9.4 percent. Utility production is a negative in the September data, down 1.0 percent. Here, the year-on-year decline is only 0.4 percent. Capacity utilization came in at 75.4 percent vs a downwardly revised 75.3 percent in August. Year-on-year, industrial production is down 1.0 percent with manufacturing dead even at zero percent. The 2014 collapse in oil prices and its hit on demand for energy equipment pulled the factory sector into low single digit contraction, which is where it continues to struggle.

Industrial Production Increases a Sluggish 0.1% -- Robert Oak - The Federal Reserve Industrial Production & Capacity Utilization report shows industrial production had a 0.1% increase for September.  Manufacturing production by itself increased 0.2%.  The bigger news is industrial production has declined by -1.0% for the year and manufacturing by itself had no annual growth.  Q3 by itself brought better tidings as industrial production rose an annualized 1.8%.  This is the first quarterly increase since Q3 2015.  The G.17 industrial production statistical release is also known as output for factories and mines.Total industrial production is below -1.0% from what it was a year ago, mainly on the implosion of oil and gas  September industrial production was 4.2 percentage points above the 2012 average.  Industrial production is still way below the very long term 1972-2015 average by -4.6 percentage points.  Below is graph of overall industrial production's percent change from a year ago.  Industrial production is a recession indicator and follows the grey recession bars. Here are the major industry groups industrial production percentage changes from a year ago.  While mining looks bad, it increased an annualized 3.7% for Q3, the first gain in six quarters.  For the month manufacturing overall increased by 0.2%.  August saw a -0.5% decline while July showed a 0.4% increase.  Manufacturing output is 3.1 percentage points above its 2012 Levels and is shown in the below graph.  Within manufacturing, durable goods had no change at all.  Machinery dropped -0.6% and Aerospace declined by -1.4%.  Motor vehicles & parts increased 0.1% for the month.  Primary metals, on the other hand, declined by -0.7%. Nondurable goods manufacturing increased 0.5% for the month.  Petroleum and coal products categories increased 1.4%.  The Plastics and rubber category had a 1.0% monthly increase.  Printing and support increased by 1.5%.  Mining increased by 0.4% and is now down -9.4% for the year.  August's monthly change was -1.0% but for Q3, there was a 3.7% annualized gain after six quarterly losses in a row.  Mining includes gas and electricity production and oil and gas extraction increased 5.1% for the month and looks like it is growing again with output gains the last for months.  Oil and gas drilling is still down -40.3% from a year ago.  Coal mining increased 1.8%.   Below is oil and gas well drilling to show the incredible bust in production and what looks to be at least a bottom, if not a turn around.   Utilities decreased by -1.0%.  Utilities are often volatile due to changes in weather, as shown below.  There are two reporting methodologies in the industrial production statistical release, market groups and industry groups.  Market groups is output bundled together by market categories, such as business equipment or consumer goods and shown below: 

September 2016 Industrial Production Remains In Contraction Year-over-Year: The headlines say seasonally adjusted Industrial Production (IP) marginally imrpoved. Headline manufacturing also improved. The market expected improvement this month in industrial production - and their was marginal improvement. The manufacturing surveys have been weak, but pointed to marginal improvement - and manufacturing employment growth has evaporated. This sector remains slightly in a recession. Capacity utilization also is contracting year-over-year but in the New Normal - it seems meaningless

  • Headline seasonally adjusted Industrial Production (IP) increased 0.1 % month-over-month and down 1.0 % year-over-year.
  • Econintersect's analysis using the unadjusted data is that IP growth accelerated 0.1 % month-over-month, and is down 1.0 % year-over-year.
  • The unadjusted year-over-year rate of growth accelerated 0.1 % from last month using a three month rolling average, and is down 0.9 % year-over-year.
  • The market was expecting (from Bloomberg / Econoday):

IP headline index has three parts - manufacturing, mining and utilities - manufacturing was up 0.2 % this month (unchanged year-over-year), mining up 0.4 % (down 9.4 % year-over-year), and utilities were down 1.0 % (down 0,4 % year-over-year). Note that utilities are 10.8 % of the industrial production index, whilst mining also is 10.8 %.

October 2016 Empire State Manufacturing Index Remains In Contraction: The Empire State Manufacturing Survey remained in contraction. And important internals are also in contraction. I am not a fan of surveys, but the continued weakness in this survey is not foretelling a recovery in manufacturing.

  • Expectations were for a reading between 0.00 to 2.50 (consensus +1.0) versus the -6.8 reported. Any value above zero shows expansion for the New York area manufacturers.
  • New orders subindex of the Empire State Manufacturing and unfilled orders sub-index remains in contraction.
  • This noisy index has moved from -11.4 (October 2015), -10.7 (November), -4.6 (December), -19.4 (January 2016), -16.6 (February), +0.6 (March), 9.6 (April), -9.0 (May), +6.0 (June), +0.6 (July), -4.2 (August), -2.0 (September) - and now -6.8.

As this index is very noisy, it is hard to understand what these massive moves up or down mean - however this regional manufacturing survey is normally one of the more pessimistic. Econintersect reminds you that this is a survey (a quantification of opinion). Please see caveats at the end of this post. However, sometimes it is better not to look to deeply into the details of a noisy survey as just the overview is all you need to know. From the report: Business activity continued to decline in New York State, according to firms responding to the October 2016 Empire State Manufacturing Survey. The headline general business conditions index slipped five points to -6.8. The new orders index edged up but remained negative at -5.6, indicating an ongoing drop in orders, and the shipments index increased to -0.6, suggesting that shipments were essentially flat. Labor market conditions remained weak, with both employment levels and the average workweek reported as lower. Price indexes increased somewhat, and continued to signal moderate input price increases and a slight increase in selling prices. Indexes for the six-month outlook suggested that manufacturing firms expect conditions to improve in the months ahead.

Philly Fed Manufacturing Index Continues to Improve in October, Better Than Expected --The Philly Fed's Manufacturing Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. While it focuses exclusively on business in this district, this regional survey gives a generally reliable clue as to direction of the broader Chicago Fed's National Activity Index. The latest Manufacturing Index came in at 9.7, down from last month's 12.8, but still in positive territory. The 3-month moving average came in at 8.2, up from 2.7 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 38.6, an increase over the previous month's 35.2. Today's 9.7 came in better than the 5.3 forecast at Investing.com. Here is the introduction from the survey released today: Results from the October Manufacturing Business Outlook Survey suggest that regional manufacturing conditions continued to improve. Indexes for general activity, new orders, and shipments were all positive this month. But firms reported continued weakness in overall labor market conditions. Firms expect continued growth for manufacturing over the next six months and are becoming more optimistic about employment expansion. (Full Report) The first chart below gives us a look at this diffusion index since 2000, which shows us how it has behaved in proximity to the two 21st century recessions. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average, which is more useful as an indicator of coincident economic activity. We can see periods of contraction in 2011 and 2012, and a shallower contraction in 2013. Last year saw a contraction with an improvement in 2016. In the next chart we see the complete series, which dates from May 1960. For proof of the high volatility of the headline indicator, note that the average absolute monthly change across this data series is 7.7.

No, U.S. Manufacturing Isn't Really Booming - Employment in manufacturing peaked in the U.S. in June 1979, at almost 19.6 million jobs. This September, that was down to 12.3 million (these numbers are seasonally adjusted).  It helps explain why regions that were heavily reliant on manufacturing have been struggling so much, why older Americans without college degrees are so cranky, why labor unions are so weak. But does it mean that American manufacturing is in decline? An answer frequently offered by wonky economics journalists is that, no, U.S. manufacturing output has actually kept growing. A recent example, from Binyamin Appelbaum of the New York Times: Because of automation, there are far fewer jobs in factories. But the value of stuff made in America reached a record high in the first quarter of 2016, even after adjusting for inflation. The present moment, in other words, is the most productive in the nation’s history.  There's a catch, though. As economist Susan N. Houseman points out, about half of the growth in U.S. manufacturing output since 1997 has been in just one sector: computer and electronics manufacturing. If it weren't for computers and electronics (which includes semiconductors), manufacturing output would still be well below its 2008 peak and only 21 percent higher than in 1997...The way those computers-and-electronics numbers are arrived at is worthy of a closer look. ... Without adjusting for deflation, value added in computer and electronics manufacturing is up 45 percent since 1997. With the adjustments, it's up 699 percent! What's happening here is that the Bureau of Economic Analysis has been trying to account for vast improvements in  quality... Writes Houseman: Such quality adjustment ... can make the numbers difficult to interpret..., figures that exclude this industry ... arguably provide a clearer picture of trends in manufacturing output.  As it stands now, those trends don't look impressive. U.S. manufacturing output has held up a lot better than manufacturing employment. But it definitely isn't booming.

 Ford To Idle Four Factories Due To Slowing Car Demand, Rising Inventories - Over the weekend we recapped some of the less than impressive moments in the recent US car industry history, which suddenly appears to be bombarded with a barrage of bad news: starting with Ford's disastrous August sales when the company admitted "sales have reached a plateau", continuing to the surge in delinquent subprime auto borrowers hitting nearly a 7 year high as the marginal creditworthy car buyers disappears, then noting the record $4,000 in industry-wide new car incentives in September as preventing a plunge in last month's auto sales, and recalling last week's downgrade of the US auto sector by Goldman which said that the US "cycle has peaked".....one would almost think that a respite from the bad news was in order. One would be wrong. As a result of slowing demand and declining US auto sales coupled with growing inventory, Ford Motor is halting one of two plants that builds its top-selling F-150 pickup as it idles four factories this month amid slowing U.S. auto sales. As Bloomberg reports, starting this week, Ford is shutting its Louisville, Kentucky, factory building the Escape and Lincoln MKC sport utility vehicles, as well as two plants in Mexico that make the Fusion sedan and Fiesta subcompact, according to an e-mailed statement. Next week, the second-largest U.S. automaker will close the F-150 factory near Kansas City for seven days. And starting Oct. 31, the Louisville plant will be idled for another week. The plant closings follow last week’s shutdown of Ford’s Mustang factory in Michigan after sales of the sports car plunged 32% in September. US auto sales are slowing as many analysts predict the industry won’t match last year’s record of 17.5 million cars and light trucks. As we reported recently, Ford CEO Mark Fields has said the U.S. auto market has plateaued and that showroom sales are weakening. “We said we expected the overall retail industry to decline in the second half of the year,”

 Weekly Initial Unemployment Claims increase to 260,000 -  I expected some increase this week due to Hurricane Matthew. The DOL reported: In the week ending October 15, the advance figure for seasonally adjusted initial claims was 260,000, an increase of 13,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 246,000 to 247,000. The 4-week moving average was 251,750, an increase of 2,250 from the previous week's revised average. The previous week's average was revised up by 250 from 249,250 to 249,500. There were no special factors impacting this week's initial claims. This marks 85 consecutive weeks of initial claims below 300,000, the longest streak since 1970. The previous week was revised up. The following graph shows the 4-week moving average of weekly claims since 1971.

Why Capitalism Creates Pointless Jobs - David Graeber -- A recent report comparing employment in the US between 1910 and 2000 gives us a clear picture (and I note, one pretty much exactly echoed in the UK). Over the course of the last century, the number of workers employed as domestic servants, in industry, and in the farm sector has collapsed dramatically. At the same time, “professional, managerial, clerical, sales, and service workers” tripled, growing “from one-quarter to three-quarters of total employment.” In other words, productive jobs have, just as predicted, been largely automated away (even if you count industrial workers globally, including the toiling masses in India and China, such workers are still not nearly so large a percentage of the world population as they used to be). But rather than allowing a massive reduction of working hours to free the world’s population to pursue their own projects, pleasures, visions, and ideas, we have seen the ballooning not even so much of the “service” sector as of the administrative sector, up to and including the creation of whole new industries like financial services or telemarketing, or the unprecedented expansion of sectors like corporate law, academic and health administration, human resources, and public relations. And these numbers do not even reflect on all those people whose job is to provide administrative, technical, or security support for these industries, or for that matter the whole host of ancillary industries (dog-washers, all-night pizza deliverymen) that only exist because everyone else is spending so much of their time working in all the other ones.  These are what I propose to call “bullshit jobs.”

"Labor force participation: what has happened since the peak?" --Some interesting analysis on the Labor Force Participation Rate from economist Steven Hipple at the BLS: Labor force participation: what has happened since the peak?.  (see the paper for Hipple's discussion of these trends):After rising steadily for more than three decades, the overall labor force participation rate peaked at 67.3 percent in early 2000 and subsequently fell to 62.7 percent by mid-2016. In recent years, the movement of the baby-boom population into age groups that generally exhibit low labor force participation has placed downward pressure on the overall participation rate.From 2000 to 2015, the decline in participation occurred across most of the major demographic groups. Teenagers experienced the steepest drop in participation, which coincided with a rise in their school enrollment rate. Yet, labor force participation rates of both teenagers enrolled and not enrolled in school fell since 2000. Adults 20–24 years showed a decrease in labor force participation that was less steep than that of teenagers. The young adults least likely to participate in the labor force were those without a high school diploma, in particular young women, especially mothers. The labor force participation of women 25–54 years also declined from 2000 to 2015. This decrease was most pronounced for women who did not attend college. Women with a college degree experienced a much smaller reduction in labor force participation. Since 2000, labor force participation of mothers with children under 18 years old has receded; the declines were larger among less-educated mothers. The labor force participation of men 25–54 years continued to decline from 2000 to 2015. The decrease in participation among men with less education was greater than that of men with more education.The labor force participation of men and women 55 years and older rose from 2000 to 2009 and subsequently leveled off. This plateau could be attributed partially to the fact that the oldest baby boomers reached age 62 in 2008 and became eligible for Social Security retirement benefits. CR Note: As I've mentioned before, most of the decline in the participation rate was expected, and was due to demographics and other long term trends.

"The Structural Factors Behind the Steady Fall in Labor Force Participation Rates of Prime Age Workers" --Here is some additional analysis on the labor force participation rate. Dr. Frank Lysy discusses the various reasons for the decline in the labor force participation rate for prime age workers - especially the multi-decade decline for prime working age men: The Structural Factors Behind the Steady Fall in Labor Force Participation Rates of Prime Age Workers. Here is the introduction:  Increasing attention has recently been directed to the decline in labor force participation rates observed for men over the last several decades, and for women since the late 1990s.  The chart above tracks this.  It has indeed been dubbed (for men) a “quiet catastrophe” in a new book by Nicholas Eberstadt titled “Men Without Work”.The issue has been taken up by those both on the right and on the left.  Even President Obama, in one of the rare “By invitation” pieces that The Economist occasionally publishes, has highlighted the concern in an article under his name in last week’s issue (the issue of October 8).  President Obama treats it as one of “four crucial areas of unfinished business” his successor will need to address.  A chart similar to that above is shown.  President Obama notes that in 1953, just 3% of men between the ages of 25 and 54 were not working, while the figure today is 12% (that is, the labor force participation rate fell from 97% to 88%).  The share of women of the same age group not participating in the formal labor market has similarly been falling since 1999.While Obama is careful in his wording not to say directly that all of this increase in those not working was due to “involuntary joblessness”, he does note that involuntary joblessness takes a devastating toll on those unable to find jobs.  This is certainly correct. The fundamental question, however, is to what degree do we know whether the rise has been involuntary, and to what degree has it risen due to possibly more benign factors with rational choices being made.  Dr. Lysy discusses the various reasons for the decline (disability, "Mr. Mom", more prime workers in school, etc.).

How worrisome is the decline in labor mobility? – Thoma - Americans have long been willing to relocate in pursuit of a job, and economists believe this willingness is an important factor in the success of the U.S. economy. When workers are highly mobile, it’s much easier for the country to recover from recessions, adjust to technological shocks that create layoffs and to match workers with the jobs they’re best suited for.  In the 1980s, around 3 percent of the workforce moved to a different state each year, but mobility has declined steadily over time, and now approximately just 1.5 percent move today, according to research by the New York Federal Reserve (roughly half of these moves are job-related).  Is this a sign that the U.S. is losing its advantage in “dynamism,” or does the decline have some other explanation? One possibility the researchers investigate is that the drop in mobility is related to the aging of the population. As they note, mobility rates fall substantially between the ages of 25 and 40, and the percentage of workers between the ages of 40 and 59 increased from 45 to 60 percent in the last 30 years. However, an aging workforce can explain only about 20 percent of the fall in mobility. In fact, much of the decline occurs across all age groups.   In the past, labor mobility in the U.S. has been much higher than in other countries, for example those in Europe, and it’s often cited as one reason the U.S. economy exhibits more dynamism and resilience. To the extent that the slide in labor mobility can be explained by structural factors such as demographics, it’s not worrisome.  But subsequent research could come to different conclusions, and a large component of the drop is still not fully understood. Until more conclusive research appears, I’m not ready to conclude that the fall in geographic mobility should be taken off the list of things to worry about.

Labor Recovery and the Productivity Slowdown - Dietrich Vollrath --Everyone loves talking about productivity, and how it doesn’t grow as fast as it used to. Very low productivity growth rates, in same cases negative, have been used very recently as evidence of this long-run slowdown and why perhaps it will get worse. But inferring something about long-run trends in productivity growth from a few years of data, especially years that represent a recovery from a deep recession, is probably unwise. Now that I have the 2015 BEA data on sector-specific output and employment, let me try to illustrate what I mean. Productivity growth is just output (value-added) growth minus input (however measured) growth. In this post I’m working with BEA data on value-added and full-time equivalents, so when I say productivity that is short-hand for “value-added per full-time equivalent”, which some might refer to as a measure of labor productivity. The point of the post is really just to point out that a notable feature of the slow growth in productivity in 2013 and 2014 was the incredibly rapid growth in full-time equivalents. Aggregate value-added growth did not drop off appreciably. Rather, the growth rate of full-time equivalents was high, and hence measured productivity growth was very low. The figure shows the growth rate of productivity (value-added per FTE) as the thick black line, and then also includes the separate growth rates of value-added (thin gray line) and FTE’s (thin dashed line). What you can see in 2013, and in 2014 especially, is that productivity growth dropped to about -2% per year. But value-added growth was still about positive 2% per year, and the entire reason for the decline in productivity growth was that FTE growth was over 3%. Compare that to the numbers from the rest of the time period I plotted, and that is an exceptional number. Labor force growth drove the decline in productivity, purely from an accounting perspective.

Americans Work 25% More Than Europeans, Study Finds - Bloomberg: Americans are addicted to their jobs. U.S. workers not only put in more hours than workers do almost anywhere else. They’re also increasingly retiring later and taking fewer vacation days. A new study tries to measure precisely how much more Americans work than Europeans do overall. The answer: The average person in Europe works 19 percent less than the average person in the U.S. That’s about 258 fewer hours per year, or about an hour less each weekday. Another way to look at it: U.S. workers put in almost 25 percent more hours than Europeans. Hours worked vary a lot by country, according to the unpublished working paper (PDF) by economists Alexander Bick of Arizona State University, Bettina Bruggemann of McMaster University in Ontario, and Nicola Fuchs-Schundeln of Goethe University Frankfurt. Swiss work habits are most similar to Americans', while Italians are the least likely to be at work, putting in 29 percent fewer hours per year than Americans do. The study was designed to make it easier to compare countries to each other, by capturing the overall hours per person, not just for people with jobs. That incorporates not just the length of the typical workweek but also retirement, vacation, unemployment, and other time spent out of the workforce. Not all time spent at the office, shop, or factory is time well spent; output is also critical to the productivity equation. But it's important to have a reliable calculation of hours worked per person to accurately measure productivity, the amount of economic value nations get out of each hour their citizens spend working. The study's detailed data could help researchers figure out why Americans toil so much longer than Europeans and which factors most influence productivity.

Zuckerberg group proposes changes to Obama ‘startup visas’ -- The immigration advocacy group associated with Mark Zukerberg is offering up recommendations for a Department of Homeland Security (DHS) proposal that would allow foreign entrepreneurs to come to the United States. The group, FWD.us, submitted the revisions jointly with a coalition of 23 other groups, tech founders and tech executives. The submission was made as part of the of the the DHS’s 45-day period for comment on their proposed International Entrepreneur Rule or “startup visa.” The rule would allow the DHS to evaluate business owners interested coming to the U.S. on a case-by-case basis, pending certain criteria. FWD.us’s recommendations call for changes to the qualifying criteria to make it easier for foreign entrepreneurs to come to the United States.  In their comment to the DHS, FWD.us outlined six eligibility revisions to the rule: reducing the minimum funding of a business in question from $345,000 to $250,000 from U.S. investors; increasing the visa term from a potential of five years to eight; broadening the definition of a U.S. investor; reducing the amount of jobs a startup must create; improving paths to permanent residence; and providing clearer guidelines for leaner, bootstrapped companies who don’t have significant investors. Gary Shapiro, president and CEO Consumer Technology Association (CTA) spoke favorably of the rule.  “While we wait for Congress to take action on immigration reform, we welcome the White House's new 'startup visa' proposal to attract and retain the world's best and brightest talent,” Shapiro said. His organization is one of the 23 entities who supported FWD.us’s comments. FWD.us, who is affiliated with high-profile individuals in tech like Bill Gates and Marissa Mayer, has been an outspoken advocate for immigration reform and revisions to the H-1B visa.

Unemployment Fell in Nine of 12 Swing States From a Year Ago -  Unemployment fell over the past year in nine of the 12 most competitive states in the 2016 presidential election. The economy and labor market typically rank among the biggest issues on voters’ minds as they head to the polls. Democratic nominee Hillary Clinton has pointed to economic stability and job growth in her argument to keep her party in control of the White House. Republican nominee Donald Trump has pointed to weak wage growth and underemployment—many workers are stuck in part-time or temp jobs—in arguing for a big change in Washington. The Labor Department on Friday released the final major snapshot of state labor markets before the Nov. 8 presidential election. It shows that the jobless rate, which many voters view as a signal of the overall strength of the economy, has dropped in most of the “battleground states” that could help decide the election. Among them, North Carolina posted the biggest drop in unemployment over the past year, with the rate falling a full percentage point to 4.7% in September. Unemployment fell by eight-tenths of a point to 5.8% in both Nevada and West Virginia. It fell half a point in Georgia (5.1% in September), Michigan (4.6%) and Wisconsin (4.1%). It dropped fourth-tenths in Arizona (5.5%), Florida (4.7%) and New Hampshire (2.9%). Meanwhile, the jobless rate rose eight-tenths of a point in Pennsylvania (5.7%), sixth-tenths in Iowa (4.2%) and two-tenths in Ohio (4.8%). Nationally, the rate fell to 5% last month from 5.1% a year earlier.

BLS: Unemployment Rates stable in 42 states in September --From the BLS: Regional and State Employment and Unemployment Summary --Unemployment rates were significantly lower in September in 7 states, higher in 1 state, and stable in 42 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today.... New Hampshire and South Dakota had the lowest jobless rates in September, 2.9 percent each. Alaska had the highest unemployment rate, 6.9 percent.This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession. The size of the blue bar indicates the amount of improvement. The yellow squares are the lowest unemployment rate per state since 1976. The states are ranked by the highest current unemployment rate. Alaska, at 6.9%, had the highest state unemployment rate. Note that the lowest unemployment rate in Alaska was 6.3%, so this is pretty close to the all time low. The second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 11 states with an unemployment rate at or above 11% (red). Currently no state has an unemployment rate at or above 7% (light blue); Only four states and D.C are at or above 6% (dark blue). The states are Alaska (6.9%), New Mexico (6.7%), Louisiana (6.4%), D.C. (6.1%), and Mississippi (6.0%).

Unemployment Risk and Unions- Atlanta Fed's macroblog -- A recent paper by the Economic Policy Institute (EPI) argues that increased unionization would have broad economic benefits and, in particular, could help improve the wage stagnation facing many lower-skilled workers. Yet union membership has been declining, down by about 3 million between 1983 and 2015, and membership is down 4.5 million in the private sector.  The overall membership decline in private-sector unions reflects a combination of lower employment in some traditionally unionized industries such as the steel and auto industries and lower unionization rates within industries. For example, the rate of unionization for goods-producing industries (largely manufacturing and construction) is down from 28 percent to 10 percent, and the rate in service-producing industries has declined from 11 percent to 6 percent. In contrast, union membership in the public sector has increased, mostly as a result of broad unionization among public safety, utility, and education occupations coupled with the fact that employment in these occupations has tended to grow over time.  For goods-producing industries in particular, unionized employment is down by about 4.2 million since 1983, and nonunionized employment is up by around 2.5 million. Many factors may have contributed to this shift away from union membership. A possibility I explore here is the role of wage rigidity. In particular, if union wage contracts prevent employers from adjusting wages in the face of an unexpected decline in output demand, then employers may adjust along the employment margin instead. The monopoly power of unions leads to higher wages for continuously employed union workers but also makes layoffs more frequent.  It is the case that unionized workers tend to earn more than their nonunion counterparts. For 1983 to 2015, I estimate that prime-age union workers in goods-producing industries earn an average of about 25 percent more (on a median hourly basis) than comparable nonunion workers (about 50 percent more in construction and about 10 percent more in manufacturing). In addition, the median wage growth of union workers is less cyclically sensitive. The following chart uses the Atlanta Fed's Wage Growth Tracker data, and it shows the annual median wage growth of continuously employed prime-age workers in goods-producing industries, by union status.

 Important Labor Fights Are Going Down at Ivy League Schools - The United States’ Ivy League schools are commonly associated with old money, the offspring of the country’s ruling class and a certain symbolic power that inevitably drifts into the rest of the culture. Yet the last few months have been full of worker agitation at the most elite private institutions. Here’s a list of recent Ivy League labor fights.

  • 1. Union bid at Columbia gives graduate students at private universities the right to unionize: In August, the National Labor Relations Board ruled that graduate research and teaching assistants are entitled to collective bargaining under the National Labor Relations Act (NLRA). The ruling came in regards to a unionization attempt by grad students at Columbia University and it reverses a 2004 ruling (handed down in regards to Brown University) that determined teaching assistants and research assistants were not employees.
  • 2. Cafeteria workers at Harvard strike for better wages: The New York Times reports that there’s “no end in sight” in a dispute between Harvard University and the employees who work in its cafeterias. The 750 workers are represented by Local 26 and are seeking to be paid at least $35,000 a year, which would be a $5,000 increase from their current $30,000-a-year rate.
  • 3. Yale’s unions fight for a new contract: Yale’s clerical, technical and maintenance worker unions have spent the last six months fighting for a new contract before the January 20 deadline. Workers say that the campus is expanding but the rate of union jobs hasn’t been congruent with the development.

 Are Americans better off than they were a decade or two ago? -  Ben Bernanke and Peter Olson - Economically speaking, are we better off than we were ten years ago? Twenty years ago? When asked such questions, Americans seem undecided, almost schizophrenic, with large majorities saying the country is heading “in the wrong direction,” even as they tell pollsters that they are optimistic about their personal financial situations and the medium-term economic outlook.  In their thirst for evidence on this issue, commentators seized on the recent report by the Bureau of the Census, which found that real median household income rose by 5.2 percent in 2015, as showing that “the middle class has finally gotten a raise.” Unfortunately, that conclusion puts too much weight on a useful, but flawed and incomplete, statistic. Among the more significant problems with the Census’s measure are that: 1) it excludes taxes, transfers, and non-monetary compensation like employer-provided health insurance; and 2) it is based on surveys rather than more-complete tax and administrative data, with the result that it has been surprisingly inconsistent with the official national income numbers in recent years. Even if precisely measured, data on income exclude important determinants of economic well-being, such as the hours of work needed to earn that income. While thinking about the question, we came across a recently published article by Charles Jones and Peter Klenow, which proposes an interesting new measure of economic welfare. While by no means perfect, it is considerably more comprehensive than median income, taking into account not only growth in per capita consumption but also changes in working time, life expectancy, and inequality. The bottom line: According to this metric, Americans enjoy a high level of economic welfare relative to most other countries, and the level of Americans’ well-being has continued to improve over the past few decades despite the severe disruptions of the last one. However, the rate of improvement has slowed noticeably in recent years, consistent with the growing sense of dissatisfaction evident in polls and politics

A Little Pre-Election BS From the White House on Income Inequality – Dean Baker - I respect Jason Furman, the chair of President Obama's Council of Economic Advisers. I think he is doing a great job in this position. Anyhow, in spite of my respect, I feel the need to call him out on trying to pull the wool over folks' eyes in a recent column. The column touts many of the positive measures (in my view) to help people at the middle and the bottom under the Obama administration, such as expansion of the earned income tax credit, the child tax credit, and most importantly the Affordable Care Act which has extended health insurance coverage to 20 million people and allows people with serious health conditions to get insurance at the same price as every one else. These measures have been paid for by higher taxes on the wealthy. This is all very positive and the Obama administration deserves credit for these measures, even if I would have liked to see it go much further. However, the reason my BS detector went off is that Furman tried to claim we had turned the corner in some big way on the upward redistribution of income from the last four decades. He tells readers:"Partly as a result of these policy changes, the top 1 percent’s share of income after taxes was 12 percent in 2013 (the most recent year for which data are available), well below its 2007 peak and roughly equal to its share in 1997." The problem with this story is that the 2013 numbers for the top 1 percent are skewed downward in a big way as a result of the tax increase on the rich that the administration put in place in 2012. The wealthiest 1 percent often have considerable control over the timing of their income. They knew the top tax rate would rise from 35.0 percent for 2012 to 39.6 percent in 2013. This gave them a very strong incentive to declare income in 2012 that would have otherwise appeared in 2013. This makes 2012 look really good for the 1 percent and 2013 much worse.

Black Workers See Fastest Wage Growth in More Than 15 Years - More than seven years after the recession ended, black workers’ earnings are accelerating sharply. Median usual weekly earnings for full-time black workers rose 9.8% in the third quarter from a year earlier, the fastest rate of growth on records back to 2000, according to data the Labor Department released Thursday. The recent gains mean the increase in earnings for blacks since the recession ended in mid-2009, 15.7%, is now outpacing the gain for whites, 13.3%, and Latinos, 15.5%. But bulk of the improvement for blacks and Latinos has occurred in the past two years. Despite recent gains, the pay gap between races is wide. Median weekly pay for blacks in the third quarter was $624, versus $829 for whites and $602 for Latinos. The data is consistent with the argument put forth by some economists that wage gains for minority groups tend to be most pronounced when the economy is near full employment. The unemployment rate, 5% last month, has held near that historically low mark for the past year. The wage gains come alongside lower levels of unemployment and stronger labor-force participation among blacks. The emerging wage improvement could have implications for Federal Reserve policy makers considering whether the economy is strong enough to absorb an increase in the central bank’s benchmark interest rate. Such increases are generally intended to keep the economy from overheating.

NY Gov. Cuomo urged to sign 'farm to foodbank' bill — A broad coalition of environmentalists, anti-hunger advocates and agriculture groups is urging New York Gov. Andrew Cuomo to sign legislation giving farmers a tax break for donating food to food banks. In a letter sent to Cuomo on Tuesday and signed by 144 groups including the New York Farm Bureau and the Natural Resources Defense Council, the coalition said the bill would address a growing hunger problem while reducing wasted food. "Often, the most nutritious food is also the most expensive and the most perishable — and therefore the most out-of-reach for low-income families," said Margarette Purvis, president of the Food Bank For New York City. "The farm to food bank bill will be a further encouragement to the generous farmers of our great state to make new produce donations for neighbors in need." Farmers last year donated 12 million pounds of food in New York. Supporters argue that number could go up dramatically if the state gives a credit to farmers to offset the cost of harvesting and transporting surplus crops that otherwise might go to waste. The credit would be capped at $5,000 annually. More than 2.3 million New Yorkers rely on emergency food programs like the ones offered by food pantries. More than a third are children. Cuomo vetoed the bill last year because lawmakers chose to handle it outside the standard state budget process. It passed the Legislature again this year, and a spokesman for the Democratic governor said the bill remains under review.

 The perpetual lineup: Half of US adults in a face-recognition database -- Half of American adults are in a face-recognition database, according to a Georgetown University study released Tuesday. That means there's about 117 million adults in a law enforcement facial-recognition database, the study by Georgetown's Center on Privacy & Technology says."We are not aware of any agency that requires warrants for searches or limits them to serious crimes," the study says.The report (PDF), titled "The Perpetual Line-up: Unregulated Police Face Recognition in America," shows that one-fourth of the nation's law enforcement agencies have access to face-recognition databases, and their use by those agencies is virtually unregulated."Innocent people don't belong in criminal databases," said Alvaro Bedoya, the executive director of the Center on Privacy & Technology and co-author of the study. "By using face recognition to scan the faces on 26 states' driver's license and ID photos, police and the FBI have basically enrolled half of all adults in a massive virtual line-up. This has never been done for fingerprints or DNA. It's uncharted and frankly dangerous territory."Where do the mug shots come from?For starters, about 16 states allow the FBI to use facial recognition to compare faces of suspected criminals to their driver's licenses or ID photos, according to the study. "In this line-up," the study says, "it's not a human that points to the suspect—it's an algorithm." The study says 26 states or more allow police agencies to "run or request searches" against their databases or driver's licenses and ID photos. This equates to "roughly one in two American adults has their photos searched this way," according to the study. Many local police agencies also insert mug shots of people they arrest into searchable, biometric databases, according to the report. According to the report, researchers obtained documents stating that at least five "major police departments," including those in Chicago, Dallas, and Los Angeles, "either claimed to run real-time face recognition off of street cameras, bought technology that can do so, or expressed an interest in buying it."

How maths can get you locked up - BBC News: Criminals in the US can be given computer-generated "risk scores" that may affect their sentences. But are the secret algorithms behind them really making justice fairer? In deciding to lock Eric Loomis up, the court noted that he had been identified as an "individual who is at high risk to the community" by something called a Compas assessment. The acronym - which stands for Correctional Offender Management Profiling for Alternative Sanctions - is very familiar to Julia Angwin of ProPublica, an independent investigative journalism organisation in the US. "Compas is basically a questionnaire that is given to criminals when they're arrested," she says. "And they ask a bunch of questions and come up with an assessment of whether you're likely to commit a future crime. And that assessment is given in a score of one to 10." Angwin says the questions include things like: "Your criminal history, and whether anyone in your family has ever been arrested; whether you live in a crime-ridden neighbourhood; if you have friends who are in a gang; what your work history is; your school history. And then some questions about what is called criminal thinking, so if you agree or disagree with statements like 'it's okay for a hungry person to steal'." A risk score might be used to decide if someone can be given bail, if they should be sent to prison or given some other kind of sentence, or - once they're in prison - if they should be given parole. Image copyright Getty Images Compas and software like it is used across the US. The thinking is that if you use an algorithm that draws on lots of information about the defendant it will help make decisions less subjective - less liable to human error and bias or racism. For example, the questionnaire doesn't ask about the defendant's race, so that in theory means no decisions influenced by racism. But how the algorithm gets from the answers to the score out of 10 is kept secret.

How schools are turning ‘joy’ into a character strength — and why it’s an awful idea - Back in March I published a post titled, “Now some schools are testing kids for their ‘grit’ and ‘joy’ levels. Really.” For years we’ve heard of schools viewing “grit” as a character strength and moving to measure how much grit students have while attempting to build it up in those deficient. Now one of the co-authors of that post is back with a piece on a similar effort with “joy” — and why this effort to elicit joy in students is not authentic social-emotional learning but instead counterproductive. This was written by Joan Goodman, a psychologist who has spent her career combining applied psychology with teaching. She is also an expert in moral education and she studies the practices and moral underpinnings of school discipline and authority in classrooms. She gave me permission to republish this piece. “No excuses” charter schools face a teaching predicament.Their long school day/year with few diverting extracurricular activities and heavily rule-governed pedagogy is tough on students. Inevitably, strict behavior restrictions, aimed not just at controlling common misbehaviors but also behaviors that might lead to misbehavior, result in a gulf between student desires and teacher demands.To close the gulf and avoid constantly admonishing students, charter management organizations have layered onto their culture an expectation that learning is to be approached joyously. Indeed, joy has been elevated to a central value at many charter management organizations (CMOs). Uncommon Schools promotes “joy” as one of its five values; Democracy Prep advertises a “joyous culture” with enthusiasm as one of its DREAM values; Mastery lists “joy and humor” among its nine core values; and Achievement First includes the child’s joy in its assessments of student progress. Success Academy says that, along with rigor, its schools stress “humor (joy) … making achieving exhilarating and fun!”

Most US Syrians arrivals are kids, now enrolling in school - Seated at his desk at a suburban San Diego middle school, 12-year-old Abdulhamid Ashehneh tries not to let his mind wander to the painful memories of his life in civil war-torn Syria. His father disappeared suddenly four years ago and, the family believes, was killed. Months later, Abdulhamid's mother boarded a bus with her six children, the youngest 2, and fled to Jordan, the sound of bombs ringing in the distance. "I think about my Dad a lot," Abdulhamid said recently after practicing English at Cajon Valley Middle School, which has received an influx of Syrian children. "I wish he would come back." Abdulhamid is like many of the Syrian refugees arriving today in the U.S.: According to the U.S. State Department, nearly 80 percent of the more than 11,000 Syrian arrivals over the past year were children. That's a larger percentage than most refugee groups, in part because Syrians tend to have larger families and many have managed to stay together despite displacement, according to resettlement agencies helping the families acclimate to the U.S. Many of those children are enrolling in public schools around the country, including Chicago; Austin, Texas; New Haven, Connecticut; and El Cajon, which received 76 new Syrian students the first week of school. Syrian children face many of the same challenges as other young refugees — limited English, an interrupted education — but they are somewhat distinct in the level of trauma they have experienced, school leaders and resettlement workers said.

Prop. 51 vs. a State-Owned Bank: How California Can Save $10 Billion on a $9 Billion Loan - Ellen Brown - School districts are notoriously short of funding -- so short that some California districts have succumbed to Capital Appreciation Bonds that will cost taxpayers as much as 10 to 15 times the principal by the time they are paid off. By comparison, California's Prop. 51, the school bond proposal currently on the ballot, looks like a good deal. It would allow the state to borrow an additional $9 billion for educational purposes by selling general obligation bonds to investors at an assumed interest rate of 5%, with the bonds issued over a five-year period and repaid over 30 years. $9 billion × 5% × 35 equals $15.75 billion in interest -- nearly twice principal, but not too bad compared to the Capital Appreciation Bond figures. However, there is a much cheaper way to fund this $9 billion school debt. By borrowing from its own state-chartered, state-owned bank, the state could save over $10 billion -- on a $9 billion loan. Here is how. First it would need to charter a bank. In California this can be done with an initial capitalization of $20 million; but for our purposes, assume an initial capitalization of $1 billion. Where to get this money? The state's public pension funds are always seeking good investments. Today they are looking for a return of about 7% per year (although in practice they are getting less), and they have wide leeway in the sorts of things in which they can invest. So assume the capital comes from the pension funds, which are promised a 7% annual dividend and the return of principal after 35 years. At a 10% capital requirement, $1 billion in capitalization is sufficient to back $10 billion in new loans, assuming the bank has an equivalent sum in deposits to provide liquidity. Where to get the deposits? One possibility would be the California Pooled Money Investment Account (PMIA), which contains $68.3 billion earning a modest 0.61% as of the quarter ending September 30, 2016. This huge pool of rainy day, slush and investment funds is invested 46% in US Treasuries, 20% in certificates of deposit and bank notes, 11% in commercial paper, and 8% in time deposits, along with some other smaller investments. $10 billion of this money could be deposited into a savings account at the state-owned bank, on which the bank could pay 0.61% interest, the same average return the PMIA is getting now. At a 10% reserve requirement, $1 billion of this money would need to be held by the bank as reserves. The other $9 billion could be lent or invested -- a sufficient sum to provide the funds sought by Prop. 51.

 In a Nightmare for Neoliberal Ed Reformers, Chicago Charter School Teachers May Strike This Week - When the Chicago Teachers Union (CTU) struck in 2012, then-CEO of the United Neighborhood Organization (UNO) Juan Rangel took the opportunity to sing the praises of the city’s charter schools, which remained open as CTU members walked the picket lines. Four years later, the tables have turned. An eleventh-hour agreement between the CTU and the school district headed off a second strike in Chicago Public Schools (CPS) last week. But there’s another teacher walkout still brewing—this time, at the UNO Charter School Network (UCSN), a group of 15 publicly-funded, privately-managed schools established by Rangel’s organization, from which he resigned in 2013. For the past seven months, UCSN teachers have been in a tough contract fight with management. If no agreement is reached this week, teachers plan to strike starting this Wednesday. A walkout by charter teachers would not be totally unprecedented. Former American Federation of Teachers (AFT) organizer Shaun Richman notes in Jacobin that teachers at a Philadelphia charter school engaged in a “sick-out” during contract negotiations in 2011. But disruptive labor actions are a rare sight in the traditionally union-free charter industry, and UCSN teachers’ overwhelming vote this month to authorize a network-wide strike breaks new ground. As education reformers have aggressively pushed the nationwide expansion of charter schools in recent years, teachers unions have fought back on two fronts. In addition to opposing continued charter growth, they have poured resources into unionizing existing charters in order to thwart what many believed was the central rationale of charter schools: chipping away at unions and driving down wages and working conditions in the industry.

 Many UC workers struggle to feed themselves and their families, study shows - Seven in 10 University of California workers in clerical, administrative and support services struggle to put adequate food on the table, according to a new Occidental College study. The study, released Monday, found that 45% of 2,890 employees surveyed throughout the 10-campus UC system went hungry at times. An additional 25% had to reduce the quality of their diet. The problems persisted even though most of those surveyed were full-time employees with college degrees and average earnings of $22 an hour. Peter Dreier, an Occidental professor of politics who conducted the study with two colleagues and the International Brotherhood of Teamsters Local 2010, said the results were startling. “This is a systemwide problem; it exists on every campus,” Dreier said. “This is not a handful of people who happen to be down on their luck. They need a living wage so they can afford to feed their families.”This is a systemwide problem; it exists on every campus.— Peter Dreier, professor of politics at Occidental College UC spokeswoman Dianne Klein said she could not comment on the study because she had not yet seen it and could not assess its methodology. She added that UC is currently in contract talks with the Teamsters and that “issues such as higher wages should be negotiated at the bargaining table.” The food problems among UC workers were even higher than those found among students in a separate university study in June.The survey of nearly 9,000 UC students found that 42% did not have a consistent source of high-quality, nutritious food. UC President Janet Napolitano, in conjunction with the student survey’s release, announced a $3.3-million effort to expand the fight against campus malnutrition. Each campus was to receive $151,000, adding to the $75,000 each received last year to build what officials said would be the nation’s most comprehensive, systematic plan to tackle the problem.

Starving Harvard Hires Scabs to Replace Striking Cafeteria Workers - Harvard is hiring. Applicants must be willing to work for free in the dining halls. On Monday, the Ivy League school entered the sixth day of its standoff with dining hall workers, who have gone on strike for the first time in over 30 years. The cafeteria staff are demanding affordable health care and base pay of $35,000 for year-round workers. But workers and Harvard negotiators can’t come to an agreement. And while dining hall workers strike for better wages, Harvard is hiring scabs. After nearly six months of bargaining with the university, cafeteria staff walked out on Wednesday. In anticipation of a strike, Harvard allegedly stockpiled three days’ worth of frozen foods. But now on the strike’s sixth day, students say they’re living on undercooked chicken prepared by untrained strikebreakers while administrators scour the faculty for any employees willing to serve breakfast. The university is “actively seeking for volunteers all across campus,” an email from Harvard’s Campus Services implored. The email, obtained by the Harvard Crimson clarified that only employees who were not paid hourly and did not qualify for overtime would be allowed to work for free in the dining halls. “Students have noticed there aren’t many workers in the dining halls,” Itzel Vasquez-Rodriguez, a Harvard senior and activist with the Student Labor Action Movement told The Daily Beast. “It looks like some temp workers, some volunteer workers, as well as [cafeteria] managers,” who are not part of the dining hall workers’ union. Vasquez-Rodriguez said the call for strikebreakers has been largely laughed down on the liberal campus.

Student Loan Debt For Recent College Graduates Increases Again, Now At $30K - With college tuition continuing to increase, it probably won’t surprise many people to learn that college graduates are leaving school burdened with more loan debt. According to a new report, the average amount of student loan debt for new graduates has passed $30,000 for the first time.   The latest annual student debt survey [PDF] from The Institute for College Access & Success (TICAS) found that nearly 7-in-10 graduating seniors (or 68%) of 2015 graduates of four-year public and nonprofit colleges owed an average of $30,100, up 4% compared to $28,950 in 2014.  As with previous TICAS debt reports, it’s important to note that this study does not include debt rates for for-profit colleges because most choose not to report what their graduates owed.  This year’s report was compiled by data provided by 56% of public and nonprofit bachelor’s degree-granting four-year colleges, representing about 82% of graduates.  While previous TICAS reports focused on the level of employment of students shortly after graduation, the most recent study attempts to examine their debt at a granular level. For example, 19% of students who graduated with debt did so with private, non-federal student loans. While many of these loans are provided by banks, TICAS found that some states also have loan programs designed for college students. TICAS notes that the relatively high number of students using private loans — and states’ willingness to facilitate those loans — is a cause for concern, as they are typically more costly and provide far fewer consumer protections and repayment options than federal student loans. Federal student loans, on the other hand, come with consumer protections and options like income-driven repayment plans that assist borrowers in avoiding default. According to TICAS, 67% of student debt from state-run programs comes from just three states: New Jersey, Texas, and Minnesota. Despite this, the study found that those states only awarded 11% of bachelor degrees in 2015.

Student loan money being spent on clothes, vacations | WWLP.com: – Student loan debt has reached a record high of $1.3 trillion, but that doesn’t necessarily mean students have spent that much money on college costs. Every year, the government trusts tens of thousands of college students with millions of dollars. The money comes in the form of student loans. It’s meant for college, but where it’s actually spent is another story. Student loans are meant to cover the cost of things like tuition and housing but, some students are using that money to pay for everything from clothes to vacations. Rebecca Gray, a senior at AIC in Springfield told 22News, she has seen it happen first hand. “I see a lot of people spend it on rent, or the phone bill, or the Internet bill,” she said. Federal student loans are first come, first serve. If one student spends $200 on clothes, that’s $200 another student could have spent on tuition. That’s why Gray believes the government should do a better job of regulating the student loans they give out. “I think having tighter regulations would make it a lot fairer for more people to get loans, who actually can’t afford their books or tuition,” she said. According to a Student Loan Hero Survey, nearly half of college students spent student loans on non-educational expenses, from vacations and restaurants, to alcohol and drugs.

 How some of the most vulnerable student loan borrowers are set up to fail - Over the next two years, more than 220,000 low-income borrowers who have already defaulted on their student loans will default again, according to projections released by the Consumer Financial Protection Bureau Monday, unless policy makers take immediate action. This group represents about one-third of the 650,000 federal student loan borrowers who made the minimum payments necessary to cure their defaults in the last year. All federal student loan borrowers have the ability to become current on their loans through a program called rehabilitation, which allows them to cure their default by making nine on-time monthly payments in 10 months. The amount of the monthly payments is determined in part by a borrower’s income. The CFPB report focuses on a cohort of borrowers who made the minimum monthly payment of $5 during rehabilitation, meaning that their income is likely low -- so low in fact that typically once they get out of default, they could stay current on their loans by paying just $0 a month. The danger that these borrowers may default again is particularly concerning, the CFPB noted, because it indicates that both debt collectors and student loan servicers aren’t doing enough to ensure that borrowers who are struggling have enough information to avoid a credit-ruining event a second time. Once a borrower rehabilitates her debt out of default her loan is then transferred to a loan servicer where she has access to plans that allow borrowers to make payments tied to their income. The CFPB found that communication breakdowns during this process put borrowers at risk of winding up in expensive repayment programs and defaulting again, even when they have access to affordable repayment plans.“It confirms some of our worst fears about collection,” Persis Yu, the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, said of the report. “It seems like we’re setting borrowers up to fail.”

CFPB Projects that One-in-Three Rehabilitated Student Loan Borrowers Will Re-default Within Two Years | Consumer Financial Protection Bureau: — Today the Consumer Financial Protection Bureau (CFPB) Student Loan Ombudsman released a report projecting that over the next two years, one-in-three rehabilitated student loan borrowers could be driven back into default due to gaps between student loan programs. The report examines debt collection and servicing problems plaguing the federal programs designed to help millions of defaulted student loan borrowers get on track and into affordable repayment plans. The Bureau estimates that the breakdowns along the path out of default will cost borrowers hundreds of millions of dollars, including over $125 million in unnecessary interest charges over the next two years. The Bureau is calling for an overhaul of these programs in order to help improve the recovery process for distressed consumers. “The consumer protections promised under federal law should make it nearly impossible for the most vulnerable consumers to be trapped in default,” said CFPB Director Richard Cordray. “Today’s report shows that far too many of these borrowers continue to fall through the cracks of a flawed student loan system."“Too many student loan borrowers are being left behind due to breakdowns in the federal programs designed to provide them a fresh start, including an affordable monthly payment and a path to long-term success,” said CFPB Student Loan Ombudsman Seth Frotman. “This report offers further evidence that industry practices and needless red tape can turn a student loan into an unbearable burden. Policymakers should work to reform the programs that are failing those borrowers that need help most.”

Program to Help Student Loan Borrowers Fails Many Who Need It Most -- For the 8 million federal student loan borrowers whose loans are in default, a process called rehabilitation might seem like a perfect solution. It allows borrowers to get out of default and back on track by making nine monthly payments of as little as $5 over a 10-month period—and also wipes the stain off their credit reports. At least, that’s how it’s supposed to work. Unfortunately, a new report from the Consumer Financial Protection Bureau (CFPB) projects that one in three rehabilitated student loan borrowers will re-default in the next two years because of debt collection and loan servicing problems. That translates to more than 220,000 borrowers out of the 650,000 who rehabilitated a defaulted federal student loan last year. What’s more, borrowers can rehabilitate their loans only once, making it much harder for those who relapse into default to get back into good credit standing. “The consumer protections promised under federal law should make it nearly impossible for the most vulnerable consumers to be trapped in default. Today’s report shows that far too many of these borrowers continue to fall through the cracks of a flawed student loan system,” CFPB Director Richard Cordray said in a statement. From thousands of student loan complaints, the report identified a range of obstacles that keep defaulted borrowers from getting into an affordable, income-driven repayment plan (IDR) that would set their monthly payments as low as 10% of their disposable income. The bureau cited problems with payment processing, billing, customer service, borrower communications, and enrollment in the income-driven plans. The CFPB is calling on policymakers and the loan servicing industry to take immediate action to address these problems and simplify the process for borrowers.

Black College Grads Owe Nearly Twice as Much Student Debt as Whites Four Years Out - Blacks owe nearly twice as much student debt as whites four years after graduating college—and they are three times more likely to default. Those findings, contained in a new paper from the Brookings Institution, suggest the past decade’s surge in student debt is affecting blacks far more than any other racial group. The debt rise largely reflects higher enrollment among blacks in college and graduate school, which typically leads to better careers and an earnings boost. But it also threatens to increase wealth inequality as blacks carry higher balances while persistently earning less than whites in the workplace. Other research shows that while black college graduates fare far better than blacks without college, they still fare worse than white peers. The average unemployment rate for black college graduates last year stood at 4.1%, nearly double the 2.4% jobless rate among white college grads, the Economic Policy Institute found. The national unemployment rate, across all races and education levels, averaged 5.3%. And in 2013, the typical black household headed by someone with a college degree earned $52,147, compared with $94,351 among white college-educated households, according to research released last year by the Federal Reserve Bank of St. Louis.  The Brookings paper used data from the Education Department and the Census Bureau to track two groups—1993 and 2008 college grads—and how much debt they owed four years after graduation. Student debt surged across all races when comparing the 2008 class to the 1993 class. But the biggest increase, by far, occurred among African-Americans, leaving huge racial disparities today. Blacks who graduated college in 2008 owed an average $52,726 in student debt as of 2012. Whites owed $28,006. Asians owed a bit less than whites while Hispanics owed slightly more.

One More Way Student Loans Are Crippling the Economy -- Millennials are delaying just about everything, from buying their first car or home to getting married and having kids. Student debt is frequently cited as a reason for the delays—and new research suggests those loans may also lead young people to delay retirement three or four decades down the road. Student debt stands at nearly $1.4 trillion. It afflicts all adult generations, including 44% of millennials, 26% of Gen X, and 13% of baby boomers, according to a survey from Aon Hewitt. Those with student loans are less likely to participate in a 401(k) plan and more likely to be saving too little, the survey found. Among workers with student debt, 71% participate in a 401(k) plan and 51% contribute 5% of pay or less, Aon Hewitt found. Among workers without student debt, 77% participate in a 401(k) plan and just 40% contribute 5% or less. With 401(k)s, the contribution rate is critical. Most large employers match some part of pay up to 6%. By contributing less than that, many workers leave matching funds on the table. They are also losing out on the long-term potential of compound growth. According to Aon Hewitt, a typical 30-year-old worker with a dollar-for-dollar match and average annual returns of 6% would accumulate $351,407 by age 65 by contributing 4% of pay. But the same worker saving 6% would accumulate $527,110. The survey turned up a variety of other costly distractions associated with student debt:

  • 51% of those with student loans say debt is ruining their quality of life, vs. 28% of those without these loans.
  • 54% of those with student loans spend time at work dealing with financial issues, vs. 47% without student loans.
  • 31% of those with student loans are worried about paying their bills, vs. 20% of workers without student loans.
  • 56% of those with student loans are worried about saving for the future, vs. 41% of those without the loans.
  • Only 27% of those with student loans say they are financially comfortable, vs. 43% for those with no loans.

 California promised public employees generous retirements. Will the courts give government a way out? LA Times - California’s generous public employee pensions, shielded for decades by the state’s courts, may soon no longer be sacrosanct. In a potentially huge win for advocates of cutting government pensions, an appeals court in August declared that public retirement plans were not “immutable” and could be reduced. The three-judge panel said the law merely requires government to provide a “reasonable” pension. That unanimous ruling, now before the California Supreme Court, could be a vehicle for reducing a shortfall amounting to hundreds of billions of dollars in state and local pension systems. If upheld, the decision could lead to the kinds of cutbacks previous courts blocked. Emory University Law Professor Alexander Volokh called the decision “a big change from what the doctrine has been so far” and expressed doubt that it would be upheld.  The decision has attracted national attention because of California’s influential role in pension law. Like California, other states are facing massive shortfalls in public pensions and wrangling with ways to head off staggering debts. Standing in the way have been decades of court decisions that created what is called the “California Rule.” It guarantees government workers the pension that was in place on the day they were hired. The formula for calculating retirement income generally can be changed only if it is neutral or advantageous to the employee, courts have ruled. It cannot be reduced, except for new hires. “It is a rule that makes it extremely difficult for states to reform their pensions,” Volokh said, “and lots of states have really big pension problems now.”

New York Pension Regulator Shellacks State for Overpaying for Hedge Fund Underperformance, Enabling Private Equity Fee Secrecy --Yves Smith - New York’s feared former Superintendent of Financial Services, Benjamin Lawsky, appears to have left a mark on the agency. Yesterday, the agency issued a blistering report on the failings of the New York State Comptroller in managing the state pension fund system’s “alternative” investments, specifically hedge funds and private equity funds. We’ve embedded the document at the end of this post.  We may have played a role in the section that discusses private equity, since we called the problem of private equity fee abuses and lack of transparency to the Department of Financial Service’s attention in January 2015. The entire report is worth reading if nothing else for its exceptional direct style and harsh criticism. The DFS, which supervises state pension funds, found no excuse for the fact that the two state pension funds, which together make New York State the fourth biggest public pension fund in the US, were overpaying for hedge fund duds: over $1 billion in excess fees to hedge fund managers who underperformed to the tune of $2.8 billion.” Even worse, the state only now has gotten around to addressing the fact that many of its managers charge hefty fees for the privilege of lagging the stock market, while most other public pension funds have woken up to the problems with hedge funds and have been cutting allocations to or firing doggy fund managers. The report cuts the hedge fund data every way conceivable and has nothing nice to say about it. The report points out that not only have public pension funds in California, Illinois, and New Jersey shrunk or ended their hedge fund investment programs, but even the New York City comptroller woke up to the problem of excessive hedge fund fees and lousy performance in 2015 and early this year, the trustees of the New York City pension system voted to wind down the program.

The Other War on Coal: Thousands of Retired Miners Could Lose Their Health Care and Pensions | Mother Jones: Tens of thousands of retired coal miners could lose their health coverage and pensions over the next year if a bill to ensure federal funding for the benefits doesn't pass Congress. The crisis has erupted into an impassioned political debate, pitting Republican opponents of the legislation against a bipartisan coalition of coal-state lawmakers. It's even emerged as an issue in the presidential race, with Hillary Clinton expressing support for the bill and Tim Kaine (D-Va.), her running mate, co-sponsoring it in the Senate.The dispute has its roots in 1946, when, in order to end the strike, then-United Mine Workers of America union president John Lewis and Interior Secretary Julius Krug worked out a deal in which coal companies would pay royalties into a pension fund for retired miners and would also contribute money (deducted from miners' paychecks) into a health insurance fund. These pension and health care programs went through various iterations in subsequent years. But in recent years, a confluence of economic and policy factors has decimated the coal industry and now threatens to wipe out the miners' hard-won retirement benefits. Tougher environmental regulations, mechanization in the mines, and increasing competition from clean energy and cheap natural gas have made a huge dent in the industry's bottom line. Some companies have closed, and industry leaders such as Alpha Natural Resources and Peabody have filed for bankruptcy. As coal firms slashed their workforces, the amount of money being paid out in retirement benefits surpassed the amount coming in. The 2008 financial crisis also hit the pension plan hard, he says. What's more, the bankrupt companies have been relieved by the courts of their obligation to pay for retiree benefits.

Social Security Benefits to Increase by Just .3%: — Millions of Social Security recipients and federal retirees will get a 0.3 percent increase in monthly benefits next year, the fifth year in a row that older Americans will have to settle for historically low raises.There was no increase this year. Next year’s benefit hike will be small because inflation is low, driven in part by lower fuel prices.The federal government announced the cost-of-living adjustment, or COLA, Tuesday morning. By law, the COLA is based on a government measure of consumer prices.The COLA affects more than 70 million people — about 1 in 5 Americans. The average monthly Social Security payment is $1,238. That translates into a monthly increase of less than $4 a month.More bad news for seniors: Medicare Part B premiums, which are usually deducted from Social Security payments, are expected to increase next year to the point in which they will probably wipe out the entire COLA.By law, the dollar increase in Medicare’s Part B premium cannot exceed a beneficiary’s cost-of-living raise. That’s known as the “hold harmless” provision, and it protects the majority of Medicare recipients.But another federal law says that the Part B premium must raise enough money to cover one-fourth of expected spending on doctors’ services. That means that a minority of beneficiaries, including new enrollees and higher-income people, have to shoulder the full increase. Their premiums would jump.More than 60 million retirees, disabled workers, spouses and children get Social Security benefits. The COLA also affects benefits for about 4 million disabled veterans, 2.5 million federal retirees and their survivors, and more than 8 million people who get Supplemental Security Income, the disability program for the poor. Many people who get SSI also receive Social Security.

Cost of Living Adjustment increases 0.3% in 2017, Contribution Base increased to $127,200 --With the release of the CPI report this morning, we now know the Cost of Living Adjustment (COLA), and the contribution base for 2017. Currently CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). Here is a discussion from Social Security on the current calculation (0.3% increase) and a list of previous Cost-of-Living Adjustments. Note: this is not the headline CPI-U. The latest COLA is 0.3 percent for Social Security benefits and SSI payments. Social Security benefits will increase by 0.3 percent beginning with the December 2016 benefits, which are payable in January 2017.  The contribution and benefit base will be $127,200 in 2017. The National Average Wage Index increased to $48,098.63 in 2015, up 3.48% from $46,481.52 in 2014 (used to calculate contribution base).

Social Security’s Challenges Get a Moment in Final Trump, Clinton Debate -  The presidential contest has focused little attention on the looming solvency challenges facing Social Security, until it came up at the end of Wednesday’s debate. Given current population and spending projections, retirees will face an across-the-board cut in benefits after 2034, when it will have liquidated assets in certain reserve accounts. During the Democratic primary battle, Vermont Sen. Bernie Sanders pushed Hillary Clinton, who won the Democratic nomination, to support more generous benefits for retirees and to swear off any cuts, positions that have grown popular on the left. Mrs. Clinton has said she supports enhancing benefits for certain, lower-income retirees and has said she backs some sort of increase in taxes on top earners to pay for it and to extend solvency of the program. The Republican Party has traditionally been more open to an overhaul of Social Security because as the program nears depletion, it will be more difficult to preserve benefits without raising taxes or increasing government spending. But Donald Trump has promised to keep benefits at their current levels. Neither candidate was willing to embrace the hypothetical deal moderator Chris Wallace presented at the debate: would you accept tax increases and benefit cuts of some kind to repair the program’s solvency. Most analysts expect this is what will ultimately happen. The program’s solvency issues can’t entirely be solved by economic growth because it faces stiff demographic headwinds. There were 2.8 covered workers for each beneficiary last year, down from 3.2 in 2008, and that ratio is set to slide to 2.2 over the next two decades.

Blackstone’s Tony James Touting What Looks Like Hillary’s Scheme to Gut Social Security - Yves Smith - Readers may recall that Bill Clinton planned to privatize Social Security in the second term of his Presidency. The Monica Lewinsky scandal derailed his plan. As the Clintons knew, only a Democrat can dismantle Social Security. Hillary looks to be picking up where Bill left off. As David Sirota describes in a must-read story, Hillary is planning to introduce mandatory retirement accounts, a scheme that Hillary has mentioned in high concept form earlier. As details emerge, this “enrich Wall Street at the expense of everyone else” program is even more attractive to pet Democratic party constituencies than the 1.0 version of going after Social Security directly. No one in the Clinton or George W. Bush administration was so audacious as to cut in private equity and hedge funds in the way this variant would. But Hillary, and her major advisor on the plan who is also on her short list of Treasury Secretary candidates, Blackstone CEO Tony James, are too adept to label these required savings accounts as a stealth replacement for Social Security.The plan, as described in Sirota’s article parallels the way the contributions are made now to Social Security, with both employers and employees required to put aside a percentage of payroll…but not in the form of Social Security taxes, but in individual retirement accounts that in turn are put in “pooled plans run by professional managers”. If you look at James’ speech, what he is proposing sounds innocuous, a supposed additional 3% of worker savings. But that is a nearly 25% increase over what workers are paying into Social Security now. Moreover, most experts agree that to the extent that Social Security needs fixing (30 forecasts are fraught), some not very onerous tweaks would do the trick. First and foremost would be to eliminate the payroll tax ceiling. It’s not hard to see the long-term game plan. Social Security will be cut due to purported need to keep the budget balanced while funding bombing runs in the Middle East. It will be turned from a universal social safety net more and more into a welfare program. That in turn makes it easier to make more cuts, since its core supporters will be further and further down the food chain.

MACRA Final Rule: CMS Strikes A Balance; Will Docs Hang On? - On Friday, the Centers for Medicare and Medicaid Services (CMS) released the Final Rule implementing the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)—aka the “SGR” repeal bill, aka Medicare physician payment 3.0. The central theme of the MACRA Final Rule is its softening of key program parameters in an effort to allay provider concerns, rally participation, and avoid adverse consequences out of the gate.While the rule concludes—for now—the crescendo that started with passage of MACRA in 2015 and gained steam with the Proposed Rule CMS issued in April, the song is far from over. What seems clear is that CMS has called the tune for the first few years of the program; what’s less clear is whether physicians and related providers will play along. The rule finalizes parameters of the Merit-Based Incentive Payment System (MIPS) and the Advanced Alternative Payment Models (APMs), collectively referred to as the Quality Payment Program (QPP). (You can’t break this stuff down without a healthy dose of alphabet soup). The rule softens several parameters of the MACRA regime, changes that have been hinted at, for example, during Acting Administrator Andy Slavitt’s appearance before the Senate Finance Committee on July 13 and the Agency’s September 8 announcement that physicians would be able to “pick their pace” for satisfying MIPS criteria in 2017. More on that in a bit. Highlights of the rule include, first, formalization of the “transition year” during calendar year (CY) 2017 that significantly modifies the reporting requirements of the QPP for that year. Second, CMS took steps to weaken the thresholds by which providers may participate. Third, CMS reduced the amount of measures required for reporting under the Advancing Care Information and other MIPS categories. Finally, the Agency softened the degree of risk providers must accept in Advanced APMs, though it preserved the requirement that such entities face downside risk (i.e., the possibility of losing money due to poor performance). We’ll catch a few additional changes along the way.

Medicare premiums to soar— again - Congress fixed a Medicare problem last year, but it is back again.  If action is not taken during the “lame duck” session after the November election, 15 million Medicare beneficiaries will be hit with a staggering increase in their Medicare premiums.  Paradoxically, the culprit is low inflation.  The Social Security Administration announced on Tuesday that the annual cost of living adjustment for Social Security payments will be 0.3% in 2017.  That means the average retired worker will see an increase of about $4 in the monthly payment. But Medicare costs rise much faster than general inflation — about 3.1% per enrollee next year, according to the Medicare trustees—and that’s the problem. Thanks to the “hold harmless” provision, most Medicare beneficiaries will pay a premium next year that is no higher than the dollar amount of their Social Security increase. That means most beneficiaries will pay $125 a month for Part B coverage. But some 15 million beneficiaries are not protected and will pay a much larger increase.  Anyone turning 65 in 2017 and enrolling in Medicare Part B for the first time will pay about $25 a month more than their 66-year-old friends for exactly the same Medicare coverage. The increase is even greater for seniors making more than $85,000 a year.  Higher-income seniors pay an income-related premium which is not protected by “hold harmless.” Those premiums are likely to jump by between $38 and $86 a month, topping out at about $475 a month for Medicare Part B.  This is no surprise. As I pointed out last October, legislation enacted last fall that reduced the 2016 premium spikes would not help this year unless the general price level remained perfectly flat.  The 0.3% Social Security COLA means that we are back where we were last year. Congress will undoubtedly try to make a similar fix this year.

Why High Earners Are Likely to See Higher Medicare Premiums in 2017 -- Low inflation, generally good for purchasing power, is likely to leave some high earners facing higher Medicare premiums next year. When the Social Security Administration on Tuesday releases its annual cost-of-living adjustment for retirement benefits,  Americans whose health-care costs are covered by Medicare will be watching to gain insight into how their premiums will rise in 2017. This is because the so-called COLA figure plays a big role in determining premiums for Medicare Part B, which covers doctor visits and other types of outpatient care.While the final figure on the premium increase won’t be announced immediately—the Centers for Medicare and Medicaid Services last year released it in November—a high figure would spread the rising health-care costs over a greater number of people. A low figure would concentrate costs among the highest-earning Medicare beneficiaries. Because inflation has been low, the cost-of-living adjustment is widely expected to be small. The American Institute for Economic Research this week predicted an increase in the 0.2% to 0.5% range. In a June report, the Medicare trustees forecast a 0.2% increase. This would mean that most beneficiaries have little to worry about. Under the so-called hold-harmless provision of the Social Security Act, Medicare can’t pass along a Part B premium increase that’s greater than what most participants would receive through Social Security’s annual cost-of-living adjustment.  The problem for high earners is that Medicare must then spread much of the projected increase in its costs across the remaining 30% of beneficiaries who aren’t covered under the hold-harmless provision.

Obamacare rates to jump 16.7% in Michigan despite state scrutiny -- The sticker price for individual health plans sold on Michigan's Affordable Care Act exchange will jump 16.7% next year under new rates announced Monday by state officials. The rates will be in effect Nov. 1, when open enrollment starts again on Healthcare.gov. The double-digit increases will mean a financial hit for taxpayers in general, as well as some of the 393,322 Michiganders who currently buy individual health insurance on or off the government-run exchange. Most people in Michigan who buy through the exchange do not pay full sticker price because they qualify for the Affordable Care Act's tax credit subsidies, which increase as the premiums increase. That means taxpayers will ultimately foot the bill for the higher cost of insuring people who get subsidies. For their part, insurers say they need higher rates due to ever-rising health care costs, galloping prices for prescription drugs like EpiPens, larger-than-expected medical claims and the end of a federal "reinsurance" program that distributes money to health plans whose members have very high claims. The approved rates are slightly smaller than the average 17.2% increase initially sought by the insurers. That was due to the insurance department's rate review, state officials said, adding that public comments on the proposed rates were considered in the process. By comparison, last year the insurance department granted every insurer the exact rate increase it requested for individual plans -- producing a 6.5% increase from 2015 to 2016. State regulators vowed this summer to take an extra close look at the latest rates because of the especially large requests. For small group policies (businesses with fewer than 51 employees), regulators approved rates an average of 2.5% higher in 2017, or 0.1% less than insurers sought. "Ensuring rates are adequate but not excessive is critical to make sure consumers not only receive health insurance coverage at a reasonable price, but can count on the coverage they purchase,” Patrick McPharlin, the department's director, said in a released statement.

 Rate Increases for Health Plans Pose Serious Test for Obama’s Signature Law - WSJ: Finalized rates for big health insurance plans around the country show the magnitude of the challenge facing the Obama administration as it seeks to stabilize the insurance market under the Affordable Care Act in its remaining weeks in office. Market leaders that are continuing to sell coverage through HealthCare.gov or a state equivalent have been granted average premium increases of 30% or more in Alabama, Delaware, Hawaii, Kansas, Mississippi and Texas, according to information published by state regulators and on a federal site designed to highlight rate increases of 10% or more. In states including Arizona, Illinois, Montana, Oklahoma, Pennsylvania and Tennessee, the approved rate increases for the market leader top 50%. In New Mexico, the Blue Cross Blue Shield plan agreed to resume selling plans through the online exchanges after sitting out last year, but has been allowed to increase rates 93% on their 2015 level. Dominant insurers in Connecticut, Georgia, Indiana, Kentucky, Maine, Maryland and Oregon have been allowed to raise premiums by 20% or more, and rate increases from similarly situated carriers in Colorado, Florida and Idaho are brushing up against that threshold. Most of the 10 million people who currently get coverage through an insurance exchange such as HealthCare.gov don’t pay the full premiums because they receive subsidies from the federal government that are pegged to insurance prices in their area. As many as nine million people currently buy individual coverage without using the site, but at similar prices, and most of them aren’t eligible for subsidies. The Obama administration has characterized the year as one of “transition,” in part because insurers priced aggressively low in the opening enrollment periods for coverage under the law, and has pledged new efforts to encourage healthier people to sign up.

Obamacare Premiums Up 30% In TX, MS, KS; 50% In IL, AZ, PA; 93% In NM: When Does The Death Spiral Blow Up? --Obamacare premiums are skyrocketing out of sight. A jump of a mere 30% looks like a good deal compared to jumps of over 50% in six states, and 93% in New Mexico. Congratulations are in order for those living in a handful of states whose premiums only rose 20%.The Wall Street Journal reports Rate Increases for Health Plans Pose Serious Test for Obama’s Signature Law.Finalized rates for big health insurance plans around the country show the magnitude of the challenge facing the Obama administration as it seeks to stabilize the insurance market under the Affordable Care Act in its remaining weeks in office.“The situation is serious,” said Alissa Fox, senior vice president of the Office of Policy and Representation for the Blue Cross Blue Shield Association. “The reason the premiums are where they are is that the people we are covering have serious conditions and they’re using a lot of medical services because of their chronic illnesses. That’s clear. And there’s not enough young, healthy people to balance out those costs.”In Minnesota, for example, Blue Cross Blue Shield is pulling its preferred provider organization plans from the state’s online exchange, MNSure, and the narrow network product has been approved for an average rate increase of 55%.

U.S. health insurers are in denial about climate change -- The biggest health insurers in the U.S. show little understanding or concern about the risks to their business posed by climate change, even though warmer winters and springs are already causing spikes in conditions such as allergies, asthma and Lyme disease.   That’s one of the findings of a report from non-profit Ceres that ranks the 148 largest insurance companies in the U.S. on their response to climate risks, including severe weather events. The report is based on a climate risk survey developed by the National Association of Insurance Commissioners, or NAIC, and first conducted in 2014. The survey polled insurers such as AIG AIG, -1.05% MetLife Inc. MET, -0.34% and Travelers Cos. TRV, -5.77% that write more than $100 million in premiums, and then ranked their responses using a four-tier scoring system of high quality, medium quality, low quality and minimal. The companies polled represent about 71% of the U.S. insurance market measured by direct premiums written.  Ceres found that while property and casualty insurers and life and annuity insurers have made some progress in engaging with climate change and attempting to evaluate the risks to their business, health insurers appear to be in a state of denial.  “Every segment can improve, but health insurers are just not engaged much and that really came through in their disclosures,” said Max Messervy, manager of the Ceres insurance program and one of the authors of the report. “ A few actually said they do not believe climate change is a material business risk.”

Why 27 Million Are Still Uninsured Under Obamacare:  When the Affordable Care Act was signed into law in 2010, it promised to extend health insurance to tens of millions of people. And although the law has helped push the U.S. uninsured rate down to a record low, the ACA’s new insurance markets are proving to be volatile, with insurers recording big losses and pulling out. Meanwhile, there are still millions of people without health insurance. One key to stabilizing the law is drawing in more of those who are uninsured, particularly the younger, healthier ones. In fact, young people are the most likely to go uninsured, according to a detailed analysis by the Kaiser Family Foundation. The analysis shows that those who lack insurance cut across age and income and vary from state to state. Taking a look at who these people are can give clues to how the health law is falling short, and what can be done to fix it. That’s not to say that the law hasn’t achieved a primary goal: reducing the number of people without health insurance. When President Barack Obama signed the ACA in 2010, about 47 million Americans under the age of 65 lacked health insurance.Since then, people with low incomes became eligible for Medicaid in states that expanded the program, adults younger than 26 rejoined their parents’ plan, and customers bought insurance on the law’s new markets—usually with subsidies. In all, the government estimates that about 20 million people have gained coverage. But there are still those 27 million uninsured. And there are a variety of reasons they’re being left behind by the law’s gains, according to the Kaiser analysis.Kaiser surveyed the uninsured in late 2015 in a separate study, to get a better idea of who still lacks coverage and why. Nearly half the people who didn’t buy coverage thought it was too expensive.Of the uninsured, the largest group is between 26 and 34 years old—which makes sense when you consider that they’re just moving off their parents’ plans and may not have a good job that provides them with insurance, or that pays them enough to be able to buy it on their own.The uninsured tend to have relatively low incomes. About 7 million of them make less than the poverty level—approximately $24,000 for a family of four—while about the same number of uninsured people make between one and two times the poverty line.

Pharmacists blame PBMs for high cost of Nexium - Pharmacists around the country are agitated. For years they've been watching their customers struggle to pay for prescription drugs, even when they have generic or over-the-counter alternatives. These drugs are supposed to treat simple, everyday ailments, like acid reflux and heartburn. In the case of acid reflux, the drug in question is Nexium, and it serves as an illustration of the pharmacists' chief complaint. Nexium comes in many forms, including a less potent over-the-counter version. That costs between $25 and $50. There's also a prescription version with twice the strength. If you're getting that one through Medicare Part D, the government's program for prescription drugs, it could cost as much as $700. To try to understand why, we talked to pharmacists, and they all pointed to the same thing: It's the pharmacy benefit managers, or PBMs. PBMs are companies that manage insurance plans for the government, employers, and other payers. They're middlemen. For the insurance companies and employers, they help manage prescription claims. They do this in part by creating lists of drugs that will or won't be paid for and then use their scale to negotiate lower costs.  But they also get paid by the drugmakers, who want their product on the list of approved drugs. And, because some of their fees are pegged to the drug's price, the PBMs can actually profit from higher prices too. To the pharmacists, these conflicts are made worse by the PBM's secretive contracts.

CDC Blocks Testimony by Vaccine Whistleblower in Medical Malpractice Case --Thomas Frieden, the director of the Center for Disease Control (CDC), has blocked CDC whistleblower, Dr. William Thompson, from testifying on scientific fraud and destruction of evidence by senior CDC officials in critical vaccine safety studies regarding the causative relationship between childhood vaccines and autism.  Attorneys Bryan Smith and Robert F. Kennedy, Jr., of Morgan & Morgan , have been seeking to have Dr. Thompson testify in a medical malpractice case to explain how the CDC committed scientific fraud in a series of studies, which found no link between vaccines and autism. In denying the request, Dr. Frieden said, "Dr. William Thompson's deposition testimony would not substantially promote the objectives of CDC or HHS [Health and Human Services]."  Dr. Thompson, a 19-year veteran at the CDC and former senior vaccine safety scientist at the agency's Immunology Safety Office, is the co-author of four key studies that the CDC widely touts to exonerate the MMR vaccine and vaccines containing the mercury-based preservative thimerosal, from being linked to autism. Thompson is currently employed at the CDC's National Center for HIV/AIDS, Viral Hepatitis, STD and TB Prevention.  In August 2014, Dr. Thompson revealed that the data underlying CDC's principle vaccine safety studies demonstrated a causal link between vaccines and autism or autism symptoms, despite CDC's claims to the contrary. According to Thompson, based upon interpretation of the data, "There is biologic plausibility right now to say that thimerosal causes autism-like features." Dr. Thompson invoked federal whistleblower protection in August 2014.

Gonorrhea And Syphilis Rates Reach All-Time High In The U.S. - The U.S. is backsliding on progress against sexually transmitted infections, according to a new report from the U.S. Centers of Disease Control and Prevention.  Rates of chlamydia, gonorrhea and syphilis reached an unprecedented high nationwide, while rates of congenital syphilis ― when a pregnant woman passes the infection on to her baby ― also increased. This is the second year in a row that these three STDs have increased, and experts say the all-time highs reflect a nationwide disinvestment in public health, specifically STD prevention. There were 1.5 million cases of chlamydia reported in 2015, a six percent increase from 2014. At 395,000 cases, gonorrhea is up 13 percent from 2014, and at 24,000 cases, syphilis is up 19 percent from 2014. Young people ages 15 to 24 make up about two-thirds of all chlamydia cases and half of all diagnoses for gonorrhea. Gay and bisexual men make up the majority of syphilis cases.

Toxic products cost the US $340 billion a year -- Chemicals found in plastic bottles, flame retardants, food cans, detergents, cosmetics and pesticides cost the US twice as much as in the EU, where the toxins are regulated.  The chemical policy in the United States is so illogical; how does it make sense that we allow toxic chemicals with known negative health effects to persist? The research comes from New York University’s Langone Medical Center and was published in The Lancet Diabetes and Endocrinology. The researchers discovered that endocrine disruptors cause more than $340 billion a year in health costs and lost earnings. For comparison, it’s more than double the yearly estimated cost of $163 billion in the European Union.  In matters of chemical policy, the EU operates by means of the precautionary principle, in which ingredients likely to be hazardous can be removed from the market, even if full scientific evaluation hasn’t been completed.  “Adults and children in the U.S. carry more industrial chemicals in their bodies than their European counterparts simply due to differences in chemical policies,” Joseph Allen, a public health researcher at Harvard University told Reuters.  “In the U.S. our chemical policy largely follows the approach of our legal system – ‘innocent until proven guilty,’” Allen added. “This is appropriate for criminal justice policy but has disastrous consequences for health when used for chemical policy.” The chemicals in the study are endocrine disruptors. Found in a wide array of consumer products – think plastic bottles, flame-retardants, food cans, detergents, cosmetics and pesticides. They can interfere with the body’s hormone system and cause all kinds of deleterious developmental, reproductive, neurological and immune effects. Reuters points out some of the startling highlights from the study: This chemical blend, polybrominated diphenyl ethers (PBDEs) [flame-retardants], is responsible for about 43,000 cases of intellectual disability in the U.S. each year, compared with 3,290 cases in Europe, the researchers estimate.  PBDEs are also tied to the loss of 11 million IQ points each year in the U.S., compared with 873,000 lost IQ points in Europe.  Combined, the costs associated with intellectual disabilities and lost IQ points linked to PBDEs come to $266 billion a year in the U.S., compared with $12.6 billion in Europe.

In New Ozone Alert, A Warning Of Harm to Plants and to People - For the last four years Jack Fishman, a professor of meteorology at St. Louis University, has guided the planting of five gardens in the Midwest, gardens that have a distinct purpose: to show the impacts of an invisible gas that is damaging and contributing to the premature death of forests, crops, and other plants — and also humans.   The snap beans, milkweed, coneflowers, and other plants that turn brown and sickly from exposure to ozone when it occurs at ground level, he said, are "natural bio-indicators showing this pollutant is harmful to anything that lives — a human, a squirrel, or plants. It's the only way to show the real-time impacts of something that's happening to our planet." The ozone crisis may fly under the radar compared to climate change, but it is entwined with that mother of all problems. And it’s nothing new for Fishman. He began studying ground-level ozone for NASA in 1977 and has been warning about its impacts since the 1980s. Ozone is highly toxic, even at very low concentrations. Over the last few decades, background levels have steadily increased, though pollution controls have brought down the highest concentrations in many places. And while what scientists know about the effects of ground-level ozone on life on earth is deadly serious, the subject is not all that well-researched — and what they don't know is potentially disastrous. Ozone is both a naturally occurring and human-created gas. It is chemically similar to chlorine; at high enough concentrations, it has an odor and is a pale blue color. Copy machines give off the smell as they heat up. Because it is not as pungent as chlorine, ozone is used as a less harsh alternative to chlorine for disinfecting swimming pools.

Florida Faces Worst Orange Harvest Crisis Since Records Began in 1913 --  Production of the official fruit of Florida continues to plummet as the first forecast from the U.S. Department of Agriculture (USDA) for the 2016-2017 growing season indicates a 14 percent drop in the state's orange crop.  On Wednesday, the USDA predicted farmers will have enough oranges to fill 70 million boxes for the season. Last season, Florida produced 81.5 million boxes, a 52-year low . This latest forecast shows that the region is in the midst of the worst orange harvest crisis since records began in 1913, according to The Guardian .  After the announcement, Florida Commissioner of Agriculture Adam Putnam said that the forecast is disheartening and further proof of the difficult times facing Florida's citrus industry which has been dealing with citrus greening , an incurable bacterial disease that can kill a tree within two years. The state has set aside $8 million in the budget to help fight against greening, in addition to $14.7 million for a citrus health response program within the Florida Department of Agriculture and Consumer Services, reports The Tampa Bay Times . Farmers themselves have put $100 million into fighting the disease that is spread through hurricanes and storms that hit the state.

5 Renowned Judges Heard 30 Witnesses Describe Crimes Against Humanity at Monsanto Tribunal -- Last weekend , farmers, scientists and activists from all over the world gathered at the Monsanto Tribunal in The Hague, Netherlands, to present the case against destruction caused by one of the corporate giants that promotes industrial farming.  The symbolic Monsanto Tribunal aimed to hold Monsanto —the giant agrochemical company—to account for its alleged atrocities against humanity and the environment. This event is far from over. It will echo back through the food system as the tribunal's participants bring home lessons, solutions and renewed hope for change.  Five internationally renowned judges heard 30 witnesses. Experts gave their accounts of the environmental damage wrought by Monsanto. One testimony described how monoculture has caused a great loss to seed variety. They compared the patenting of seeds to a new form of colonization.  These testimonies will give people all over the world a well-documented legal brief to be used in lawsuits against other similar corporations.  "Although this is not legally binding, it is legally sound," said Arnaud Apoteker, member of the steering committee of the tribunal. "The witnesses were presenting real cases to real judges. The lessons from this event can be used in ensuing local battles."  One of the 30 witnesses, Feliciano Ucam Poot, a Mayan farmer from Mexico, submitted evidence to support his allegations that glyphosate and other chemicals are linked to children's sickness.  "Before the introduction of glyphosate and other agrochemicals, I did not see our people suffer from sickness like this," he said. "A lot of people are suffering like us and this tribunal will ensure that our stories will be heard around the world."

Return of screwworm could have huge impact on livestock, hunting industries: The return of screwworms would deal a severe blow to the ranching and hunting industries, Texas A&M AgriLife Extension Service veterinary entomologist Dr. Sonja Swiger said. Swiger's observation came after the flesh-eating pest was confirmed in Florida. She said Dr. Thomas Hairgrove, AgriLife Extension veterinary specialist at College Station, Texas, recently gave a presentation to producers during which he said the cost to control the pest today in cattle alone could easily exceed $500 million annually. “Some in attendance at Dr. Hairgrove’s presentation had no idea of the gravity of the issue. That’s understandable, as the last reported case in the U.S. was decades ago.” The current infestation in deer is isolated to one of the Florida Keys, she said. Swiger said the primary or New World screwworm, as it’s called, is a serious pest of all mammals, including livestock, wildlife, birds and humans, although its presence is rare in birds and people. “The primary screwworm, the ‘worm’ being the larval stage of a fly a bit larger than a housefly, is different from all other blow flies in the U.S.,” she said. “The difference is that it infests and feeds on living tissue in live animals. In contrast, blow flies feed on carrion and rotting meat.” Swiger said wounds or mucous tissue on animals attract the female screwworm, which lays several-hundred eggs. The larvae soon hatch and live inside the wound. As the wound festers, more females are attracted and lay their eggs. "Infestations, if left untreated, usually led to the death of the animal."

‘Strict’ pesticide rules fail to erase threat to Wisconsin’s drinking water - In 2014, Jacob Reeves’ body started swelling up. Then he developed an unusual rash. After multiple hospital visits, Jacob, now 11, was diagnosed with juvenile dermatomyositis. It is a rare inflammatory disease that affects muscles, skin and blood vessels, afflicting just 3 out of every 1 million children each year, The cause of the disease is unknown, so Dawn Reeves went looking for answers as to why the second-youngest of their five children suddenly fell ill. She and her husband, Doug, started with the well at their home about 20 miles southeast of Madison. Testing found the family’s water was contaminated with fertilizers and pesticides. Most surprising was the weed killer atrazine, which has been banned from the area where the Reeves family lives for 20 years. It was found at twice the state and federal drinking water health standard. Follow-up testing by the state Department of Agriculture, Trade and Consumer Protection found 8.2 parts per billion of atrazine — nearly triple the state health standard — present in the water they drank every day. In a letter, DATCP warned that “Long-term exposure to atrazine may cause a variety of health problems, including weight loss, heart damage and muscle spasms.” When it comes to pesticides — including insecticides, herbicides and fungicides — in our water, the Wisconsin Center for Investigative Journalism has found: One-third of private drinking water wells in Wisconsin had pesticide contamination, according to the most recent comprehensive statewide survey; Nearly two-thirds of the more than 90 pesticides used on Wisconsin crops lack a health standard for water.

Toxic Blob Spreading Across Lake Erie, Could Put Cleveland's Drinking Water at Risk -- Ohio governmental officials will be releasing an updated report about a two-square-mile toxic blob at the bottom of Lake Erie that might be spreading perilously close to a water intake pipe that supplies drinking water for the city of Cleveland.   Lake Erie's toxic sediment is a potential threat to city of Cleveland's drinking water. Stefanie Spear   According to The Plain Dealer , the new report is expected for release later this fall and is based on new tests taken nearby a section of the lake bottom known as Area-1, located about nine miles off the coast. Prior Ohio Environmental Protection Agency (EPA) tests of the tainted plot from 2014 and 2015 revealed levels of PCBs (polychlorinated biphenyls) and PAHs (polycyclic aromatic hydrocarbons) that were much higher than elsewhere in Lake Erie. These highly toxic chemicals can harm or kill aquatic life and can cause cancer in humans.   Lake Erie's toxic blob is the result of the U.S. Army Corps of Engineers' dumping of dredged and untreated sludge from the polluted Cuyahoga River shipping channel in the 1970s. The disposal took place before the Clean Water Act of 1972 was enacted.  The mass is located about five miles from an intake valve for the Nottingham Water Treatment Plant, which supplies drinking water to parts of Cuyahoga County—Ohio's most populous county. It is unclear how fast the blob is moving or if it will actually reach the pipe.

America's Lead Crisis Continues: Chicago Parks Shut Off Drinking Fountains After Tests Find High Levels of Lead -- Nearly 20 percent of the water fountains in Chicago parks tested positive for excess levels of lead in the water and have been shut down by the Chicago Park District.  Of the 1,891 outdoor fountains in city parks, 445 exceeded the U.S. Environmental Protection Agency's (EPA) action level of 15 parts per billion. Another 14 of 544 indoor water fountains were contaminated as well. However, the EPA's Lead and Copper Rule refers primarily to municipal water systems, not single source supplies. The rule requires that action be taken if more than 10 percent of the taps tested exceed the 15 parts per billion standard.  The U.S. Food and Drug Administration (FDA) regulates bottled water , and has set a standard of 5 parts per billion. The difference is designed to account for the fact that bottled water does not flow through lead pipes. In cases where it is sourced from municipal water supplies, it must be run through one of several filtration processes in order to be labeled as "purified." If the Chicago Park District used the FDA standard, an additional 250 fountains would have to be shut down.  Exposure to high levels of lead for children can lead to reduced cognitive function, lower IQ scores, behavior, learning and hearing problems as well as anemia and slowed growth. Effects on pregnancy include premature birth and reduced growth of the fetus. Lead can be harmful to adults, including hypertension and reproductive issues. In Flint, Michigan, where the crisis of lead in water gained national attention, residents reported rashes and hair loss that may be linked to contaminated water.

'We cannot breathe:' A poor Alabama town has lived with the rotten egg stench of gas for 8 years – LATimes - When methane started leaking out of a well at the Aliso Canyon natural gas storage facility outside Los Angeles last October, noxious fumes blanketed the nearby Porter Ranch neighborhood for months. Residents complained of nausea, nosebleeds and vomiting; more than 8,000 families were forced out of their homes by the stench of the chemical odorant added to natural gas to help detect leaks.Two thousand miles away, in a poor Alabama community, residents are complaining of similar symptoms after lightning struck equipment at an underground pipeline. An estimated 500 gallons of the same chemical spilled into the soil and groundwater, according to state environmental officials. But, unlike in affluent, predominantly white Porter Ranch, residents in Eight Mile have been largely ignored, stuck for eight years with the stifling rotten egg stench that still hovers over the low-income, mostly African American enclave just north of the Gulf of Mexico.Residents say there have been no relocations to hotels or rented homes. No transfers to schools out of harm’s way. No U.S. Cabinet members swooping in to investigate. No national media hordes.“Because we don’t have the financial wherewithal to put pressure on these people, they simply turn their heads,” said Eight Mile resident Carletta Davis, one of hundreds of people suing Mobile Gas Service Corp. over the leak of the chemical mercaptan. “Our children are sick.... It’s absolutely an outrage.”The two leaks have another thing in common: San Diego-based Sempra Energy owns and operates Aliso Canyon and, for most of the eight years since the lightning strike, it also owned the Eight Mile facility.’

As California water use rises, some ask: Were limits eased too soon? — This state slashed urban water use over 25 percent in the face of a punishing drought last year, exceeding a mandatory order issued by Gov. Jerry Brown and turning California into a model of water conservation. Californians tore out lawns, cut back landscape watering and took shorter showers as they embraced Mr. Brown’s call to accommodate what he warned were permanently drier times. But this year, after regulators lifted the mandatory 25 percent statewide cut following a relatively wet winter, water use is up again, a slide in behavior that has stirred concern among state officials and drawn criticism that California abandoned the restrictions too quickly. In August, water conservation dropped below 18 percent compared with August 2013, the third consecutive month of decline.“The lifting of the mandatory conservation targets was a big mistake,” said Peter H. Gleick, a founder of the Pacific Institute, a think tank dedicated to water issues. “It sent the wrong message, it stopped the implementation of a growing set of effective urban conservation and efficiency programs, and it took pressure off both utilities and individuals to continue to improve water-use efficiency.”  Felicia Marcus, the chairwoman of the Water Resources Control Board, said the state could not continue to ask Californians to take emergency measures amid evidence that the situation had eased. Still, she said she was concerned by the rise in water use and warned that the state may reimpose mandatory cuts if conservation continues to decline and California endures another dry winter.

Dairy farmers in California say anti-flatulence law stinks: Happy cows may come from California, but their farts could be overheating the atmosphere. A new state law aims to reduce methane from cows, but the cattle industry thinks the regulation stinks. "I don't have a whole lot of hope that common sense will prevail," said Rob Vandenheuvel, general manager of the Milk Producers Council, a industry group in California. The Golden State has the most dairy cows in the nation with a herd of 1.7 million animals churning out milk. There are also nearly 4 million beef cattle. Vandenheuvel may not have much to worry about. The law leaves a lot of wiggle room, and it will take so long to kick in that there's a chance it could end up as little more than a burp in the road. "Any regulation is a ways off," said Dave Clegern, spokesman for the California Air Resources Board. Gov. Jerry Brown signed the law last month to reduce "short-lived climate pollutants." Part of the law mandates cutting methane from livestock 40 percent by 2030 from 2013 levels. Methane doesn't "live" long in the atmosphere, but it is considered a powerful greenhouse gas. "Agriculture represents the largest methane source in California, accounting for nearly 60 percent of methane emissions," said a draft report on the legislation.Cows are the main culprit of livestock methane — through flatulence, belching and manure. An estimated 19 percent of methane wafting through California's air comes from so-called dairy cattle "enteric," that is, gas coming out of one end or the other of the animal. Another 25 percent comes from dairy manure, and 10 percent comes from nondairy livestock.  It's not even clear how to measure methane emissions from cattle operations, or what 2013 levels were, but Vandenheuvel suspects regulators will come up with a baseline by multiplying the number of cattle known to be in California that year by the amount of methane an average cow generates.  How are farmers and ranchers supposed to cut down on methane emissions, short of cutting down the size of their herds? The air resources board will spend the next couple of years investigating whether it can be done by changing animal diets, something the industry worries could hurt the animals. A long-shot idea is an experimental contraption out of Argentina called a Fart Pack, which collects gas directly from a cow's digestive tract.

Factory farms get bigger, pollution grows, but regulators don't even know where they are - After Hurricane Matthew churned across North Carolina earlier this month, swollen rivers deluged poultry and swine farms, killing millions of chickens and thousands of hogs and sending potentially toxic animal waste coursing into waterways. It could take weeks or months for North Carolinians to learn the scope of the pollution or where it came from—if they ever do. "We may never know how bad this was or the extent of the damage," said Travis Graves, a North Carolina-based member of the Waterkeepers Alliance, who has been surveying the scene from the air. "The state doesn't even know how big the poultry industry is here." Thousands of industrial farms across the country release contaminants into the nation's water and airways, but in many states like North Carolina, the public has limited access to information about them. Federal authorities can't gauge the scope of the pollution, either, because in some states they have very little idea of the number and location of farms. This makes regulatory oversight weak and in some cases, nonexistent. "You can get this information on coal plants or any other polluter," said Tarah Heinzen, an attorney with Food & Water Watch, an environmental advocacy group that has called for the agency to submit information about CAFOs to the public. "But you can't for this industry." These massive farms, or CAFOs—Concentrated Animal Feeding Operations—can house hundreds of thousands of animals in confined spaces, creating potent volumes of nutrient pollution that have fouled rivers, lakes and oceans. Decomposing manure releases toxic chemicals, mostly ammonia and hydrogen sulfide, into the air. Manure stored in lagoons releases methane and nitrous oxide, global warming gases more powerful than carbon dioxide. The Environmental Protection Agency has estimated that about 11 percent of the greenhouse gas emissions in the U.S. come from agriculture, and about 12 percent of total methane emissions comes from manure management, a rise of about 65 percent since 1990.The EPA, which regulates CAFOs under the Clean Water Act, puts the number of CAFOs at about 19,200, up from about 3,600 three decades ago. But environmental groups say that number is probably higher, largely because the agency has been unable to get reliable and comprehensive information, thanks to patchy state regulation and years of legal pushback from the livestock industry to keep the information from the public.

A Saudi Prince May Be Racing Away with Farm Subsidies -- Billionaire Saudi Prince Khalid bin Abdullah could be raking in hundreds of thousands of dollars in U.S. taxpayer-funded crop insurance subsidies through farms he owns in Kentucky – but we have no way of knowing for sure.   Billionaires can no longer qualify for traditional commodity subsidies in the U.S., thanks to a modest means test that was tightened in the 2014 Farm Bill. However, Congress failed to enact reforms to the crop insurance program that would have prevented millionaires and billionaires from collecting unlimited subsidies through the federal crop insurance program – so they likely still do. At the same time, there are no basic transparency requirements or payment limits for recipients of crop insurance subsidies, leaving taxpayers in the dark about who is receiving subsidies and how money they are getting.  According to a report released by Greenpeace, a horse breeding farm owned by Prince Abdullah and incorporated in England received over £406,826 in European Union farm subsidies last year – equivalent to $522,730. In addition to farms in England and Ireland, his business Juddmonte Farms operates three horse breeding farms in the Bluegrass state. While foreign persons are generally prohibited from collecting commodity subsidies if they own more than a 10 percent stake in the farm business, the federal crop insurance program has no strict prohibition on eligibility for premium subsidies. In fact, a 2015 report by the Government Accountability Office found that more than 20 crop insurance participants in the highest income category had foreign residences. One crop insurance avenue the prince could be taking advantage of is for pasture, rangeland and forage, a category which was expanded in the last farm bill. According to the U.S. Department of Agriculture, in 2015 nearly 21,000 pasture, rangeland and forest insurance policies offered $1 billion of coverage on more than 54.7 million acres of such land. On average, taxpayers cover 62 percent of the cost of crop insurance premiums. Between 2010 and 2014, the average annual cost was $8.7 billion, with about $6.5 billion going toward premium subsidies. One thing is clear: Unless Congress takes action to fix the current crop insurance system, foreign billionaires like Prince Abdullah will continue having the opportunity to win big on U.S. subsidies.

Trump and Clinton both wrong on ethanol -- Hillary Clinton and Donald Trump don’t agree on much, but they see eye-to-eye on the Renewable Fuel Standard. Too bad they’re both wrong. The policy requires America’s gasoline supply be mixed with renewable fuels like corn-based ethanol. In their public addresses, both nominees continue to cite ethanol as key to breaking U.S. dependence on foreign oil and reducing greenhouse gas emissions. America’s domestic energy boom has laid that first argument to rest. As for the environment, the RFS does more to harm our planet than to help it. Instead of aligning themselves on the wrong side of this issue, both candidates should commit to ending the RFS as quickly as possible.   Remember, ethanol was supposed to be a greener, more climate-friendly alternative to fossil fuels. By artificially inflating the demand for corn, however, the RFS has dramatically increased the amount of previously unfarmed land devoted to corn production. Some 7.3 million acres of natural habitat were destroyed in the few years after the policy took effect, according to researchers at the University of Wisconsin. Since the process of transforming these lands unlocks vast amounts of carbon dioxide, ethanol ultimately contributes to greenhouse gas pollution. According to an analysis from the Clean Air Task Force, in fact, over a 30-year period, emissions from ethanol would actually be 28 percent higher than those produced from gasoline. Motorists are also worse off thanks to the RFS. After all, corn-based ethanol contains a third less energy than gasoline, reducing the number of miles a driver can travel on a full tank. In New England alone, ethanol mandates cost motorists an additional $6.29 billion between 2005 and 2014. Even our cars are poorly served by the ethanol mandate. Increasingly stringent Environmental Protection Agency blending requirements have made motor fuel unsuitable for many cars. For nine out of 10 of today’s vehicle engines, in fact, filling up on high-ethanol fuel could result in serious damage.

Why I Give PBS Documentary "The Ethanol Effect" a Grade of C-  - by K.M. of Big Picture Agriculture -  Last week I provided a link for you to watch the new PBS ethanol documentary "The Ethanol Effect" online at Detroit Public Television. It's unfortunate that the show was constrained to one hour, which made it impossible to cover all that needed to be covered. It appears important segments on irrigation and air pollution were cut, judging by short video clips available online (included below). All things considered, I'm giving the show a grade of C-, considering its omissions and overall stance. This list is mostly about the things it omitted. You must watch it to learn the rest.
1. If someone only watched the first 12 minutes of the 54-minute show, they'd feel pretty warm and fuzzy about ethanol.. NASCAR ethanol promoters are one way to start a documentary about ethanol, to set the stage, but that's not how I would have allocated the frontline spotlight.
2. The energy content of ethanol is 33 percent less than that of gasoline. This is information every consumer should know and it was glossed over in the film.
3. To the film's credit it interviewed farmers who had thousands of acres of land. Ethanol policy and the corn acreage demanded by this policy begets larger farms, and investor owned farms/farmland. This contributes to a depopulation of our rural communities and areas, things the film perhaps implied to the well-informed, but lacked saying for those uninformed.
4. While ethanol was given credit as a necessary octane booster, replacing MTBE, it didn't mention that there are other better choices for octane boosters, such as the bioethers. (See my Yale e360 Interview for more on that.)
5.  Because Iowa produces far more ethanol than any other state (see chart below), naming Tom Vilsack as Secretary of Agriculture, who was previously an Iowa politician, supplies the optimal conditions for ethanol to be the recipient of special political favors.... blender pumps, facility grants, research monies, export trade missions, positive public relations, exploration of markets in our military, and (perhaps-assumed) important influential power over at the EPA.
6. I thought that the show was weak in naming environmental consequences of today's level of ethanol production. For wildlife, the documentary only mentioned bees and ducks, when there are so many other species that have been impinged upon including pollinators, songbirds, amphibians, fireflies, and Monarchs. It's all about the lack of habitat when a policy such as this rewards and encourages fencerow to fencerow industrial farming.

As the Global Demand for Palm Oil Surges, Indonesia’s Rainforests Are Being Destroyed – Audubon - Indonesia is ground zero for palm oil, a substance that, unbeknownst to most Americans, has quietly invaded our lives. Now present in half of all products on U.S. grocery store shelves—from crackers and ice creams to lotions and lipsticks—the cheap, versatile commodity also is on a precipitous rise in India, China, and beyond. Glob- ally, production of palm oil has doubled during the past decade, and is set to do so again by 2020.  Cultivation of the oil palm plant already has exacted a devastating toll on the birds of Indonesia (and of Malaysia, where most of the rest of the world’s oil palm is grown). Here on Sumatra, more than 75 percent of the 102 lowland-forest-dependent bird species are now considered globally threatened. And BirdLife International reports that 27 of the island’s 34 Important Bird Areas contain major tracts of just the sort of lowland forest prized by the industry. As the forests disappear, hornbills and other birds find themselves squeezed into ever tinier patches of suitable habitat. At the same time, new roads and oil-palm plantations render the remaining forests that much more accessible to poachers.   But the destruction of Indonesia’s tropical rainforests has implications for us all. Not only do the archipelago’s forests provide one of the planet’s most significant carbon sinks, but the country is home to Earth’s largest concentration of tropical peatlands—soils formed over thousands of years through the accumulation of organic matter. The peat deposits on Sumatra alone, which stretch across 460,000 acres and can reach depths of 25 feet, contain 11 times more carbon than the biomass of the forests above them. When the palm oil companies burn the peatlands as a precursor to digging canals and planting, massive quantities of carbon dioxide escape into the atmosphere. Deforestation and peat degradation account for a full 85 percent of Indonesia’s CO2 emissions; today the nation ranks fifth in the world in greenhouse gas emissions.

Climate Change Blamed for Collapse of Hawaiian Forest Birds -  (AP) — Native forest birds on the Hawaiian island of Kauai are rapidly dying off and facing the threat of extinction as climate change heats up their habitat and allows mosquito-borne diseases to thrive, according to a study released Wednesday. Higher temperatures caused by global warming increase the spread of diseases such as avian malaria in wooded areas once cool enough to keep them under control, the research says. The findings are an early warning for forest birds on other islands and other species worldwide that rely on rapidly disappearing habitat, according to the study published in the journal Science Advances. Most of Hawaii's forest birds are restricted to forests in high elevations where disease has been seasonal or absent. A sharp increase in disease has occurred over a 15-year period in the upper-elevation forests of Kauai's Alakai Plateau, a highly eroded crater of an extinct volcano, the study said. "If native species linearly decline at a rate similar to or greater than that of the past decade, then multiple extinctions are likely in the next decade," it warns. Two Hawaiian honeycreeper species — akikiki and akekee — are endangered. A petition is asking for the iiwi to be listed as endangered, too, said co-author Lisa Crampton, a wildlife ecologist and conservation biologist who is also coordinator for the Kauai Forest Bird Recovery Project.

10,000 Critically Endangered Water Frogs Found Dead in Polluted Lake --  Peru's National Forest and Wildlife Service, SERFOR, is investigating the deaths of hundreds of critically endangered Titicaca water frogs, whose bodies were found floating in the waters of Lake Titicaca, the only place in the world the species is found.  SERFOR responded to the banks of the river in the buffer zone of the Titicaca National Reserve to investigate the reported deaths and found 500 dead frogs in a 200-meter (656-foot) area. However, based on statements from locals and samples taken in the days after, SEAFOR estimated that more than 10,000 frogs were likely affected in a 30-mile span.  SEAFOR's investigation found the presence of solid waste and sludge formation in the area. The Committee Against Pollution of the Coata River told the BBC pollution in the Coata River that flows into Lake Titicaca is to blame for the deaths, and that the government has ignored pleas to address the problem.  After this latest incident, committee leader Maruja Inquilla and other supporters brought 100 of the dead frogs to the central square in the regional capital, Puno.  "I've had to bring them the dead frogs," Inquilla told AFP . "The authorities don't realize how we're living. They have no idea how major the pollution is. The situation is maddening."  The committee said a sewage treatment plant is needed to clean up the lake and its tributaries.

Scientists Warn Federal Agency's Plan Would 'Result in Extinction of Red Wolves in the Wild' -- The same scientists who provided the population viability analysis to the U.S. Fish and Wildlife Service (USFWS) for the red wolf have sent a rebuttal to the agency, accusing it of "many alarming misinterpretations" in its justification for removing most of the remaining animals in the wild. Last month, the USFWS announced that it would recapture 32 of the 45 wolves in the wild and leave only those on federal lands. Currently, there are about 200 red wolves in captive breeding programs in the U.S. as part of the agency's Species Survival Plan (SSP). The letter , released to the public today, bluntly counters the agency's proposal to recapture 32 wolves and place them in captive breeding programs: "A singular focus on the SSP will no doubt result in extinction of red wolves in the wild." On Sept. 29, the U.S. District Court for the Eastern District of North Carolina issued a preliminary injunction ordering the USFWS to stop capturing and killing—and authorizing private landowners to capture and kill—members of the rapidly dwindling population of wild red wolves . "There's no need to capture wild wolves in an effort to save the captive population, which is what the service contends," said Defenders of Wildlife attorney Jason Rylander.

100 Years Ago 100,000 Tigers Roamed the World, Now There Are Fewer Than 4,000 -- Discovery Communications and World Wildlife Fund (WWF) announced Wednesday a partnership to conserve nearly 1 million acres of critical tiger habitat in India and Bhutan in hopes of doubling the world's population of tigers by 2022.  The big cats are known to have once roamed much of Asia. Poaching and habitat loss slashed the 100,000 tigers that existed just 100 years ago by 96 percent and led to the extinction of four subspecies. As top predators, they are crucial to the ecosystems where they live. The current tiger population is estimated at under 4,000.  "Not on our watch will we let these beautiful animals disappear from the world," David Zaslav, president and CEO of Discovery Communications, said when making the announcement.  The effort, dubbed Project C.A.T. (Conserving Acres for Tigers), will improve security measures for this protected habitat and maintain land corridors for better wildlife movement. To reduce conflict between tigers and people, the project will provide community education and engagement. More camera-trap installations will increase tiger monitoring and assessment.

Poachers Illegally Kill Hundreds of Endangered Snow Leopards Each Year  -- With possibly as few as 4,000 snow leopards surviving in the wild, a new report from TRAFFIC has found that hundreds of the endangered big cats are being killed illegally each year across their range in Asia's high mountains.  Published ahead of today's UN meeting on snow leopards and International Snow Leopard Day on Sunday, An Ounce of Prevention: Snow Leopard Crime Revisited estimates that between 221-450 snow leopards have been poached annually since 2008—a minimum of four per week. But this number could be substantially higher since many killings in remote areas go undetected.   Combating poaching and illegal trade of snow leopards is a key objective of the Global Snow Leopard Ecosystem Protection Program (GSLEP), which unites all 12 snow leopard range countries with intergovernmental and non-governmental organization partners. The GSLEP Secretariat is among the organizers of today's UN meeting.  Using a combination of methods, including seizure records, market surveys and expert interviews to provide the first quantitative estimates of the scale of snow leopard poaching and trafficking since 2003, the report found that the majority of snow leopards are killed in retaliation for attacks on livestock (55 percent) or by non-targeted methods, such as snares (18 percent). Only 21 percent of snow leopards were poached specifically for the illegal trade in their pelts and products. However, the report found that over half the retaliatory and non-targeted poaching incidents result in opportunistic attempts to sell, contributing to the estimated 108-219 snow leopards that are illegally traded each year.

Park Ranger Murdered While Protecting Critically Endangered Gorillas --A wildlife ranger tasked with protecting critically endangered Grauer's gorillas was killed this month in the Democratic Republic of Congo's Kahuzi Biega National Park, Mongabay reported.  Munganga Nzonga Jacques, 26, died Oct. 4 in an area in the Tshivanga region of the park, an area previously believed to be safe for the gorillas, showing the dangers conservationists face in unstable regions, the Wildlife Conservation Society (WCS) said . Jacques is the second ranger to be killed in the park in the last six months. Rebel groups shot and killed park ranger Oscar Byamungu Mianziro back in March. "We are very concerned about these increased threats to the rangers and their families, and to the protection of these animals," Andrew Plumptre, WCS senior conservation scientist for Africa , said in a statement.  Grauer's gorilla—a subspecies of eastern gorilla, the world's largest ape—are confined to eastern Democratic Republic of Congo. They were listed as critically endangered on the IUCN Red List of Threatened Species back in September after their population dropped 77 percent.

NASA: September Temps Warmest in 136 Years -- Last month was the hottest September ever recorded, beating 2014's previous record by 0.004°C.  According to new NASA data , temperatures were 1.6°F (0.91°C) above the 1951-1980 average.  According to an official statement from NASA's Goddard Institute for Space Studies, "September 2016 was the warmest September in 136 years of modern record-keeping, according to a monthly analysis of global temperatures by scientists at NASA's Goddard Institute for Space Studies in New York."    NASA's Gavin Schmidt said it "seems locked in" that 2016 will be the hottest year ever with temperatures approximately 1.25°C above the late 19th century average. For More News: Climate Central , Mashable , New York Magazine , IB Times , Independent .  Commentary: Discover, Tom Yulsman column ; Minnesota Public Radio, Paul Huttner column ; ThinkProgress, Joe Romm column

Earth's 16-month record heat streak ends but warming remains: (AP) — Earth's 16-month sizzling streak of record high temperatures is finally over, according to one group of federal meteorologists. The National Oceanic and Atmospheric Administration said last month's 60.6 degrees (15.9 Celsius) was merely the second hottest September on record for the globe. That's ever so slightly cooler — a few hundredths of a degree — than the record set in 2015. But it was quite a bit warmer — 1.6 degrees (0.9 Celsius) — than the 20th century average. Global average temperatures include both land and sea surface readings. And while oceans were cooling off a tad, global land temperatures in September still set a record high, NOAA climate scientist Jessica Blunden said. It was an unusually hot month in much of Europe, Asia, Africa and North America. NASA, which averages global temperature differently, considers last month as record hot . But the space agency didn't have a big consecutive hot streak because it didn't consider last June as record hot. "It's kind of nice to see it cool down a little bit even though it will go back up again," Blunden said. "It may not be a record now because we have natural variations in weather and climate. There's always going to be ups and downs but that doesn't mean global warming isn't happening." The fact that despite the end of El Nino — a warming of the central Pacific that tends to spike global temperatures — the world came close to setting another heat record "is quite a feat and offers evidence that global climate change is contributing to these monthly records/near records," University of Oklahoma meteorology professor Jason Furtado said in an email.

Earth on track for its warmest year on record after hottest September in 136 years | The Independent: Last month was the warmest September the world has seen since modern records began 136 years ago, according to new figures from Nasa. However the US agency added that the difference between it and the previous record in September 2014 was just 0.004 degrees Celsius, making the result a statistical tie. It was 0.91 degrees warmer than the average temperature for the month between 1951 and 1980.The figures mean 11 of the past 12 months have set new records for highest average temperature. However, Nasa said it had now established that June this year was not a record, as it previously said. Additional temperature readings from Antarctica showed it was actually the third warmest June, behind last year and 1998. Gavin Schmidt, director of Nasa’s Goddard Institute for Space Studies, said: “Monthly rankings are sensitive to updates in the record, and our latest update to mid-winter readings from the South Pole has changed the ranking for June. “We continue to stress that while monthly rankings are newsworthy, they are not nearly as important as long-term trends.” The Nasa figures are calculated using publicly available information from about 6,300 weather stations around the world, including ships and buoys that measure the temperature of the sea. The records go back to the 1880s as prior to this there were not enough temperature readings to give a global average

Warm water in Gulf blamed for sanctuary's bleached coral (AP) -- Experts blame lingering warm water temperatures in the Gulf of Mexico for significant bleaching of coral in a marine sanctuary 100 miles off the Texas coast. Researchers this month determined that nearly half of the coral colonies in the East Flower Garden Bank were bleached or paling, according to the Galveston County Daily News (http://bit.ly/2dYICdP). This year's bleaching problem is considered the worst in the marine sanctuary's history, with the next highest from 2005, when about 45 percent of the corals paled during a similar incident. Flower Garden Banks Superintendent G.P. Schmahl said the bleaching is caused by the coral's expulsion of the algae that gives it pigmentation. Experts from the National Oceanic and Atmospheric Administration, who attribute the bleaching to climate change, said sea surface temperatures were recorded at more than 86 degrees for 85 days over four months. The water temperatures should be between 68 and 84 degrees for coral to grow comfortably, according the Flower Garden Banks' website. Schmahl said the algae should return when water temperatures cool in the winter. Even with the optimism, Schmahl said, the long period of bleaching could result in corals to starve and die off. "In recent decades there has been a documented general increase in seawater temperatures associated with climate change and it's putting coral reefs throughout the world under stress," Schmahl said.

New pictures show Great Barrier Reef is not repairing itself as it should | The Independent: New images of the Great Barrier Reef have revealed the extent of the damage climate change has caused to the coral. The world’s largest reef system, which stretches for over 1,400 miles off the coast of Australia, has been severely affected by rising water temperatures. In May, researchers found more than a third of corals in central and northern parts of the reef had been killed and 93 per cent of individual reefs had been affected by a condition known as coral bleaching, where too warm water causes corals to expel algae living in their tissue and turn completely white. Corals depend on a symbiotic relationship with algae-like single cell protozoa, so when these are expelled they stop growing and often die. New research shows the damage has worsened rather than begun to repair. Amanda McKenzie, CEO of the Australian Climate Council, said at the start of this year scientists had described the reef as “110% alive”. "After the bleaching event in May, 60 per cent of what we saw was bleached very white,” she said. “Another 19-20 per cent was covered in sludgy brown algae. Even of what remained healthy, some looked a bit on edge. “When we went back a few weeks ago to see if they [the affected corals] had recovered or died, quite a large proportion had died.” Ms McKenzie estimated around half the bleached coral in the site they visited, a popular offshore reef about 54 kilometres from Port Douglas, was dead. She said delicate corals had been particularly badly affected: while strong ‘brain corals’ had mostly survived, many fragile varieties, such as plate corals, had died. Fish had also been affected she said, with far fewer species now living on the reef.

A changing climate for coral reefs - Bulletin of the Atomic Scientists - Tropical coral reefs are magical places, yet if all the world’s reefs were placed together they would occupy a relatively small area—less than half the size of France. These most diverse of marine ecosystems punch above their size, however, supporting up to a third of all marine species and acting as home to between hundreds of thousands or possibly millions of reef-associated organisms—even marine biologists just don’t know how many. This tremendous diversity and spectacular array of different life forms has been an endless source of fascination. Looking underwater in the northern sector of the reef in 2016, one would have seen no vibrant colors but a ghostly white scene of dead and dying corals, rapidly being overgrown by seaweeds. This was part of a protracted mass coral bleaching event, the third global event since 1998, which has affected many of the world’s coral reefs since mid-2014 and is still ongoing as of late 2016. So what has gone wrong in the intervening two centuries for the Great Barrier Reef, and why are more than 60 percent of the world’s tropical coral reefs considered to be under immediate and direct threat from local causes? And why should humanity care what happens? The answers lie with people. People are responsible for both the local degradation of reefs due to over-exploitation and pollution, and the global-scale consequences of interfering with the Earth’s climate system. And it is people who will be affected by these consequences. And it is people who could protect these reefs. Coral reefs are not found everywhere in the tropical oceans but are instead confined to warm, shallow, well-lit, clear, low-sediment, and low-nutrient waters. The chemistry of the seawater is also an important control on the distribution of coral reefs; this is quantified by its “aragonite saturation state”—a measure of how easily the main type of calcium carbonate created by reef-building corals can form, which depends on the concentration of calcium and carbonate ions in seawater. Despite their long geological history, coral reefs are fragile ecosystems that occur within a narrow and specific range of environmental conditions. As with many tropical plants and animals, this makes them more vulnerable to relatively small changes in their environment compared to species living at higher latitudes which are accustomed, for example, to a much wider temperature range during the course of a year. Many human activities are now altering the make-up of coral reef communities and taking coral reefs outside of their environmental comfort zone.

Great Barrier Reef Obituary Goes Viral, To The Horror Of Scientists - Dead and dying are two very different things. If a person is diagnosed with a life-threatening illness, their loved ones don’t rush to write an obituary and plan a funeral. Likewise, species aren’t declared extinct until they actually are. In a viral article entitled “Obituary: Great Barrier Reef (25 Million BC-2016),” however, writer Rowan Jacobsen proclaimed ― inaccurately and, we can only hope, hyperbolically ― that Earth’s largest living structure is dead and gone. “The Great Barrier Reef of Australia passed away in 2016 after a long illness,” reads the sensational obituary, published Tuesday in Outside Magazine. “It was 25 million years old.” There’s no denying the Great Barrier Reef is in serious trouble, having been hammered in recent years by El Niño and climate change. In April, scientists from the Australian Research Council’s Centre of Excellence for Coral Reef Studies found that the most severe coral bleaching event on record had impacted 93 percent of the reef. But as a whole, it is not dead. Preliminary findings published Thursday of Great Barrier Reef Marine Park Authority surveys show 22 percent of its coral died from the bleaching event. That leaves more than three quarters still alive ― and in desperate need of relief. Two leading coral scientists that The Huffington Post contacted took serious issue with Outside’s piece, calling it wildly irresponsible.  Russell Brainard, chief of the Coral Reef Ecosystem Program at NOAA’s Pacific Islands Fisheries Science Center, told HuffPost he expects the article was meant to highlight the urgency of the situation. But those who don’t know any better “are going to take it at face value that the Great Barrier Reef is dead,” he said. And judging by comments on social media, many did just that.  The Spokesman-Review, in Spokane, Washington, fueled the myth Thursday, when it published a blog with the headline: “Great Barrier Reef pronounced dead by scientists.” Brainard told HuffPost the recent bleaching event was a “severe blow” that resulted in serious mortality. Still, “we’re very far from an obituary,” he said.

Hurricane Matthew Brought 1,000-Year Record Rainstorms to North Carolina The storm swept in by Hurricane Matthew has produced rainfall that exceeds the level expected about once every 1,000 years, according to a statistical analysis using National Oceanic and Atmospheric Administration data. Matthew broke numerous rainfall records in some of North Carolina’s toughest-hit towns, marking another spike in this year’s extreme weather. The new rainfall records were enabled by warming in the ocean and coastal atmospheres, which hold more water as temperatures increase — with a few cities across the Southeast reporting record levels of air moisture during the storm. After devastating the Caribbean, and leading to at least 1,000 deaths in Haiti, Matthew came ashore Saturday in the Carolinas. President Barack Obama signed a disaster declaration Monday for North Carolina and did the same for South Carolina yesterday. Matthew’s toll is still rising: American deaths from Matthew climbed yesterday to 21, with damages totaling at least $4 billion. But the most staggering rainfall landed in North Carolina. There, water levels are still rising as the massive pulse of rainwater makes its way to the ocean. At least three rivers have hit, or are expected to hit, record flood stage, inundating countless homes and cutting off roads in one of the poorest parts of the state. In Lumberton, near the heart of the flooding, the water level was up to the rooftops of houses. The New York Times reports that the flooding threatens to kneecap struggling communities, and as with August’s floods in Louisiana, the Washington Post reports that many of those forced out of their homes couldn’t afford flood insurance.  The flood was also likely made worse by climate change. The 14 inches that accumulated in Fayetteville on Saturday is more than 90 percent likely to fall outside the town’s 1,000-year rainfall return period for a 24-hour rainstorm, and it more than doubled the previous single-day record of 6.80 inches from 1999’s Hurricane Floyd. In fact, only four whole months in Fayetteville’s recorded weather history have seen over 14 inches of total rainfall, Weather Underground has reported. At least two other spots in North Carolina broke the 90 percent confidence intervals for 1,000-year storms: Elizabethtown, with a reported 18.38 inches, and William O. Huske Lock, with 15.65.

Super Typhoon Haima slams into the Philippines as a Category 4 --  A dangerous typhoon is making landfall in the Philippines just days after another major storm. Local emergency managers are warning storm surge could exceed 15 feet in the northernmost region of Luzon. Another foot of rain is likely on top of soaking-wet soil. Typhoon Haima, known as Lawin in the Philippines, is a monster of a storm. With sustained winds at 160 mph, it became the fifth super typhoon of 2016 on Tuesday morning. The average for this time of year is approximately three. It’s also the seventh Category-5 equivalent of the year, globally. On Wednesday, Haima made landfall in northern Luzon with 140-mph winds — the equivalent of a Category 4 hurricane. The storm comes just days after Typhoon Sarika, which rapidly intensified into a Category 4 just before making landfall Sunday in Luzon. Sarika killed at least two people in the Philippines before tracking to China and prompting hundreds of thousands of evacuations, Al Jazeera reports.Sarika’s heavy rain already saturated Luzon’s soil, which dramatically increases the chance of deadly landslides during Haima.  “Sarika’s west-northwest track took it across the heart of the island, where it produced rainfall totals that topped 20 inches in spots,” Weather Underground’s Bob Henson and Jeff Masters said Tuesday in a blog post. “Haima is likely to dump another 10 — 20” of rain, with even higher local totals, across the northern half of Luzon.”The Philippines weather agency is comparing Haima’s potential impacts to Super Typhoon Haiyan, known as Yolanda in the Philippines, which killed more than 6,000 people in 2013.

Super Typhoon Haima batters northern Philippines -  One of the most powerful typhoons to ever hit the Philippines destroyed houses, tore roofs off schools and ripped giant trees out of the ground on Thursday, but there were no immediate reports of deaths.Super Typhoon Haima hit the northern province of Cagayan late on Wednesday night with winds similar to those of catastrophic Haiyan in 2013, which was then the strongest storm to strike the disaster-prone Southeast Asian archipelago and claimed more than 7,350 lives.  Haima roared across mountain and farming communities of the northern regions of the main island of Luzon overnight, and by morning a picture was emerging of large-scale destruction."Rice and corn plants as far as the eye can see are flattened," Villamor Visaya, a university teacher in Ilagan, one of the main northern cities with a population of 130,000 people, told the AFP news agency by phone."Many houses were destroyed. I saw one school building crushed under a large tree ... it was as if our house was being pulled from its foundations."Haima hit coastal towns facing the Pacific Ocean with sustained winds of 225km an hour, and wind gusts of up to 315km/hr.It weakened overnight as it rammed into giant mountain ranges and by Thursday morning had passed over the western edge of Luzon and into the South China Sea, heading towards southern China.

US Ignored Rising-Sea Warnings at Radar Site - The U.S. Air Force is spending nearly $1 billion to build a radar installation that will help keep astronauts and satellites safe by tracking pieces of space junk as small as a baseball. That is, if global warming doesn't get in the way. The Space Fence is being constructed on a tiny atoll in the Marshall Islands that scientists say could be regularly swamped by rising seas within a couple of decades as a result of climate change. The salt water could play havoc with the equipment, the scientists say. And The Associated Press found that neither the military nor its contractor, Lockheed Martin, gave serious consideration to that threat when designing the installation and choosing a site, despite warnings from the island nation's environmental agency. The future "does not look good for a lot of these islands," said Curt Storlazzi, an oceanographer with the U.S. Geological Survey who is leading a study at Kwajalein Atoll, where the Space Fence complex is being built. Dana Whalley, a civilian who is managing the Space Fence program, said that the radar installation has a projected lifespan of 25 years and that he doesn't expect sea levels to rise enough over that period to cause a problem. But if necessary, he said, the base could take steps to improve its seawalls. Still, because of budget pressures, military equipment is often used well beyond its projected lifespan. In fact, a key part of the radar tracking system that the Space Fence replaces was built during the dawn of the space age and was badly outdated by the time it was shut down 50 years later in 2013.

Scientists find 500 U.S. seabed vents of powerful greenhouse gas | Reuters: Scientists have found 500 seabed vents bubbling methane into the Pacific Ocean off the United States, roughly doubling the number of known U.S. seeps of the powerful greenhouse gas, a study showed on Wednesday. Methane naturally escapes from the sea floor in many places around the world and can stoke global warming if it reaches the atmosphere. Worldwide, scientists are trying to see if rising ocean temperatures cause more leaks. "It appears that the entire coast off Washington, Oregon and California is a giant methane seep," Robert Ballard, who is famed for finding the wreck of the Titanic and has now discovered the 500 new seeps, said in a statement. "The discoveries double to about 1,000 the number of such vents now known to exist along the continental margins of the USA," the statement said. Nicole Raineault, Director of Science Operations with Ballard's Ocean Exploration Trust, said it was unknown how long the seeps had been active, what triggered them and how much, if any, of the gas reached the atmosphere. Gunnar Myhre, an expert at the Center for International Climate and Environmental Research in Oslo, said research in Arctic waters off Norway's Svalbard archipelago indicated that most seabed methane there dispersed in the water. And when seeps are found "it's most likely that they've been occurring for a long time," he told Reuters. No one has had technology to map seeps until recent decades.

Slow-motion wrecks: how thawing permafrost is destroying Arctic cities  - Nadezhda wasn’t crazy: one corner of their five-storey building at 59 Talnakhskaya Street in the northern Russian city of Norilsk was sinking as the permafrost underneath it thawed and the foundation slowly disintegrated. In March 2015, local authorities posted notices in the stairwells that the building was condemned.  Cracking and collapsing structures are a growing problem in cities like Norilsk – a nickel-producing centre of 177,000 people located 180 miles above the Arctic Circle – as climate change thaws the perennially frozen soil and increases precipitation. Valery Tereshkov, deputy head of the emergencies ministry in the Krasnoyarsk region, wrote in an article this year that almost 60% of all buildings in Norilsk have been deformed as a result of climate change shrinking the permafrost zone. Local engineers said more than 100 residential buildings, or one-tenth of the housing fund, have been vacated here due to damage from thawing permafrost. In most cases, these are slow-motion wrecks that can be patched up or prevented by engineering solutions. But if a foundation shifts suddenly it can put lives at risk: cement slabs broke a doctor’s legs when the front steps and overhanging roof of a Norilsk blood bank collapsed in June 2015. Building and maintenance costs will have to be ramped up to keep cities in Russia’s resource-rich north running. Engineers and geologists are careful to note that “technogenic factors” like sewer and building heat and chemical pollution are also warming the permafrost in places like Norilsk, the most polluted city in Russia. But climate change is deepening the thaw and speeding up the destruction, at the very same time that Russia is establishing new military bases and oil-drilling infrastructure across the Arctic. Greenpeace has warned that permafrost thawing has caused thousands of oil and gas pipeline breaks. “There were problems there before, but climate change exacerbates them,” says Ali Kerimov, an engineer at Foundation Research and Production in Norilsk. “We need to study each case separately to understand what awaits us with climate change.”

Greenland calls on Denmark to clean up toxic waste buried in melting ice sheet - A vast pit of toxic waste buried in the Greenland ice sheet is threatening indigenous peoples' rights to a clean and safe environment, Greenlandic officials claim. The decades-old waste is part of a long-simmering dispute between Denmark, Greenland and the United States over Cold War-era military bases established around the country (some of which are still operating). The waste buried at Camp Century is becoming more of a threat now that the Greenland ice sheet is melting due to global warming. Greenland, which is home to about 56,500 people, is a semi-autonomous territory within Denmark. SEE ALSO: Melting Greenland ice sheet will soon unearth waste from long-forgotten Cold War-era military base Last week, officials with Greenland's government accused the Danish government of violating an agreement to protect indigenous peoples on the world's largest island, saying the Danes have failed to address the legacy of U.S. military pollution. Officials cited a recent study that found global warming could eventually unearth millions of liters of sewage, chemicals and nuclear waste stored deep below the Greenland Ice Sheet at Camp Century. "So far, nobody has been held responsible for their activities in Greenland," Vittus Qujaukitsoq, Greenland's foreign affairs minister, wrote in an Oct. 13 op-ed in the Danish newspaper Berlingske.

Ancient Andes glaciers have lost half their ice in just 40 years - The snowcapped skyline of the Andes is beating a hasty retreat. Since the mid-1970s, the area covered by glaciers in Peru’s Cordillera de Vilcanota range has nearly halved, with most losses occurring below 5000 metres.Using Landsat images taken every decade, glaciologists at the Federal University of Rio Grande do Sul in Brazil measured the snowline of the southern Peruvian range and found the ice caps that feed the glaciers shrinking.Overall, they found that 48 per cent of ice had disappeared since 1975, with 81 per cent vanishing in areas below 5000 metres. As global warming continues, such tropical glaciers are likely to disappear. Losses are occurring at different speeds on either side of the mountain range. “In general, the western sides of the tropical Andes maintain cold and dry conditions, whereas the eastern sides are humid and warm,” says Bijeesh Veettil, who led the study. The humid air that circulates in from the Amazon basin to the east should bring rain that replenishes the ice, but the high eastern glaciers are balding faster than their west-facing partners. At the moment, the reason for this disparity is unclear, but the researchers are conducting further studies to solve the mystery. The Andes host more than 95 per cent of the world’s tropical glaciers, a rich source of water for drinking, hydroelectric power and farming. The most pressing impacts from glacier loss on local people are dwindling water resources and the loss of wetland grasses that they feed to livestock,  The research backs the idea that glaciers are retreating quickly, says Doug Hardy at the University of Massachusetts at Amherst, who has studied ice caps in the region. He doubts that the peaks will regain their previously ice-capped area.

How climate change triggers earthquakes, tsunamis and volcanoes - The atmosphere is far from isolated and interacts with other elements of the so-called “Earth system”, such as the oceans, ice caps and even the ground beneath our feet, in complex and often unexpected ways capable of making our world more dangerous. We are pretty familiar with the idea that the oceans swell as a consequence of the plunging atmospheric pressure at the heart of powerful storms, building surges driven onshore by high winds that can be massively destructive. Similarly, it does not stretch the imagination to appreciate that a warmer atmosphere promotes greater melting of the polar ice caps, thereby raising sea levels and increasing the risk of coastal flooding. But, more extraordinarily, the thin layer of gases that hosts the weather and fosters global warming really does interact with the solid Earth – the so-called geosphere — in such a way as to make climate change an even bigger threat. This relationship is marvellously illustrated by a piece of research published in the journal Nature in 2009 by Chi-Ching Liu of the Institute of Earth Sciences at Taipei’s Academia Sinica. In the paper, Liu and his colleagues provided convincing evidence for a link between typhoons barrelling across Taiwan and the timing of small earthquakes beneath the island. Their take on the connection is that the reduced atmospheric pressure that characterises these powerful Pacific equivalents of hurricanes is sufficient to allow earthquake faults deep within the crust to move more easily and release accumulated strain. This may sound far fetched, but an earthquake fault that is primed and ready to go is like a coiled spring, and as geophysicist John McCloskey of the University of Ulster is fond of pointing out, all that is needed to set it off is – quite literally – “the pressure of a handshake”. Perhaps even more astonishingly, Liu and his team proposed that storms might act as safety valves, repeatedly short-circuiting the buildup of dangerous levels of strain that otherwise could eventually instigate large, destructive earthquakes. This might explain, the researchers say, why the contact between the Eurasian and Philippine Sea tectonic plates, in the vicinity of Taiwan, has far less in the way of major quakes than further north where the plate boundary swings past Japan.

 Carbon Emissions are the Lowest They Have Been Since 1991. Can That Last? -- Clean Power Plan or not, carbon emissions are declining and are at their lowest levels since 1991. That’s according to the US Energy Information Administration, which says that it is because of a changing electricity portfolio and milder weather. In its short term energy outlook, the agency says that 2016 will become the first year in which natural gas officially surpasses that of coal generation. It says that coal consumption dropped by 18 percent in the first half of the year compared to the first six months of 2015. Natural gas consumption fell by 1 percent during that time frame. And renewable energy growth increased by 9 percent during the first six months of 2016, with wind energy making up half of that. Hydro, meantime, comprised 35 percent of the 9 percent increase in renewable energy growth and solar energy has been 13 percent. Furthermore, in the first half of 2016, the United States had the fewest heating degree days since 1949. Energy consumption was thus 2 percent less in those months than during the same time period in 2015. The release: U.S. energy-related carbon dioxide (CO2) emissions totaled 2,530 million metric tons in the first six months of 2016. This was the lowest emissions level for the first six months of the year since 1991, as mild weather and changes in the fuels used to generate electricity contributed to the decline in energy-related emissions. EIA’s Short-Term Energy Outlook projects that energy-associated CO2 emissions will fall to 5,179 million metric tons in 2016, the lowest annual level since 1992. “Utilities are ready, willing and able to drive their asset base to lower carbon,” says Kit Konolige, a utility analyst with Bloomberg Intelligence, during a conference call. “They are happy to do it as long as they get a return. The coal plants they are retiring have little remaining non-depreciating value anyway.”

Clinton WikiLeaks Update: Leaked Emails Show Hillary Told Climate Change Activists To 'Get A Life' - At a meeting with environmentalists last year in which they probed Democratic U.S. presidential candidate Hillary Clinton on renouncing fossil fuels, the former secretary of state dismissed the activists saying they should “get a life.” The revelation came about when WikiLeaks dumped more emails from the accounts of Clinton aide John Podesta on Saturday. A section of Clinton’s meeting with the building trades union in September last year was made public Saturday where she said she defended natural gas and fracking “under the right circumstances.” The meeting occurred at a time when she was fighting a challenge from Vermont Sen. Bernie Sanders. “Bernie Sanders is getting lots of support from the most radical environmentalists because he’s out there every day bashing the Keystone pipeline. And, you know, I’m not into it for that,” Clinton said at the meeting, according to transcripts. “My view is, I want to defend natural gas. I want to defend repairing and building the pipelines we need to fuel our economy. I want to defend fracking under the right circumstances.” Clinton was also repeatedly asked at rallies if she will put an end to oil and gas drilling on federal lands and to oppose the Keystone XL pipeline. “I’m already at odds with the most organized and wildest” of the environmental movement, Clinton said. “They come to my rallies and they yell at me and, you know, all the rest of it. They say, ‘Will you promise never to take any fossil fuels out of the earth ever again?’ No. I won't promise that. Get a life, you know.” The meeting occurred a few weeks before the former secretary of state announced that she opposed the Keystone XL pipeline. She added at the meeting that she would focus on repairing and maintaining the existing natural gas infrastructure.

Executive Order -- Coordinating Efforts to Prepare the Nation for Space Weather Events - Barack Obama - By the authority vested in me as President by the Constitution and the laws of the United States of America, and to prepare the Nation for space weather events, it is hereby ordered as follows: Section 1. Policy. Space weather events, in the form of solar flares, solar energetic particles, and geomagnetic disturbances, occur regularly, some with measurable effects on critical infrastructure systems and technologies, such as the Global Positioning System (GPS), satellite operations and communication, aviation, and the electrical power grid. Extreme space weather events -- those that could significantly degrade critical infrastructure -- could disable large portions of the electrical power grid, resulting in cascading failures that would affect key services such as water supply, healthcare, and transportation. Space weather has the potential to simultaneously affect and disrupt health and safety across entire continents. Successfully preparing for space weather events is an all-of-nation endeavor that requires partnerships across governments, emergency managers, academia, the media, the insurance industry, non-profits, and the private sector. It is the policy of the United States to prepare for space weather events to minimize the extent of economic loss and human hardship. The Federal Government must have (1) the capability to predict and detect a space weather event, (2) the plans and programs necessary to alert the public and private sectors to enable mitigating actions for an impending space weather event, (3) the protection and mitigation plans, protocols, and standards required to reduce risks to critical infrastructure prior to and during a credible threat, and (4) the ability to respond to and recover from the effects of space weather. Executive departments and agencies (agencies) must coordinate their efforts to prepare for the effects of space weather events.

7 Key Scenes in Leonardo DiCaprio's Climate Film 'Before the Flood' --Before the Flood , a new feature-length documentary presented and produced by Leonardo DiCaprio , is released in cinemas today.  The Oscar-winning actor and environmentalist has spent the past three years asking a wide variety of people around the world about climate change . His collection of interviews in the film—ranging from President Obama and the Pope through to Elon Musk and Piers Sellars—cover the science, impacts, vested interests, politics and possible solutions.  Carbon Brief was invited to the European premiere of Before the Flood last weekend. Before the screening in London began, DiCaprio took to the stage to introduce the film. He said:  " Before The Flood is the product of an incredible three-year journey that took place with my co-creator and director Fisher Stevens. We went to every corner of the globe to document the devastating impacts of climate change and questioned humanity's ability to reverse what maybe the most catastrophic problem mankind has ever faced. There was a lot to take on. All that we witnessed on this journey shows us that our world's climate is incredibly interconnected and that it is at urgent breaking point…[…]  Here, Leo Hickman, Carbon Brief's editor, identifies seven key scenes in Before the Flood …

 We have money to fight climate change. It's just that we're spending it on defense -- One year ago this week, I was sitting in a cramped hotel room with 15 other staffers in Las Vegas for Bernie Sanders’ first debate for the presidential nomination. The question came from CNN: “What is the greatest national security threat?” Pundits criticized and mocked him for weeks after he answered “climate change”. But he was right.And it’s not just Sanders pointing out the imminent threat posed by climate change to global and national security. CIA analysts and our nation’s military strategists are rightfully naming it as a contributor to refugee flows, the spread of disease, and conflicts over basic resources like food and water.In 2014, 17.5 million people were displaced by climate-related disasters. Those numbers will continue to rise dramatically in the coming decades, according to climate displacement program manager Alice Thomas of Refugees International.  Our nation’s defense officials know global warming’s destructive forces could undermine fragile governments in unstable regions of the world where extremist ideologies can take root. Yet mainstream Republican avoidance of reality on the science of climate change impedes the necessary reassignment of resources to meet the challenges posed. Now a new report from the Institute of Policy Studies provides the most accurate calculation of government spending on climate security to date. The picture isn’t pretty. We’re spending 28 times as much on military security than climate security. A public sector investment of $55bn per year is required to meet the challenge, according to the study. With $21bn in the 2017 budget, a shortfall of $34bn is left.  That may seem like an insurmountable hill to climb. It’s not! As the IPS report points out, plenty of money lies untouched in the nation’s bloated military budget.

Modi said to plan $3.1 billion boost for India’s solar factories -Prime Minister Narendra Modi’s government is planning a 210 billion-rupee ($3.1 billion) package of state aid for India’s solar panel manufacturing industry, according to two officials. The so-called Prayas initiative, short for “Pradhan Mantri Yojana for Augmenting Solar Manufacturing,” a central-government plan designed to lift India’s installed photovoltaic capacity as well as to create an export industry, according to two senior government officials with direct knowledge of the plan. They asked not to be identified because the policy isn’t yet public. Modi wants to raise renewable capacity to 175 gigawatts by 2022 from 45 gigawatts at present. In addition to meeting its own energy targets, which Bloomberg New Energy Finance estimates may cost $200 billion, India wants to emulate industrial developments in neighboring China, where solar manufacturers have created a world-leading export industry. The Prayas program, part of Modi’s “make in India” campaign, is intended to create 5 gigawatts of photovoltaic manufacturing capacity from 2019 and build 20 gigawatts of projects in the country by 2026, according to the officials. The policy, which is being developed by the ministry in charge of renewable energy and industrial policy, along with the Niti Aayog government research group, will be presented to the Finance Ministry within a month before going to the cabinet for final approval, they said.

India blocks Pakistan climate change project at Green Climate Fund board meeting - India singled out to oppose and block a climate change project from Pakistan at the Green Climate Fund, raising eyebrows at the meeting currently going on in South Korea. The project is to be located in Gilgit Baltistan and the province of Khyber Pakhtunkhwa. The Green Climate Fund (GCF) is the arm of the climate change convention meant to fund projects in developing countries supported by financing by the rich countries and other multilateral donors. India is one of the three board members representing the Asia Pacific region along with China and Saudi Arabia. The fund’s board is meeting in Songdo, South Korea to consider a tranche of proposals for funding. It was in this meeting on Wednesday that India’s representative, Dinesh Sharma, special secretary in the finance ministry singled out the Pakistan project for adapting to climate change in the Himalayan region, calling the project flawed. He said that he agreed with all others. In response to emailed Business Standard queries, Sharma defended his intervention at the GCF board meeting and said it was purely on technical grounds that he found the Pakistan project flawed and nothing else should be implied from it. But, two other developing country board members that Business Standard spoke to expressed anguish and disappointment. “Here (at climate negotiations) we don’t represent just our individual national interests but we work as a group to protect developing country interests. India could have put more conditions but let it move ahead. Unfortunately it is not budging. This will, we fear, isolate India and at the same time weaken our unity,” said one of the two wishing to remain anonymous. India did not object to another multiple-country project which did not have approval from some host countries – a ground principle that developing countries, including India, had earlier fought to get in as a mandatory requisite. Many other developing country board members did. The Pakistan project, supported by the UNDP, is meant to reduce risks in Northern Kashmir area from flooding caused by outbursts of glacial lakes. The independent technical committee of the GCF assessed that the project would provide protection to more than 700,000 people and save more than 100 lives that get lost due to the frequent glacial lake outbursts.

Nearly 200 nations agree binding deal to cut greenhouse gases | Reuters: Nearly 200 nations have agreed a legally binding deal to cut back on greenhouse gases used in refrigerators and air conditioners, a major move against climate change that prompted loud cheers when it was announced on Saturday. The deal, which includes the world's two biggest economies, the United States and China, divides countries into three groups with different deadlines to reduce the use of factory-made hydrofluorocarbon (HFC) gases, which can be 10,000 times more powerful than carbon dioxide as greenhouse gases. "While diplomacy is never easy, we can work together to leave our children a planet that is safer, more prosperous, more secure, and more free than the one that was left for us," the White House said in a statement on the deal. U.S. Secretary of State John Kerry said the deal was "a monumental step forward" as he left the talks in the Rwandan capital of Kigali late on Friday. Under the pact, developed nations, including much of Europe and the United States, commit to reducing their use of the gases incrementally, starting with a 10 percent cut by 2019 and reaching 85 percent by 2036. Many wealthier nations have already begun to reduce their use of HFCs. Two groups of developing countries will freeze their use of the gases by either 2024 or 2028, and then gradually reduce their use. India, Iran, Iraq, Pakistan and the Gulf countries will meet the later deadline.

How the Chemical Industry Joined the Fight Against Climate Change -- It might seem surprising to find the world’s chemical companies on the front lines of preventing climate change, fighting to disrupt their own industries.But in a sweeping accord reached on Saturday in Kigali, Rwanda, companies including Honeywell and Chemours, a DuPont spinoff, were among the most active backers of a move away from a profitable chemical that has long been the foundation for the fast-growing air-conditioning and refrigeration business.The companies were driven less by idealism than by intense competition, and a bet that they could create more environmentally friendly alternatives.Still, some environmentalists say the aggressive move away from hydrofluorocarbons, or HFCs, provides a template for other industries to follow. “They learned that without a rule change, their new products couldn’t compete,” said David Doniger, director of the Climate and Clean Air Program at the Natural Resources Defense Council, based in Washington. “They woke up and said, ‘The science is real.’” The chemical industry’s response stands in stark contrast to the foot-dragging, and in many cases the outright obstruction of climate regulations, by the big oil companies. Exxon Mobil, Chevron and others have been criticized for lobbying against rules to curb greenhouse gases for decades, even though their own researchers have warned of the risks of climate change.

Important global warming pollutants excluded from ‘historic’ aviation pact -- Something important is missing from an “historic” climate change pact reached last week in Montreal to cap carbon pollution from airplanes.All 191 member states of the International Civil Aviation Organization — the United Nations agency that oversees global air traffic — agreed that airlines will be allowed to increase CO2 emissions until 2020 but must offset any growth beyond that date. But World Wildlife Fund Deputy Director of International Climate Cooperation Brad Schallert said there are other climate-warming factors that the agreement failed to address.“We’ve needed policy options in order to address non-CO2 impacts [since] yesterday,” Schallert said. “We cannot assume the market-based measure is the panacea and that it’s the deal that will save us. It is a single policy.”The comments come after Canadian Transport Minister Marc Garneau hailed the ICAO pact as an "historic" agreement. The deal is expected to cost industry billions of dollars, Reuters reported last week.An Intergovernmental Panel on Climate Change report on aviation emissions from 1999 found that while the principal emissions from aircraft are CO2 and water, aviation is also responsible for emissions like nitric oxide, nitrogen dioxide, sulfur oxide and soot — climate change-inducing emissions the ICAO’s market-based measure doesn’t cover.

 We’re placing far too much hope in pulling carbon dioxide out of the air, scientists warn - In the past decade, an ambitious — but still mostly hypothetical — technological strategy for meeting our global climate goals has grown prominent in scientific discussions. Known as “negative emissions,” the idea is to remove carbon dioxide from the air using various technological means, a method that could theoretically buy the world more time when it comes to reducing our overall greenhouse-gas emissions.   Recent models of future climate scenarios have assumed that this technique will be widely used in the future. Few have explored a world in which we can keep the planet’s warming within at least a 2-degree temperature threshold without the help of negative-emission technologies. But some scientists are arguing that this assumption may be a serious mistake.   In a new opinion paper, published Thursday in the journal Science, climate experts Kevin Anderson of the University of Manchester and Glen Peters of the Center for International Climate and Environmental Research have argued that relying on the uncertain concept of negative emissions as a fix could lock the world into a severe climate-change pathway.“[If] we behave today like we’ve got these get-out-of-jail cards in the future, and then in 20 years we discover we don’t have this technology, then you’re already locked into a higher temperature level,” Peters said.

Obama carbon rule ‘far exceeded’ EPA authority, challengers say | TheHill: A coalition of conservative states, energy companies and business interests fired their opening shots in the court fight against a key climate change rule, saying the federal government went far beyond its authority. At issue is the Environmental Protection Agency’s (EPA) regulation released last year setting limits on the amount of carbon dioxide that can be released from newly built coal- and natural gas-fired power plants, based on the amount of electricity they produce.  The regulation at issue is separate, though related to, the Clean Power Plan, which mandates a cut in the entire power sector’s emissions. The D.C. Circuit Court heard oral arguments in a case against that rule last month. Crucially, if the regulation on new power plants is found illegal or unconstitutional, the Clean Power Plan cannot be enforced. The challengers’ central argument, outlined in briefs filed late Thursday with the Court of Appeals for the District of Columbia Circuit, is that the standards for coal plants are based on carbon-capture technology that is not widely used, as required under the Clean Air Act. “In adopting the rule, EPA far exceeded the authority provided by Congress under section 111(b) of the [Clean Air Act] to set emission standards for new fossil-fuel-fired steam generating units,” the states, led by West Virginia, told the court.

Global warming phonies, Scott Sumner -- I seem to be one of the relatively few right-of-center intellectuals that worry about global warming. In previous posts I've argued that if the GOP were smart (no jokes please) they would propose the following policy:

  • 1. Global warming is a crisis for our planet, and it's time to stop playing politics with the issue. Therefore we suggest that Congress pass the sort of policy that experts believe is the most effective solution, without any bells and whistles that address other partisan concerns.
  • 2. It's clear that experts view a carbon tax as the most efficient solution.
  • 3. This tax should be completely revenue neutral, and should not be viewed as a back door way to advance other agendas, such as bigger government and more spending.
  • 4. Therefore the carbon tax should be offset by reductions in our most distortionary taxes, especially those that bias us toward consumption. A revenue neutral carbon tax focuses like a laser on the environmental problem, and doesn't get bogged down in left-right disputes over the proper size of government.

I've suggested that this is a win-win for the GOP. First, it's possible (indeed likely) that the concerns over global warming are valid. In that case a revenue neutral carbon tax is clearly beneficial. And second, even if scientists are wrong about global warming, our current tax system is so grotesquely inefficient that it would be easy to find taxes far more distortionary than the carbon tax, which could then be reduced to offset its impact. Thus it's probably a sound public policy, even if global warming is not a problem at all. But for GOP climate skeptics it gets even better. I've argued that the Democrats might well reject this proposal, as they actually care more about taxes than global warming, even though they pay lip service to Al Gore's claim that global warming is the great challenge of the 21st century. They would reject the GOP proposal, and this would expose their hypocrisy.

 It could be the nation’s first carbon tax. And environmentalists are fighting over it. A new initiative slated for the ballot in Washington state next month would create the first-ever carbon tax to be implemented in the United States. But while the initiative promises to fight climate change by making it more expensive to emit greenhouse gases, it’s caused an unexpected controversy among environmentalists.  Despite the endorsement of dozens of climate scientists and economists, many environmental groups have refused to support it at all, citing concerns about the proposal’s revenue projections, its approach to the involvement of disadvantaged communities, and a lack of true investment in clean energy.  Initiative 732 began as a grassroots campaign known as Carbon Washington, founded by environmental economist and stand-up comedian Yoram Bauman. If successful, it would become one of just a few ever to be implemented in North America and the first in the United States.  The idea of a carbon tax is to place a tax on the carbon that people or industries emit or on the fossil fuels they purchase, thus providing an incentive to reduce greenhouse gas emissions. I-732 proposes a starting fee of $15 per ton of carbon, increasing to $25 in the second year, and then gradually growing over the next few decades to a maximum of $100 per ton. The scheme is designed to be “revenue-neutral,” meaning it won’t produce any additional income for the state. Instead, the proposal calls for a reduction in other taxes, including the state sales tax, which many activists consider one of the most regressive taxes in the nation. Because Washington has no income tax, the sales tax currently provides a major portion of the state’s revenue, thereby forcing lower income households to pay a greater percentage of their total income in taxes. “Our approach has been to directly put money back into the pockets of low-income people,”

Why we don’t have a carbon tax -- From Brad Plumer at Vox: “We have done extensive polling on a carbon tax,” Podesta apparently told Clinton adviser Jake Sullivan back in January 2015. “It all sucks.” There is further detail at that link.  A quite remarkable David Roberts piece at Vox, worth reading in its entirety, lays out why much of “the left” opposes the carbon tax on the ballot in Washington state.  It is revenue-neutral, doesn’t produce enough social justice, and as I would say it doesn’t have the right mood affiliation, among other factors.  Economist Yoram Bauman plays a key role in the article, and here is a quotation from him: I am increasingly convinced that the path to climate action is through the Republican Party. Yes, there are challenges on the right — skepticism about climate science and about tax reform — but those are surmountable with time and effort. The same cannot be said of the challenges on the left: an unyielding desire to tie everything to bigger government, and a willingness to use race and class as political weapons in order to pursue that desire. I’m not so sure about that portrayal of the Republicans, but still that is a perspective you don’t hear enough.  (Scott Sumner comments on the piece.)  You may recall my earlier post on Republicans and Democrats: At some level the Republicans might know the Democrats have valid substantive points, but they sooner think “Let’s first put status relations in line, then our debates might get somewhere.  In the meantime, I’m not going to cotton well to a debate designed to lower the status of the really important groups and their values.”  And so the dialogue doesn’t get very far. To return more directly to the title of this post, why don’t we have a carbon tax?  I would put it this way: for better or worse, the American people expect their government to solve this problem without raising the price of energy.  Funny that.

Exxon, Chevron May Face 'Investor Death Spiral' From Tesla, EVs - Oil markets are expected to rebalance next year as the oil patch swings through another boom-and-bust cycle, but the rise of electric vehicles could make another contraction happen sooner than expected, according to a report out Tuesday. "Widespread adoption of battery-powered vehicles is a serious threat to the oil industry," the report from Fitch warned. The report said that oil producers, like Exxon Mobil, Chevron and Royal Dutch Shell, need to be ready for "radical change" as adoption of new technologies like electric cars could happen faster than originally anticipated, creating an "investor death spiral" as investors flee the oil patch. "An acceleration of the electrification of transport infrastructure would be resoundingly negative for the oil sector's credit profile," the analysts wrote. In the U.S., Tesla Motors is already dominating the luxury sedan market, besting names like BMW and Mercedes-Benz in sales. And in July, Tesla began offering a new lower-end, lower-priced version of its Model X sport utility vehicle, and in June the company started delivery of a lower-end version of its Model S sedan. Fitch said some oil majors have already taken steps to diversify their offerings including Total, which has invested in batteries. In May, the French oil company said it would buy Saft Groupe SA for $1.1 billion. In 2011, the company purchased a 60% stake in solar panel maker SunPower.

Oil groups ‘threatened’ by electric cars - Oil companies face a “resoundingly negative” threat from a sharp growth of electric cars, one of the leading credit rating agencies has warned. “Widespread adoption of battery-powered vehicles is a serious threat to the oil industry,” says a report from Fitch Ratings that urges energy companies to plan for “radical change” spurred by new technologies that could arrive faster than expected. “If they stick their heads in the sand and try and pretend it will all go away, we think they will ultimately have issues,” the report’s lead author, Alex Griffiths, a Fitch managing director, told the Financial Times. “They need to have a plan.” Although the report accepts it could take a long time for electric cars to become a disruptive force through mass adoption, Fitch outlines a grim scenario for global oil companies, such as Chevron, ExxonMobil and Royal Dutch Shell. The agency says that the threat of electric cars could create an “investor death spiral” as nervous asset holders sell out of oil companies, making debt and equity more expensive. In the first of a series of studies on the potential consequences of a sharp acceleration of disruptive technologies, the rating agency finds that batteries could upset industries accounting for just under a quarter of the $14.7tn in corporate bonds outstanding globally. The oil sector would not be the only industry affected. Big electricity utilities burning fossil fuels such as gas or coal face the risk of batteries solving the intermittency problem of wind or solar plants that cannot generate on windless days or at night. Utilities with a lot of gas “peaker” plants that deliver power quickly at times of peak demand, when prices are generally high, could be more at risk. If batteries start supplying this peaking power, prices could eventually fall to the point where “traditional peakers can no longer compete”, says Fitch.

The Latest: N. Carolina Investigates Possible Coal Ash Spill - ABC News: North Carolina officials say Hurricane Matthew has caused erosion at an inactive coal ash basin, and they're investigating whether any has been released. The Department of Environmental Quality issued a news release saying that Duke Energy notified it Friday of the erosion and a "possible coal ash release" at the plant near Goldsboro in Wayne County. The H.F. Lee plant is near the Neuse River, one of the rivers overflowing from torrential rains during Matthew. State investigators are going to the site Saturday to determine if any coal ash spilled. Department spokesman Mike Rusher said he would not speculate as to whether coal ash was discharged until a team can investigate. Rusher said the basin isn't in use and has been covered by soil and trees. A Duke Energy spokeswoman said the company was preparing a statement. .

 Coal Ash Continues to Spill Into River, Where Is Duke Energy? -Waterkeeper Alliance and Sound Rivers have discovered a large coal ash spill into the Neuse River from the Duke Energy H.F. Lee facility, 10 miles upstream of Goldsboro, North Carolina . A substantial but undetermined amount of coal ash was found floating on the surface of the river in a layer over one inch thick. See the video below: The spill came from at least one of three inactive coal ash ponds containing more than 1 million tons of exposed coal ash. The ponds had been submerged by Hurricane Matthew flood waters for more than seven days until flood waters receded over the weekend. Fly ash coated tree branches as much as seven feet above the river surface, indicating the spill began no later than last Tuesday, when the water level reached a record flood stage. Independent microscopic analysis confirmed the white material is fly ash particles known as cenospheres, a waste product of coal combustion.   Upper Neuse Riverkeeper Matthew Starr, said:   "This spill is easily visible to anyone in a boat. The area looks like a winter wonderland of toxic coal ash as it has coated the water and trees. It is hard for me to understand how both Duke Energy and state regulators failed to notice such a large area of coal ash contaminating the Neuse River when they claim to have inspected these very ash ponds on Saturday."  On Oct. 15, Duke Energy issued a press release stating:  "Site inspections at the H.F. Lee Power Plant in Goldsboro, N.C., today confirm there was only very minor erosion of material from an inactive coal ash basin on the site.  The majority of that material, which includes coal ash, remained very close to the inactive basin, on the berm or a few feet away on the basin roadway. The state team that inspected the facility determined that the amount of material that was displaced would not even fill the bed of an average pickup truck."  "When a raging river floods over 1 million tons of coal ash, you're obviously going to get more than a pickup truck's worth of ash polluting the river," said Waterkeeper Alliance staff attorney Pete Harrison.

France burns coal like it's 1984 as prices jump on atomic woes  -- France produced the most power from fossil fuels for September in 32 years to help meet demand as nuclear generation dropped. Output from coal and gas plants more than doubled as Paris-based Electricite de France SA was forced to keep reactors offline for inspections. French month-ahead power prices have risen to near the highest since 2009. “The availability of French nuclear continues to alarm market participants,” said Bruno Brunetti, managing director of global power at Pira Energy Group in New York. “With the lack of French exports supporting thermal generation, we have revised upward forecasts of coal-fired dispatching by roughly 5 terawatt-hours through 2017 in western Europe.” EDF’s reactors produced 26.6 terawatt-hours of electricity in September, the least since August 1998, prompting “heavy use” of stations burning coal and gas in a trend that has been increasing since April, according to a report by French grid operator Reseau de transport d’electricite. Thermal power generation was 4,132 gigawatt-hours, or 11 percent of the total. France has seven fewer reactors available than at the same time last year after EDF announced it needed more time to carry out inspections to rule out potential anomalies on steam generators at 18 of its 58 units ordered by the nation’s nuclear regulator. EDF cut its nuclear output targets for the year on Sept. 21 after the safety checks were taking longer than expected. Six reactors are due to return this week.

France to drop carbon tax plan: Les Echos - The French government is set to drop plans to introduce a carbon tax, French financial daily Les Echos said on Thursday. The newspaper, quoting several sources, said the socialist government will not include the carbon tax in a draft 2016 budget update currently being discussed. Environment Minister Segolene Royal had said in May that France would unilaterally introduce a carbon price floor of about 30 euros ($33) a tonne with a view to kickstart broader European action to cut emissions and drive forward the December 2015 United Nations-led international climate accord. The plan had pushed power prices higher in the spring. Les Echos quoted a source as saying that the measure is too complicated to put in place and might be unconstitutional. The paper said that state-owned electric utility EDF, which produces mostly carbon-free nuclear power, was in favor of the measure, but that gas utility Engie SA had lobbied against the tax because it would make its gas-fired power plants less competitive than similar plants in neighboring countries.

Brazilian senate approves new coal funding -  Brazil’s senate approved a package of coal subsidies on Wednesday, which was smuggled into a bill on electricity sector privatisation at the last minute. The provision, supporting “modernisation” of a coal power park, with new plants from 2023, was added after the Chamber had analysed the bill. Two senators objected that the incentives clashed with Brazil’s climate commitments, but were overruled. “This article goes against everything Brazil has done to limit carbon dioxide emissions, and in the opposite direction from the rest of the world,” said Randolfe Rodrigues of the Sustainability Network party. It comes just two weeks after Brazil’s development bank pledged to end support to coal plants, in favour of solar power. And a month ago, president Michel Temer ratified the Paris climate pact, confirming Brazil’s participation in global efforts to curb greenhouse gas emissions.

From April, Govt will keep tabs on new vehicles’ emissions -  New Delhi - Automobile makers will have to mandatorily disclose the emission and noise levels of every vehicle produced by them with effect from April 2017, the road transport and highways ministry said in a statement on Tuesday. “The emission norms of the vehicle, including the levels of each pollutant like carbon monoxide, hydro carbon, non-methane HC, NOx, HC+ NOx and PM, for petrol and diesel vehicles and also sound level for horn and pass by noise values, would have to be provided through a form,” the statement said. The ministry said it also intends to award star ratings to vehicles on the basis of their emission and noise pollution levels. Once the new rules are notified, all vehicle makers will have to prominently display the star rating awarded to their vehicles. The new rules will apply to all vehicles, including agricultural and construction vehicles, running on all fuel types, as well as e-rickshaws and e-carts.

India headed for coal power overcapacity - India Climate Dialogue: India is building new coal power plants and expanding existing ones, creating excess capacity in this sector, according to a recent study by Greenpeace India. The activist group says, “Over INR 3,00,000 crore (close to USD 50 billion) is being wasted on building an additional 62 gigawatt (GW) of coal power plants, which will remain idle due to huge overcapacity in the power sector.” Today, India has a capacity of around 186 GW in operational plants and another 65 GW under construction. Some 41% of this capacity is in the private sector. The next biggest source of electricity, hydropower, comes a poor second with 43 GW. Coalswarm, an independent global coal power station tracker, using data from India’s Ministry of Environment, Forests and Climate Change, estimates that there are about 178 GW of proposed power plants at varying stages of approval. The government has indicated that 37 GW of old power plants will be retired to reduce emissions and increase efficiency. India has been increasing its coal power capacity from 5.6 GW per year in 2007-08 to 19.5 GW in 2014-15 with a compounded annual growth rate of 11%, according to Greenpeace. Since the electrification of the country is seen as a major national priority, there is “a large future capacity that is in various stages of development”.

UN tells Bangladesh to halt mangrove-threatening coal plant - The UN’s world heritage body has made an urgent intervention to stop the construction of a coal power station in Bangladesh. Unesco said the plant could damage the world heritage-listed Sundarbans mangrove forest, which houses up to 450 Bengal tigers. A fact finding mission, published by Unesco and the International Union for the Conservation of Nature (IUCN) on Tuesday, found that the proposed site of the Rampal coal power plant, which is 65km north of the Sundarbans world heritage area, would expose the downriver forests to pollution and acid rain. Ships carrying coal and other material for the plant’s functioning will move through the mangrove reserve, requiring dredging and dumping of 32.1 million cubic metres of river bottom at first and further annual dredging. This threatens the breeding grounds of the endangered Ganges and Irrawaddy river dolphins. Fresh water supply to the mangroves, already stretched by agriculture, must not be placed under any more stress, the observers said. Their report concluded that the power station posed “a serious threat to the site”. “The mission recommends that the Rampal power plant project be cancelled and relocated to a more suitable location,” said a Unesco statement on Tuesday.

Coal: after the $100 per metric ton boom, how long until the bust? | Reuters: As Australian thermal coal prices hit $100 per tonne on Tuesday for the first time since 2012, the fuel's rally is now among the commodity's top-three bull-runs on record. The bull-run rivals the 2011 Fukushima nuclear meltdown and Australian mining flood spike, and the 2008/09 financial boom and bust. [L4N1CO2XG] With Australian Newcastle spot cargo prices for November, up almost 100 percent since June to $100 per tonne, their highest since 2012, traders and analysts say a bust is inevitable. "Of course it's not going to last. Rising prices are encouraging Chinese miners to raise output and the government, seeing how much prices have risen, has backed down somewhat and asked for an increase in production," said Ralph Leszczynski of shipping brokerage Banchero Costa. While Newcastle prices are unlikely to drop back anywhere near annual lows, head of research at Marex Spectron Georgi Slavov believes there is a $20 premium that could be wiped out. "I certainly believe we are at the top - coal will kill this rally by itself," he said in reference to higher prices stimulating greater production growth. However, many believe prices could keep rising until the end of the year or possibly into early 2017 as the winter season fuels demand and miners take time to bring on more production.

FirstEnergy ‘bailout’ raises questions of corporate separation - A new charge ordered by Ohio regulators last week could add up to $1 billion into FirstEnergy’s coffers without requiring the company to do any specific work in return. While the company says the order is “disappointing” and will provide “insufficient” funds, competitors and advocates call it a “bailout” that raises serious questions about corporate separation in the electricity market.  “The decision is setting a dangerous precedent for Ohio families,” said Trish Demeter of the Ohio Environmental Council. “It’s not good for the environment because it’s essentially rewarding the company for bad bets that it made on coal.” As first proposed two years ago, FirstEnergy’s case before the Public Utilities Commission of Ohio asked for a different charge altogether to make utility customers guarantee electricity sales by its unregulated generation affiliate from certain coal and nuclear plants. Critics said the plan could cost consumers up to $4 billion. The PUCO approved a slightly modified version of that plan in March 2016 despite widespread objections. After the Federal Energy Regulatory Commission ruled it would require strict scrutiny of any electricity purchases under the plan, FirstEnergy dropped any reference to a power purchase agreement that might trigger federal review, but still sought to collect the same amount of charges.  The PUCO’s 190-page order and opinions last week rejected FirstEnergy’s modified request, but nonetheless imposed on customers a charge of $132.5 million per year, plus whatever corporate taxes would have to be paid, for a total of about $204 million per year.

 Ohio deserves better - The Blade: At first glance, it appears that the Public Utilities Commission of Ohio put its proverbial foot down when it rejected FirstEnergy Corp.’s request for funding to improve its power grid. But closer scrutiny reveals that the utility seems to have been handed a “cash grab” and no requirement to upgrade the grid after all. And though PUCO did not give FirstEnergy everything it wanted, its 1.9 million customers will still soon start being charged $36 a year to fund a multimillion-dollar annual rate increase. PUCO’s unanimous decision on Oct. 12 to support the rate hike has not pleased the energy company or its critics, which is no surprise. The Akron-based energy firm wanted $558 million a year over eight years, for a total of $4.5 billion. Instead, PUCO agreed to let it collect $132.5 million annually in new surcharges. By the time taxes are included, the customers will have shelled out a total of about $204 million a year. Customers have only a little to be thankful for: the commission told the utility to come back in 2018 if it wants to make the case to extend the surcharge. The plan will cost the average residential customer, who uses about 750 kilowatt hours, about $3 a month over a three-year period. The surcharge will soon appear on the bills of customers who obtain their electricity from FirstEnergy and those who buy their power from competitors too. That will make them as unhappy as other FirstEnergy customers. And while $3 a month is nominal to a good number of the utility’s customers, it adds up. Those customers are not likely to look kindly on the commission for granting even a scaled-back version of the power company’s request. All this will surely raise eyebrows because the company had the audacity to express its disappointment when it did not get all that it wanted. Opponents maintain that the plan is effectively a financial bailout for the utility’s poor business decisions. You have to wonder whether they are right. The Federal Energy Regulatory Commission rejected PUCO’s approval of the original plan in which customers would have been required to subsidize FirstEnergy’s power plants. The Davis-Besse nuclear power plant near Oak Harbor and the W.H. Sammis coal-fired plant near Steubenville have struggled to compete against natural gas and other less expensive sources of energy. .

Ohio Judge Rejects Use Of Eminent Domain In Construction Of Ethane Pipeline  -- A Wood County judge has ruled a company seeking to build an ethane pipeline across Ohio for a Canadian company does not have the right acquire property through eminent domain. The ruling could hinder Pennsylvania-based Kinder Morgan's plans to build a 12-inch pipeline from eastern Ohio shale fields across the state to an existing Michigan pipeline that ends at a Windsor, Ontario, chemical plant. Kinder Morgan had sued Wood County property owners to obtain paid easements to their land. Ethane is a byproduct of fracking that's used to produce plastics. The judge says forcing property owners to grant easements would violate their constitutional rights. Kinder Morgan has filed an appeal with the U.S. 6th Circuit Court of Appeals in Cincinnati. The company also gave Ohio State University 200 thousand dollars that will partially fund a study of the Utopia East pipeline's impact on soil and agriculture.

Hydraulic Fracking, Pipelines and Land Rights: Ohio Judge Rules against Pipeline Consortium — A Wood County Common Pleas judge ruled today that the company behind the Utopia East pipeline project does not have eminent domain rights, throwing a potentially expensive roadblock into the project’s path. Judge Robert Pollex ruled that Kinder Morgan’s plan to pipe ethane from the Utica shale region in eastern Ohio to a chemical company in Windsor, Ont., is not necessary and not for a public use, and thus the company cannot use eminent domain to force Wood County landowners to give easements on their property. Kinder Morgan, North America’s largest energy-infrastructure company, has been negotiating with landowners in 14 Ohio counties to build the 12-inch pipeline, which would transport the ethane — used in the production of plastics — to a pipeline in Michigan that then heads to Canada. The product would solely be used by NOVA Chemicals Corp., a Canadian company. Wood County Common Pleas Judge Robert Pollex ruled today that the company behind the Utopia East pipeline project does not have eminent domain rights, throwing a potentially expensive roadblock into the project’s path. For property owners who have not been willing to sell, or sell at the price Kinder Morgan proposed, the company has petitioned Ohio courts for the right to appropriate the property at fair value. Some of those cases are in Wood County, including one involving PDB Farms of Wood County, which is south of Pemberville. The product Kinder Morgan wants to transport is a byproduct of hydraulic fracturing of shale to extract oil and natural gas. Mr. Mayle said that pipeline companies are becoming increasingly aggressive, asserting eminent domain rights as they build pipelines across the Midwest.  “It’s probably the most important eminent domain case in the United States right now,” he said.

Supreme Court Grants Teter's Request For Stay in Pipeline Fight - Harrison News Herald – In the ongoing struggle with Sunoco Pipeline and their pushing of eminent domain, Carol Teter, last Friday, was granted a stay by the Ohio Supreme Court preventing Sunoco from conducting any work on the Teter property going forward. The appellate court in Youngstown had recently ruled against Teter upholding Harrison County Common Pleas Judge, T. Shawn Hervey’s decision earlier this year granting Sunoco Pipeline the right to eminent domain therefore allowing pipeline work on Teter’s property.  John Lovejoy, Teter’s partner, expressed via email, excitement at the quick decision, which states: “Upon consideration of appellant’s emergency motion to stay execution of court of appeals’ judgment, it is ordered by the court that the motion is granted. No bond is required to be posted for this stay. Lanzinger (Judith Ann) and French, JJ. (Judith L.), dissent.” Though, the decision for a stay is only temporary, the major decision is yet to come and could open the floodgates for many other companies, not only for access to the Teter property but also around the fracking world in Ohio with oil and gas companies using the Sunoco decision, if upheld by the Ohio Supreme Court, as precedent to run roughshod through other properties. The chain reaction may already be in place as thirteen plaintiffs filed a joint lawsuit back in April against Kinder Morgan in an attempt to fight off eminent domain. And the same two attorneys butting heads over Sunoco vs. Teter, are also on opposites sides in the Kinder Morgan case (Gregory Brunton-Sunoco and Nicholas Andersen representing the 13 plaintiffs as well as Teter). Just last week though, Kinder Morgan suffered a blow when Wood County Common Pleas Judge, Robert Pollex ruled against Kinder Morgan in that territory for use of eminent domain. Kinder Morgan has filed numerous claims on an individual basis where they are spread out over various jurisdictions. Pollex ruled that the pipeline “is not necessary and not for a public use, and thus the company cannot use eminent domain to force Wood County landowners to give easements on their property,” according to a report in the Toledo Blade.

Residents speak out against proposed NEXUS pipeline (video and photos) - cleveland.com -- Dozens of Ohio residents had one message for the Ohio Environmental Protection Agency on Wednesday evening -- say no to the proposed Nexus natural gas pipeline that would run from Ohio to Canada.  Northeast Ohio property owners from many counties attended a hearing of the EPA at Elyria High School to voice their concerns about the 255-mile, 36-inch pipeline being proposed to run from Kensington, Ohio, to upstate Michigan, where it would connect with an existing pipeline into Ontario, Canada.  The EPA held the hearing to determine residents' concerns that the pipeline running through hundreds of private properties in two states could affect water quality in streams and wetlands. While the Ohio EPA must approve the project, the primary approval rests with the Federal Energy Regulatory Commission (FERC). Nexus and its parent company, Spectra, have said they want to begin construction of the pipeline in early 2017 and complete it by November 2017. "The EPA will consider technical, economic, social and environmental aspects of the project before deciding on whether to issue or deny a water quality certification," an EPA news release said.  "The amount of natural gas produced, which will be caused by fracking, could destroy society. We need the EPA to protect us from this pipeline." Several groups of Ohio landowners, like the Coalition to Reroute Nexus (CORN), have formed to oppose the pipeline, maintaining that it would affect their property value. They also fear that the high-pressure natural gas could explode, causing injury and damage to their homes and property.  CORN member Debby Christy of Medina handed out information about the "pipeline blast zone," which is the area on either side of the pipe (1,500 feet on either side) that would be affected in the event of an explosion. While dozens of people testified their objections to the pipeline, two men spoke in favor of it. One was Mike Chasey of the Ohio Oil and Gas Association, who said that gas pipelines were necessary.  "This winter, when you people are crying for more heat, when the windmills and solar energy cells fail, you'll want the natural gas," he said.

Ohio Enviros Pushing Same Local Fracking Bans That Failed 5 Times Before - -- Ohio environmentalists are trying to get local governments to ban fracking again this election, despite past failures to get such a state law on the books.  The Community Environmental Legal Defense Fund (CELDF) have gotten a measure to ban fracking on the ballot Youngstown and Waterville. The measure is opposed by the local government, unions, business leaders and even the local media.The city’s lawyers have already determined that any ban would probably be illegal and “will not be enforceable.”  “The City of Youngstown taxpayers have already spent over $80,000 just to put the measure on the ballot, only to have the voters say ‘no’ five consecutive times,” Jackie Stewart, the Ohio director of the pro-industry group Energy In Depth, told The Daily Caller News Foundation. “CELDF knows the amendment is not enforceable and would not hold up in court, yet they continue their antics. Even in a polarizing political year, members of both parties, business leaders, unions, and elected officials have loudly reject the amendment, and even the media is calling the measure a ‘potentially destructive community bill of goods.’”  Even if the measure is enacted, it could not be enforced because the Ohio Supreme Court has already ruled in another case that only the state government has authority over oil and gas drilling in the state. This means that any ban would be “preempted by state law and therefore, is invalid and unenforceable.”

Democracy Deferred: Ohio Removes Anti-Fracking Measures From County Ballots - Truth-Out -  Ohioans are not nearly as conservative as their gerrymandered state legislature might have one think. To fight back, many progressive Ohioans are going local to make gains on issues like the minimum wage and fracking. For this reason, the local ballot initiative process -- by which citizens write, petition for and vote on legislation -- has taken on increased significance. But after years of local battles, the future of this basic mode of resistance is in jeopardy. This September, county-level "community bills of rights" in Medina, Portage, Athens and Meigs were removed from these Ohio counties' respective ballots, despite all four gathering enough signatures to qualify for the ballot. The bills of rights would have banned fracking-related projects, established enforceable rights for ecosystems and carved out powers for localities to improve state protections for health, safety and welfare. Some, like Medina's, would have halted construction on the fiercely contested NEXUS fracked-gas pipeline. But as a result of the removal of these measures from local ballots, no votes will be cast. They were removed by county boards of elections working closely with the Secretary of State to apply stringent pre-election requirements. It is a virtual repeat of 2015, when the Ohio Supreme Court sided with Secretary of State and gubernatorial hopeful Jon Husted in a decision that effectively pulled four county-wide initiatives -- in Medina, Fulton, Meigs and Athens counties -- from their ballots, ahead of the November 2015 elections.  Decisions, such as this, which sidestep the democratic process, maintain predictable "investment climates" for the oil and gas industry, and perpetuate the illusion of consensus and the notion that somehow issues regarding the oil and gas industry are democracy-immune. The industry -- wary of a domino effect -- does not want the thought that oil and gas extraction can be governed by citizen-crafted law to spread, for fear that if it does, it will do so rapidly. The very concept of putting fracking to a vote is dangerous to the oil and gas companies' agenda. It is why they worked so hard to squelch attempts at 2016 statewide anti-fracking ballot measures in Colorado and Michigan.

Fed official signs plan to allow oil-gas leasing on Wayne - The federal government has scheduled a lease sale for 1,600 acres of public land in the Wayne National Forest’s Marietta Unit for this December, dealing a blow to area environmentalists who oppose oil and gas drilling on the national forest. On Friday, Dean Gettinger, district manager of the Northeastern States District of the federal Bureau of Land Management (BLM), signed a finding of no significant impact (FONSI) for drilling on 40,000 acres in the Marietta Unit, which covers parts of Washington, Noble and Monroe counties, northeast of Marietta. Oil and gas companies so far have filed expressions of interest to drill for natural gas on 18,000 of those acres, with 1,600 acres contained in the first round of land entering the lease program. “Based upon a review of the EA (Environmental Assessment) and supporting documents, I have determined that the proposed action is not a major federal action, and will not significantly affect the quality of the human environment, individually or cumulatively, with other actions in the general area,” the signed FONSI states. The document says “the BLM plans to lease some parcels now and make the rest available in the future.”

Wayne forest could be used for fracking - Columbus Dispatch - The federal government has given notice that it plans to auction oil and gas lease rights for 1,600 acres of Wayne National Forest near Marietta, a step that could lead to fracking on public land. Energy industry officials are applauding the decision, which affects parts of Monroe and Washington counties, while environmentalists are criticizing it. With the notice, a 30-day clock starts in which opponents can file a formal protest. The government will review the objections before moving ahead with an online auction scheduled for Dec. 13. The affected land is part of Ohio's only national forest, which covers more than 240,000 acres in the southeastern part of the state. The proposed leases are "a step in the right direction," said Shawn Bennett, executive vice president of the Ohio Oil and Gas Association, a trade group. "It opens up lands that are required to be leased by several federal statutes." Many environmental groups oppose the leases, saying this would be a step toward allowing widespread hydraulic fracturing, or fracking, on public lands. "This decision is bad for wildlife, bad for recreation, and bad for the overall health of the Wayne," said Nathan Johnson, an attorney for the Ohio Environmental Council, in an e-mail. He said his group will appeal the decision on the grounds that the government has not done enough to consider environmental concerns. The land to be leased is in the far eastern part of the forest, where there are substantial oil and gas reserves and less public opposition to drilling for energy. The Bureau of Land Management, one of the federal agencies handling the process, is not leasing land in the part of the forest in and around Athens County, where public opposition has been strong, and where energy companies are showing less interest.

Wayne National Forest could soon be fracking site - (WTAP) The federal government plans to auction oil and gas lease rights for 1,600 acres of the Wayne National Forest near Marietta. The Bureau of Land Management released a notice of a competitive oil and gas internet-based lease sale. It says there would be no significant environmental impact to the forest because of drilling. It's the only national forest in the state of Ohio, which covers more than 240,000 acres. Oil and gas extraction has taken place there for a while, but on a smaller scale. Industry workers favor the decision, while environmentalists plan to appeal it. "This is opportunity for those landowners to have a better and brighter future and that is very important. Again, that's through leasing of land and royalties and they can use those royalties to reinvest back into their selves, their farms, or back into the community," says executive vice president of the Ohio Oil and Gas Association, Shawn Bennett. "This will be bad for wildlife. It will be bad for recreation and bad just for the health of the forest, generally. Another problem is the federal government isn't following its own laws. This is heavy, industrial development we're talking about and most people don't want that in their backyards or their publicly owned forests," says an attorney for the Ohio Environmental Council, Nathan Johnson. The notice allows opponents 30 days to file a formal protest.

EPA continues to clean up gas line leak - -WLIO- Lima, OH -- Workers are in the process of cleaning up a Sunoco gas line leak on the south side of Lima. The Ohio Environmental Protection Agency responded to the leak near McClain Road and Commerce Parkway around 9pm Monday night. Officials tell Your New Now that crews were able to identify the source of the leak and remove any contaminated soil. The director of Allen County Emergency Management says they aren't sure exactly how much gas leaked, but the public should not be worried.

Marcellus Shale Coalition sues to block new Pennsylvania drilling rules - As it had previously indicated, the Marcellus Shale Coalition on Friday filed suit to block implementation of some of the new rules the Pennsylvania Department of Environment Protection implemented on Saturday, claiming the rules would add an average of $2 million to every well drilled in the state with little environmental benefit. The suit, filed in the Commonwealth Court of Pennsylvania, challenges aspects Chapter 78a of the Pennsylvania Code, which regulates many aspects of unconventional gas drilling and which was published in the Pennsylvania Bulletin and went into effect on Saturday. "This approach, which we had hoped we would not have to pursue, was necessary to assert the legal rights of our members directly impacted by final rulemaking's provisions, which conflict with the Pennsylvania Department of Environmental Protection's statutory authority as well as Supreme Court precedent," MSC President David Spigelmyer said in a statement Friday. The suit marks the first time the coalition, which represents segments of the oil and gas industry active in the Marcellus Shale play, has taken direct legal action against a state entity."Pennsylvania's natural gas industry is governed by some of the nation's most stringent laws and regulations, and our members continue to follow all relevant Pennsylvania and federal environmental statutes and regulations," Spigelmyer said. "To be absolutely clear, the MSC and its members support fair, consistent and clear regulation of the industry while protecting the environment and ensuring safety," he said. "However, certain provisions conflict with DEP's legal authority granted by the Pennsylvania General Assembly while other provisions are vague and not clear how they will be implemented by the agency.

Pennsylvania ruling on eminent domain puts contentious pipeline project on alert -- The Pennsylvania Supreme Court has unanimously ruled unconstitutional a section of state law that lets companies seize private land for certain natural gas projects, with potentially major implications for one of the biggest proposed pipelines in the state. Under the original rule, passed in 2012, any company has the authority to take private land through eminent domain for the purpose of storing natural gas underground. The justices unanimously decided on Sept. 28 that this section of the law unconstitutionally lets private companies profit from taking people's land with no direct or obvious benefit to Pennsylvanians. The oil and gas companies argued the projects could benefit the state by creating new jobs, for example, but the justices were not convinced. "The Commonwealth does not claim, nor can it do so reasonably, that the public is the 'primary and paramount' beneficiary when private property is taken in this manner," the justices wrote. "Instead, it advances the proposition that allowing such takings would somehow advance the development of infrastructure in the Commonwealth. Such a projected benefit is speculative, and, in any event, would be merely an incidental one and not the primary purpose for allowing these types of takings." The high court's decision reversed a lower court's ruling that upheld this part of the rule. This decision is the latest victory for property rights owners and environmental activists who are increasingly challenging energy companies nationwide as they seek to use eminent domain for pipelines and other large infrastructure projects. Earlier this year, the Georgia legislature passed a bill that would have stalled construction on Kinder Morgan's Palmetto Pipeline until 2017 due to property rights concerns; before the bill was signed into law, the company suspended construction on the pipeline.

U.S. natgas production to decline for first year since 2005: EIA STEO | Reuters: The U.S. Energy Information Administration on Thursday projected year-over-year dry natural gas production in 2016 would fall for the first time since 2005 as low energy prices reduced drilling activity, according to its Short Term Energy Outlook (STEO). EIA reduced its output projection for 2016 to 72.49 billion cubic feet per day (bcfd) in its October outlook from 74.06 bcfd in September. That compared with an all-time high of 74.14 bcfd in 2015. EIA forecast dry gas production would return to a record high in 2017, rising to 76.23 bcfd. The last time year-over-year gas production declined was in 2005 when Hurricanes Katrina and Rita slammed into the Gulf Coast, damaging energy infrastructure. In 2005, more than 20 percent of annual U.S. dry gas output of 49.45 bcfd came from the federal waters in the Gulf of Mexico. Since then, producers have figured out how to use horizontal drilling and hydraulic fracturing and other technologies to unlock more gas trapped in shale rocks. Today, the seven biggest U.S. shale fields provide more than 60 percent of the nation's dry gas production, while the Gulf of Mexico accounts for just 4 percent of the total. EIA also forecast U.S. gas consumption would slip to 75.97 bcfd in 2016 versus the 76.38 bcfd it forecast in September. That would still top the 2015 record high for gas demand of 74.81 bcfd and would be the seventh annual record in a row.

Some US producers stomp on the gas. - The past production profiles of the ten companies in RBN’s Gas-Weighted E&P peer group are dramatically different from the Oil-Weighted and Diversified U.S. E&Ps, boosting production by over 18% from 2014 to 2015, while the output of the other two peer groups was virtually flat. The group as a whole finally put on the brakes in early 2016 because of mounting debt and persistent low gas prices, cutting capital investment by 49% to dampen production growth to 4%. However, a small group of producers with solid balance sheets and strong hedging protection continue to target double-digit output growth. And with gas prices over $3.00/MMbtu, more growth is on the way.  In today’s blog we discuss 2016 capital spending and production for our representative group of E&Ps whose operations are primarily focused on natural gas. Here in the RBN blogosphere we have been reviewing U.S. upstream capital spending and production trends for the past couple of years. Back in August, we analyzed the second quarter 2016 capital spending and production guidance for 46 of the top U.S. E&Ps that we segregated into three peer groups––Oil-Weighted E&Ps, Diversified E&Ps, and Gas-Weighted E&Ps.  That analysis was contained in the blog titled Been Down So Long - U.S. E&P Upstream Capex Bottoms, Signs of Growth Emerge and we showed that total capital spending in 2016 was expected to be about 50% lower than in 2015 after a 40% reduction in 2014. Based on the company’s financials and investor presentations we calculated an expected 4% decline in production for 2016, we also pointed out that second quarter 2016 production guidance was stronger than original 2016 estimates because of an increase in oil prices from the lows in early 2016. Next, we took a deep dive into the Oil-Weighted E&Ps in a blog titled You Go Your Way, I'll Go Mine - Oil-Weighted E&Ps Put the Brakes on Capex Cuts, But Location Matters. In that analysis, we noted that while capital spending was expected to be down 51% in 2016, there was a new feeling of optimism driven by the reduction in drilling and completion costs and lease operating expenses, which contributed to the 20% increase in the U.S. rig count in late May 2016. Then we took an in depth look at the Diversified E&Ps in a blog titled  Different Strokes by Different Folks:  Unconventional Investment Rises, Conventional Falls among Diversified U.S. E&Ps. In that analysis, we saw that this peer group has reduced capital investment by 70% since 2014, or almost $40 billion. And the cumulative effect of these spending cuts is an estimated 5% decline in production or nearly 100 MMboe in 2016.

NYMEX November gas settles at $3.141/MMBtu, down 2.9 cents - Natural Gas | Platts News Article & Story: The NYMEX November natural gas futures contract fell Thursday after the US Energy Information Administration estimated a build to gas storage stocks that was slightly higher than analysts expected. The November contract ended trading Thursday at $3.141/MMBtu, down 2.9 cents. The front-month contract traded in a range between $3.101/MMBtu and $3.201/MMBtu. The EIA said there was a 77-Bcf injection to storage in the week ended October 14. The injection was 5 Bcf higher than analysts' consensus of a 72-Bcf build. The cumulative storage volume now stands at 3.836 Tcf. The total working gas in storage is 175 Bcf, or 4.8%, higher the five-year average storage volume of 3.651 Tcf. The storage stocks are also 46 Bcf higher than last year at this time."Look at where we've been recently," Jay Levine, analyst/principal with Enerjay, said in an interview. "The improving technicals have put the bears on notice. We should be careful now as, perhaps, $3 may become the new bottom." Meantime, dry gas supplies for the Lower 48 states on Thursday are expected to be about 70.4 Bcf, according to Platts Analytics' Bentek Energy. However, daily demand will also drop by 1 Bcf as the eastern US received another day of warm temperatures.

EPA Agrees Its Emissions Estimates From Flaring May Be Flawed - The U.S. Environmental Protection Agency has agreed to re-examine the accuracy of its 33-year-old estimates of air pollution from flaring near refineries and at oil and gas drilling sites. The decision has health advocates and some people in South Texas hoping relief from the effects of foul air is coming. The agreement comes in the wake of a lawsuit against the EPA by four environmental organizations. They claimed that air samples near oil refineries in Houston showed elevated levels of volatile organic compounds, chemicals associated with threats to public health and smog-forming pollution. Those levels, the plaintiffs said, were 10 to 100 times higher than being reported under outdated and inaccurate formulas that estimate levels of air pollution. Although the lawsuit focused on refineries in Houston, the agreement could have consequences nationwide. Booming oil and gas drilling in Pennsylvania, Colorado, North Dakota and other states have been blamed for noxious emissions that residents say has sickened them. The EPA said it will re-examine, and if necessary revise, the emissions formulas for flares at many of the estimated one million natural gas drilling and production sites across the country, according to the consent decree filed with the U.S. District Court for the District of Columbia. The EPA has until February 2018 to complete its review and issue any revisions to the emissions equation. The agency did not respond to a request for comment.

Court to rule if gas expansion plan needed environment study (AP) — The state Supreme Court is considering whether Connecticut’s environmental protection agency and state regulators were wrong for not studying the potential environmental impact of a major natural gas expansion plan before they approved it in 2013. The high court’s review comes in a lawsuit filed two years ago by the Connecticut Energy Marketers Association, a group of more than 500 energy marketers who sell gasoline and heating fuel to residents and businesses across the state. The association claims the Department of Energy and Environmental Protection and the Public Utilities Regulatory Authority violated the Connecticut Environmental Policy Act by approving the gas expansion plan without first performing an environmental impact evaluation. The plans call for making natural gas available to up to 300,000 additional homes by building about 900 more miles of gas mains over the next decade. “The conversion process will have an unprecedented impact on the environment, principally by significantly increasing the amount of methane, a greenhouse gas, that is emitted each year by Connecticut’s gas companies,” lawyers for the association wrote in a brief to the Supreme Court. The association says the state Environmental Policy Act requires an environmental impact evaluation any time a state agency proposes or initiates any activities that may adversely affect the environment. It’s seeking a court order stopping gas expansion projects until an environmental assessment is done.

Con: Clean energy the only answer - Evansville Courier & Press -The use of unconventional and environmentally damaging methods to eke out of the ground finite supplies of oil and natural gas is a foolhardy method for ensuring the nation’s energy needs. The most expensive and ecologically destructive method for extracting natural gas and shale oil from the ground is hydraulic fracturing, commonly called fracking. Fracking relies on a witch’s brew of trillions of gallons of clean water and dangerous toxic and carcinogenic chemicals that is  injected into the ground at high pressure in order to extract natural gas and oil. Moreover, fracking produces toxic waste, such as formaldehyde and acetic boric acids, which, added to the fracking chemicals used by drillers, threatens the fresh water supplies of many states like Pennsylvania, Ohio, Texas, Colorado and West Virginia, where fracking is commonplace.In Oklahoma and other states, fracking has been directly linked by scientists to increased earthquake activity — thus increasing the danger to public safety.
However, the fracking industry, through various political action committees, has showered pro-fracking candidates with large sums of campaign cash. Candidates who oppose fracking and tar sands oil production, both of which entail the building of pipelines across pristine wilderness and high-yield agricultural and livestock grazing areas, often come up short in their efforts to defeat their well-heeled opponents. It’s hard to believe, but there actually are elected officials who oppose applying the federal Clean Water and Safe Drinking Water Acts to the fracking and tar sands industries, even though these sectors pose the greatest threat to the purity of the nation’s water supply. Thousands of cases of contamination of fresh water supplies located near fracking wells have been reported across the United States. Wastewater from fracking cannot be redirected for other purposes, such as crop irrigation or water treatment, because of its high concentration of dangerous chemicals.

Key pieces still absent from Mackinac straits oil spill cleanup readiness  — In a meeting last week, federal officials acknowledged key shortfalls in the ability of Enbridge Inc. to clean up an oil spill from its Line 5 pipeline under the Straits of Mackinac within the critical first 12 hours.  According to emergency planners, not enough large local boats have agreed to help with cleanup, training on new equipment hasn't happened yet, real-time hydrodynamic current modeling in the straits is missing, and controlled open water burning couldn't occur if oil were to spill from the pipeline today. Burning floating oil is an offensive maneuver spill responders use to keep it from dispersing into the water column and reaching shore, but the U.S. Coast Guard only began planning for that in June, according to the sector commander. In-situ burning, as it's called, would send huge amounts of harmful smoke into the air and could involve evacuating people who live downwind. The technique requires heat-resistant equipment and pre-positioned air quality monitors. Neither of those things are now present in the area.

The U.S. Department of Energy’s approval of U.S. natural gas export overseas from two proposed Canadian export terminals last week: The U.S. Department of Energy’s approval of U.S. natural gas export overseas from two proposed Canadian export terminals last week confirms Congressman Edward Markey’s “long-standing warnings that the ultimate goal of some natural gas pipeline proposals being made in New England is not to help our residents with expanded infrastructure but to use New England as a throughway to export U.S. natural gas to Canada and ultimately to overseas markets.” Markey said, “The companies who are proposing these pipeline projects need to be fully forthcoming about the ultimate fate of the gas that would be transported through these pipelines in order for these proposals to be examined in their entirety.” DOE’s authorization is Bear Head LNG and Pieridae LNG to export up to 0.8 billion cubic feet a day equivalent U.S.-sourced natural gas to Canada for liquefaction and re-export as LNG to any country with which the United States lacks a free-trade agreement requiring the national treatment for trade in natural gas. The 20-year agreements would make use of the Maritimes and Northeast US Pipeline, which runs between Dracut and the Canadian border at Woodland, Maine. The controversial Kinder Morgan Northeast Energy Direct pipeline through Franklin County connects to facilities in Dracut, and for this reason many pipeline critics argue its’s primary purpose is to export natural gas not feed New England.

US Natural Gas Exports Are About to Take a Huge Leap Forward - The shale revolution has changed the U.S. natural gas production and trade dynamics forever. Domestic output and exports have been rising, to the point where the U.S. is poised to become a natural gas net exporter in the second quarter of next year, the EIA said last month. In this scenario of abundant resources, U.S. companies have been planning on building pipelines and LNG export terminals to ship domestically-produced natural gas to Mexico, Canada and to future LNG export hubs along the coast. These exports hubs will be used for further LNG shipments to markets in South America, Asia, Europe, and the Middle East. Since Cheniere Energy (NYSEMKT:LNG) shipped the first U.S. LNG commissioning cargo out of its Sabine Pass LNG terminal en route to Brazil in February of this year, the terminal has exported an estimated 113 Bcf of LNG to 12 countries worldwide, the EIA said last month. More than half of those exports were bound to South America and the Caribbean, followed by India and China in Asia, the Middle East (UAE, Kuwait, and Jordan), Europe (Portugal and Spain), and Mexico. The Sabine Pass LNG terminal is currently the U.S.’s only LNG export terminal, but four other export terminals are currently under construction. As of September 21, 2016, seventeen others had been proposed or were pending various authorizations. Almost all of the proposals are for terminals along the Gulf Coast, which will benefit from the expanded Panama Canal, now that it is able to accommodate 90 percent of the current LNG tankers in the world, compared to just 6 percent before the expansion. The extended canal is also significantly shortening travel time and transportation costs for the U.S. Gulf LNG exports, which docked in China for the first time in late August.

Chesapeake Energy Declares 'Propageddon' With Record Frack - Chesapeake said Thursday at an analyst conference that it set a record for fracking by pumping more than 25,000 tons of sand down one Louisiana natural gas well, a process the shale driller christened "propageddon.” The super-sized dose of sand -- known as "proppant" -- is able to prop open bigger and more numerous cracks in the rock for oil and gas to flow. Output from the well increased 70 percent over traditional fracking techniques, Jason Pigott, vice president of operations, said during a presentation. “What we’re doing is unleashing hell on every gas molecule downhole,” Pigott said. Shale drillers aren’t holding back in North American shale fields, where the average amount of sand used for each well has doubled since 2014, according to Evercore ISI. At the same time, the length that wells are drilled sideways underground has grown by 50 percent, and the number of zones for hydraulic fracking are also up by half. Each zone of the well isolated for each frack is also growing larger as service companies attempt to break down more of the oil-soaked rock into rubble and cram more sand into the crevices for the hydrocarbons to escape. Explorers are taking advantage of the larger frack jobs while prices for oilfield work remains low. Halliburton Co. , the world’s largest fracking provider, told analysts and investors Wednesday on a conference call that about 70 percent of the industry’s fleet of frack pumps are being put to use. Halliburton confirmed it executed the record frack for Chesapeake. "This emerging trend has already created a significant increase in the uptake of our high-end drilling technologies," Kibsgaard said. "We have therefore shifted focus from maintaining presence to now gaining market share for our drilling business in North America land." The rush to jam as much sand as possible into a well is creating cost inflation for buying and shipping the granules, Kibsgaard said. That will "further obstruct and delay the hydraulic fracturing industry’s path toward restoring profitability" for service companies, he said. Southwestern Energy Co. isn’t letting up. It’s currently testing frack jobs with as much as 5,000 pounds per foot in a well, Jack Bergeron, senior vice president of operations, told analysts and investors Friday on a conference call.

A climate activist tried to buy oil and gas land in Utah. The federal government just said no. - When the environmental writer Terry Tempest Williams offered up $2,500 for 1,120 acres of federal land in rural Utah earlier this year, she didn't expect to spend months fighting President Barack Obama's Bureau of Land Management. She saw her spur-of-the-moment decision to lease the land as a statement: Rather than drill for oil and gas, as the federal government intended, she would keep those planet-warming fossil fuels in the ground, her own small contribution to the fight against human-caused climate change. Federal officials had other ideas. This week — eight months after the Salt Lake City oil and gas lease auction Williams attended — the Bureau of Land Management's Utah branch rejected her bids and said it would return most of her money. The rejection was a small but symbolic blow to the "keep it in the ground" movement, which has urged the Obama administration to stop allowing new fossil fuel extraction on federal land. ""Keep it in the ground" activists have pointed to studies showing that if the world hopes to avoid the most dangerous effects of global warming, the vast majority of coal, oil and natural gas reserves can never be burned. But while Obama has made climate a top priority, his administration has taken a dim view of the activists' argument. In an interview with The Desert Sun earlier this year, Interior Secretary Sally Jewell called the "keep it in the ground" movement "naïve." "It's going to take a very long time before we can wean ourselves from fossil fuels, so I think that to keep it in the ground is naïve, to say we could shift to 100 percent renewables is naïve," Jewell said at the time. "We really have to have a blend over time, and a transition over time, that recognizes the real complexity of what we're dealing with."

Dakota Access protests come to Houston as the light crude market keeps shifting - The fight to halt construction of the Dakota Access crude pipeline made its way to the US energy capital as dozens of activists marched and chanted through the streets of downtown Houston. Carrying signs decorated with oil derricks, solar panels and tombstones, a group of around 75 activists marched for about six city blocks on October 12. The procession was headed by people in traditional Native American dress carrying incense burner.The display is the latest in the ever-escalating pushback against crude oil pipelines. Similar satellite protests have been held in Dallas, Detroit, Denver and other sites across the nation. Actress Shailene Woodley, star of “Snowden,” “Divergent” and “Once Upon a Mattress,” was arrested in North Dakota on October 10 and the celebrity opposition pool includes Susan Sarandon, Ben Affleck, Jason Momoa, Leonardo DiCaprio and Pharrell among others. The Dakota Access pipeline cleared a key hurdle October 9 when a federal appeals court denied the Standing Rock Sioux Tribe’s request for an injunction to block construction of the 1,172-mile pipeline that will transport Bakken and light Canadian crude across North Dakota, South Dakota, Iowa and Illinois. Developer Energy Transfer Partners said October 11 that it plans to immediately resume construction but still needs the blessing of the Army Corps of Engineers, which is reviewing the line’s crossing of the Missouri River. Analysts expect startup of the line to be delayed into mid-2017, while climate activists have pledged to continue their opposition to the project.

Impacted Communities Take Fight Against Dakota Access to Corporate Heads - Activists from oil-impacted communities around the country are descending on Energy Transfer Partners' corporate offices in Houston, Texas, to protest the company's Dakota Access Pipeline and other controversial pipeline projects. Despite ongoing, growing protests against the Dakota Access Pipeline and the federal government's repeated requests that Energy Transfer Partners halt its construction, the company has reiterated its intention to continue building the pipeline, undaunted. Wednesday's action is a part of nationwide protests against the corporate powers behind Dakota Access. The demonstration will see members from communities affected by the fossil fuel industry from Richmond, Calif., Chicago, Ill., the Gulf Coast, and others joining local Texas organizers to voice their collective opposition to Energy Transfer Partners' pipeline projects, and to push for a just transition to renewable energy. "Energy Transfer Partners has drawn national attention for driving both the Dakota Access Pipeline and the equally controversial Trans Pecos Pipeline, that has also violated the rights of Indigenous peoples in West Texas, and poses significant threat to the water and land for many communities in Texas," Grassroots Global Justice Alliance, an organizer of the demonstration, noted in a press statement.

Fire Damages Dakota Access Equipment, Arson Suspected (AP) — Authorities suspect arson in the latest burning of heavy equipment being used in the construction of the four-state Dakota Access pipeline in central Iowa. The Jasper County Sheriff’s Office says the blaze late Saturday near Reasnor, Iowa, caused about $2 million damage to an excavator and three bulldozers. The equipment is operated by a contractor for Dakota Access, a subsidiary of Dallas-based Energy Transfer Partners. Opponents have for months been protesting the $3.8 billion, nearly 1,200-mile project pipeline, warning its construction could jeopardize water supply and damage cultural artifacts. Another suspected arson of construction equipment happened on Aug. 1 at the same site, about 30 miles east of Des Moines. No arrests have been made in either fire. The Iowa Fire Marshal Division and the FBI are investigating.

Journalists Face Charges for Dakota Pipeline Protest Coverage - Two journalists are facing jail time for covering protests against oil and gas pipelines in North Dakota. The better-known of the pair, Amy Goodman, host of the television and radio program Democracy Now!, will appear in court today to face charges that she participated in a riot while covering Dakota Access Pipeline (DAPL) protests last month. The protests, attended by thousands, are being led by Native American groups and environmental activists. While Goodman and her crew were filming, private security guards pepper sprayed and unleashed dogs to attack protestors. Goodman’s report went viral; one Facebook posting of the video has 14 million views. Five days after that report was recorded, a warrant was issued for Goodman’s arrest. Initially, she was charged with trespassing, but that count was dropped by North Dakota state prosecutors, who admitted it likely would not stand up in court. They then charged Goodman with participating in a riot. If convicted, she could be fined and serve jail time. Her appearance is set for 1:30 Central Time in Morton County court. “I came back to North Dakota to fight a trespass charge. They saw that they could never make that charge stick, so now they want to charge me with rioting,” Goodman in a statement posted to Democracy Now!’s website on Saturday. “I wasn’t trespassing, I wasn’t engaging in a riot, I was doing my job as a journalist by covering a violent attack on Native American protesters.”  But Goodman is not the only journalist to face charges for filming protests against the state’s fossil fuel infrastructure. Just last week, Deia Schlosberg, a producer on the film How to Let Go of the World and Love All the Things Climate Can’t Change, was arrested and charged with three felonies, all conspiracy charges, that carry a sentence of up to 45 years in prison. The charges stemmed from Schlosberg’s filming of an Oct. 11 protest that briefly shut down five oil pipelines that bring about 15 percent of the oil used each day to America from Canada’s tar sands. The director of Schlosberg’s film, Josh Fox (famous for his 2010 film Gasland and a sequel to it), is circulating a petition asking the state to drop the charges against her. Along with 20,000 others, actors Mark Ruffalo and Daryl Hannah, musician Neil Young and environmental activist Bill McKibben have signed it.

Judge Rejects 'Riot' Charges Against Amy Goodman for Coverage of Dakota Access Pipeline -  A North Dakota judge today refused to authorize riot charges against award-winning journalist Amy Goodman for her reporting on an attack against Native American-led anti-pipeline protesters.  "This is a complete vindication of my right as a journalist to cover the attack on the protesters, and of the public's right to know what is happening with the Dakota Access pipeline," said Goodman. "We will continue to report on this epic struggle of Native Americans and their non-Native allies taking on the fossil fuel industry and an increasingly militarized police in this time when climate change threatens the planet."  District Judge John Grinsteiner did not find probable cause to justify the charges filed on Friday, Oct. 14 by State's Attorney Ladd R Erickson. Those charges were presented after Erickson had withdrawn an earlier charge against Goodman of criminal trespass. Goodman had returned to North Dakota to turn herself in to the trespassing charge.  The charges in State of North Dakota v. Amy Goodman, stemmed from Democracy Now!'s coverage of protests against the Dakota Access pipeline. On Saturday, Sept. 3, Democracy Now! filmed security guards working for the pipeline company attacking protesters. The report showed guards unleashing dogs and using pepper spray and featured people with bite injuries and a dog with blood dripping from its mouth and nose.  Democracy Now!'s report went viral online and was viewed more than 14 million times on Facebook and was rebroadcast on many outlets, including CBS, NBC,NPR, CNN, MSNBCand the Huffington Post.  "These shifting charges were a transparent attempt by the prosecutor to intimidate Amy Goodman and to silence coverage of the resistance to the pipeline," said Reed Brody, an attorney for Goodman. "Fortunately, these bully tactics didn't work and freedom of the press has prevailed."

Judge Rejects Riot Charge Against Amy Goodman of ‘Democracy Now’ Over Pipeline Protest - The radio journalist Amy Goodman spent the weekend with the threat of a riot charge hanging over her, arising from protests over a planned oil pipeline in North Dakota. But on Monday a judge rejected the case for lack of evidence. Ms. Goodman, the host and executive producer of the syndicated radio, television and web show “Democracy Now!” on Pacifica Radio, had planned to enter a not guilty plea on Monday, but District Judge John Grinsteiner declined to sign the charging document, bringing the case to a stop — at least for now. She and her lawyers declared victory on Monday, but Ladd Erickson, a state prosecutor who is assisting the Morton County state’s attorney’s office in the case, said other charges were possible. “I believe they want to keep the investigation open and see if there is any evidence in the unedited and unpublished videos that we could better detail in an affidavit for the judge,” he said via email. “The Democracy Now video that many people have seen doesn’t have much evidence value in it.” Mr. Erickson had informed the broadcaster of the planned riot charge. Ms. Goodman had characterized that as a threat to journalism and the First Amendment. Appearing in a Facebook Live video from outside the courthouse in Mandan, N.D., on Monday after it became clear she would not face the riot charge, Ms. Goodman said she and her program would continue to cover the pipeline protests. “The state’s attorney was attempting to stop journalism,” she said. “The state’s attorney must respect freedom of the press and the First Amendment.”

Bernie Sanders called for a halt to the Dakota Access Pipeline. Why won’t Hillary Clinton? -- The Dakota Access pipeline currently hangs in a state of uncertainty. On October 9, a federal appeals court dismissed the Standing Rock Sioux tribe's request for a permanent injunction to stop to the project. Meanwhile, Obama administration officials continue to stall; one day after the court ruling, the departments of Justice, Interior, and the Army issued a joint statement refusing to authorize construction along part of the proposed route.  And while a federal review of the permitting process began this week, a handful of Senate Democrats, led by Vermont Sen. Bernie Sanders, have now penned a powerful letter to President Barack Obama, calling on him to suspend all construction permits for the project and to order a full environmental impact statement. Check it out below.

Journalism group wants charges dropped against pipeline protest filmmakers | Reuters: A press freedom group on Thursday urged prosecutors in two states to drop charges against three documentary filmmakers who were arrested while filming activists as they sought to shut down major oil pipelines from Canada to the United States. The Committee to Protect Journalists said Lindsey Grayzel, Carl Davis and Deia Schlosberg were acting as journalists, not protesters, when they were taken into custody at pipeline sites in Washington state and North Dakota, and were protected by free speech rights. "Recording civil disobedience and arrests is news-gathering, not conspiracy," Robert Mahoney, deputy executive director of the committee, said in a written statement. "Prosecuting filmmakers for covering protests sends a chilling message. We call on authorities in North Dakota and Washington to drop these troubling charges and to stop interfering with journalists doing their jobs," Mahoney said. A North Dakota judge earlier this week dismissed charges against journalist Amy Goodman, who was arrested while filming demonstrations there. During the protests, activists broke into valve stations at five remote locations near the U.S.-Canada border on Oct. 10 to stop the flow of crude through arteries that pump about 15 percent of the oil consumed in the United States daily. Companies operating the pipelines shut down their lines for five to seven hours as a safety measure before restarting them, according to Reuters estimates and company representatives.

Dakota Access Pipeline Coalition Lashes Out At Obama's Attempt To "Ignore The Rule Of Law" -- Despite a federal court decision issued on October 9th allowing the continued construction of the Dakota Access Pipeline, the massive infrastructure project remains on hold today after the Obama administration caved to the demands of protesters and shut down access to federal lands.  According to a letter written by a coalition of industry groups impacted by the construction halt and obtained by the Washington Examiner, the Obama administration's refusal to allow construction workers access to federal land is a blatant abuse of power that"ignores the rule of law." "We write to express our deep concerns over recent actions that took place in North Dakota to effectively ignore the rule of law in an attempt to halt infrastructure development," the letter reads, reminding Lynch that "one of our nation's founding fathers, John Adams, once wrote that the United States is a 'government of laws, and not of men.'""This North Dakota project has complied with the procedures laid out in law, engaged in more than two years of federal review and has received the necessary federal approvals," the letter added. "Additionally, the project has been fully approved by all four states it traverses.""Throughout this entire process, there are multiple opportunities for stakeholder engagement, whether through public fora or through written submittal," the letter states. "If stakeholders disagree with the government's final decision, there is a judicial process in place to address those concerns.""Despite the federal judge's opinion, your agencies then jointly denied access to federal property necessary to complete the pipeline until the administration 'can determine whether it will need to reconsider any of its previous decisions' under various federal laws," the groups said. "The previous decisions now being 'reconsidered' were properly considered and made through a fair and thorough process on which the company and others are entitled to rely.""In our 'nation of laws,' when an established legal process is complete, it is just that — complete" the letter added. "When your agencies upend or modify the results of a full and fair regulatory process for an infrastructure project, these actions do not merely impact a single company. The industries that manufacture and develop the infrastructure, the labor that builds it, and the American consumers that depend on it all suffer." Of course, the Dakota Access Pipeline has gained national attention over the past couple of months as protests by the Standing Rock Sioux Tribe of North Dakota have grown in size and become increasingly violent.  According to reports from Anti Media, protesters recently trespassed on to construction sites and destroyed nearly $2mm worth of equipment.

100+ Militarized Police Deployed Against Native American Water Protectors -- On Saturday, hundreds of people temporarily stopped work at multiple construction sites at the site of the $3.8 billion Dakota Access Pipeline . One person reportedly delayed work for up to six hours by locking to an excavator. At least 14 people were arrested. Democracy Now! began covering the action just after dawn, from the main resistance camp in Cannon Ball, North Dakota. Watch here: A federal appeals court recently rejected a bid by the Standing Rock Sioux Tribe to permanently halt construction on part of the Dakota Access pipeline, paving the way for the Dakota Access company to resume construction on private lands adjacent to Lake Oahe on the Missouri River. A decision on whether the pipeline can proceed under the river rests with the Army Corps of Engineers. The Standing Rock Sioux Tribe argued that construction of the $3.8 billion pipeline is destroying cultural artifacts and sacred sites , including a sacred tribal burial ground that was bulldozed on Sept. 3, Labor Day weekend, when Dakota Access pipeline's guards unleashed dogs and pepper spray on the Native Americans. Since then, members of the Standing Rock Sioux Tribe and others have set up a permanent encampment across the street from the bulldozed burial ground. They call it the Sacred Ground Camp and say they'll continue to fight the Dakota Access pipeline.  We are joined by Dave Archambault II, chair of the Standing Rock Sioux Tribe. Watch here:

Oil and Gas: Nearly 3,000 gallons of oil, brine spill in Mountrail County: . (AP) — State Health Department officials say cleanup is underway after the spill of nearly 3,000 gallons of oil and saltwater in Mountrail County. Officials say about 40 barrels of oil and 30 barrels of brine were released Monday at a site operated by Arsenal Energy USA Inc. near Stanley. A barrel holds 42 gallons. An unknown amount of oil and brine flowed into a stock pond. State officials are monitoring the cleanup. The spill was blamed on a treater leak. A treater is used to separate and condition oil-gas-saltwater mixtures so the oil can be transported.

Natural gas released from McKenzie County well after mechanical failure -  bismarcktribune.com: – An unknown volume of natural gas released from a well in McKenzie County this week after a mechanical failure caused crews to lose control of the well, the North Dakota Department of Health said Thursday. A Continental Resources well about 10 miles north of Watford City was releasing natural gas and other hydrocarbons from about 10 a.m. until it was stabilized around 7 p.m. Tuesday after a blowout valve malfunctioned, said Bill Suess, spill investigations program manager. No one was hurt in the incident and no water sources were affected. The release was primarily natural gas. The spill is under investigation to determine how much oil and produced water were released and the extent of the impact, Suess said. Law enforcement and the county emergency manager blocked traffic from the area until the well was stabilized.  “If that had ignited, that could have been an issue,” Suess said. “We got pretty lucky on this one. The wind kind of was in our favor on that.” The release affected an area about 500 yards off the well pad, including trees, Suess said. Health department officials will work with the company on cleanup plans. Continental Resources spokeswoman Kristin Thomas said the situation is under control and the company continues to cooperate with state agencies.

Where Has the Waste Gone? Fracking Results in Illegal Dumping of Radioactive Toxins - Over the last 10 years North Dakota has been home to an unprecedented surge of industrial oil extraction activity. New technologies, such as fracking and horizontal drilling, have allowed companies to access previously inaccessible deep oil shale reserves. Between 2006 and 2012 North Dakota rose from eighth to second in oil production nationally. In 2006, the state produced 39 million barrels of oil. By 2014 that number had grown to over 390 million barrels of oil per year. "All that oil," Novak told Truthout, "produces a lot of waste. And it has to go somewhere." In January of 2016, Novak found out that the "special" waste landfill -- which is what the state of North Dakota calls landfills that are permitted to accept oil field waste -- just six miles north of his ranch applied to receive a permit from the state to accept oil field waste that had higher levels of radioactivity. That landfill, known as the IHD waste disposal plant, sits in the middle of a miles-wide oxbow of the meandering Missouri River. A pile of dirt, 10 stories high, overlooks the wide-open spaces of the prairie, and underneath is waste from the oil fields."The landfill operator and the health agency tell us that this is as safe as having banana peels in the landfill. That it is just as safe as having granite counter tops in your house," Novak said. "That insulted my intelligence."  "There are rural water lines that run under that facility, in plastic pipes, not lead. There are people that live within a mile of it. Dust blows off the waste pile toward their homes. This is not okay, and the health department won't lift a finger for us," Novak told Truthout.

Bakken Update: 30 Of The Best US Oil Wells Show Why Operators Can Compete Internationally -- Mike Filloon - There was a time when most thought the oil business in the lower 48 was done. Natural declines and only small conventional reservoirs remained, leaving US production with the Gulf and Alaska. This was not enough to keep production from declining. This decline continued for decades until technologies were developed to tap shale for natural gas and then oil. No one could have guessed how quickly production would increase, nor the effect it would have on world oil markets. Not only did shale production aid in the US getting closer to energy self-sufficiency, it tipped the world supply/demand balance. Summary:

  • The best unconventional wells in the US continue to get better, with some locations producing over 60,000 bbls of oil in the first month
  • Shale production has pushed the US closer to energy self-sufficiency, and has tipped the balance of world oil markets
  • Operators continue to produce play best type wells through enhanced well designs or mega-frac's, and we expect these types of results to continue going forward
  • Improving shale economics have made it competitive on an international level, as production from deep water is losing out on operator cap ex.

Just One Random Example Of Bakken 2.0 -- From The November, 2016, Hearing Docket Agenda --Case No. 25459:Application of Continental Resources, Inc. for an order authorizing the following for the Dimmick Lake-Bakken Pool, McKenzie County, ND: (i) the drilling, completing and producing of a total not to exceed twelve wells on an existing 1280-acre spacing unit described as Sections 1 and 12, T.150N., R.97W.; and (ii) the drilling, completing and producing of a total not to exceed twenty-four wells on an existing overlapping 2560-acre spacing unit described as Sections 30 and 31, T.151N., R.96W. and Sections 6 and 7, T.150N., R.96W., eliminating any tool error requirements and such other relief as is appropriate.  From the very beginning, the MillionDollarWay suggested that if "you" had one well, you would eventually have four wells, probably eight wells, and possibly, many more than that. In this case, some folks with mineral rights in the area described above might have 24 wells plus 8 existing wells = 32 wells (so far). That's a lot of mailbox money.  And remember, operators are not drilling wells if the EURs are not at least 500,000 bbls; some operators require more. The eight wells in the two current 1280-acre drilling units are the Kennedy-Miles wells, which I track here.

Crude by rail shipments down by half as North Dakota oil production hits two-year low - Rail shipments of petroleum from Midwestern oil fields to East Coast refineries have plummeted as North Dakota’s oil production has fallen to a two-year low. Production dropped below 1 million barrels per day for the first time in more than two years, officials said Thursday — yet another reminder that the drilling boom is over in the country’s No. 2 oil state due to the slump in world oil prices. The state produced an average of 981,039 barrels of oil daily in August, down from 1.029 million in July, the state Department of Mineral Resources said. Oil production numbers typically lag at least two months. Those numbers are reflected in the crude shipment data collected by the U.S. Energy Information Administration, which show rail shipments from the Midwestern region were down 49 percent from the previous year in July. Shipments from the Midwest to the East Coast — which represent more than half of the region’s production and move over rail lines crossing Minnesota and Wisconsin — were down by similar numbers. The 5.4 million barrels that traveled to East Coast refineries in July was even 15 percent lower than in July 2013 when production was on the rise. That works out to fewer than three trains per day, about half the number that railroads reported to state officials in 2014. East Coast shipments peaked in November 2014 at 13.8 million barrels, according to the EIA.

The U.S. has its own ‘oil curse’ - The term “oil curse” — coined to describe petro-rich developing countries where the “black gold” came with the heavy price of economic and political instability — is now being adapted for use in the U.S., where “petrostates” and cities are seeing shrinking tax revenues, budget deficits, negative credit ratings, rising unemployment and even outright recession as oil prices have fallen. Alaska, North Dakota, Wyoming, New Mexico, Louisiana, Oklahoma, and Texas, which enjoyed the feast of the shale revolution, are now threatened with famine. How they weather the storm, analysts now say, could largely determine their fiscal and economic fortunes for the next decade. In Alaska, poster child of oil-dependent states, lawmakers spent two contentious summer legislative sessions debating how to cover a $4 billion budget deficit. They weren’t alone: Plunging oil prices have drilled holes into state budgets — $2 billion in Louisiana, $1.3 billion in Oklahoma, $1.3 billion in North Dakota — that left lawmakers bickering over how to close the gaps. “We spend about $1 billion per year on our schools,” Pat Pitney, director of Alaska’s Office of Management and Budget, said in an interview with MarketWatch. “We could close every school in the state and that still wouldn’t be enough to close the budget gap.” Tumbling tax revenue Oil prices dropped a whopping 46% in 2014, then another 31% in 2015. They bottomed in February 2016 at $27.45 per barrel, and while they have since recovered to around $50 a barrel, they are still down 60% from 2014 highs. These declines have caused a huge revenue gap for states that rely on so-called severance taxes to fund operations. As oil prices plunged, severance taxes declined nationwide up to 50% in the last year, Moody’s said in September. And severance taxes fell 46% from 2014 to 2015, according to the U.S. Census Bureau.

The Deadly Global War for Sand - In scores of countries across the globe, a crisis is building around the world’s most important and yet most overlooked commodity: sand. We use more of this humble natural resource than any other except water and air. Sand is the thing modern cities are made of. Every apartment block, office tower and shopping mall from Beijing to Lagos is made at least partly with concrete, which is basically just sand and gravel stuck together with cement. Every yard of asphalt road that connects all those buildings is also made with sand. So is every window in every one of those buildings. Sand is the essential ingredient that makes modern life possible. And, incredibly, we are starting to run out. That’s mainly because the number and size of cities is exploding, especially in the developing world. Since 1950, the world’s urban population has ballooned to over 3.9 billion from 746 million. To build those cities, people are pulling unprecedented amounts of sand out of the ground. There’s so much demand that riverbeds and beaches are being stripped bare, ocean beds denuded, and landscapes devastated. (Desert sand, shaped more by wind than by water, generally doesn’t work for construction.) Governments are cracking down in response—which in turn has spawned a worldwide black market in sand. In a shocking number of countries, people are being imprisoned, tortured and murdered over sand. Still, the amount of sand being mined worldwide is increasing—at terrible costs to people and the planet.

New analysis of natural gas storage warns of ‘significant’ consequences from leaks -- Nearly a year after the record-breaking rupture at the Aliso Canyon natural gas storage facility in Los Angeles, which prompted thousands of people to evacuate and released 97,100 metric tons of methane into the atmosphere, a White House task force has issued a report on the state of the country’s natural gas storage. It’s a troubling picture. The report found that “while incidents at U.S. underground natural gas storage facilities are rare, the potential consequences of those incidents can be significant and require additional actions to ensure safe and reliable operation over the long term.” The Aliso Canyon leak, for instance, can be blamed on both poor design and lack of monitoring. The report offers 44 recommendations to protect health and the environment from the risks of natural gas storage and was authored by staff from the Department of Energy, the Department of Transportation, the EPA, the Federal Energy Regulatory Commission (FERC), and other agencies. “This new report accurately describes the serious safety and environmental hazards involved with these crumbling links in our energy infrastructure. The challenge now is taking action,” said Mark Brownstein climate and energy vice president at the Environmental Defense Fund.  Currently, there are no federal guidelines to regulate natural gas storage, even as it has become a bigger and bigger portion of America’s energy portfolio. The Department of Transportation’s Pipeline and Hazardous Material Safety Administration is expected to issue an interim final rule regarding natural gas storage later this year.

Aliso Canyon task force recommends new rules for natural gas storage -  The multi-agency federal and state task force, which was convened in the wake of the Aliso Canyon natural gas release, on Tuesday announced recommendations designed to prevent such incidents from occurring in the future. In addition, Pipeline and Hazardous Materials Safety Administration will issue an interim final rule by the end of the year, which would incorporate two American Petroleum Institute recommended practices, and would apply to the more than 400 underground natural gas storage wells in the US. The API practices call for operators of underground storage facilities to conduct a systematic evaluation of their wells, including compiling and standardizing all available well records; instituting an integrity testing program that includes usage of leakage surveys and cement bond and corrosion logs; creating and documenting a risk management plan to guide future monitoring; establishing design standards for new well casing and tubing; and establishing safe operating pressures for existing casing and tubing. PHMSA will conduct the rulemaking under the new powers given to the agency in the Protecting our Infrastructure of Pipelines and Enhancing Safety (PIPES) Act of 2016, which was signed into law by President Barack Obama in June. The law, which was passed in response to the four-month release of methane from Southern California Gas' Aliso Canyon storage field, gives PHMSA the authority to act quickly to address urgent safety concerns.

After Calif. leak, feds seek to curtail natural gas blowouts (AP) — A year after a blowout at a natural gas well near Los Angeles spewed tons of noxious gas and drove thousands from their homes, a federal task force is recommending dozens of safety changes for the nation’s 400 underground natural gas storage facilities. A report released Tuesday recommends that operators of gas-storage sites conduct strict risk assessments and develop robust safety procedures, including ensuring that storage wells have backup systems to contain gas flows in the event of a leak. The leak at the Aliso Canyon well was the largest-known release of climate-changing methane in U.S. history, spewing an estimated 107,000 tons of methane before being controlled in February. The blowout sickened residents in the Porter Ranch neighborhood and surrounding suburbs. Many complained of headaches, nausea, nosebleeds and other symptoms from the foul-smelling gas. “Natural gas plays an important role in our nation’s energy landscape, and we need to make sure the associated infrastructure is strong enough to maintain energy reliability, protect public health and preserve our environment,” said Franklin Orr and Marie-Therese Dominguez, who co-chaired the interagency task force. The failed Aliso Canyon well was one of 115 wells at a sprawling storage facility operated by Southern California Gas Co. The well was built in 1953 to pump oil and converted in the 1970s to store natural gas. It used a design that made it dependent on a single barrier to contain the gas. When that barrier failed, a blowout reported Oct. 23 spewed methane uncontrollably for nearly four months.

CAMPAIGN 2016: Oil bets big to hold GOP Congress, sits out Trump-Clinton brawl -- Oil and gas executives are pouring record amounts of money into electing Republicans this year, even though they're largely sitting on their wallets in the presidential race. Oil and gas has pumped more than $70 million into federal races so far this year, according to OpenSecrets.org. But Democratic presidential nominee Hillary Clinton and GOP nominee Donald Trump have picked up less than $1 million of that (Greenwire, Sept. 7). Clinton seems hostile to their interests, and although Trump offers kind words, the industry's politically active members figure he can't win. So instead, they're pouring their money into the Republican effort to keep control of Congress. "The executives of these companies are pragmatic," said one energy industry executive. "There's a recognition that you're going to have to work with the [Clinton] White House. So you put your money where you can make a difference." He added that oil executives have many reasons to worry about Democratic control of Congress, or even just the Senate. They might shudder to think of climate change hawk Sen. Sheldon Whitehouse (D-R.I.) leading a committee. Advertisement "If Sheldon Whitehouse has a gavel, he's going to be hauling energy CEOs up there all the time for hearings," he said.

'Get A Life': Clinton Bashed Anti-Fracking Activists During Private Labor Meeting - At a private meeting with the Building Trades Council, Hillary Clinton bashed environmentalists who oppose natural gas fracking and insist the United States must keep all fossil fuels in the ground. She said these environmentalists need to “get a life.”A transcript of a part of the meeting, which took place on September 9, 2015, was published by WikiLeaks. It was attached to an email from Clinton campaign chairman John Podesta’s account, which he says was hacked. Clinton met with the Building Trades Council, which is part of North America’s Building Trades Unions (NABTU). She sought their endorsement, however, she wanted to be clear about what she was willing to support in the way of new pipeline construction. The labor organization is very pro-pipeline because its members work on pipelines.“Bernie Sanders is getting lots of support from the most radical environmentalists because he’s out there every day bashing the Keystone pipeline,” Clinton stated. “And, you know, I’m not into it for that.”“My view is I want to defend natural gas. I want to defend repairing and building the pipelines we need to fuel our economy. I want to defend fracking under the right circumstances,” Clinton added. She made it clear she was willing to defend new, modern energy sources. Then, on environmentalists, Clinton shared, “I’m already at odds with the most organized and wildest. They come to my rallies and they yell at me and, you know, all the rest of it. They say, ‘Will you promise never to take any fossil fuels out of the earth ever again?’ No. I won’t promise that. Get a life, you know.”

WikiLeaks: Hillary's Conflicted Comments on Fracking – One of the recent WikiLeaks email dumps revealed some interesting things about hydraulic fracturing, also known as fracking. (This enhanced drilling technology is a big part of America’s new era of energy abundance.) First, they add to the growing question about what Hillary Clinton really believes: her public comments, or her private positions?Regarding fracking, the leaked emails offer a glimpse into speeches she made to closed groups that we’ve previously been unable to access. One such speech was given to the troubled Deutsche Bank on April 24, 2013. There, she praised fracking as a tool to “make even more countries more energy self-sufficient.” She told the audience: “I’ve promoted fracking in other places around the world.” She bragged about “the advantages that are going to come to us, especially in manufacturing, because we’re now going to produce more oil and gas.”  Yet, everything she’s said in the campaign, paints a different picture.  Her stated energy policies are decidedly anti-fossil fuel. The party platform calls for “a goal of producing 100 percent of electricity from renewable sources by 2050.” In addition to promoting “enough clean renewable energy to power every home in America within ten years,” Hillary’s website outlines her desire to “reduce the amount of oil consumed in the United States and around the world.” She’s declared that banning fossil fuel extraction on public lands is: “a done deal.” While she won’t come out and clearly state that she’d ban fracking, at a March 6 CNN debate with Bernie Sanders in Flint, Michigan, she proudly stated: “By the time we get through all of my conditions, I do not think there will be many places in America where fracking will continue to take place.” And, she has pledged to “stop fossil fuels.”  Then there’s her comment about green-group funding, as coming from Russia. It’s long been suspected that Russia is protecting its national oil-and-gas interests by funding anti-fracking activism—while not a new idea, the current attention makes it worth revisiting.

WikiLeaks: Hillary's Conflicted Comments on Fracking – Breitbart - Regarding fracking, the leaked emails offer a glimpse into speeches she made to closed groups. One such speech was given to Deutsche Bank on April 24, 2013. There, she praised fracking as a tool to “make even more countries more energy self-sufficient.” She told the audience: “I’ve promoted fracking in other places around the world.” Yet, everything she’s said in the campaign, paints a different picture. Her policies are decidedly anti-fossil fuel. The party platform calls for “a goal of producing 100 percent of electricity from renewable sources by 2050.” In addition to promoting “enough clean renewable energy to power every home in America within ten years,” Hillary’s website outlines her desire to “reduce the amount of oil consumed in the United States and around the world.” She’s declared that banning fossil fuel extraction on public lands is: “a done deal.” While she won’t come out and clearly state that she’d ban fracking, at a March 6 CNN debate with Bernie Sanders in Flint, Michigan, she proudly stated: “By the time we get through all of my conditions, I do not think there will be many places in America where fracking will continue to take place.” And, she has pledged to “stop fossil fuels.” Then there’s her comment about green-group funding, as coming from Russia. It’s long been suspected that Russia is protecting its national oil-and-gas interests by funding anti-fracking activism—while not a new idea, the current attention makes it worth revisiting.  The idea that Russia is funding anti-fracking groups, such as the Sierra Club and the Natural Resource Defense Council, has popped up in a variety of outlets including the 2013 movie FrackNation, and in 2014 comments from NATO secretary general, Anders Fogh Rasmussen, the former Prime Minister of Denmark. And then, in late 2014, the New York Times featured a story titled: “Russian money suspected behind fracking protests.” In 2015, The Washington Free Beacon reported on a Bermudian firm that had connections to Russian oil interests and was funneling money to anti-fracking groups in the U.S.

U.S. crude oil imports increase during first half of 2016, the first increase since 2010 U.S. gross crude oil imports increased by 528,000 barrels per day (b/d), or 7%, during the first half of 2016 compared to the first half of 2015. This increase reverses a multiyear trend of decreasing U.S. crude oil imports as a result of increasing U.S. production.  Imports from Nigeria, Iraq, and other members of the Organization of the Petroleum Exporting Countries (OPEC) rose by 504,000 b/d. Declining imports from Mexico, which fell 118,000 b/d, more than offset the increase in imports from Canada, limiting the net change in imports from non-OPEC countries to an increase of less than 24,000 b/d.  Changes in crude oil price spreads were a significant factor in the rise of U.S. oil imports during the first half of 2016. The narrowing price differences between U.S. crudes and international benchmarks provided an incentive for increased imports by refiners in areas where imported crudes now had a delivered cost advantage relative to similar domestic crudes. Additionally, lower overall crude prices contributed to a decline in U.S. crude production from an average of 9.5 million b/d in the first half of 2015 to 9.0 million b/d in the first half of 2016, resulting in higher net crude oil imports.  As a result of shifting price, supply, and logistical dynamics, East Coast (defined as Petroleum Administration for Defense District, or PADD, 1) crude imports rose by 244,000 b/d (41%) in the first half of 2016 compared to the same period in 2015, nearly three-quarters of which were supplied by Nigeria. Nigerian production actually declined during the first half of 2016 as a result of elevated supply disruptions. However, falling U.S. production and increasing competitiveness for seaborne light sweet crudes into the East Coast more than offset lower production levels, enabling imports from Nigeria to displace crude oil received from the Midwest (PADD 2).  In the Midwest (PADD 2), crude imports rose by 104,000 b/d (5%) during the first half of 2016 compared with the same time last year. Canada accounted for almost all of the increase despite wildfires in Alberta that disrupted production later in the second quarter. Canada is the largest source of crude oil imported into the United States, and its heavy crude is particularly well suited for U.S. refiners in the Midwest and Gulf Coast.  Gulf Coast (PADD 3) imports increased 88,000 b/d (3%), with rising imports from Middle East and African countries offsetting declines from Latin America. Imports from Iraq increased by 142,000 b/d, more than the next four countries combined. Iraq’s production in 2015 rose by 700,000 b/d, enabling more of their production to be exported to the United States.

ConocoPhillips CEO Lance says flexible US shale oil can serve as swing producer - US shale oil can serve as a swing producer in the global market due to its flexibility and speed to market, ConocoPhillips CEO Ryan Lance said Tuesday. "Not only is it possible [to be a swing producer], when you think about the marginal barrel required to satisfy demand today, I think it falls right in the cost of supply that onshore tight oil and shale is in," Lance told the Oil & Money Conference in London. He said US shale production has declined in recent months due to the oil price slump. However, that has left an inventory of drilled but uncompleted wells that can serve as de facto spare capacity, he said."It doesn't take long to drill new wells, and usually there's infrastructure nearby due to the previous drilling," he said. "As prices fall, you stop drilling. You can ramp up or ramp down along with commodity prices." Lance's assessment contrasted with that of Hess CEO John Hess, who told the same conference that US shale could not be considered a swing producer akin to Saudi Arabia, highlighting the obstacles that make shale a "short cycle" producer, with a lag of six-12 months between investment decision and first oil production. "When we say short cycle, one of the things that make it not like a light switch is in North Dakota it takes maybe three months to get permits," Hess said. "The logistical planning is huge. You need hundreds of trucks ... to get the rigs set up, to get the frac equipment there and have the water and sand necessary for the hydraulic fracturing." While Hess said the US shale industry needs $50/b oil to keep current production levels flat, Lance said ConocoPhillips has already gained enough efficiencies to bring its break-even costs below $50/b Brent. He said tight oil plays will draw capital away from longer term drilling projects and added that the US has "enormous" tight oil resources remaining.

BP can operate in $50-$60/b oil range next year: Dudley - Oil | Platts News Article & Story: BP can now balance the books in 2017 at "just south of $55/barrel" compared to its previous guidance of $60/barrel thanks to greater cost discipline, CEO Bob Dudley said at the Oil & Money conference in London on Tuesday. "We can operate in the $50 range, we have to," he said, adding that the business needs to be resilient to price cycles, can adapt and is agile. "In practical terms, this means standardizing what we do, make things safer, simpler, and cheaper," Dudley said.He warned that while demand may be strong, supply is even stronger and this has led to a renewed focus on competitiveness. Dudley also said the market is essentially in balance and "as long as oil demand grows at 1-1.2 million b/d we're going to see a tightening. There's probably 18 months of storage out there." "We'll see a steady tightening of the price. Next year...somewhere between $50 and $60 next year. We can plan our company against $50-60 next year. That feels right, the fact that the OPEC members are talking to each other and have reached some understandings...is just a further sign of tightening of the market," Dudley said.

 "Big Oil" - The Crude Market Is Larger Than All Metals Markets Combined -- Ever since the invention of the internal combustion engine, oil has been one of the most crucial commodities on Earth. Without it, modern transportation as we know it would not be possible. Industries such as aviation, aerospace, automobiles, shipping, and the military would look nothing like they do today. Of course, as we now know, this has all come with some extreme drawbacks from an environmental perspective. And while new green technology and the lithium revolution will aid in eventually reducing the role of oil in transportation, the fact is we still use 94 million barrels per day of crude worldwide. As a result, Visual Capitalist's Jeff Desjardins details, the energy industry continues to have huge amounts of influence on our lives. Special interest groups with a focus on energy have influence on a domestic level. Meanwhile, from a foreign policy angle, countries like Saudi Arabia and Russia wield additional geopolitical and economic power because of their natural resources. It’s even arguable that everything from the Gulf War to the more recent Middle East interventions in Libya, Syria, and Iraq have been at least partially to do with oil. This week’s chart of the week aims to help explain the influence that oil has on countries and markets by using a very simple perspective: the size of the crude oil market vs. all metal markets combined.

Oil industry needs $10 trillion to meet coming demand, says OPEC’s Barkindo - The global oil industry needs an astronomic investment injection over the next two decades or risk jeopardizing it’s ability to meet future oil demand, the Organization of the Petroleum Exporting Countries warned on Tuesday. Speaking at the “Oil & Money” conference in London, the cartel’s Secretary-General Mohammed Barkindo said the recent oil crash has already taken a serious toll on investments, particularly the exploration-and-production sector, and poses a “serious threat” to both producers and consumers.“It affects all of us,” he said. “Hence the need to restore balance in this market and to restore investments on a sustainable basis.” “According to our world oil outlook report that will be officially released next month in Abu Dhabi, we estimate that by 2040 this industry will need in the region of $10 trillion dollars of investment in order to sustain production as well as supply,” he added. The slump in oil prices since the summer of 2014 has dramatically hampered money flowing into the industry, both when it comes to current production and finding new fields for future supply. Barkindo said investments which dropped 26% in 2015, are projected to slide 22% this year and are forecast to continue to contract in 2017. If the contraction continues, “then the global community—not only the industry—should really take this seriously and join hands in order to ensure the much needed security of supply going forward,” the OPEC chief said. Fatih Birol, executive director at the International Energy Agency, agreed. He said supply each year drops by 2 million barrels a day, removing the equivalent of Iraq’s entire production from the global oil market every two years. That means the industry won’t be able to meet the expected rise in energy demand in the coming years, even if demand surprises to the downside, he explained. Birol pointed out that both the number of oil discoveries and new oil projects are at historic lows. “And this will have implications in the next years to come and therefore it’s something we all need to bear in mind. It’s a major issue we all need to monitor very closely,” he said.

Exxon CEO: world needs oil of five Saudi Arabias by 2040 - Global demand for energy will grow 25% in the next 25 years and countries will guzzle oil five times the size of Saudi Arabia’s reserves. Exxon Mobil CEO Rex Tillerson was on bullish form in London on Wednesday, dismissing any concerns that the UN’s new climate treaty will limit near-term consumption of oil and gas. His scenario would blow efforts to contain global warming to below the 2C danger zone sky high, unless nascent carbon capture technologies come online fast. While greenhouse gas emissions in developed countries will likely peak in 2030, developing economies will struggle as they burn more fossil fuels, Tillerson told the Oil and Money conference.As a company Exxon “shares the view that addressing climate change is serious and warrants thoughtful action,” he said, citing projects on carbon capture, efficiency and waste heat conversion. Tillerson also said he supports a price on carbon, noting that Exxon already operates with an average internal carbon cost of $80 per tonne, double that of Shell.

OilPrice Intelligence Report: Oil Heavyweights Worry About Future Oil Supply: The top oil officials and executives gathered in London this week for the Oil & Money conference, jointly hosted by the New York Times and Energy Intelligence. Several headlines came out of the conference. ExxonMobil’s CEO Rex Tillerson said that he does not see a supply shortage several years from now even though so many voices are warning about the shortfall in investment today. "I don’t necessarily have the view that we are setting ourselves up for some big collapse in supply within the next three, four, five years," Tillerson said. That comes despite warnings from the IEA and even Saudi energy minister Khalid al-Falih. In fact, the diverging perspectives about future supply is turning out to be one of the hottest debates right now. OPEC’s Secretary-General Mohammed Barkindo said that the global oil industry will need around $10 trillion in investments through 2040 to meet oil demand, but the low levels of investment today because of low oil prices poses a “serious threat.” If investment continues to fall “then the global community—not only the industry—should really take this seriously and join hands in order to ensure the much needed security of supply going forward,” Barkindo said. Others at the conference echoed his worries about future supply shortages.  The European Central Bank kept its quantitative easing program intact, and Mario Draghi said that the ECB has not discussed altering the stimulus. The comments pushed up the dollar and putting downward pressure on oil prices as a result. Separately, the chief of Russia’s Rosneft, Igor Sechin, hinted at the fact that his company could boost production “significantly.” He said that Russia has the ability to add roughly 4 million barrels of oil per day at some point in the future if there is enough demand. Also, Nigeria slashed the price that it is selling its crude for by $1 in order to offload a glut of cargo. Altogether, these developments pushed down oil prices by more than 2 percent on Thursday. 

Oil's Biggest Threat: 'Peak Demand' Within 15 Years? -- For more than two years the oil industry has suffered through its worst down cycle since the 1980s, and relief may not come until the middle of 2017 at the earliest. Some argue that oil prices may take even longer before they rebound. But while oil executives are focusing on the next few years, a much bigger threat looms over the long-term: Peak oil demand. A new report from the World Energy Council predicts that global demand for crude oil could hit a peak in 2030 at 103 million barrels per day. The scenario would require rapid and substantial advancements in electric vehicles, efficiency, renewable energy, and digital technologies – developments that are no longer difficult to imagine. Additionally, the report envisions a scenario in which global primary energy demand – which includes energy demand for everything including transportation and electricity – could also peak before 2030. These conclusions fly in the face of the prevailing assumptions within the oil and gas industry, which assumes consistent and stable growth in demand for decades to come. The oil market has always gone through cycles, in which demand spikes or flattens out. The cyclical nature has overwhelmingly been due to the changing nature of global or regional economic growth. But while demand has always been a bit volatile in the short-term, oil demand has grown inexorably for more than a century as population and GDP expand. Recessions hit demand, but once economies recover, demand resumes its upward trajectory. This constant, almost a law of nature, makes it difficult for many to picture a structural, rather than just a cyclical, decline in oil demand. But many analysts, including the WEC, say that such a development is underway. "Historically people have talked about peak oil but now disruptive trends are leading energy experts to consider the implications of peak demand,” Ged Davis, executive chair of scenarios at the World Energy Council, said in a statement.

USGC natural gasoline climbs to 15-month high with crude, gasoline blending - Natural gasoline on the US Gulf Coast climbed to a 15-month high Wednesday as crude futures ended the day almost 3% higher on a surprise US crude stocks draw. Market sources said a slight uptick in demand -- for gasoline exports and diluent for Latin America -- are also supporting prices. "I wouldn't call it a huge pickup but just enough to perk up everyone's mood regarding the spreads," a broker said.Natural gasoline, or C5, and light naphtha are similar products used for blending into gasoline or as heavy crude diluent, although natural gasoline is largely fractionated from the natural gas stream while naphtha comes from the refining process. Non-Targa natural gasoline from the Enterprise terminal in Mont Belvieu, Texas, rose 3 cents to $1.1525/gal based on an offer at $1.1550 left standing at the end of the S&P Global Platts Market on Close assessment process. It was last assessed higher at $1.1795 on July 2, 2015, at a $7.4/b discount to crude futures. In comparison, C5 was at a $3.2/b discount to WTI on Wednesday. A natural gasoline trader echoed that sentiment, noting "good buying" of Gulf Coast light naphtha for gasoline blending.

 New crude oil pipelines and new diluent pipelines and storage capacity in Alberta - Several oil-sands expansion projects committed to when crude oil prices were double what they are today are finally coming online, and midstream companies active in Alberta are building new crude/diluent pipelines and storage capacity to keep pace. New storage caverns for natural gas liquids are also in the works, giving a much-needed boost to Canada’s Energy Province. Today we conclude our series on midstream infrastructure under development in or near Western Canada’s oil sands region that move and store hydrocarbon liquids. Alberta––sometimes called “the Texas of the North”––has experienced as many ups and downs in its oil patch as the Lone Star State, and lately, with crude prices hovering near $50/bbl and the Fort McMurray, AB area still rebuilding from the wildfires of May 2016 (see Back in the High Life and Over the Hills and Far Away), it’s fair to say that times have been better. The good news is that oil prices have been inching up; a number of the projects committed to a few years ago to boost oil sands production are approaching commercial operation; and the expected output increases are spurring the development of new midstream infrastructure. In Part 1 of this series, we discussed the challenges that oil sands producers have faced (low crude prices, the wildfires, the extra costs associated with moving bitumen and heavy oil to market, etc.), as well as the fact that Alberta producers decided a few years ago (when Western Canadian Select – WCS - crude prices topped $70 to $90/bbl) to undertake a combined 850 Mb/d or so of oil sands capacity-expansion projects that would come online in the 2015-19 period.  In Part 2, we discussed how the need for more diluent has encouraged natural gas producers in Alberta to focus on “wet” gas and field condensate production in the province’s Montney and Duvernay plays, and how that shift has spurred the development of new natural gas processing capacity (to extract NGLs and remove impurities from raw gas) and fractionation capacity (to separate mixed NGLs into purity products like ethane, propane, butane and natural gasoline––the leading diluent material).

Mexico eases terms for deepwater joint venture with Pemex - Terms have been eased for an upcoming tender for foreign companies seeking a deepwater oil partnership with Mexico's state-owned Pemex in the Trion Block. Mexico's upstream regulator, the National Hydrocarbons Commission, ruled Friday that consortia can be composed of three companies, instead of four. Until Friday, the rules stipulated that consortia had to have four companies: Pemex, two operators and a financial partner. The December 5 auction is for a joint-operation agreement in the Trion Block in Mexican Gulf waters of the Perdido Fold Belt. The Trion block sits close to the maritime border with the US in the Gulf of Mexico and has certified proven, probable and possible reserves of 480 million barrels of light crude, with water depths of 2,200-2,500 meters (7,200-8,200 feet), according to Pemex. Ten companies have begun prequalification for bidding. They are BHP Billiton, BP, Chevron, ExxonMobil, Inpex, Mitsubishi, Shell, Total, PC Carigali and Lukoil. Companies had pressured for the change in the consortium rules because they were concerned that a larger consortium would mean dilution of profits. Commissioner Sergio Pimentel welcomed the change but said that more companies would have wanted to take part in the auction if the terms had been eased earlier.

EU natural gas demand set to rise by 6% year on year in 2016 to 447 Bcm: Eurogas - EU natural gas consumption is expected to increase by 6% this year compared with 2015 to around 447 Bcm, industry group Eurogas said Friday, as gas demand in Europe continues a robust trend following year-on-year growth last year. The rise is due to increased demand for gas in power generation following signs of revival in industrial activity, as well as greater use of gas in transport, Eurogas said. The group pointed to the rise of gas use in power generation in France, Germany, Italy and the Netherlands as a key factor supporting the expected yearly demand increase."In France, for example, gas demand in this sector doubled in the first half of the year, compared with the same period last year," it said. In Germany, it added, several new gas-fired power plants have started to operate "due to the competitive price" of gas. "This increase in the use of gas in power generation is also a quick and cost-effective way to reduce greenhouse gas emissions substantially," it said. Eurogas also pointed to increased economic growth in parts of Europe, such as the Czech Republic. This, it said, has led to higher gas consumption.

SEA\LNG: LNG Sector Ready to Meet Shipping Industry Demand | World Maritime News: The cross-industry coalition SEA\LNG has highlighted the ability of the liquefied natural gas (LNG) sector to meet the future emissions requirements of the global shipping industry ahead of the 70th Session of the IMO’s Marine Environment Protection Committee (MEPC). “Independent of the timing of the IMO’s implementation of the 0.5% global sulphur cap, today LNG is already a clean, safe, practical and economically viable fuel for the shipping industry,” SEA\LNG Chairman, Peter Keller, said. He added that the industry is making “big steps” in creating the infrastructure to enable quick, safe and cost effective LNG bunkering in key global ports, diminishing the price premium for LNG-fuelled vessels, as well as working with regulators to establish consistent international and national regulations. SEA\LNG coalition, which supports the implementation of the MARPOL Annex VI for the prevention of air pollution by ships, said that it believes the implementation date decision for the marine fuel sulphur cap needs to rest with the Member States comprising the MEPC. “LNG as a marine fuel is a proven and available solution with available technologies to meet the project needs. There are already 86 LNG-fueled ships in operation worldwide (excluding LNG carriers) and a further 95 on order,” SEA\LNG said.

Indonesia may have 63 excess LNG cargoes next year: official - Indonesia is forecast to have 63 excess LNG cargoes next year from the Tangguh and Bontang LNG plants due to the rise in natural gas production, which the domestic market is unable to absorb because of lack of infrastructure, a senior government official said Friday. "We are in the middle of negotiating the sale of 13 cargoes of the 63. We aim to sell the cargoes to existing buyers rather than on the spot market," oil and gas director general Wiratmaja Puja said, adding that excess cargoes are expected to rise above 63 in 2018. In 2016, Indonesia is still has 11 cargoes that have not been sold. The government is still seeking buyers for these cargoes, Puja said. Indonesia's LNG plants are Tangguh in Papua, Bontang in East Kalimantan and Donggi Senoro in Central Sulawesi. Bontang plans to produce 147 LNG cargoes this year or the equivalent of 8.3 million mt. The planned output is less than 2015's 189 cargoes or 10.6 million mt/year.State-owned oil and gas company Pertamina has forecast Indonesian LNG demand is likely to be 12 million mt/year in 2019-20 because domestic gas demand will increase by 4% a year. Pertamina has secured LNG import commitments totaling 3 million mt/year, including 1.52 million mt/year under a 20-year contract from Houston-based Cheniere Energy. The first phase of supply from Cheniere of 76,000 mt/year will start in 2018, with the second phase starting by 2019. Indonesia has to import LNG to cover domestic demand because a substantial part of its own production is earmarked for export under long-term contracts.

The People vs. Arctic Oil -- An unprecedented legal case was filed today against the Norwegian government for allowing oil companies to drill for new oil in the Arctic Barents Sea. The plaintiffs, Nature and Youth and Greenpeace Nordic, argue that Norway thereby violates the Paris agreement and the people's constitutional right to a healthy and safe environment for future generations.  "We will argue in court that the Norwegian government has an obligation to keep its climate promises and will invoke the people's right to a healthy environment for ours and future generations. This is the People vs. Arctic oil," Ingrid Skjoldvær of Nature and Youth said.  The lawsuit demands that Norway uphold its constitutional guarantee for future generations as it is written in article 112 of Norway´s Constitution:  "Every person has the right to an environment that is conducive to health and to a natural environment whose productivity and diversity are maintained. Natural resources shall be managed on the basis of comprehensive long-term considerations which will safeguard this right for future generations as well. The authorities of the state shall take measures for the implementation of these principles."  Norway was among the first countries in the world to ratify the Paris agreement which is about to enter into force. By ratifying, Norway has promised to ambitiously reduce its emissions and help limiting the temperature increase to 1.5 C. At the same time Norway has opened up new oil license rounds, allowing the state-owned Statoil and other oil companies to start a major new exploration campaign in the Barents Sea, where they want to drill up to 7 new exploratory wells in 2017.

Oil From $50 Billion Kashagan Field Starts Flowing to Export - Kashagan, a vast oil field in the Caspian Sea, sent its first crude for export after about 16 years in development and more than $50 billion of investments. The venture loaded 26,500 metric tons of crude for export into the country’s pipelines, Kazakhstan’s Energy Ministry said in an e-mailed statement Friday. Of that, 7,700 tons was sent to the Caspian Pipeline Consortium. Reaching stable production will take “some time” as commissioning work continues both offshore and onshore, the ministry said. The project has been plagued by multiple delays and cost overruns. A 2008 budget estimate of $38 billion jumped to $53 billion by the end of last year as the partners replaced undersea links after sulfurous gas corroded and cracked the pipes after a brief startup in 2013. The crude from Kashagan is reaching an already saturated market, with prices at less than half the level of three years ago. Expectations for the field’s exports even prompted OPEC to flip supply predictions for next year. “Restarting production even in this low oil price environment is good because it means beginning to see some returns on that massive investment,” Andrew Neff, Paris-based principal analyst at IHS Energy, said by e-mail. “The real payoff will be phase two,” which has the potential to increase output to 1 million barrels a day, he said. North Caspian Operating Co., which took over running of the field from Eni SpA in 2009, said it’s working to gradually increase production capacity to a target level of 370,000 barrels a day by the end of 2017. U.K. consulting firm Wood Mackenzie Ltd. forecasts only about 154,000 barrels a day from the field on average next year.

Kazakhstan's Kashagan ships first oil for export. (Reuters) - The first batches of oil from Kazakhstan's giant offshore Kashagan field were shipped on Friday for export via two pipelines, the Central Asian nation's Energy Ministry said. Energy companies developing the field have shipped 7,700 tonnes of oil through the private CPC pipeline and 18,800 tonnes through a pipeline operated by state-controlled firm KazTransOil, it said in a statement. The ministry said start-up work and testing was continuing at field and getting it into "stable operations mode will take some time". Kashagan has also shipped 22.8 million cubic metres ofgas into the state-run gas pipeline system, it said. Energy Minister Kanat Bozumbayev said on Wednesday four wells at Kashagan were producing a total of 90,000 barrels per day, although it was unclear how much was oil and how much was gasthat would then be shipped separately, flared or injected back into the reservoir. The field off Kazakhstan's Caspian coast has cost about $50 billion to develop and first started production in 2013 but output was suspended shortly afterwards because of technical problems with the gas pipelines. The NCOC consortium developing Kashagan is made up of China National Petroleum Corp, Exxon Mobil, Eni , Royal Dutch Shell, Total, Inpex and KazMunaiGas. Kashagan was initially expected to produce 75,000 barrels per day (bpd) in October, rising to between 150,000 bpd and 180,000 bpd in November and December.

Russia is planning for low oil prices for years - Russia is betting oil prices will stay low for a long time.President Vladimir Putin's government has just set a draft budget for the next three years based on the assumption Russia will be able to sell its oil for $40 a barrel. That's $10 below current world prices. Russia is the second biggest oil exporter after Saudi Arabia. It has been talking to the Saudis and other OPEC producers about restraining supply to support prices. Putin's budget suggest he wants to be prepared if a preliminary OPEC production cut agreed last month is not implemented, or proves ineffective. He may also have learned a painful lesson. In 2015, the Russian government originally based its budget on an average price of $100, double what it actually was. The slump in oil prices forced the government to slash spending. That hurt everyday Russians, who were already struggling with rising prices and falling wages. Some even took to the streets in rare public protests. The budget for 2016 predicted $50 oil, $10 above the average price in the first nine months of the year. And once again, the government was forced to change its plans. It amended the budget earlier this month, to accommodate higher defense spending and a one-off bonus for pensioners to be paid in January. That will push up borrowing: the budget deficit is now expected to reach 3.7% of GDP, well above the official target of 3%. The government is now expecting the deficit to fall to slightly above 3% of GDP next year.

What It Takes to Be the World’s Biggest Crude Producer --Russia’s oil industry has proved its strength over the past several years, raising production while powering through the Great Recession, a round of international sanctions, and the steepest drop in oil prices in a generation. In September, Russia set a post-Soviet record for crude output, pumping 11 million barrels a day. Next year its oil companies should be able to produce even more, if the Kremlin wants them to. On Oct. 10, Russian President Vladimir Putin said a freeze, or even a cut, would be the proper response to the currently oversupplied market. This followed a September agreement between members of the Organization of the Petroleum Exporting Countries to finalize a small production cut in November. Setting aside any deals with OPEC, analysts had anticipated that Russia would increase its 2017 production by 1 percent to 3 percent. Investments made during the years of $100-a-barrel oil are still bearing fruit. Russia’s largest producers, Rosneft and Lukoil, have poured billions of dollars into Siberia, where they’ve been able to slow the decline rates of aging fields and in some instances revive growth. “Russia has a lot of oil that can be produced at competitive prices, so it will look to muscle in on higher-cost competition where it can,” says Christopher Haines, head of oil and gas at BMI Research. That means taking market share from countries that rely on oil sands and deepwater projects. Low oil prices have battered Russia’s economy, leading to a recession, the widest budget deficit since 2010, and a sharp drop in the value of the ruble—it’s down about 50 percent against the dollar since 2013. But the cheaper currency is a plus for Russian oil companies. BBecause they get dollars for the oil they sell, and they pay for services, including drilling, in rubles, they’ve been able to raise the value of their earnings while cutting costs. Losses from lower oil prices are mainly borne by the government, which gets 37 percent of its revenue from oil and gas. Last year the government responded with a surprise tax increase on oil companies. That helped slow the deterioration of public finances. The threat of another hike looms over 2017. Vagit Alekperov, the billionaire chief executive officer of Lukoil, predicted last month that the nation’s output would flatline next year and potentially decline in 2018 or 2019 because of the state’s tax plans. “The cow that is giving milk today is not being fed,” Alekperov told reporters in Sochi on Sept. 30.

Force majeure on Bonny, Forcados crude oil terminals slashes Nigeria Sep revenues: ministry - Declining oil production and export volumes due to militancy and large-scale crude theft cut the Nigerian government's gross revenue in September by about 12% from August to Naira 279.75 billion ($8 billion), the finance ministry said Friday. The ministry said that despite the rally in global oil prices averaging $48.43/b in June, Nigeria's export volume declined by 1.15 million barrels in that month, resulting in a $46.52 million drop in oil export sales for the government. Nigeria's oil exports sales are accrued to the government's account two or three months later. "Force majeure was declared at the Bonny Terminal and there was a subsisting force majeure at the Forcados Terminal," the ministry said in a statement. "Shut-in and shutdown of pipeline for repairs and maintenance also contributed to the drop in revenue."Oil exports account for about 80% of the Nigerian government revenue. Nigerian oil output plummeted to near 30-year lows of around 1.4 million b/d in May from 2.2 million b/d earlier in the year as attacks on oil facilities in the Niger Delta rose at an alarming pace amid resurgent militancy. The Nigerian Navy said Friday that it has arrested 13 suspected oil thieves who illegally tapped into pipelines in the Escravos area of the Niger Delta, to siphon about 900 mt of crude oil. "The suspects and exhibits have been handed over to officials of [state security] for necessary action,"

India eyes investment in Nigeria's hydrocarbon sector -  India is exploring an option to invest $15 billion in Nigeria's hydrocarbon sector in lieu of its annual crude oil imports from the West African nation, the petroleum ministries of both countries said Tuesday. Emmanuel Kachikwu, Nigeria's minister of state for oil who is currently on a three-day visit to India, discussed the potential of diversifying the engagement in the oil sector with his Indian counterpart Dharmendra Pradhan. The two countries are working on a memorandum of understanding to enable the participation of Indian companies in Nigeria's upstream and downstream oil and gas sector. The deal being negotiated by Kachikwu will also have the Indian government make an upfront payment for the purchase of Nigeria's crude on a long-term term basis as well as Indian public sector companies investing in Nigerian refineries, the Nigerian oil ministry said in a statement.An agreement is expected to be signed in early December during Petrotech 2016, India's flagship biennial oil conference and exhibition. Nigeria, a major crude oil producing nation, needs funds to bolster its dwindling oil reserves and production after seeing its revenues dropped sharply due to low global crude prices and declines in production. It recently revealed it was also in talks to secure over $70 billion worth of investment in its oil sector from Chinese companies. India is the largest buyer of Nigerian crude, which is largely light and sweet, rich in gasoline and diesel and low in sulfur, and meets the appetite of the Indian refiners. In 2015-16, India imported nearly 23.7 million mt of Nigerian crude, nearly 12% of India's overall oil imports.

Nigeria Slashes Oil Prices, Admits There Is A "Huge" Cargo Glut -- Something ironic happened on the way to OPEC's alleged production cut: the world finds itself drowning in excess oil. We touched on this first last week when we observed that according to the latest OPEC monthly production numbers, OPEC had produced a record 33.4mmbpd, with some expectations that by the time the November Vienna OPEC summit takes place, there will be another million barrels in output.  And while the market, or at least the marginal price setting algos have been reluctant to admit the excess supply reality and adjust prices accordingly, OPEC member Nigeria has found the hard way that when there is a glut, the only way to gain market share is to underprice the competition. Nigeria National Petroleum Corporation lowered by at least $1 a barrel its official selling prices (OSPs) for 20 out of 26 oil grades monitored by Bloomberg, according to pricing lists. Qua Iboe, Nigeria’s largest export crude under normal circumstances, was reduced by the most since 2014.  NNPC cut the selling price of Qua Iboe for November to a 17 cent premium to the benchmark Dated Brent, according to the price list, from $1.07. It reduced the price of Bonny Light to a 7 cent premium and Forcados to a 41 cent discount to Dated Brent. The reason for the dramatic price cuts according to Mele Kyari, group general manager for the oil-marketing division at NNPC, the state oil company, is a  “huge cargo overhang”, the same overhang we cautioned back in March as much of the land-based storage has moved to sea, which is preventing the country from regaining market share.

Libya's NOC plans Nov Es Sider crude oil cargo, first since Dec 2014 - Libya's Es Sider is set to resume exports in the coming weeks, with the first cargo potentially being lifted by Libya's National Oil Corporation (NOC) during the first week of November, a source at NOC told S&P Global Platts on Thursday. Several trading sources active in the Libyan crude market also said they had heard similar news. This would be the first cargo lifted since force majeure was declared on loadings from Es Sider port in December 2014. Following the restart of production at the eastern Waha fields of around 50,000 b/d, whose pipelines feed into the main Eastern oil terminals Es Sider (320,000 b/d) and nearby Ras Lanuf (240,000 b/d) trading sources said that NOC has been planning to lift a cargo of Es Sider crude from Ras Lanuf terminal. "We hear it's an end of October-loading NOC cargo, and as far we know, they've not found a buyer yet," one sweet crude trader said. "The laycan will be during the first [week] of November," said the NOC representative, adding that the Es Sider cargo will likely be lifted from nearby Ras Lanuf terminal. Ras Lanuf came out of force majeure on September 14 and several cargoes of Sirtica and Amna crudes have since been loaded over the course of the past month. Loadings from Es Sider port remain suspended, due to infrastructure damage, including fire damage, that occurred during the civil war over the past few years and has not yet been repaired to enable crude exports.

Signs of dissent, desperation amid food shortages and rising prices in Egypt - Despite a widespread government crackdown on dissent, some Egyptians are resorting to drastic measures to express their desperation over the food shortages and double-digit inflation that have made many of life’s necessities hard to come by.  Nearly six years ago, a frustrated and destitute Tunisian street vendor, Mohamed Bouazizi, set himself ablaze, sparking a series of popular revolts across the region now collectively known as the Arab Spring. Following on the heels of Tunisians, Egyptians took to the street in January 2011 and succeeded in overthrowing President Hosni Mubarak, the repressive military dictator who ruled the country for almost 30 years. But whereas Tunisians managed to build a functioning, if flawed, democracy in the aftermath of their revolt, Egyptians today find themselves under an even more repressive military regime coupled with dwindling food supplies and skyrocketing prices. The price of rice has gone up by 48 percent over the past year while the cost of cooking oil – which is increasingly hard to find – has gone up 32 percent. And despite a draconian clampdown on dissent, Egyptians are increasingly expressing their desperation. On Saturday, a 30-year-old taxi driver named Ashraf Mohammed Shaheen self-immolated in front of an army centre in Alexandria. According to press reports citing witnesses, he criticised the government and rising prices before dousing himself in gasoline and setting himself alight. He suffered burns on 95 percent of his body and was rushed to a nearby hospital. News of the incident spread quickly on social media under the Arabic hashtag #Bouazizi_Egypt, a reference to the Tunisian vendor who took similarly desperate measures nearly six years earlier. “The economic situation in Egypt continues to intensify and worsen – and in a country where the majority is around the poverty line, that has meant the impact is felt the most by the most vulnerable,”

 Saudi Aramco's halt of oil product supply to Egypt surprises markets --In early October Saudi Aramco stopped its open credit line to Egypt's EGPC halting the supply of refined products, according to traders. What led to this decision, and how does this fit into the political context in the Middle East? Ned Molloy, managing editor European fuel oil, George Shaw, editor European gasoil, and Adal Mirza, senior writer Middle East, discuss developments with a focus on the impact on the oil markets.

The World’s Biggest Oil Kingdom Reverses Course - Bloomberg: Next year will be a test of strength for Saudi Arabia, the world’s largest oil exporter, as it tries to regain control of the market and lift prices. After two years of pumping at full blast, and helping drive prices to 12-year lows in January, the Saudis now appear willing to pull back. In September, at a meeting in Algiers, the Organization of the Petroleum Exporting Countries agreed to the outlines of a plan to lower the group’s production by as much as 750,000 barrels a day. Although the details won’t be final until the cartel’s Nov. 30 meeting in Vienna, the Saudis are expected to make most of those supply cuts.The retreat signals an end to the kingdom’s foray into free-market economics. Two years ago, with prices already falling in response to a growing supply glut, Saudi Arabia, against the wishes of its fellow OPEC members, refused to lower output. The move was a direct challenge to other oil producers. By flooding the world with its low-cost crude, the Saudis bet that they could withstand lower prices longer than other countries and oil companies and force them out of the market. The strategy worked to a degree. The Saudis are pumping and selling record amounts of oil. Output hit almost 10.7 million barrels a day in July. At the same time, other producers have had to cut back: U.S. shale production has fallen, and non-OPEC oil supplies are set to drop in 2016 by the largest amount in 30 years. In April 2016 the powerful deputy crown prince, Mohammed bin Salman, said the kingdom no longer cared whether oil cost $60 or $20 a barrel. Rather than keeping prices high, the Saudis seemed resigned to cheap oil and made plans to use that revenue to fund other investments in a bid to diversify the kingdom’s economy and reduce its reliance on crude. But the economic consequences of cheap oil have been severe for Saudi Arabia. Riyadh is burning through foreign-exchange reserves, government contractors have gone unpaid, and civil servants, who make up two-thirds of the labor force, will get no bonus this year. The country’s fiscal deficit is more than 10 percent of gross domestic product, the highest ratio of any Group of 20 nation. The International Monetary Fund forecasts that Saudi economic growth will slow to about 1 percent next year, the worst since 2009. A few banks predict a recession.

OPEC’s Oil U-Turn Missed Looming Peak Demand -  OPEC’s decision last month to reverse its policy of unfettered production and cut oil output to boost prices may be at odds with the industry’s most important long-term trend: demand for what they produce could start falling within 15 years. If rapid improvements continue in renewable energy, electric vehicles and other disruptive technologies, petroleum consumption will peak in 2030 and decline thereafter, according to a report from the World Energy Council. As the globe’s largest producers gather in London this week for the Oil and Money conference, they might want to check their assumption that the market will grow for decades to come.The plunging cost of renewable energy -- with solar-module costs falling 50 percent since 2009 -- is already upending the business model of utilities. Disruption could spread to the oil industry as electric vehicles become more economic than gasoline or diesel cars, potentially displacing millions of barrels of daily fuel use by the late 2020s. Projections for decades of demand growth that underpin investments in oil projects could be misplaced.“The longer-term outlook, beyond 10 years, is certainly less rosy,” said Alex Blein, London-based energy-portfolio manager at Amundi, which holds more than $1 trillion of assets. “Given the advances in battery technology, by 2030 carbon-powered vehicles will be the exception rather than the norm. This will inevitably impact on oil demand.” When the Organization of Petroleum Exporting Countries last cut production to support prices in 2008, the decision made economic sense. At that time, the phrase “peak oil” described the growing fear that the world was running out of petroleum, so the group’s 1 trillion barrels of reserves would be guaranteed to fetch a higher price in the future. That calculation may be changing, with a growing risk that some resources might not be needed. This is evident in demand estimates from the International Energy Agency, which have been revised down over the past 20 years, just as projections for renewable energy increased, said Michael Liebreich, founder of Bloomberg New Energy Finance. He predicts the growth of electric vehicles and improvements in fuel efficiency mean oil demand will peak around 2025 and decline in the 2030s.

Kuwait's emir dissolves parliament, cabinet resigns over oil price dispute (UPI) -- Disputes over fuel price increases in oil-rich Kuwait have prompted the country's emir to dissolve its parliament. Every member of Kuwait's cabinet had already resigned. Emir Sheikh Sabah al-Ahmad al-Sabah issued an emergency government decree Sunday afternoon "given the circumstances in the region," BBC reported. The emir's decision has prompted early elections, but no date has been set. Members of parliament would otherwise have remained in office through July 2017, Al Jazeera reported.  The ruling al-Sabah family has the last word over all key decisions in Kuwait and has dissolved the legislature repeatedly over the years over various disputes. While oil prices around the world remain low, Kuwait has cut subsidies to its citizens. One of the ways it accomplished that was to raise fuel prices by nearly 80 percent. The nation's parliament, typically considered pro-government, has filed three requests to ask the government about the price increases. The global price of oil has been cut in half from heights of over $100 a barrel during the summer of 2014. Security in Kuwait has also become a major issue lately. Kuwait has recently faced the threat of attacks with the rise of the Islamic State militant group.

Iran Boosting Oil Production in Possible Hitch to OPEC Deal - Iran, OPEC’s third-biggest member, plans to boost its oil output to 4 million barrels a day this year, potentially complicating the producer group’s plan to cut supply in an effort to prop up prices. Oil Minister Bijan Namdar Zanganeh said he hopes the Organization of Petroleum Exporting Countries will agree next month at a meeting in Vienna to limit output. Iran is seeking about $200 billion of investment in its oil, natural gas and petrochemicals industries to raise production and sales, according to figures Zanganeh presented Monday at a conference in Tehran. The country is targeting an average daily output of 4.28 million barrels of crude and 1 million barrels of condensate within four years, he said. OPEC members will meet next month to seek agreement on how to put into effect a planned cut in the group’s output. OPEC decided last month in Algeria to reduce its collective production to between 32.5 million and 33 million barrels a day to rein in a global glut and support prices, though it may exempt Iran from any cuts. Iran lost its position as OPEC’s second-biggest producer after international sanctions were tightened in 2012 and has defended its steps to ramp up output to return to prior levels. “The difficulty in implementing the deal will be with the potential for production increases within OPEC,” Giovanni Staunovo, a commodities analyst at UBS Group AG, said by phone from Zurich. “It may also be a bargaining chip, as what everyone wants is to get into the OPEC talks with a higher level of production from which to cut or freeze.” Iran aims to raise production from 3.89 million barrels a day currently, Ali Kardor, managing director of National Iranian Oil Co., said at the conference in Tehran. Amir Hossein Zamaninia, deputy oil minister for international affairs, told reporters the country pumped 4.085 million barrels a day before sanctions were imposed on its economy. “We need to reach pre-sanctions production levels,” he said.

Iran hopes to hit 4 million b/d crude oil output in two weeks: NIOC - Oil | Platts News Article & Story: Iran hopes to raise its crude oil production to around 4 million b/d in the next two weeks, up from the current level of 3.89 million b/d, a senior National Iranian Oil Company official said Monday. The Islamic Republic also aims to increase its exports to 2.4 million b/d, from 2.2 million b/d currently, NIOC managing director Ali Kardor told journalists on the sidelines of a conference in Tehran. "We think we will be able to export 2.5 million b/d [by the end of the Iranian year], and gas condensates will be 500,000 b/d then," Kardor said. Oil minister Bijan Zanganeh said in a speech to the conference Iran was aiming to reach a production capacity of 4.03 million b/d by the end of the current Iranian year in March 2017.This is just below Iran's pre-sanctions production of 4.085 million b/d, Deputy Oil Minister for International and Commercial Affairs Amir Hossein Zamaninia told reporters. He stressed that the OPEC member needs to reach the pre-sanctions level before it can talk of freezing production. "We will talk about figures in November," Zamaninia said when asked if Iran would freeze at this level or cut from it. Zanganeh said in September Iran would be willing to discuss an OPEC move to stabilize the market when its output reaches "close to 4 million" b/d. Along with Nigeria and Libya, Iran is one of three countries exempt from a deal that OPEC brokered in Algiers in which it agreed to cut production to between 32.5 million b/d and 33 million b/d.

Iran Disagree With OPEC Production Estimates As Hedge Fund Oil Longs Hit 2 Year High - As we reported last week, just as OPEC announced a new monthly production record, with total cartel output rising by 220kbpd to a record 33.4mmbpd... ... driven by a jump in production in Iraq, Nigeria and Libya, more confusion emerged regarding the recently concluded OPEC Algiers "deal", according to which production would be cut back to 32.5-33.0 mmbpd, as opposition to OPEC's secondary production estimates rose, as Venezuela join Iraq in disagreeing with the cartel's third-party production estimates. To wit: Venezuela reported crude output of 2.33m b/d in Sept. to OPEC, 245k more than secondary source estimates, while Iraq reported 4.78m b/d in Sept., 320k above secondary source estimates. Making matters worse, during last week's Istanbul meeting, OPEC secretary general Mohammed Barkindo told reporters that "OPEC has still hasn't decided yet whether OPEC and non-OPEC would make cuts at the same time, or OPEC would move first" while adding to the confusion, Putin said that Russia would only join OPEC if the organization agreed on a freeze, while Rosneft suggested it would only join a price freeze, not cut.' Today, the rising OPEC discord hit a crescendo when Iran, one of the few nations exempt from the OPEC production freeze agreement, said it plans to boost its oil output from the current 3.89 mmbpd to 4 mmbpd by the end of the year, complicating the producer group’s plan to cut supply in an effort to prop up prices. Shortly thereafter Oil Minister Bijan Namdar Zanganeh added that new Iranian petroleum contracts are meant to help the country reach an even higher production plateau, somewhere in the 5 million bpd range. Iran is seeking about $200 billion of investment in its oil, natural gas and petrochemicals industries to raise production and sales, according to figures Zanganeh presented Monday at a conference in Tehran.

OPEC Deal Still Wobbly, But Oil Investment Takes Off - Oil prices wobbled to start off the week, rebounding a bit during early trading on Tuesday. A slightly weaker dollar supported prices, while energy analysts suggested the oil market is not as oversupplied as some think. "Global oil inventories (industry and government) increased by 17 million barrels to 5.618 billion barrels in 3Q16. This is the smallest build since 4Q14, confirming that inventory builds are slowing as the market comes back into balance," Bernstein Energy analysts said, according to Reuters. Wood Mackenzie is even more aggressive, predicting a balanced market by the end of the year. Iran became the third OPEC member to question the data being used to calculate baseline production figures for the group. Venezuela and Iraq already said that OPEC was underestimated their production levels, an important point that would affect what the countries can produce after the pending deal to cut output is finalized in November. The head of the National Iranian Oil Co. said on Monday that it is actually producing 300,000 barrels per day more than it is getting credit for. The fight over data threatens to undermine the whole deal, and a failure in Vienna in November could reverse the latest oil price rally. “If nothing concrete emerges on production control, the market will lose patience, with the risk of an end-year price bloodbath,” David Hufton, CEO of PVM Group, told Bloomberg. Iran wooing oil and gas investment. Iran is soliciting interest from international oil and gas companies, asking them to submit documents to pre-qualify as bidders for future oil auctions. Iran is hoping to attract $100 billion in investment over the next decade in order to increase output by some 1 million barrels per day. In the short run, Iran plans on increasing production to 4 mb/d by the end of this year, up from 3.8 to 3.9 mb/d currently.

Why Algeria Will Be A Key Part Of Any OPEC Deal―  At the 23rd World Energy Congress in Istanbul last week, talks regarding the OPEC crude oil production freeze took a surprising turn. Energy Minister Noureddine Boutarfa from Algeria has taken the lead on this deal, having facilitated prior negotiations between Saudi Arabia and Iran. Informal meetings took place in Algeria leading up to the announcement on September 28th that the two competing nations could proceed to accept a production freeze. Countries aiming to participate in the deal have failed to agree on key aspects but are now coming to the table. Algeria has been described as one of OPEC’s most negatively affected countries in response to low oil prices. Low oil prices hinder exports and earnings for oil majors, putting their respective countries into economic decline. In order to regain stability, it’s in Algeria’s best interest to make the production freeze succeed. Algeria has a long-standing relationship with Saudi Arabia and Iran that helped bring these competitors together diplomatically. Boutarfa was with Saudi Arabia and Iran for the duration of their private talks and is believe to have prompted their unified agreement. Concerns exist for other countries as well. If the price of oil doesn’t rise fast enough, member nations may decide to return production output to their higher levels. Countries are skeptical on whether the agreement will succeed and may decide not to participate whatsoever. Any rising concerns with respect to other countries’ participation may deter those pondering participating as well. Vladimir Putin has mentioned how eager Russia is to work with OPEC on their oil production freeze. Other Russian leaders, however, weren’t as stoked. Igor Sechin, Vice-Chairman of the Board of Directors for state-owned oil company Rosneft and close ally of Putin’s, shared a different opinion. At the WEC, he questioned why Russia should participate and potentially detriment from the deal. On October 7th, Energy Minister Alexander Novak also opposed the notion that this deal will succeed. The lack of agreement from the leading nation in energy exports shows there’s still much to discuss

WTI Surges Above $51 After Unexpected Crude Inventory Draw - Seasonally, expectations are for continued builds in inventories (following last week's biggest build in 6 months) but API reported a massive 3.8mm drawdown (against 2.1mm build expectations) sending WTI prices soaring. Distillates also saw a notable draw as Gasoline built modestly. Cushing saw the biggest draw since Feb 2014. API

  • Crude -3.8mm (+2.1mm exp)
  • Cushing -1.96mm (-1.4mm exp)
  • Gasoline +929k
  • Distillates -2.3mm

As Bloomberg added, “We’ll see what happens with the weekly DOE’s. People will look for confirmation tomorrow about how much refining capacity is offline,” Sam Margolin, energy markets analyst at Cowen & Co., says by phone.

  Oil Prices Gain as Dollar Retreats - WSJ: Crude-oil prices flipped from losses to gains Tuesday, pivoting around the $50 mark, as the dollar retreated and market participants continued to evaluate OPEC’s proposed production cuts. U.S. crude for November rose 35 cents, or 0.7%, to $50.29 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained 16 cents, or 0.31%, at $51.68 a barrel on ICE Futures Europe. Hedge funds and other big money managers have increased their bets that oil prices will rise since the Organization of the Petroleum Exporting Countries announced an agreement to cut production in late September. “There are a lot of people who believe we’re going higher and are willing to buy the dips,” said John Kilduff, founding partner of Again Capital. Crude also got a boost from the weaker dollar, which makes oil cheaper for buyers who deal in foreign currencies. The WSJ Dollar Index, which tracks the dollar against a basket of other currencies, was down 0.21%. Oil prices have been trading in the $48 to $53 a barrel bracket since OPEC’s agreement was announced. Many watchers say the news has been largely priced in and the market now has little fuel to sustain momentum. “It’s just going to be erratic until we get clearer definition regarding OPEC’s intentions,”

WTI Crude Spikes After Major Crude Inventory Draw Trumps Production Increase - Oil held gains overnight following API's surprise crude inventory draw, DOE data surprised even more with a massive 5.247mm draw (2.1mm build exp). Cushing saw the biggest draw in 6 months but we note that Gasoline inventories rose 2.469mm barrels - the biggest build since Feb. Production rose very modestly but hovers around the 8.5mm b/d level. DOE:

  • Crude -5.247mm (+2.1mm exp)
  • Cushing -1.635mm (-1.4mm exp) - biggest in 6 months
  • Gasoline +2.469mm - biggest in 8 months
  • Distillates -1.24mm

Following last week's big build, DOE reports an even bigger draw than API. However the huge swings in Cushing (draw) and Gasoline (build) are notable.

Oil down 2 percent, strong dollar knocks U.S. crude off 15-month highs | Reuters: Oil prices settled down more than 2 percent on Thursday, as a resurgent dollar encouraged players to take profit on the previous day's rally that sent U.S. crude to 15-month highs. The dollar hit seven-month highs against a basket of currencies and a three-month peak versus the euro after the European Central Bank kept interest rates unchanged and U.S. data showed home resales surged in September. Benchmark Brent crude for December delivery LCOc1 settled down $1.29, or 2.5 percent, at $51.38 per barrel. U.S. West Texas Intermediate (WTI) crude's November contract CLc1, which expired as the front-month, fell $1.17, or 2.3 percent, to finish at $50.43. WTI's December contract CLc2, which will be front-month from Friday, slid $1.19 to settle at $50.63. On Wednesday, oil rallied after the U.S. government reported an unexpected drawdown of more than 5 million barrels in weekly crude stockpiles that drove WTI's November contract to a 15-month high of $51.93. "This is predominately being driven by the dollar's strength," Matt Smith, director of commodity research New York's ClipperData said, referring to Thursday's retreat. "It's also to do with the dust settling on yesterday's report and the realization that it wasn't quite as bullish." Some market participants noted that despite the crude drawdown, the EIA also reported an unexpected build of 2.5 million barrels in gasoline stockpiles instead of the drop that was forecast.

Baker Hughes Rig Count Up 14 as Oilfield Services Stocks Tumble - Baker Hughes reported Friday, Oct. 21, that U.S. oil and natural gas drillers brought 14 rigs online in the latest week as positive sentiment continues to build among operators that a recovery is on the horizon. The Houston oilfield services giant said the count is up to 553 this week, while oil rigs climbed 11 to 443 and natural gas rigs rose by 3 to 109. Miscellaneous rigs were flat at 2. The news indicates that drillers are continuing to bolster activity as crude oil prices hover above the psychologically significant $50 per barrel mark. Crude was fluctuating Friday, however, as an OPEC-fueled rally has died down and traders continue to look for more evidence of fundamental supply and demand support after the U.S. Energy Information Administration reported Wednesday that crude inventories fell by 5.2 million barrels last week. Global benchmark Brent crude futures were trading up about 0.3% Friday afternoon to $51.68 per barrel, while U.S. benchmark West Texas Intermediate crude contracts for December delivery were up slightly to $50.70. Meanwhile, the U.S. offshore industry continues to show little signs of life as Baker Hughes said Friday that count remains flat at 23, but down 12 from this time last year. Offshore markets remains challenging at the moment, according to Stephens analyst Matthew Marietta, as the backlog of orders continues to erode and an overall lack of notable contracting activity persists. Marietta noted in a recent report that 12 offshore rigs have received contracts or extensions in the prior 30 days, but 10 of those have a duration of less than 6 months. All told, Baker Hughes' U.S. rig count is down by 234 from last year's count of 787, with oil rigs down 151, gas rigs down 85, and miscellaneous rigs up 2.

Permian And Eagle Ford Recover As Rig Count Rises To 8 Month High -- This week’s Baker Hughes report shows an 11-rig increase in the United States oil count, marking 17 straight weeks of no-decline in the active rig figure.  The streak suggests a strong recovery for the U.S. drilling sector, which was hit hard when oil prices dropped for the first time two years ago due to a global supply glut. The last time the Houston-based oilfield services company reported an oil-rig count this high was in its February 5th report, meaning the figure has reached an eight-month record. Still, the oil rig count sits 151 rigs below the 594-rig figure reported during the same period last year.“Apparently $45/50 oil is high enough for shale producers to come storming back in,” Zero Hedge said.The gas count saw a three-rig increase to 108 rigs, but is still 85 rigs lower than the count last year. Texas’ rigs increased in number by 10 sites, after losing 3 in last week’s report. Wyoming gained three, while Alaska and Utah saw a one-rig jump. The Permian and Eagle Ford basins saw a combined increase of 13-sites, after losing six rigs last week. Mississippian and Haynesville gained one rig each, and the DJ-Niobrara site lost one, becoming the only basin to lose a rig this week. West Texas Intermediate traded flat at $50.63 after the count was released, and Brent traded up 0.41 percent at $51.59 at the time of the report’s writing.

Oil steadies after early loss on dollar; US oil rig count rises again: Oil prices steadied on Friday as the dollar eased off eight-month highs and the weekly U.S. oil rig count showed drilling remained on the upswing with crude trading above $50 a barrel. Russia's reiteration of its commitment to join OPEC in curbing output helped support crude, although some viewed signs of a post-Soviet high in crude production as bearish. Ahead of Friday's settle, oil prices threatened to record the first weekly loss since mid-September. Global benchmark Brent crude futures rose 24 cents to $51.62 a barrel by 1:45 p.m. ET (1745 GMT). The contract is down about 0.6 percent for the week. U.S. West Texas Intermediate (WTI) crude was trading 1 cent higher at $50.64 a barrel, and were up 0.6 percent on the week. The November contract expired at the close of trading on Thursday.The dollar surged to a seven-month high against a basket of currencies, its third straight week of gains. A stronger greenback means dollar-traded commodities become more expensive to hold, making it less attractive for investors to buy them. The U.S. oil rig count rose by 11 rigs to a total of 443 in the last week, compared with a count of 594 rigs at this time last year, oil services firm Baker Hughes reported. The rig count has now gone 17 weeks without registering a decline. Some analysts think oil drillers will ramp up activity soon with crude rising above $50 this month. Others say it will take more time to get the double-digit rig additions that will significantly boost production.

AP Interview: IMF says low oil prices still hurting Mideast (AP) — Oil-producing Mideast countries are coping with low global oil prices though more government reforms are needed, the International Monetary Fund’s chief for the Mideast said as the organization issued a new report Wednesday showing weak economic growth in the region. Masood Ahmed also told The Associated Press that Iran’s economy beat expectations by growing by 4.5 percent this year and could keep up that pace if it can modernize its industries and allow in more foreign investment after its nuclear deal with world powers. Much of the IMF’s new report on the Mideast’s economic outlook won’t come as a surprise to those living in the region since oil prices have been halved following highs of over $100 a barrel in mid-2014. All Gulf Arab countries have cut back on generous subsidies that kept gasoline prices low, while some have reorganized government agencies and halted construction projects. With oil prices expected to remain low, the IMF report estimates growth across Gulf states to be around 1.7 percent this year, while regionally “little improvement” is expected in 2017. It suggests only Iraq, Kuwait and the United Arab Emirates will be able to see budget surpluses by 2021, while the war against the extremist group Islamic State, Yemen’s civil war and the Syrian conflict continue to weaken confidence in the region. “Some countries — Saudi Arabia, Bahrain and Oman — start from a position where they have to make more of an adjustment to be able to balance their budget in five years,” Ahmed told the AP in an interview Tuesday. “They all do have policies that they’re articulating that will help them get there, but they will entail difficult choices.” Among those tough choices will be cutting public sector salaries and jobs in Saudi Arabia and Oman, he said.   Meanwhile, Iran’s economy has charged ahead through boosting oil production close to levels seen before Western nations imposed economic sanctions over its contested nuclear program. Iran will have to modernize both its banking system and its manufacturing industry, as well as allow more foreign direct investment in the country, to continue that growth.

Saudi Bank stress builds as kingdom's cash injection falls short - The Economic Times: Saudi Arabia has work to do to ease pressure in the kingdom’s banking system. The interest rate banks charge one another for loans rose by the most since August on Sunday, extending a trend that’s slowing earnings and corporate borrowing in the world’s biggest oil exporter. The increase is defying the central bank, which has sought to ease the cash crunch by relaxing lending limits, offering new borrowing facilities and injecting funds into the financial system, including 20 billion riyals ($5.3 billion) pledged Sept. 25. “Rates won’t easily come down with one $5 billion injection,” said John Sfakianakis, director of economic research at the Gulf Research Center Foundation in Riyadh. “Bringing them down would require a significant liquidity injection effort. The $5 billion is a good step forward, but given the asset size of Saudi banks it would require several additional injections.” Financial institutions in the Arab world’s largest economy are bearing the brunt of a halving of oil prices since 2014. Economic growth in the kingdom is slowing, curtailing bank deposits just as the government increases borrowing to help plug a budget deficit that last year was the widest since 1991.

 Saudi Arabia Launches Sale Of 5, 10 And 30 Year Bonds, Seeks To Raise Up To $15 Billion - Saudi Arabia has officially launched its much anticipated, first international bond sale on Wednesday, as the kingdom turns to debt markets to help ease a fiscal squeeze from the two-year slump in oil prices, which has slammed not only the country's economy, leading to a period of unprecedented austerity resulting in widespread job cuts and a slowdown in local construction and infrastructure projects, but also has impacted the country's bank sector where the largest bank has seen its shares plunge to all time lows, as bets on a currency devaluation continue to rise. As Bloomberg reported moments ago, the sale has officially started, with Saudi Arabia seeking to sell between $10 and $15 billion in three tranches, a 5Y, 10Y and 30Y offering. Pricing is expected to take place tomorrow, Oct. 19; with the books set to close at 5pm in NYT on Tuesday October 15.  According to the FT, Riyadh is thought to be targeting a sale between $10bn and $15bn, making it the largest issue of international debt in the Middle East and a potential rival to Argentina’s record-breaking $16.5bn emerging market bond sale earlier this year.

Saudi Arabia sets record with mammoth $17.5 billion bond issue | Reuters: Saudi Arabia conducted the largest-ever emerging market bond sale on Wednesday, selling $17.5 billion (14.22 billion pounds) of debt in the government's first international offer while attracting investor orders totaling almost four times that amount. The huge demand, larger than many market participants had expected, was partly due to ultra-low global interest rates and funds' frustration with a lack of high-yielding assets around the world. But the sale was also a success for the world's top oil exporter in its efforts to convince investors that it can cope with an era of low crude prices and ultimately reduce its dependence on oil. London-based Capital Economics estimated the U.S. dollar issue would finance around a third of next year’s state budget deficit and almost all of the kingdom's current account gap, meaning its foreign exchange reserves were unlikely to fall much further in coming years. "This should dampen any lingering concerns that the riyal will be devalued. The government’s debt-to-gross domestic product ratio will rise as a result of the bond sale but, given its low starting point, it is hardly on a worrying path," Capital Economics said.

Middle East’s Migrant Population More Than Doubles Since 2005 - Pew Research - Between 2005 and 2015, the number of migrants living in the Middle East more than doubled, from about 25 million to around 54 million, according to a Pew Research Center analysis of data from United Nations agencies. Some of this growth was due to individuals and families seeking economic opportunities. But the majority of the migration surge, especially after 2011, was a consequence of armed conflict and the forced displacement of millions of people from their homes, many of whom have left their countries of birth.The rapid rise in the number of people looking for safe havens and new livelihoods has over the past decade transformed the Middle East into the world region with the fastest growing international migrant and forcibly displaced population, according to a Pew Research Center analysis of data from United Nations agencies.All told, the Middle East’s migrant population increased by about 120% between 2005 and 2015. This far exceeds increases in the combined international migrant and forcibly displaced populations over the same period in continental Africa (91% growth), Latin America and the Caribbean (77%) and the Asia-Pacific region (26%).  Europe’s and North America’s migrant populations also grew more slowly over the 2005-2015 period (about 20% in each region), even though Europe received a record 1.3 million asylum seekers in 2015 – many from the Middle East.

 Saudi has little room to slow austerity drive, IMF says | Reuters: The International Monetary Fund feels the pace of Saudi Arabia's austerity drive is broadly appropriate and there is little room for Riyadh to ease up on the spending cuts that have slowed economic growth sharply, a senior IMF official said. Its budget strained by low oil prices, the Saudi government has slashed capital spending this year and delayed payments that it owes to some companies, while last month it announced cuts to allowances for public sector workers. Gross domestic product growth fell to 1.4 percent year-on-year in the second quarter, the lowest in more than three years. The non-oil sector - the part of the economy directly affecting most people's living standards - expanded just 0.4 percent, after shrinking 0.7 percent in the first quarter. Masood Ahmed, director of the IMF's Middle East department, said Riyadh could not soften austerity policies significantly without endangering its goal of balancing its budget in about five years. "I don't see there is a lot of scope for postponing fiscal consolidation," he told Reuters in an interview. Ahmed said the IMF expected Saudi Arabia to run a fiscal deficit of 13.0 percent of GDP this year, compared to an estimated 15.9 percent last year. The Fund projects next year's gap at 9.5 percent. Months-long delays in state payments to construction firms have hit the sector hard, forcing some companies into severe financial difficulties. Ahmed said the delays were "not a preferred method" of cutting the budget deficit but it was hard to impose austerity without pain. The IMF expects Saudi economic growth to bottom out at 1.2 percent this year, rebounding to 2.0 percent in 2017. Some private analysts think growth could be near zero this year.

U.S.-backed, Saudi-led coalition found responsible for Yemen funeral attack that killed more than 100 — A Saudi Arabia-led investigation into an airstrike last week on a Yemeni funeral has concluded that Saudi-led coalition jets “wrongly” bombed the ceremony, killing more than 100 people, after receiving faulty information and not following proper procedures. In a statement Saturday, the Joint Incidents Assessment Team based in the Saudi capital, Riyadh, said that “a party affiliated” with the chief of staff of Yemen’s president, Abed Rabbo Mansour Hadi, “wrongly passed information that there was a gathering of” armed rebel Houthi leaders in the Yemeni capital, Sanaa, on Oct. 8. The party, the investigators said, “insisted that the location be targeted immediately as a legitimate military target.” But the coalition’s air operations center ordered the attack “without obtaining approval from the Coalition command to support legitimacy and without following the Coalition command’s precautionary measures to ensure that the location is not a civilian one that may not be targeted,” the statement said. A coalition aircraft then “carried out the mission.”  “JIAT has found that because of noncompliance with Coalition rules of engagement and procedures, and the issuing of incorrect information a Coalition aircraft wrongly targeted the location, resulting in civilian deaths and injuries,” the statement said.

Hiding US Role in Yemen Slaughter So Bombing Can Be Sold as ‘Self-Defense’ - To hear US corporate media tell it, the US was dragged into a brand new war on Wednesday. US destroyers in the Gulf of Aden launched airstrikes against Houthi rebels, a Shia insurgent group currently withstanding a massive bombing campaign from a Saudi-led coalition in a year-and-half conflict between largely Shia rebels and the Saudi-backed Sunni government in Yemen. The Pentagon insisted that cruise missiles had been fired onto the USS Mason on Sunday and Wednesday from Houthi-controlled territory, and called the airstrikes a “limited self-defense” response. Needless to say, US media followed the Pentagon’s lead. The fact that the United States has been literally fueling Saudi warplanes for 18 months while selling weapons and providing intelligence support to the Gulf monarchy—acts which even the US State Department believes could expose the US to war crimes prosecution—was either downplayed or ignored. Nor did media recall the US’s long history of drone warfare in Yemen, where the military and CIA have been carrying out long-range assassinations since 2002, killing more than 500 people, including at least 65 civilians. So far, most print media reporting has at least bothered to briefly put the attack and counterattack in broader context, noting the US role in the brutal bombing campaign that has left over 4,000 dead, including over 140 bombed at a funeral in Sana’a last week—even as the stories’ framing downplayed the US’s history in the conflict. The New York Times (10/12/16), for example, said in the second paragraph of its report on the airstrikes: The strikes against the Houthi rebels marked the first time the United States has become involved militarily in the civil war between the Houthis, an indigenous Shiite group with loose connections to Iran, and the Yemeni government, which is backed by Saudi Arabia and other Sunni nations.TV news reports, on the other hand, kept the spin and left out the context. They mostly failed to mention that the US has been assisting the Saudi assault on the Houthi rebels for a year and a half, and framed the incident as a US warship being attacked while simply minding its own business in international waters.

Iranian warships deployed off Yemen coast after US bombs Houthi targets - Iran has deployed a fleet of warships to the Gulf of Aden, the republic's naval commander has confirmed. The deployment follows US cruise missile strikes on Yemeni positions thought to be under Houthi rebel control. The Iranian Navy has sent the warships to international waters for a mission that includes entering the area off the southern coast of Yemen, Rear Admiral Habibollah Sayyari confirmed on Wednesday. The area is among the world’s busiest maritime trade routes. “The fleet will provide security to sea ways for Iranian vessels and protect Iran’s interests on the high seas,” Sayyari told Press TV. “The 34th Fleet is comprised of the Bushehr logistic vessel and Alborz destroyer, and will conduct a three-month mission.” The commander said the fleet had departed from the southern port city of Bandar Abbas in Iran. He dismissed claims the fleet has been deployed to intervene in the conflict in Yemen. Iranian ships have been tasked with providing security for civil boat traffic and protecting commercial vessels and oil tankers from pirates in the region, the rear admiral told Iranian television on Thursday.“The Iranians have a permanent presence in that part of the world ... [as] there is a lot of instability in the Red Sea and Iranian ships are there to prevent pirates from boarding Iranian ships and they've been doing that for a number of years now, having also protected the ships of other countries,” political analyst and Tehran university professor Mohammad Marandi told RT, adding that the “real problem is the US presence” in the region. The US military carried out “limited self-defense strikes” in Yemen on Thursday, in retaliation for recent attacks on an American naval destroyer, USS Mason, which has been operating north of the Bab Al-Mandab Strait.

The Story Changes: The Pentagon Is No Longer Sure Yemen Fired Missiles At A US Ship -- Last Thursday, after two consecutive missile attacks on the US Navy ship USS Mason, which allegedly were launched by Houthi rebel forces in Yemen, the US entered its latest military engagement in the middle east, when the USS Nitze launched several Tomahawk cruise missiles aimed at radar installations located by the Bab el-Mandab straight, and which enabled the launch of at least three missiles against the U.S. ship.  As Pentagon spokesman Peter Cook said, "these limited self-defense strikes were conducted to protect our personnel, our ships and our freedom of navigation," adding that "these radars were active during previous attacks and attempted attacks on ships in the Red Sea," including the USS Mason, one of the officials said, adding the targeted radar sites were in remote areas where the risk of civilian casualties was low. That said, as we highlighted, the U.S. said while there growing indications, there was no official proof that Houthi fighters, or forces aligned with them, were responsible for the attempted strikes which targeted US ships. Still, the lack of concrete proof did not bother the US which, cavalier as usual, unleashed the missile assault on Yemeni territory, breaching the country's sovereignty and potentially killing an unknown number of people. However, today - four days after the US "counterattack" - the story changes. According to Reuters earlier today the Pentagon declined to say whether the USS Mason destroyer was targeted by multiple inbound missiles fired from Yemen on Saturday, as initially thought, saying a review was underway to determine what happened. "We are still assessing the situation. There are still some aspects to this that we are trying to clarify for ourselves given the threat -- the potential threat -- to our people," Pentagon spokesman Peter Cook told a news briefing."So this is still a situation that we're assessing closely." And yet, the US had no problem with "clarifying" the source of the threat on Thursday when it fired American cruise missiles at Yemeni targets.

Terrorists Recruit Petro Engineers And Oil Experts -- Unspecified terrorist groups have been caught attempting to recruit university-level students from the Commonwealth of Independent States (CIS) - including up and coming petroleum engineers and energy analysts, according to the head of the bloc’s anti-terror organization.The nine-member bloc consisting mostly of Central Asian nations must develop an anti-radicalization plan to prevent students from joining international terrorist organizations, Andrei Novikov, who heads the CIS Anti-Terrorist Center, said on Wednesday."The attempts to recruit [students] to the international terrorist organizations continue at the universities of the Commonwealth [of Independent States],” he said.“The professional recruiters are targeting not only potential lower level agents, but also highly qualified medicine, transport, oil industry and linguistics specialists as well as, importantly, those who could map out media strategies for the global terrorism projects.”The Kurdish news site Rudaw has previously reported classified ads posted by ISIS in the underground job market offering oil operations experts a salary of $225,000 a year, with perks such as a car and weapons thrown in for good measure. The ads, released in 2014, had been marketed to Saudi Arabian expats.The oil industry is especially vulnerable to terrorism because of the geographic locations of the most active radical groups and weak governments—made ever weaker by the lower price of oil.  The Islamic State (ISIS) reaped hundreds of millions of dollars of profits from selling oil from Iraq and Libya on the black market before the U.S.-led anti-ISIS coalition began targeting oil facilities controlled by the terrorist group over the past year.

US 'Relocated' ISIS Terrorists Out Of Iraq, Into Syria To Fight Assad --  As the Iraqi military with US support closes in on Mosul it is becoming clear that the US plan is to transfer the ISIS troops defending the city to Syria as part of the regime change plan there. The Russian news media RIA Novosti, has revealed that US and Saudi leaders have decided toallow the safe passage of 9000 ISIS terrorists to vacate Mosul in Iraq and, relocate into Syria.The surprising information was leaked by an anonymous diplomatic source. It was also claimed that this decision was conditional on the terrorists agreeing to fight Syrian and Russian troops in Palmyra and Deir Ezzor. In the past two weeks we have witnessed the chaotic musing within the US Political and diplomatic corps once their impotence was exposed in Syria due to the collapse of the ceasefire and, the resumption of hostilities in Aleppo.

Iraq Launches Military Offensive To Retake Mosul From Islamic State With US Troop Support - Moments ago, Iraq's Prime Minister Haider al-Abadi publicly announced the start of an offensive to retake Mosul, the capital of Islamic State's caliphate in Iraq. US troops are said to be playing a "supporting role" in the offensive, with the Iraqi army and Kurdish Peshmerga fighters making up the bulk of the 30,000-strong force. Tonight, PM Abadi issued orders to initiate major operations to liberate #Mosul after two years of darkness under #ISIL terrorists. #?????? — Brett McGurk (@brett_mcgurk) October 16, 2016 Washington recently announced the deployment of 600 additional US troops to help with the city's recapture, bringing the total number of US force management personnel to move than 5,000, according to the Pentagon.  "The hour has come and the moment of great victory is near," Prime Minister el-Abadi said in a speech on state TV, surrounded by the armed forces' top commanders. "I announce today the start of the operation to liberate the province of Nineveh." The assault on Mosul is backed the U.S.-led coalition and could be one be the biggest military operations in Iraq since the 2003 U.S.-led invasion that toppled Saddam Hussein.It is expected to last several weeks if not longer. "We are proud to stand with you in this historic operation," Brett McGurk, U.S. envoy to the coalition against Islamic State, said on Twitter at the start of the Mosul offensive. Mosul is the last major stronghold of ultra-hardline Sunni group in Iraq. With a pre-war population of around 2 million, the northern Iraqi city is the largest city Islamic State has controlled after it declared a "caliphate" in Iraq and neighboring Syria in 2014.

US Troops 'In Harm's Way' as Battle for Mosul Begins | Military.com: Iraqi and Kurdish Peshmerga forces backed by U.S. air, artillery and forward air controller support began the battle for Mosul on Monday and gained ground in the drive for the city where the Islamic State declared the creation of a "Caliphate" more than two years ago. "The thousands of ground combat forces who will liberate Mosul are all Iraqis," but they were supported by "a wide range of coalition capabilities, including air support, artillery, intelligence, advisers and forward air controllers," said Army Lt. Gen. Stephen Townsend, commander of Combined Joint Task Force-Operation Inherent Resolve. The operation to retake Iraq's second-largest city, where as many as one million civilians remain under the control of the Islamic State of Iraq and Syria, "will likely continue for weeks, possibly longer," Townsend said in a video statement. "There are Americans in harm's way as part of this fight. They're in a support role," Pentagon Press Secretary Peter Cook said, but some were moving forward with Iraqi and Kurdish forces amid reports that ISIS was using suicide car bombers to blunt the assault. "It's fair to say there are Americans on the outskirts of the city," Cook said, but he was vague on how many U.S. troops are embedded with the advancing forces as advisers and Joint Terminal Attack Controllers to call in airstrikes.

More Than 100 US Troops Move Forward With Mosul Attack Force | Military.com: More than 100 U.S. advisers and forward air controllers are moving forward with Iraqi and Kurdish forces, backed by U.S. airstrikes and rocket artillery fire, in the early stages of the campaign to drive the Islamic State from Mosul, a Pentagon spokesman said Tuesday. The Iraqi Security Forces attacking from the south and Kurdish Peshmerga fighters pushing from the east are essentially moving along four lines of attack toward Iraq's second largest city, where more than a million residents have been under the control of the Islamic State of Iraq and Syria for more than two years. The U.S. has employed the HIMARS rocket artillery system from the Qayyarah Airfield area, the offensive's logistics hub about 40 miles southeast of Mosul, to aid the advance of the Iraqi columns pushing north, said Navy Capt. Jeff Davis, a Pentagon spokesman. "We have the HIMARS" south of Mosul, and "the HIMARS is active," Davis said at a Pentagon briefing. AH-64 Apache helicopter gunships are also available for the Mosul offensive, but they have yet to be employed, Davis said. The U.S. is also using .155mm artillery from the general Qayyarah area to back the advance, he said.

Cars Entering and Leaving Mosul -- What they don’t tell you about the battle for Mosul is how boring it is, hour by hour, day by day. From my vantage point near the Iraqi village of Bartella, ISIS positions are visible in the smoke-filled distance, across the crinkled flatness of Nineveh; in front of me, gangs of weary Peshmerga fighters clump about in their fatigues as an endless line of armored cars trundles slowly through their ranks. I hear orders shouted in Kurdish and Arabic, but there’s nobody around to translate for me. Farther off, tanks and artillery pieces are positioned behind banks of sandbags. Their engines idle, whining in the afternoon heat. They do nothing, I see nothing, I’ve learned nothing. The real action isn’t happening here, but just to the right.  All these events are being streamed on YouTube, and the live chat window boils over with instantaneous analysis and petty grudges. One commenter, “croatia? more like catholic srbija,” is repeatedly announcing that “C R O A T I A I S G A Y.” There’s a lively debate over which European country is the most cucked—Sweden, for instance, has a “prolapsed anus.” As usual, a few dedicated idiots are trying to question the historicity of the Holocaust. Other users spam porn titles (“GirlsDoPorn Ep. 29,” “Lilo DAP Anal GapeThatAss COHF”) and transcribe Green Day lyrics (“bolevourd of broken dreams… a walk alone… a walk alone… aaa aaaa a a”). Welcome to the future of eternal war.  The Mosul offensive is streamed on YouTube by the Kurdish media group Rûdaw and Ruptly, Russia Today’s Berlin-based video agency; the feeds are relayed on Facebook Live by al-Jazeera and Channel 4 News. On Facebook, emojis bubble up from the bottom of the screen in time with the rising pillar of dust as another IED detonates: shocked face, angry face, Zuckerberg-blue thumbs-up sign. This is the first time a war has been turned so directly into an object for public consumption, and the moral questions are obvious. Isn’t this repulsive? People are really dying in and around Mosul; surely it’s grotesque to turn the battle into a piece of entertainment. But the battle for Mosul isn’t at all entertaining. It’s something else.

Dramatic First Person Footage Captures Intensity Of Fight For Mosul -- As we reported on Sunday night, the Iraq offensive for Mosul - with the support of US forces - has begun, and according to Reuters, the push to kick ISIS forces out of the Iraqi town has met some early success as armed forces closing in on Mosul said on Tuesday they had secured some 20 villages on the outskirts of the city in the first 24 hours of an operation to retake what is Islamic State's last major stronghold in Iraq. With air support from a U.S.-led coalition, government and Kurdish forces edged closer to the city as smoke darkened the blue sky above one IS position, apparently from oil fires ignited to hamper the incursion and make it harder to land air strikes. Reuters reporters said they witnessed Islamic State mortar fire in villages on the plain east of the city as the militants sought to counter a push by Kurdish forces. One car bomb exploded during the fighting, although it was not immediately clear if it had been detonated or hit by incoming fire.  With a population of 1.5 million, Mosul is the largest city under the control of the Islamic State group that seized swathes of Iraq and Syria in 2014, and its recapture would be a "decisive moment" in defeating the militants, according to U.S. Defense Secretary Ash Carter. However, as the International Red Cross warned, the fight for Mosul may lead to as many as 1 million refugees. The U.N. refugee agency said it had built five camps to house 45,000 people and plans to have an additional six in the coming weeks with a capacity for 120,000, that would still not be enough to cope if the exodus is as big as feared.

Islamic State attacks Kirkuk as Iraqi forces push on Mosul | Reuters: Islamic State launched a major attack on the city of Kirkuk on Friday as Iraqi and Kurdish forces pursued operations to seize territory around Mosul in preparation for an offensive on the jihadists' last major stronghold in Iraq. Islamic State's assault on Kirkuk, which lies in an oil- producing region, killed 18 members of the security forces and workers at a power station outside the city, including two Iranians, a hospital source said. Crude oil production facilities were not targeted and the power supply continued uninterrupted in the city. Kirkuk is located east of Hawija, a pocket still under control of Islamic State that lies between Baghdad and Mosul. With air and ground support from the U.S.-led coalition, Iraqi government forces captured eight villages south and southeast of Mosul. Kurdish forces attacking from the north and east also captured several villages, according to statements from their respective military commands overnight. The offensive that started on Monday to capture Mosul is expected to become the biggest battle fought in Iraq since the U.S.-led invasion in 2003. U.S. Defense Secretary Ash Carter said on Friday Turkey and Iraq had reached an agreement in principle that could allow a Turkish role in the Mosul campaign. Speaking in Ankara after talks with Turkish President Tayyip Erdogan, Carter said the details still needed to be hammered out. NATO member Turkey sees Mosul as firmly within its sphere of influence, but Iraq views Turkish military moves on its territory with apprehension.

The World Doesn’t Need More U.S. Interventionism The American Conservative  - Shadi Hamid thinks the world needs U.S. military interventions: If the United States announced tomorrow morning that it would no longer use its military for anything but to defend the borders of the homeland, many would instinctively cheer, perhaps not quite realizing what this would mean in practice. But that is the conundrum the Left is now facing. A world without mass slaughter, of the sort of we are seeing every day in Syria, cannot ever come to be without American power. It’s very likely that a “world without mass slaughter” won’t be realized at all, but it is very doubtful that it is possible only through American use of force. The real question is whether the frequent, violent interference in the affairs of other countries that Hamid is talking about yields better results than non-interference. The answer to that question depends on the circumstances of each case, but in almost every case from the last half-century the decision to interfere, to fuel conflict, and to take sides in the quarrels of others has needlessly inflicted more harm on the affected countries. This is true of U.S.-led interventions and of the wars waged by U.S. clients with our government’s approval and support. If we’re generous, the number of “successful” U.S. interventions can be counted on a few fingers, and they are severely outnumbered by the failures and disasters. Given that shaky record, there has to be a very compelling reason to make the attempt and it has to be one that is worth taking the risks involved.   Even when an intervention can be said to have “worked” according to some definition, there are always some innocents that pay a severe price because they found themselves on the “wrong” side of the fight or because their country suffered from the adverse effects of intervention in a neighboring land. By taking sides in foreign conflicts, the U.S. is choosing to participate in bringing death and destruction upon people who have usually done nothing to us or our allies to provoke such action. That choice is often made for reasons that have little or nothing to do with concern for the well-being of the people in the country in question, and it is almost always made rashly and before other alternatives have been exhausted. At best, the record of our interference shows that we tend to be cavalier and irresponsible in our use of force in other countries, and at worst we leave those places drastically worse off than they were before we “helped.” That is not what the world or the U.S. needs.

 The U.S. Has Been Meddling In Other Countries’ Elections For A Century. It Doesn’t Feel Good - Intelligence officials are shocked that Russia appears to be meddling in the U.S. presidential election, but for some supporters of Bernie Sanders, it’s just turnabout.  Lakewood, Colorado, delegate Kim Netherton said it’s beside the point whether agents of Russian President Vladimir Putin hacked the Democratic National Committee’s emails, as reported this month. And it may come with a little poetic justice for Hillary Clinton, according to Netherton. “Isn’t it interesting that her campaign is now experiencing the same thing that she perpetrated on other countries,” Netherton told The Huffington Post, as she awaited Sanders’ speech Monday night.  “She did this in Haiti, she did this in Honduras, and now it’s coming back on her and she’s all verklempt about it,” Netherton added. “It’s a little bit of her own medicine, but unfortunately I don’t think she’s open minded enough to see that for what it is.”   Indeed, meddling in foreign politics is a great American pastime, and one that Clinton has some familiarity with. For more than 100 years, without any significant break, the U.S. has been doing whatever it can to influence the outcome of elections ― up to and including assassinating politicians it has found unfriendly.  The Clinton camp disagrees that whatever happened in Honduras is on the same level as what Russia is up to. “There’s simply no equivalency here,” said Clinton spokesperson Jesse Lehrich. Which is true: the U.S. has meddled in far more foreign elections than vice versa.

Norway Surveillance Photos Show Russian Aircraft Carrier Flotilla On Route To Syria --One month ago we reported that in the latest naval escalation involving the US and Russia, one which would make the eastern Mediterranean a carbon copy of what it looked like three years ago during the peak of 2013 Syrian conflict which almost ended in war between Russia and the US, Russia announced it would deploy its only aircraft carrier, the Admiral Kuznetsov to the coast of Syria. Russia's defence minister said Wednesday that Moscow was dispatching its flagship aircraft carrier to bolster its forces in the eastern Mediterranean off Syria. The Admiral Kuznetsov aircraft carrier would be sent to join Russia's current naval deployment there, minister Sergei Shoigu said during a televised meeting. "At the moment the Russian task force in the Eastern Mediterranean consists of no fewer than six combat ships and three or four logistic ships from all fleets" the minister said adding that "to build up the group’s combat capabilities we plan to reinforce it with an Admiral Kuznetsov-led group,” Shoigu told a meeting of the Defense Ministry’s board. He added that the Russian Navy has been permanently present in the Eastern Mediterranean since 2013.Now, according to a report by the Norwegian military which released pictures taken by surveillance aircraft, we know that the Kuznetsov accompanied by a fleet of Russian warships, is currently on its way to Syria and is sailing in international waters off the coast of Norway near Trondheim. Photos of the vessels, which include the aircraft carrier Admiral Kuznetsov and the Pyotr Velikiy battle cruiser, were taken near Andoya island, in northern Norway on Monday.

Major Russian naval deployment to intensify Aleppo assault: NATO diplomat | Reuters: Russian warships off the coast of Norway are carrying fighter bombers that are likely to reinforce a final assault on the besieged Syrian city of Aleppo in two weeks, a senior NATO diplomat said on Wednesday, citing Western intelligence. The fleet passed by the Norwegian city of Bergen on Wednesday, the diplomat said, while Russian media has said it will move through the English Channel, past Gibraltar and into the Mediterranean Sea to the Syrian coast. "They are deploying all of the Northern fleet and much of the Baltic fleet in the largest surface deployment since the end of the Cold War," the diplomat said on condition of anonymity. "This is not a friendly port call. In two weeks, we will see a crescendo of air attacks on Aleppo as part of Russia's strategy to declare victory there," the diplomat said. Photos of the vessels have been released by the Norwegian military, taken on Monday. A Norwegian newspaper quoted the head of the Norwegian military intelligence service saying the ships involved "will probably play a role in the deciding battle for Aleppo".An intensified air campaign in eastern Aleppo, where 275,000 people are trapped, would further worsen ties between Moscow and the West, which says the Kremlin may be responsible for war crimes.

Theresa May slams Moscow’s ‘sickening atrocities’ as Russian warships steam into British waters -- Theresa May has launched a scathing attack on Russian President Vladimir Putin, accusing the Russian military of "sickening atrocities" in Aleppo, just hours before Moscow’s warships are due to pass through British waters. The Prime Minister highlighted the "appalling" acts which have occurred during a sustained Russian bombing campaign that has pummelled the northern Syrian city.  As she spoke on arrival at her first EU summit as leader, a huge Russian naval taskforce was being shadowed by the Royal Navy as it headed towards the Mediterranean coast of Syria.  The Independent has been told the flotilla – including the nuclear-powered aircraft carrier the Admiral Kuznetsov – maintains current speed, it should enter the Channel before noon on Friday. The EU is now considering threatening Moscow with sanctions over air strikes in Aleppo, according to a draft EU summit communique seen by the Guardian. "The EU is considering all options, including further restrictive measures targeting individuals and entities supporting the regime, should the current atrocities continue," the draft reportedly says. The heightened tension comes after a week of hand-wringing by Western powers about how to address the plight of Syrian civilians trapped in besieged Aleppo. In Brussels, Ms May demanded a "robust and united European stance in the face of Russian aggression". She added: "It is vital that we work together to continue to put pressure on Russia to stop these appalling atrocities, these sickening atrocities, in Syria." Syrian forces, backed by Russian air power, have agreed a temporary humanitarian truce in Aleppo. Mr Putin has held out the prospect of extending it following a meeting with French President Francois Hollande and German Chancellor Angela Merkel. Nato has said the prospect of Russia's fleet heading to the region does not "inspire confidence" that Moscow is seeking a political solution to the Syrian crisis.

Russia Is Preparing for War, While The American Public Slumbers On: In an interview with the Bild newspaper on 8 October, German Foreign Minister Frank-Walter Steinmeier, who is known for his cautious rhetoric, described the present international situation in the following woeful terms: “…unfortunately it is an illusion to believe this is the old Cold War. The new times are different; they are more dangerous. Previously, the world was divided, but Moscow and Washington knew each other's red lines and respected them. In a world with many regional conflicts and dwindling influence of the great powers, the world becomes more unpredictable.” For these reasons, said Steinmeier, “The USA and Russia must continue talking with each other.” He concluded his appeal with fairly balanced recommendations to resolve the humanitarian crisis in East Aleppo, urging both Russia and the other powers to apply their influence with their clients on the ground.Sad to say, this call to reason fell on deaf ears. On the same day, a spokesman for the US State Department explained to journalists Washington’s decision over the weekend to end the joint peace process with Moscow, saying that there was “nothing left to talk about with the Russians.” Meanwhile, the Russian side took as the last straw this unilateral and trumpeted decision of the Americans to bury the deal signed on 9 September between John Kerry and Sergei Lavrov that had taken 14 hours to negotiate and was seen as a triumph of cooperation versus confrontation. De facto, from the Russian view, that deal had been sabotaged on 17 September by the Pentagon when US and coalition aircraft bombed a Syrian government military outpost at Deir Ezzor killing more than 60 Syrian service men. And de facto, the Russians had suspended the implementation of the ceasefire on 23 September when they renewed heavy bombing of East Aleppo in close collaboration with the Syrian air force and ground units. Now that the US had formalized the end of cooperation over Syria, Russia set out its own full-blooded response which it called a ‘radical change in relations’ between the two countries.

Russia to respond to any new US sanctions with ‘painful’ measures – deputy FM -- Moscow will find response measures that would be “painful” for Washington if the US decides to continue toughening its sanctions against Russia, Deputy Foreign Minister Sergey Ryabkov told Russian MPs. “If the US opts to further toughen sanctions in defiance of common sense and in disregard of its experience that has already been quite painful for them, then we will find measures in our toolbox that will have a painful impact, particularly in terms of America’s positioning in the world,” Ryabkov told the deputies of the Russian State Duma, ahead of a vote on a bill suspending the Russian-American deal on reprocessing weapons-grade plutonium.  The Russian deputy foreign minister also said that the US continues to issue threats “on a daily basis” concerning the imposition of new sanctions against Russia “under various pretexts.” He added that 281 Russian legal entities and 81 officials, including a number of high-ranking figures, are now on the US sanctions list. At the same time, the US “continues its efforts aimed at bringing its military infrastructure nearer to Russian borders and forming anti-Russian alliances with its European allies,” he said. Russia’s response moves are “strictly proportionate and adequate” and show that “Russia pursues a rational line and is not guided by emotions,” Ryabkov stressed. He went on to suggest that Russia could always shift gears and resort to “asymmetrical” measures in its response. He pointed to the recently suspended agreements between the US and Russia in the nuclear energy field as an example.The “essence” of the present crisis in relations between the US and Russia lies in the fact that “under the current administration, [US foreign policy] became even more arrogant, forceful and focused on the attempts to impose its will on other countries,” the diplomat said, adding that such policy “is doomed to failure from the start in relations with our country.”

Does America Really Need Overseas Bases? | The National Interest Blog: In the ongoing debate over U.S. grand strategy, one of the key points of discussion is the strategic utility of permanently stationing American forces abroad. Overseas U.S. bases are often thought to be the frontline forces in any outbreak of conflict. We must continue to maintain an indefinite global military base presence, we are told, so that if conflict erupts in any critical region, our forces can get there quickly to stabilize the situation. But a forward-deployed posture has lost much of its operational value in terms of contingency responsiveness. A RAND Corporation report on basing posture reiterates this point for today: “the forces that are forward-deployed are not sufficient of themselves to address conflicts of every scope.” Indeed, “after the initial phase of operations to stabilize or even resolve a situation, the response by the U.S. military to a contingency of any substantial size will come primarily from forces deployed from bases in the United States.”In other words, forward bases are useful mainly for rapid deployment of lighter forces in emergency situations. Anything beyond minor stabilization missions requires reinforcements from the continental United States. What’s interesting about this insight is that thanks to revolutionary technological advances in military capability, transportation, and communications, according to RAND, “lighter ground forces can deploy by air from the United States almost as quickly as they can from within a region.” So for any contingency that truly warrants U.S. intervention, we should be able to handle both minor and major deployments by relying on bases at home. The bottom line is that forces can deploy to virtually any region fast enough to be based in the continental United States. An armored brigade combat team can get from Germany to Kuwait in approximately 18 days, only about four days quicker than if it deployed from the east coast of the United States. As the RAND report explains, “The movement and time advantages for moving light and medium [brigade combat teams] from overseas compared with [the U.S.] by air is minor.”

The Foreign-Policy Elite Are Ready for More War in Syria: In an election cycle that has pushed American politics to new heights of partisan acrimony, the Washington foreign-policy elite has represented a singular bastion of bipartisan comity. A large segment of the GOP’s neoconservative wing broke with Donald Trump in the early days of his general-election campaign. A significant number took shelter in Hillary Clinton’s coalition, where they’ve gotten along amiably with liberal interventionists who share their belief that Obama has betrayed America’s obligation to lead. That point of agreement has now been ratified in a flurry of new reports — from an array of think tanks that span partisan divide — all calling for an escalation in U.S. military involvement in the Syrian civil war. Per the Washington Post: The studies, which reflect Clinton’s stated views and the direction she is likely to take if she is elected, break most forcefully with Obama on Syria. Virtually all these efforts, including a report that will be released Wednesday by the liberal Center for American Progress, call for stepped up military action to deter President Bashar al-Assad’s regime and Russian forces in Syria. The proposed military measures include calls for safe zones to protect moderate rebels from Syrian and Russian forces. Most of the studies propose limited American airstrikes with cruise missiles to punish Assad if he continues to attack civilians with barrel bombs, as is currently happening in besieged Aleppo. So far, Obama has staunchly resisted any military action against the Assad regime.The foreign-policy elite’s frustration with President Obama’s reluctance to engage in a large-scale military intervention in Syria is nothing new. But there are a few problems with the narrative advanced by the papers and foreign-policy thinkers quoted in the Post — which is to say, the notion that the humanitarian catastrophe in Syria illustrates the perils of America withdrawing from the world.

Trump and Obama agree on one thing: Aleppo is a lost cause -- At last night’s debate, Donald Trump falsely asserted that the city of Aleppo has fallen to the Assad regime and its Russian partners and concluded there’s nothing the United States can do about it. “Well Aleppo is a disaster,” he said. “It’s a humanitarian nightmare, but it has fallen from any standpoint. What do you need, a signed document?”   That’s not true today, but given the latest White House decision to delay any action to respond to the crisis, President Obama may be ensuring that Trump’s vision of a fallen Aleppo becomes a reality. And like Trump, Obama seems to have concluded there’s not much the United States can or should do about it.At last Friday’s National Security Council meeting on the Middle East, top Obama administration officials tabled any decisions on whether to increase the U.S. response to the ongoing Syrian and Russian aerial bombardment of civilians in Aleppo, The Post reported earlier this week. The administration prioritized discussing the new Iraqi-led offensive against the Islamic State in Mosul and the future offensive in Raqqa, for which planning is already underway. But despite what Secretary of State John F. Kerry has called ongoing Syrian and Russian war crimes in Aleppo, there was no action on any of the several options discussed at lower-level administration meetings, including but not limited to limited strikes against the Assad regime’s air force or an increase in the quantity or quality of arms provided to the moderate Syrian rebels in the area. One senior administration official pointed toward the slow pace of the bureaucracy in responding to the Aleppo crisis as evidence the White House has decided that Aleppo can’t be saved and therefore the United States should not try. “They are giving the Russians time to finish the job in Aleppo, in part to tie the hands of the next president,” the official told me.

China September Crude Output In Second-Biggest Decline On Record (Reuters) - China's crude oil production fell 9.8 percent in September from a year earlier, marking the second-biggest year-on-year decline on record, government data showed, as major producers shut high-cost wells to rein in spending. Domestic crude output fell to 15.98 million tons, or 3.89 million barrels per day (bpd), near the lowest in six years on daily basis, the National Bureau of Statistics data showed, reflecting both spending cuts at oil fields and the closure of old wells. Oil prices are hovering around $52 a barrel after recovering strongly so far this year, but are still down more than 50 percent since mid-2014 and upstream companies are still struggling to make a profit. China National Petroleum Corp's (CNPC) president Wang Yilin earlier this month promised to adjust the company's crude output plan to reduce "inefficient output" in the fourth quarter, the company's official newspaper reported. Sinopec Oilfield Services Corp, a listed unit of CNPC's upstream business, has forecast a nine-month net loss of 8.9 billion yuan ($1.3 billion) due to low prices and weakness in the sector. This low production partly contributed to record high imports in September, with the robust intake extending to the end of the year as domestic output falls and strategic reserve storage capacities are expanded at newly opened sites. China processed 43.8 million tons of crude or 10.658 million (bpd) in September, up 2.4 percent on a year earlier. In the first nine months, crude oil throughput rose 2.1 percent from a year ago to 399.93 million tons or 10.655 million bpd. China's natural gas production for September rose 0.1 percent from a year earlier to 10.2 billion cubic meters.

Winners of the oil bust: How much oil did China store? - It’s not surprising that in recent years China has been taking advantage of the low crude prices to stockpile strategic and commercial oil reserves. It’s not surprising that official data - if and when authorities decide to make it available – understates said reserves. This lack of information has left oil traders, investors and the market guessing how much crude China has been storing, and how it could use the quantity to possibly swing oil demand growth estimates and oil prices.  U.S. geospatial analytics company Orbital Insight has analyzed satellite images of China’s territory, applying computer algorithms and machine learning to identify and quantify crude storage tanks. Since tanks have floating roofs, the company uses algorithms to detect the shadows on the roofs and calculate how full a storage facility is.  Orbital Insight has found that there were 2,100 commercial and strategic petroleum reserve tanks across China, with capacity to store 900 million barrels of oil as of the end of 2014. That’s four times more than the 500 tanks reported in the industry standard database of tank farms at TankTerminals.com, Orbital Insight says. The U.S. company’s latest estimates show that China had around 600 million barrels of oil supply on its territory as of May 2016—and that’s not counting underground storage. Although the figure is higher than estimates, some analysts seem unsurprised. Michal Meidan, an analyst with London-based consultancy Energy Aspects, told Bloomberg that her estimate was over 400 million barrels including strategic and commercial stocks, but she was not surprised at Orbital Insight’s figures. “There is more storage available in China than the market is willing to acknowledge,”Meidan says.  Early last year, China had plans to increase its strategic petroleum reserves (SPR) from 30 days to 90 days. According to Reuters, some 90 days of imports are equal to around 600 million barrels. That’s the amount that Orbital Insight’s geospatial analysis has revealed. The U.S. company’s algorithms and data do not differentiate between strategic and commercial reserves. But in view of the lack of regular official and reliable data, it’s a source of data anyways. And it shows that China continues to amass crude oil supplies.

September Global Auto Sales Hit Record High Thanks To China's New Car Bubble - In recent months the US auto industry has been bombarded with a barrage of bad news: starting with Ford's disastrous August sales when the company admitted "sales have reached a plateau", continuing to the surge in delinquent subprime auto borrowers hitting nearly a 7 year high as the marginal creditworthy car buyers disappears, then noting the record $4,000 in industry-wide new car incentives in September as preventing a plunge in last month's auto sales, and recalling last week's downgrade of the US auto sector by Goldman which said that the US "cycle has peaked"......one would think that global auto sale would follow a similar downward trajectory. One would be wrong.According to data by JPM, global auto sales jumped 3.5%m/m in September on the back of strong gains in July and August. The pace of sales now stands at an all-time high of 78.0 million units per month, annualized. In whole, auto sales jumped 16.2%ar in 3Q (%3m/3m basis). On a %3m change basis, the move is an even more impressive 27% annualized through September. According to the latest data, of the impressive 4.4mn unit rise in global auto sales since June, China alone contributed for 84% of this global increase, or 3.7mn units. How did China manage to blow such a major bubble so fast? JPM explains that as the largest auto sales market in the world, China witnessed a spur in auto sales over the past year. However, this is not due to organic demand, and is almost entirely to a tax cut (by half) on small engine cars implemented by the government in September 2015. Since the cut, China’s auto sales have increased by 33%. Think cash for clunkers on trillions of debt-funded steroids.

China: Too Much Investment, But Also Way Too Much Savings - Most analysis of China’s economy emphasizes the risks posed by China’s high level of investment, and the associated rise in corporate debt. Investment is an unusually large share of China’s economy. That high level of investment is sustained by a very rapid growth in credit, and an ever-growing stock of internal debt. Corporate borrowing in particular has increased relative to GDP. Not all this investment will generate a positive return, leaving legacy losses that someone will have to bear. Rapid credit growth has been a fairly reliable indicator of banking trouble. China is unlikely to be different. Concern about the excesses from China’s investment boom permeate the IMF’s latest assessment of China, loom large in the BIS’s work, and the blogosphere. Gabriel Wildau of the Financial Times: “Global watchdogs including the International Monetary Fund and the Bank for International Settlements (not to mention this blog) have become increasingly shrill in their warnings that China’s rising debt load poses global risks.”  Yet I have to confess that defining China’s primary macroeconomic challenge entirely as “too much debt financing too much investment” makes me a bit uncomfortable.  Investment is a component of aggregate demand. Arguing that China invests too much comes close to implying that, as a result of its credit boom/ bubble, China is providing too much demand to its own economy, and, as a result, too much demand for the global economy. That doesn’t seem entirely right. China’s banks have not needed to borrow from the rest of the world to support the rapid growth of domestic credit. China’s enormous loan growth, counting the growth in shadow lending, has been self-financed; deposits and shadow deposits seem to exceed loans and shadow loans.*Most countries in the midst of credit booms run sizable external deficits. China, by contrast, still runs a meaningful current account surplus. China is exporting savings even as it invests close to 45 percent of its GDP. And even with an extraordinary high level of domestic investment, China’s economy still, on net, relies on demand from the rest of the world to operate at full capacity. That is what differentiates China from most countries that experience a credit and investment boom.

China pours $10.7 billion into overseas real estate in first half | South China Morning Post: Chinese capital outflow decreased in the first half of 2016, although deals in the latter part of the year will lift outbound investment to the same levels as last year, analysts say. A new report from Knight Frank Research says this year has seen “waves of Chinese outbound capital” worth US$10.7 billion (HK$83 billion), a 13.6 per cent drop from last year. But it added the first six months of 2015 provided a high base for comparison, since there were historically large real estate deals such as Anbang Insurance’s US$1.95 billion purchase of New York’s Waldorf Astoria. “Chinese investment was gaining momentum as we crossed the half-year mark,” the report said. “Since June there have been deals in the making that promise to turn 2016 into another productive year.” While China’s economy has slowed recently, the country’s investors remain interested in global markets, particularly in primary real estate, its analysts said. High land prices in Chinese cities – for which the government has recently rolled out cooling measures to temper overheating markets – “has encouraged capital to seek overseas opportunities,” Knight Frank added. But despite strong outbound investment, analysts warn existing restrictions on China’s foreign exchange reserves could cause money to dry up in the overseas subsidiaries of Chinese investors.

China producer prices rise for first time in nearly five years, may ease debt woes | Reuters: China's producer prices unexpectedly rose in September for the first time in nearly five years thanks to higher commodity prices, welcome news for the government as it struggles to whittle down a growing mountain of corporate debt. Official inflation data on Friday also showed a pickup in consumer prices, helping to ease investors' concerns about the health of the world's second-largest economy after disappointing trade numbers on Thursday rattled global markets. Corporate China sits on $18 trillion in debt, equivalent to about 169 percent of gross domestic product (GDP), according to the most recent figures from the Bank for International Settlements. Most of it is held by state-owned companies. "An uptick in inflation, if sustained, would be good news for China's ability to service its overhang of corporate debt," Bill Adams, senior international economist at PNC Financial Service Group, said in a note. "With low interest rates keeping debt service costs in check and producer prices rising, the outlook for Chinese industrial profits is improving." The producer price index (PPI) rose 0.1 percent in September from a year earlier, the National Bureau of Statistics said. While the gain was slight, it was the first time producer prices have expanded on an annual basis since January 2012, and came a bit earlier than the year-end timeframe that some analysts had expected. Producer prices had edged up on month-on-month basis over the summer.

Chinese Exports and Imports Are Growing in 2016 (In Real Terms) - Brad Setser --I liked John Authers’ FT column on China, and basically agree with it.  The chart showing the correction in the yuan’s value against a broad trade-weighted index is especially helpful. A lot depends on the particular index you use, but there should be no doubt that a significant part of the yuan’s broad appreciation in late 2014 has now been reversed.I did take issue with one point. Authers writes that both Chinese exports and imports are on a declining trend. “Chinese exports dropped noticeably last month (causing a frisson in global markets). Meanwhile, imports ticked up, suggesting at least some life in the Chinese economy. Both imports and exports are on a steadily declining trend, so China’s economy is slowing down.”That is true in dollar terms, but not in “volume” (or real) terms.  Using China’s own data for the year to August, exports are up a modest 1.8 percent (versus the same period a year ago), and imports are up 3.4 percent. Throw in an estimate for September’s volumes (-1 percent on exports, + 1 percent on imports: this is without any adjustment for working data) and the numbers are down a bit, but still positive year over year (1.5 percent for exports, 3.1 percent for imports). On the export side, q1 was bad—export volumes were down a couple of points (the 2014 q1 base was a pretty good, which is part of the story. But I think q2 and q3 both show roughly 3 percent y/y growth in export volumes—a strong August is offset by a weak September.And on the import side, there is no doubt that 3 to 3.5 percent growth in real imports is low relative to an economy that is growing at 6.5 percent.At the same time, I do think it is important to recognize that 2016 doesn’t look like 2015. in 2015, exports were falling—as were (goods) imports. The combination of the yuan’s broad depreciation and the domestic stimulus have reversed both falls. If you deflate nominal exports and imports (seasonally adjusted by Haver) by the reported export and import price indexes (and assume prices didn’t change in September), it is possible to construct a very rough graph of export and import volumes since 2005. I emphasize that this is a rough graph, but it is clear even in the trailing 12m sum that there has been a turn.

China Growth Holds Steady at 6.7% in Third Quarter - WSJ: —China’s drifting economy steadied in the third quarter, clocking in 6.7% growth fueled by easy credit, a hot property market and other stimulus measures that economists say come at the expense of needed restructuring. The year-over-year growth figure, reported by the government Wednesday, matches the rate posted in the second quarter and meets market and economists’ expectations. Chinese leaders have sounded upbeat in recent days about the economy, which has been on a downglide in recent years but whose performance is on track to achieve the government’s annual growth target of 6.5% or higher. “The national economic performance has been generally steady, making progress and improving in quality, resulting in growth that’s better than expected,” Sheng Laiyun, a spokesman for the National Bureau of Statistics, said. However, economists say continuing stimulus measures, while helpful for short-term growth, are masking deeper-set problems of industrial overcapacity and high levels of corporate debt. Corporate debt is now equal to around 145% of gross domestic product, according to the International Monetary Fund, up nearly one-third since the 2009 global financial crisis. “The government should act quickly before the problem becomes systemic,” the IMF said in a working paper released this week. Economists expect the strong pace of expansion to last through the end of the year, supported by a flood of loans and government spending that has fueled infrastructure projects and a rebound in the property market. But they see ebbing momentum next year.

China Sept new yuan loans surge to 1.22 trillion yuan, well above forecasts | Reuters: Chinese banks extended 1.22 trillion yuan ($181 billion) in new loans in September, well above expectations and capping a record nine-month lending spree despite growing concerns about the risks from the country's ballooning debt. Much of the loan growth in recent months has been driven by a rapid rise in home mortgages, as China's sizzling housing market drives a buying frenzy that authorities are now trying to clamp down on without triggering a price collapse. China's credit growth has been "very fast" by global standards, and without a comprehensive strategy to tackle the debt overhang there is a growing risk it will have a banking crisis or sharply slower growth or both, the International Monetary Fund said in a working paper last week. Analysts polled by Reuters had expected new lending to increase modestly to 1 trillion yuan in September, after more than doubling in August to 948.7 billion yuan. Loans over the first nine months of the year were a record 10.16 trillion yuan ($1.51 trillion), according to central bank data on Tuesday. In September alone, new housing loans to individuals totaled 475.9 billion yuan, some 76 percent higher than the same period last year, Ruan Jianhong, a central bank official said in a news release. Personal mortgages accounted for 39 percent of all new lending last month, based on Reuters calculations using central bank data.

 S&P warns China, reduce debt or we will downgrade your sovereign ratings -China has been issued another yellow card. In a report released last week, S&P Global Ratings warned that China is at risk of losing its AA-status if it doesn’t rein in its debt-fueled economic growth. “Credit growth in China continues to outpace income growth, and much new lending appears to be financing public investment,” S&P analysts Kim Eng Tan and Xin Liu wrote. “Consequently, we see support for the Chinese sovereign ratings gradually diminishing.” A downgrade would be the latest blow to the world’s second-largest economy, whose outlook was slashed to negative from stable by the ratings agency in March. At the time, S&P cited the country’s slower-than-expected economic rebalancing and the growing financial risks. In the latest report, Tan and Liu found China’s “reliance on public investment to fuel economic growth to be unsustainable and a credit weakness” with little sign of the trend abating in the near future. High volatility in the country’s stock markets and foreign exchange rates since last year, means that the Chinese government has kept the economy afloat by injecting borrowed money into public projects. This in turn resulted in a yawning gap between public and private investment this year.

 Why Hillary Clinton is a bigger concern for China than Donald Trump - So you think Donald Trump is the biggest threat to world peace? And Barack Obama engineered America’s “pivot to Asia”? It was actually Hillary Clinton, emphasising the necessity of a “strategic turn” for the United States, who launched the pivot to Asia in an October 2011 article titled “America’s Pacific Century”. The tone was martial: “Our military is by far the strongest and our economy is by far the largest.” The South China Sea duly featured: “Half the world’s merchant tonnage flows through this water”. Informed observers didn’t need a manual to spot Clinton’s subtle cue alerting them to the danger of China’s “nine-dashed line”. Clinton’s essay preceded Obama’s November 2011 speech to the Australian Parliament in which he officially announced the pivot. The key theme was the US as a “Pacific nation”. The tone was mostly combative. Only after 10 long confrontational paragraphs did a meek “effort to build a cooperative relationship with China” appear. Who would Beijing prefer as US president: Clinton or Trump? As a presidential candidate in 2008, Clinton’s tone was way more composed. She admitted that the US budget deficit was largely funded by Chinese purchases of US Treasury bills. She then seemed to be subscribing to the widely held notion in the Beltway that the root of US global hegemony is economic. Five years later, Clinton had substantially changed her mind to write her pivot essay. The source was none other than the intellectual/conceptual author of the pivot: Kurt Campbell, then US assistant secretary of state for Asia.From the beginning, the pivot’s focus was of course China – an attempt to reach a delicate balance between economic partners/strategic rivals. Obama may have been progressively swinging towards “rival”. But, already in mid-2010, the decision had actually been Clinton’s. In a conference in Hanoi, she announced that the US had a “national interest” in “respect for international law in the South China Sea”. That was the crucial moment when the evolving US-China showdown in the South China Sea actually began – framing the whole subsequent pivot as a provocative, over-militarised gambit liable to spin out of control.

Duterte aligns Philippines with China, says U.S. has lost | Reuters: Philippine President Rodrigo Duterte announced his "separation" from the United States on Thursday, declaring he had realigned with China as the two agreed to resolve their South China Sea dispute through talks. Duterte made his comments in Beijing, where he is visiting with at least 200 business people to pave the way for what he calls a new commercial alliance as relations with longtime ally Washington deteriorate. "In this venue, your honors, in this venue, I announce my separation from the United States," Duterte told Chinese and Philippine business people, to applause, at a forum in the Great Hall of the People attended by Chinese Vice Premier Zhang Gaoli. "Both in military, not maybe social, but economics also. America has lost." Duterte's efforts to engage China, months after a tribunal in the Hague ruled that Beijing did not have historic rights to the South China Sea in a case brought by the previous administration in Manila, marks a reversal in foreign policy since the 71-year-old former mayor took office on June 30. His trade secretary, Ramon Lopez, said $13.5 billion in deals would be signed during the China trip. "I've realigned myself in your ideological flow and maybe I will also go to Russia to talk to (President Vladimir) Putin and tell him that there are three of us against the world - China, Philippines and Russia. It's the only way," Duterte told his Beijing audience. Duterte's remarks will prompt fresh concern in the United States, where the Obama administration has seen Manila as an important ally in its "rebalance" of resources to Asia in the face of a rising China.

‘We’re neighbours and blood brothers’: Xi tells Duterte as firebrand leader announces ‘separation’ from US -- President Xi Jingping told his Philippines counterpart Rodrigo Duterte on Thursday that the two countries could put aside disputes and improve ties.“This truly has milestone significance for China-Philippines relations,” Xi said, praising Duterte’s landmark visit to Beijing to reset the relationship that had been damaged by territorial disputes in the South China Sea.In a further sign of his shifting allegiances, Duterte said he was announcing his “separation” from the United States at a business forum in the afternoon in the presence of Chinese Vice Premier Zhang Gaoli.On the South China Sea issue, Xi suggested the two sides “temporarily put aside” the disputes, and learn from the “political wisdom” of history when the two nations had successfully kept their differences in check through talks.“As long as we stick to friendly dialogue and consultation, we can frankly exchange views on any problem, manage differences, discuss cooperation, and temporarily put aside what is hard to reach by consensus,” Xi said.Xi said although relations had “weathered storms, the foundation ... of their relations would not be changed” as the two countries were neighbours across the sea and the two peoples were blood-linked brothers. “We have no reason to take a hostile attitude or confront each other,” he said. “I hope we can follow the wishes of the people and use this visit as an opportunity to push China-Philippines relations back on a friendly footing and fully improve things.” Duterte said improved and developed relationships would benefit both peoples.

Caught On Tape: Filipino Police Run Over Anti-American Protesters As They Storm US Embassy --As Philippine President Rodrigo Duterte continued his four-day visit to China this week, a political demonstration outside the U.S. embassy in Manila — held by Filipinos supportive of Duterte’s promise to break his country’s dependence on the West — turned violent on Wednesday, with Filipino police actually ramming into and running over protesters as they attempted to disperse the crowd.  There was absolutely no justification (for the police violence),” one of the protest leaders said. “Even as the president avowed an independent foreign policy, Philippine police forces still act as running dogs of the US.”The demonstration was led by an affiliation of activists, mostly from indigenous Filipino peoples seeking an end to Western imperialistic control of their country. Such groups have held similar demonstrations in front of the U.S. embassy in the past, nearly all of which remained peaceful.There was an altogether different vibe to Wednesday’s rally, however, with demonstrators from the beginning hurling red paint, bottles, and rocks at police officers and destroying a U.S. government seal. Some called the police “puppies of imperialists” through loudspeakers.Police initially doused the protesters with fire hoses, but the unruly crowd managed to overpower the cops, break through the police corridor, and proceed to write anti-U.S. slogans such as “US troops out now” on the embassy fence. It was then that officers turned to more drastic measures, firing tear gas into the crowd of around 1,000 people and eventually driving a police van through the demonstration. In all, three protesters had to be taken to the hospital and over 20 wound up arrested by police.

Obama Admin Stunned By Duterte: "The Minute You Say Something, He Lets Loose His Barrage Of Obscenities" --In one of the most shocking US foreign policy failures, and there have been many in the past 8 years, a long-time ally of the US, the Philippines, announced yesterday that it was seeking "separation" from the US and was looking for an alliance with Putin. As we reported yesterday, outspoken president Duterte, during his visit to Beijing for which Xi, announced his "separation" from the United States, declaring he had realigned with China as the two agreed to resolve their South China Sea dispute through talks."In this venue, your honours, in this venue, I announce my separation from the United States," Duterte told Chinese and Philippine business people, to applause, at a forum in the Great Hall of the People attended by Chinese Vice Premier Zhang Gaoli. "Both in military, not maybe social, but economics also. America has lost.""I've realigned myself in your ideological flow and maybe I will also go to Russia to talk to (President Vladimir) Putin and tell him that there are three of us against the world - China, Philippines and Russia. It's the only way," Duterte told his Beijing audience.  Meanwhile, every attempt by the U.S. to raise questions about Duterte's campaign against drugs, in which more than 3,000 people have been killed since he took office in June, has only made him angrier: he has derided Obama as a "a son of bitch" and said he should "go to hell."

The Philippines Just Blew Up Obama’s Asia Pivot -On Thursday, the president of the Philippines, Rodrigo Duterte, announced to an audience at the Great Hall of the People in Beijing a "separation" with the U.S. "America has lost now,” he said. "And maybe I will also go to Russia to talk to Putin and tell him that there are three of us against the world: China, Philippines and Russia. It’s the only way." Two things should be said here. First: Duterte is a crude vulgarian. He has called Obama a "son of a whore," and picked a fight with the pope. As a politician he is often compared to Donald Trump. As a president, he has acted like an authoritarian, waging a paramilitary war against his nation's drug users and drug dealers. Second: Duterte's own government appears to have been kept out of the loop about this new alliance. On Friday, Duterte himself said he did not mean to imply that he would cut diplomatic ties with the U.S., but he has not backed away from his pledge to end military cooperation with the U.S., though others in his government have suggested he will back down. Regardless, this is a big story. The Philippines has been an important U.S. ally since the beginning of the cold war. What's more, the Obama administration has invested in the country as part of its pivot to Asia. In 2014 the two countries signed an enhanced defense cooperation agreement. When the Philippines brought a case against China at the Hague over China's artificial islands in its territorial waters, the U.S. supported the Philippines diplomatically.

Philippines' Duterte says didn't really mean 'separation' from U.S. | Reuters: Philippine President Rodrigo Duterte said on Friday he was not severing ties with his country's long-time ally the United States, but merely pursuing a more independent foreign policy by strengthening relations with China. A day after he provoked fresh diplomatic alarm by announcing his "separation" from Washington, Duterte struck a more conciliatory tone as he arrived back in the Philippines after a four-day visit to Beijing. "It is not severance of ties. When you say severance of ties, you cut diplomatic relations. I cannot do that," the Philippine leader told reporters at a midnight news conference in his southern home city of Davao. "It's in the best interest of my countrymen to maintain that relationship." On Thursday, Duterte had told Chinese and Philippine business people at a forum in Beijing's Great Hall of the People that America had "lost now", as he sought what he calls a new commercial alliance with China. "I announce my separation from the United States," he had said, to sustained applause, adding he would also seek closer ties with Russia. Clarifying his comments on Friday, he said that what he meant was that Manila's foreign policy need not always "dovetail" with Washington. "As in separation, what I was really saying was separation of foreign policy," he said. "In the past, and until I became president, we always follow what the United States would give the cue."

U.S. has few good options for response to Philippines' Duterte | Reuters: The Obama administration has few good options and limited leverage as it struggles to craft a response to Philippine President Rodrigo Duterte's increasingly hostile rhetoric towards the United States and his warm embrace of China. For months, Washington has played down Duterte's anti-American insults and broadsides. But the flamboyant new leader raised the stakes to a new level on Thursday when he announced his "separation" from long-time ally the United States and realignment with Beijing and possibly even Moscow, America's two main strategic rivals. Duterte's latest outburst, less than three weeks before the U.S. presidential election, casts further doubt on the seven-decade U.S.-Philippine alliance and threatens to further undermine President Barack Obama's faltering "pivot" to Asia as a counterbalance to China's growing assertiveness. Potentially at stake is the Enhanced Defense Cooperation Agreement, reached under Duterte's predecessor, allowing the United States to rotate ships, aircraft, and personnel through five Philippines bases, an arrangement seen as crucial to projecting U.S. military power on China's doorstep. Mindful of Duterte's volatile nature, the Obama administration has trod carefully so far, seeking to avoid provoking him even as it chides him over his deadly war on drugs, U.S. officials say. One U.S. official, who did not want to be identified, said there had been an active internal debate in recent months on how far to go in criticizing Duterte's government on human rights and that the measured tone adopted was not as strong as some aides would have liked.

Japan investors in dilemma over U.S. bonds as hedging costs bite | Reuters: Japanese investors may soon be forced out of their U.S. debt investments as currency hedging costs soar on the prospect of higher interest rates and tougher U.S. money market regulations. With returns on U.S. Treasuries falling to around zero percent after deducting hedging costs, some investors have abandoned U.S. bonds and returned to the domestic bond market. Japan's conservative fund managers turned to higher-yielding foreign bonds, particularly Treasuries, earlier this year after the Bank of Japan stunned markets with its negative interest rate policy to help reflate the economy. "At least one big Japanese institutional investor appears to have switched back to domestic bonds last month because dollar hedging costs have become so expensive," a bond trader at a European brokerage said. Some investors are also foregoing currency hedging to boost returns - a practice they had largely avoided since the 2008/09 global financial crisis. "Some investors appear to have started buying foreign bonds without currency hedging. I think that is a part of the reason the dollar strengthened recently," said a currency trader at a North American bank.

Japan finance institutions face huge losses on government bonds if yields rise | The Japan Times: Japanese financial institutions with huge government bond holdings face large appraisal losses if yields rise, a Finance Ministry estimate showed Monday. If yields of outstanding bonds climb 1 percent across the board, the value of outstanding government bonds would drop by an estimated ¥67 trillion, or 13.5 percent of nominal gross domestic product in fiscal 2015, according to the ministry. Under similar circumstances, the ratio was higher than 2.5 percent in Germany as a percentage of its GDP, 4.3 percent in the United States, 5.2 percent in France and 13.3 percent in Britain, the ministry said. The provisional calculation was presented at a meeting of the ministry’s expert panel to discuss the government’s bond issuance plan for fiscal 2017. Yields move inversely to bond prices, and bonds with longer maturity dates are susceptible to larger price declines. Since Japan issues a massive amount of government bonds with a maturity averaging 8.4 years, the risks stemming from price declines are higher in Japan than in those other countries, the estimate showed. Under the Bank of Japan’s negative interest rate policy, which pushes down market interest rates for bonds, the government is increasing the issuance of superlong government bonds.

 Central Bank Tools Are Losing Their Edge - WSJ: Central banks have shown the will to hit their growth and inflation targets. But do they have the way? That question is more pointed after the Bank of Japan 8301 1.79 % on Wednesday announced two new central bank firsts. It now wants inflation not just to meet its 2% target, but to overshoot it. And it will now target not just short-term interest rates, but long-term government bond yields. The moves affirmed Governor Haruhiko Kuroda’s reputation for monetary experimentation, but also raised the more troubling question of why his previous innovations have fallen short.Japan’s monetary travails matter to all central banks since so many countries are coming to resemble Japan, with slow growth and too-low inflation—factors that make it difficult for an economy to tolerate interest rates much above zero. Hours after the Bank of Japan’s announcement, the Federal Reserve left its own interest rate target unchanged, while saying the case for an increase had strengthened. Though U.S. job growth is healthy, inflation is stuck below the Fed’s 2% target and bond investors expect it to stay there. The situation in Japan is similar, only worse. Japanese growth averaged 0.2% in the 12 months ending June 30, inflation is slightly negative and, most troubling, public and market expectations of inflation have slid steadily. Bond investors now anticipate inflation of only a little above zero in coming years. On Wednesday, the yen weakened initially (the expectation of lower rates generally depresses a country’s currency), then finished the day stronger, a sign of skepticism that the new actions will succeed.On Wednesday, the bank blamed three factors for inflation’s failure to reach 2%: the plunge in oil prices, a consumption-tax increase in 2014, and a slowdown in emerging markets. By depressing actual inflation this drove down inflation expectations. That presents a dilemma. As long as inflation stays low, so will people’s expectations of it, a vicious circle that in turn makes it harder to get wage- and price-setting behavior to change.

Singapore’s $24 Billion Wipeout Eats Into Its Shipyard Base - Bloomberg: More than $400 billion of proposed energy projects worldwide have been delayed since mid-2014 and pushed into 2017 and beyond, according to consulting firm Wood Mackenzie Ltd. In Singapore, the global center for oil-rig construction for decades, the slowdown contributed to the economy contracting the most in four years in the third quarter. BP Plc abandoned oil exploration off the Great Australian Bight, it said last week, five years after beginning a search for resources in one of the world’s last frontier regions. BP had previously estimated the drilling program would cost more than A$1 billion ($769 million). Decisions like this ripple through Singapore’s oil and gas services industry, from Keppel Corp. and Sembcorp Marine Ltd., the world’s biggest builders of oil rigs, to companies supplying anchors, chains and other components, to the eateries feeding an offshore engineering workforce that tripled over a decade to peak at more than 90,000.More than two years of tumbling oil prices have wiped more than $24 billion from the market value of Keppel, Sembcorp Marine and Singapore’s other listed oil-services companies -- or about two thirds of their pre-July 2014 capitalization. Since then, at least 25,000 jobs have been axed and one company, Swiber Holdings Ltd., has defaulted. “We’ll see more failures within the oil services sector,” said Song Seng Wun, regional economist with CIMB Private Banking in Singapore, in a telephone interview. “Stronger companies, like Keppel Corp. and Sembcorp Marine, will survive and take advantage of opportunities. They have deeper pockets.” Output in the marine and offshore engineering sector fell 29.7 percent in the first eight months of this year, the worst-performing industry in Singapore, according to data from the country’s Economic Development Board.

 Bollywood Becomes India and Pakistan’s Latest Battleground - India and Pakistan, longtime enemies with nuclear arsenals, have battled over borders, killed each other’s soldiers and fought three wars since the countries’ creation seven decades ago. Now their battle has reached the big screen. Pakistan on Wednesday imposed a blanket ban on Indian shows on its television networks and radio stations, a day after one of India’s top film directors vowed not to hire actors from Pakistan in response to a major Indian cinema group’s declaration that it would not screen films with Pakistani casts. The tit-for-tat measures come amid deteriorating relations between the two countries after an attack in September on an Indian Army base by militants who India says were from Pakistan. Prime Minister Narendra Modi of India responded to the attacks by authorizing retaliatory strikes against Pakistan and has tried to isolate the country diplomatically, pulling out of a regional economic conference and using a summit meeting in New Delhi that included the Russian, Chinese and Brazilian heads of state last weekend as a platform to attack the Pakistani government.That tough talk has been reverberating through the arts. Pakistani musicians have long been a mainstay of Bollywood, whose films and songs are also hugely popular across the border in Pakistan. And Pakistani actors have recently entered Bollywood amid the growing popularity in India of Pakistani-based television serials. But those cultural ties are being cut. The Pakistani ban on Indian shows goes into effect on Friday. The government acted on a recommendation from the Pakistan Electronic Media Regulatory Authority, and Pakistani officials said it was in response to escalating curbs on Pakistani films and actors in India. The license of any TV network or radio station that does not comply will be suspended, the regulating authority said.

Is India's Modi Succeeding in Isolating Pakistan? --Has India succeeded in framing the Kashmir issue as "Cross-border terrorism" rather than a genuine grass-roots freedom struggle of Kashmiri people?  Has the international and Pakistani media bought the Indian propaganda on Kashmir?  Have the media headlines changed from Kashmir protests to Uri attack and "surgical strikes"? Was the Cyril Almeida story in Dawn based on truth? Or was it planted for propaganda purposes to malign Pakistan Army? Who planted it?Is the threat of Pakistan's isolation real? If so, why are investors continuing to invest in Pakistani market to push it to new highs? Why are China and the United States rejecting India's demand to isolate Pakistan? Why did Russia do first-ever military exercises in Pakistan? Why are so many countries conducting military exercises with Pakistan? Why is Iran seeking to join CPEC projects? Why are Turkey and OIC supporting Pakistan?Will Pakistan act against Hafiz Saeed, Masood Azhar and the Haqqanis?  Why are the British not acting against Altaf Husain for taking money from RAW and ordering MQM militant attacks in Karachi to hurt Pakistan? Why is Bramadagh Bugti being hosted by the Swiss government in spite of his support for terror attacks in Balochistan?Why did the Afghan government oppose Pakistan's membership of the United Nations in 1947?  Why did the Afghan governments support Pakhtunstan movement led by Wali Khan who received money from RAW as documented by India's ex intelligence official RK Yadav in "Mission R&AW".  Why have the successive Afghan governments, except the Afghan Taliban, supported proxy wars in Pakistan for decades? Why is the Afghan government allowing RAW to use its territory to launch attacks in Pakistan?What is the possible end-game in Afghanistan with pull-out of US ground forces? Will there be a power vacuum in Afghanistan? If so, who will fill it? Taliban? ISIS? Another force?Viewpoint From Overseas host Faraz Darvesh discusses these questions with panelists Misbah Azam and Riaz Haq (www.riazhaq.comhttps://youtu.be/dy5CqkHhBkI

 How the Housing Bubble is Remaking Australia’s Class Structure - naked capitalism Yves here. Readers in the US, UK, Canada, and Ireland might compare and contrast their views on how the fact that housing costs generally continue to outpace wage rates is affecting class structure in your country. For instance, this article posits that the house-rich will be able to pass a lot of that wealth in the US along to their children. That would seem to be less often true here by virtue of many people having tapped into their home equity to pay other debts or defray living expenses, as well as some older homeowners having their home equity collected from their estate via Medicaid recovery.   The relentless housing boom in Australia’s cities, especially Melbourne and Sydney, is often framed as an intergenerational conflict in which younger generations are being priced out of the market by baby boomers. However, sociological theories of social class suggest parents’ wealth and social status will eventually be passed onto their children anyway. So, by focusing on intergenerational inequalities that will eventually be reversed, we are framing the housing affordability question the wrong way. At the same time, the impact of the housing boom is so deep that some long-established ideas about social class may be no longer relevant. The housing boom has blurred existing boundaries between upper, middle and lower classes that applied to the baby boomers and previous generations. New social class boundaries and formations are being produced. This does not mean younger generations, as a collective, are disadvantaged compared to their parents. Rather, these younger generations will be subdivided differently and more unequally.

Salvation Army Slams New Zealand’s Loose Immigration Policy for Hurting Local Workers - The Salvation Army has entered the debate over New Zealand’s high immigration program, releasing a reportthat is critical of the Government’s immigration settings and calling for a “broad public debate” around immigration: Over the past three years, we have seen record net migration that is not just the result of fewer New Zealanders leaving for Australia but also a deliberate policy of allowing more people to migrate here… Over the past three years, the Government approved an average of 114,000 migrant visas against an average of 84,000 such visas over the previous decade. An increase of this scale is not due to policy miscalculation, so must be seen as a deliberate shift in policy priorities. The reason, and even any announcement that a shift in policy has occurred, has not been given—the change has simply happened. Migration increases of this order are bound to have an impact on local labour markets, yet there appears to be little regard for such impacts in the way immigration policy is being administered. Only 13% of work visa approvals record an assessment of the need for that migrant’s skills…Just one-third of these have a job arranged before they arrive and there is little evidence that Immigration New Zealand is checking if the labour market is short of the skills these migrants bring… It is difficult to know what is driving current immigration policy settings, although it seems employers are lobbying Government for more liberal settings.

 Nigeria Spins Out of Control, and the IMF Remains Unaware - Nigeria’s President, Muhammadu Buhari, and his government have lost control as Nigeria’s economic crisis sends that African nation into a doom-loop. Everyone, including the President’s wife, Aisha, knows that Nigeria is going down the tubes. But not the International Monetary Fund (IMF). As is often the case, the IMF doesn’t have a clue. The IMF’s October 2016 World Economic Outlook projects Nigerian inflation to average 15.4 percent for 2016.  This number is in sharp contrast to my Johns Hopkins-Cato Institute Troubled Currencies Project’s inflation estimate for Nigeria. We estimate that the year-over-year inflation rate is currently 104.8 percent (see the chart below).  Why is the IMF so far off base? Because it is doing what it often does: it is taking the Central Bank of Nigeria’s (CBN) official inflation data at face value. That official rate averaged 14.3 percent from January to August of this year. For the IMF forecast to materialize, official annual inflation in Nigeria would need to average 17.6 percent for the September through December period.  What did the latest inflation report from the Central bank of Nigeria show?  According to the CBN, annual inflation was 17.9 percent in September. The IMF’s blind acceptance of the CBN’s data is a big mistake.

Some students abducted by Boko Haram may have been radicalized and are now refusing to leave their captors - More than a third of almost 300 female students abducted by Islamic militants from a school in Nigeria two-and-a-half years ago appear unwilling to leave their captors, a community leader has said.   Nigeria’s government is negotiating the release of 83 of about 190 girls from the the remote town of Chibok who are still held by Boko Haram in remote camps in the north-east of Africa’s most populous country. Twenty-one were freed last week as a “goodwill gesture” by the group.The mass abduction in April 2014 prompted a global outcry, and an international campaign to #BringBackOurGirls, backed by celebrities including Michelle Obama.  The girls unwilling to return may have been radicalised by Boko Haram or could feel ashamed to return home because they were forced to marry extremists and have children, Pogu Bitrus, the chairman of the Chibok Development Association, told the Associated Press in a telephone interview. Mausi Segun, a researcher in Nigeria for Human Rights Watch, the international campaign organisation, said the negative reaction of conservative communities would mean it was unlikely the released women would be able to return to Chibok. “Any sign that there has been sexual contact with any man, and these men are Boko Haram, will cause a backlash. The likelihood they will return home is slim,” Segun said.  There have been frequent reports of stigma and discrimination directed at women who are released by, or escape from, Boko Haram. Campaigners have repeatedly raised concerns that the reaction of communities and relatives to released women might complicate negotiations, and exacerbate victims’ trauma.

Nick Turse: The Killing Fields of South Sudan -- There it is again. That sickening smell. I’m standing on the threshold of a ghost of a home. Its footprint is all that’s left. In the ruins sits a bulbous little silver teakettle — metal, softly rounded, charred but otherwise perfect, save for two punctures. Something tore through it and ruined it, just as something tore through this home and ruined it, just as something tore through this town and left it a dusty, wasted ruin. This, truth be told, is no longer a town, not even a razed one. It’s a killing field, a place where human remains lie unburied, whose residents have long since fled, while its few remaining inhabitants are mostly refugees from similarly ravaged villages.The world is awash in killing fields, sites of slaughter where armed men have laid waste to the innocent, the defenseless, the unlucky; locales where women and children, old and young men have been suffocated, had their skulls shattered, been left gut-shot and gasping.  Or sometimes they’re just the unhallowed grounds where the battered and broken bodies of such unfortunates are dumped without ceremony or prayer or even a moment of solemn reflection.  Over the last century, these blood-soaked sites have sprouted across the globe: Cambodia, the Philippines, the Koreas, South Africa, Mexico, Lebanon, Rwanda, Bosnia, Guatemala, Afghanistan, Iraq, Syria — on and on, year after year, country after country. Chances are, you once heard something about the 1994 Rwandan genocide that saw up to one million men, women, and children murdered in just 100 days.  You may remember the 1968 massacre of Vietnamese civilians by U.S. troops at My Lai.  And maybe you recall the images of Saddam Hussein’s 1988 chemical weapons attack on Kurds in Halabja.  For years, Sudan contributed to this terrible tally.  You might, for instance, remember the attention paid to the slaughter of civilians in Darfur during the 2000s.  The killings there actually never ended, only the public outcry did.  In the 1980s and 1990s, there were also massacres farther south in or around towns you’ve probably never heard of like Malakal, Bor, and Leer. This spring, I find myself in Leer, another battered enclave, as aid groups struggled to reestablish their presence, as armed men still stalked the night, as human skulls gleamed beneath the blazing midday sun.The nose-curling odor here told me that somewhere, something was burning.  The scent had been in my nostrils all day.  Sometimes, it was just a faint, if harsh, note carried on the hot breeze, but when the wind shifted it became an acrid, all-encompassing stench — not the comforting smell of a cooking fire, but something far more malign.  I looked to the sky, searching for a plume of smoke, but there was only the same opaque glare, blinding and ashen.  Wiping my eyes, I muttered a quick curse for this place and moved on to the next ruined shell of a home, and the next, and the next.  The devastated wattle-and-daub tukuls and wrecked animal pens stretched on as far as I could see. This is Leer — or at least what’s left of it.

 From 'Socialist Utopia' To 'Silence Of The Lambs' - Venezuela's Overcrowded Prisons Devolve Into Cannibalism - Once a flagship socialist nation, Venezuela has now devolved into complete chaos as declining oil revenue has resulted in economic ruin, massive inflation, food shortages and spikes in violent crime.  The increasing criminal activity has led to massive overcrowding of Venezuelan jails where felons have been forced to live in squalid conditions. According to the Independent, one such overcrowded facility was Táchira Detention Center where 350 inmates were housed despite the facility's capacity for only 120 people.  Earlier this month, the adverse living conditions, including insufficient rations for inmates, at the facility resulted in riots that devolved into complete chaos as numerous visitors were taken hostage and 2 inmates were "stabbed, hanged to bleed, and then fed to the detainees."  The gruesome event was orchestrated by a man named Dorancel Vargas (aka "People Eater) who was jailed in 1999 for cannibalism. Juan Carlos Herrara told local media his son, Juan Carlos Herrera Jr, was stabbed, hanged, dismembered and then eaten at the Táchira Detention Center. According to reports, 350 men had been crammed into the detention centre, which has a capacity of 120. Speaking to reporters on Monday, after a visit to the prison three days after the mutiny had subsided, Mr Herrara said: “One of those who was with him when he was murdered saw everything that happened.  "My son and two others were taken by 40 people, stabbed, hanged to bleed, and then Dorancel butchered them to feed all detainees,” referring to the notorious Dorancel “people-eater” Vargas - jailed in 1999 for cannibalism. "The [inmate] with whom I spoke to told me that he was beaten with a hammer [in order] to force him to eat the remains of the two boys.

German Political Leaders Divided on Approach to Russia - Spiegel - On the day of his return from the United Nations General Assembly in New York on the last Monday in September, German Foreign Minister Frank-Walter Steinmeier met with German Chancellor Angela Merkel for lunch. They talked for two hours, but their discussion was dominated by one single issue: Germany's relationship with Russia -- or, to be more precise, what remains of that relationship. In meetings held on the sidelines of the General Assembly, Steinmeier became aware just how little interest Russia has in a peaceful resolution of the conflict in Syria. Even as he and other Western diplomats were doing all they could to get the Russians to the negotiating table, Russian bombs were falling on Aleppo and perhaps even on a UN aid convoy. Such actions stand "in direct contradiction to Russian claims that it supports a diplomatic solution," Steinmeier complained in concert with his counterparts from the US, France and Britain. The patience of the Western quintet -- a reference to the five leading countries involved in searching for a solution to the Syria crisis, made up of the US, Germany, France, Britain and Italy -- with Russia is "not unlimited," the German foreign minister said. The patience of Steinmeier's party, the Social Democrats (SPD), by contrast, appears to be inexhaustible. Merkel, at least, didn't get the impression during her lunch with Steinmeier that he and his party, her junior coalition partner, would be prepared to take a more hardline approach to Russia. On the contrary. It isn't yet clear who will be the SPD's lead candidate in next year's general election, but a fundamental policy decision has already been made: The center-left Social Democrats intend to distance themselves from Merkel's Russia policies and to invoke their tradition as a party of peace. The current debate over the possible imposition of new sanctions on Russia offers a preview of what may come. The US, Britain and France accuse Russia of probable war crimes in Syria, but SPD leaders reject the idea of applying new penalties on Moscow. "I am fundamentally skeptical of new sanctions against Russia in connection with the Syrian conflict," says Stephan Weil, the SPD governor of Lower Saxony.

 Flemish nationalists hamstrung by Belgium’s trade fiasco - Belgium’s fragmented politics have never triggered such an international frenzy. Europe and Canada can but watch and wait as Belgium’s federal government wrestles to overcome resistance in the French-speaking part of the country that is threatening to sink a landmark EU trade deal with Ottawa. If Belgium cannot sign, the entire accord is liable to collapse, unraveling seven years of painstaking diplomacy between the European Commission and Ottawa. In contrast to the Walloons, the Dutch-speaking Flemish nationalists and their partners in the federal government are robust supporters of free trade, but they are almost powerless. Ironically, it’s their own fault.  For decades, Flemish nationalists have torn Belgium apart, shifting increasing powers to the country’s regions. Now, they are stuck in a federal government immobilized and embarrassed by those very regional powers they fought so hard to win.  “If you advocate rights for regions … you can’t just say those rights then need to be violated.” The New Flemish Alliance (N-VA), Belgium’s largest party and Flemish-nationalist powerhouse, is particularly haunted by Wallonia’s obstruction over the Comprehensive Economic and Trade Agreement with Canada. The party wields the power at the federal level but can’t force the southern region to abide by its wishes. The differences over Canada reveal some of the broader economic faultlines within Belgium. According to figures from the central bank, 83 percent of overall Belgian exports come from Flanders, versus 14.6 percent from Wallonia and 2.4 percent from Brussels. In terms of trade with Canada, the northern region accounts for 90.2 percent of Belgian exports and the south for 9 percent. “Wallonia doesn’t have skin in the game,” said Sander Loones, a member of the European Parliament and vice president of the N-VA party.

Ceta talks: EU vows to unblock Canada trade deal - BBC News: The European Parliament president says he is optimistic that a free-trade deal between the EU and Canada can be signed soon despite last-minute obstacles. Objections by a Belgian region, which opposes the deal, "are for us Europeans to solve", Martin Schulz said. He was speaking after meetings in Brussels with Canadian Trade Minister Chrystia Freeland and the head of Belgium's Wallonia region. Ms Freeland said: "It's time for Europe to finish doing its job." After seven years of negotiations on the Comprehensive Economic and Trade Agreement (Ceta), talks broke down on Friday. This followed a rejection of the deal by Wallonia. Exercising its right under the Belgian federal constitution, it called for clarity on safeguards to protect labour, environmental and consumer standards. The deadlock has called into question the EU's ability to make trade deals. All 28 EU member states support the agreement, which was to be signed next week. On Saturday Mr Schultz held meetings with Paul Magnette, the head of the Walloon government, and Mrs Freeland. Afterwards he told reporters that the emergency talks have given him "much reason for optimism about the positive conclusion of Ceta as soon as possible." He added: "I am convinced that, by fully addressing the last remaining concerns, we can turn the apparent European division on Ceta (...) into a victory for every participant." "The ball is in Europe's court," Ms Freeland said. "We hope that it is possible to find a solution."

Commission faces EU court battle over secret TTIP documents --  The European Commission faces an EU court battle to keep secret its lawyers’ analysis on whether the controversial investor-state-dispute (ISDS) clause in draft trade deals with the USA and Canada is illegal.  ClientEarth, an NGO of environmental lawyers, has slapped the Commission with a lawsuit after applying for the legal opinion using EU transparency rules. It received heavily redacted documents that make it impossible to see the analysis of whether ISDS is legal under EU law.  The redactions will be embarrassing for an institution that regularly claims to be the most transparent in the world and far more so than national governments. ISDS is controversial because critics argue it will allow powerful multinationals to sue governments in international tribunals, which can have a chilling effect on their willingness to regulate in the public interest.The Commission claims that the black-out is needed to protect its negotiations with the US on the Transatlantic Trade and Investment Partnership (TTIP) but that will now be tested by judges in the EU’s General Court in Luxembourg. The executive is mandated by member states to handle free trade agreement talks.The CETA deal with Canada, facing some opposition in national parliaments, also has an ISDS clause The Court must hold a hearing and decide whether to annul the decision to refuse access to the requested documents. If it loses, the Commission will be compelled to reconsider its decision, be barred from using the same arguments to refuse access, and pay litigation costs.

As Deadline Looms, WikiLeaks Reveals Corporate Demands From The EU -- Today, for the first time, WikiLeaks released demands by the EU to lock in a wide list of services sectors to TISA's privatization and deregulation provisions, including public services in developing countries. In the mid-2000s, when European campaigners leaked similar demands during corporate efforts to expand the General Agreement on Trade in Services, the EU was forced to walk back many of those demands. The European pressure on developing countries was widely condemned by the public, and revealed the corporate, antidevelopment efforts behind the deal, just as they are revealed today.   Global union federations, including Public Services International (PSI), the International Union of Food workers (IUF), International Transport Workers' Federation (ITF), UNI Global Union, and Education International (EI) as well as European federations including the European Federation of Public Service Unions (EPSU) and UNI Europa, for the first time made united call to suspend the talks, available here [PDF].   Globalization's cheerleaders are all hand-wringing about the widespread opposition to trade pacts. But what they don't acknowledge is that people around the world are not rejecting "trade," they are rejecting corporate control over our lives. People want to live in a democracy; they want quality, accessible public services; a well-regulated financial sector; and decent jobs for all ― the opposite agenda of the deregulation, locked-in privatization, and anti-development fundamentals of the secret proposed TISA, according to today's explosive leak.  Given that public opposition in Europe to the proposed EU-U.S. Transatlantic Trade and Investment Partnership (TTIP) has put its advance on hold, and the given the growing opposition to the Trans-Pacific Partnership (TPP), corporations and the governments they represent have been hoping to get the TISA completed before a change in U.S. administration. But this corporate charade must not be hastened to a conclusion before President Obama leaves office, without the global public even hearing of it, let alone debating its pros and cons.

EU Crafting New Security Rules After IoT Debacle -- The European Commission is drafting new cybersecurity rules for Internet of Things (IoT) devices after a number of European security firms have warned that current IoT devices come with little or no security features, according to a report from security blogger Brian Krebs.The rules would apply to devices like smart home devices, web-connected security cameras, DVRs and routers.According to Krebs, the commission is drafting the new security requirements for IoT devices as part of an overhaul of the European Union’s telecommunications laws.“The commission would encourage companies to come up with a labeling system for internet-connected devices that are approved and secure,” according to Catherine Stupp, a reporter for Euractive.com, who first reported on the potential rule changes. “The EU labeling system that rates appliances based on how much energy they consume could be a template for the cybersecurity ratings.” Devices that Krebs noted could be particularly vulnerable to cybersecurity breaches are white-labeled DVRs and IP cameras made by a Chinese company called XiongMai Technologies, which are sold to vendors who use the devices in their own products. Krebs said devices made by XiongMai Technologies contain a very hackable default username and password built into their firmware.

 ECB Wants To Curb Bitcoin Use Over Fears It May "Lose Control Over Money Supply" -- The first time the ECB officially warned about the dangers of virtual currencies in general, and in particular, bitcoin - what was then a mostly unknown currency trading in the single digits (in USD terms) - was in November 2012 when in a report called "Virtual Currency Schemes" it warned that "in an extreme case, virtual currencies could have a substitution effect on central bank money if they become widely accepted. The increase in the use of virtual money might lead to a decrease in the use of “real” money, thereby also reducing the cash needed to conduct the transactions generated by nominal income. In this regard, a widespread substitution of central bank money by privately issued virtual currency could significantly reduce the size of central banks’ balance sheets, and thus also their ability to influence the short-term interest rates. Central banks would need to look at their existing tools to deal with this risk (for instance, trying to impose minimum reserve requirements on virtual currency schemes)." Ironically, since then the ECB has moved significantly down the narrative of currency substitution, and in fact, following a recent push to eliminate paper currency (now that the €500 bill is no longer produced) the central bank has been urging for a shift away from real, paper money and into electronic variants. However, overnight in a surprising reminder how the European central bank feels about bitcoin and other virtual money, the ECB urged EU lawmakers to tighten proposed new rules on digital currencies such as bitcoin, fearing they might one day weaken its own control over money supply in the euro zone. In other words, first the ECB went after cash; now it is going after all virtual currencies like bitcoin.

ECB’s Mario Draghi Hints at Extension of Bond Purchases - WSJ: The European Central Bank kicked back a decision on whether to boost its €1.7 trillion ($1.86 trillion) stimulus, disappointing investors who had hoped for greater clarity from Frankfurt and raising the stakes for its next policy meeting in December. At a short news conference, ECB President Mario Draghi said policy makers hadn’t even discussed whether to extend the central bank’s €80 billion-a-month bond-purchase program, which is due to end in five months. As that deadline approaches, investors have been growing nervous. Financial markets were rattled earlier this month by a media report suggesting that the ECB might start to wind down, or taper, its bond purchases—the opposite of what most economists had been expecting. Mr. Draghi brushed off that report on Thursday as “uninformed,” and strongly suggested the ECB would announce an extension of its so-called quantitative-easing program at a policy meeting Dec. 8. “It’s quite clear that our decisions in December will tell [financial markets] what we [plan to] do in the coming months,” Mr. Draghi said. Still, some investors were disappointed by the lack of clearer guidance from Frankfurt.Financial markets were volatile during Mr. Draghi’s remarks. The euro jumped half a cent against the dollar before reversing its gains and ending lower at $1.093. German government bond yields spiked before ending lower. Bond yields rise as prices fall. The sharp movements show how dependent financial markets have become on the actions of central banks, which have taken unprecedented action in recent years to support weak growth and inflation.

 Poland Seeks to Lock in Low Yields With First 30-Year Eurobond - Poland is tapping international debt markets with its first 30-year euro-denominated bond in more than a decade as borrowing costs edge higher from historic lows before an expected tightening of U.S. monetary policy. The investment-grade sovereign sold 500 million euros ($550 million) of bonds maturing in October 2046 at 120 basis points above mid-swaps, according to a person familiar with the matter. It also placed 750 million euros of notes due in 12 years at 48 basis points, said the person who is not authorized to speak publicly and asked not to be identified. Poland’s offering was priced at about 2.12 percent, compared with a yield of 0.67 percent on 30-year German bonds. Deputy Finance Minister Piotr Nowak told the PAP news agency the sale is aimed at pre-financing next year’s budget deficit to avoid “market uncertainty related to the situation in the U.S.” “It’s natural to issue in the fourth quarter because they like to pre-issue,” said Richard Segal, a senior analyst at Manulife Asset Management in London, before the sale. “But markets are tougher given more complicated internal politics and heavy new issuance in general. Also, emerging-market debt has been selling off as the Fed rate hike moves closer." The yield on Poland’s 2036 Eurobond, sold in January, was at 1.63 percent on Tuesday, compared with a record low of 1.58 percent Oct. 3. The rate on the country’s 2027 euro-denominated note stood at 0.79 percent, the highest since Sept. 21.

Why Italy’s Banking Crisis is Spiraling Out of Control - Things have got so serious in Italy that the only two things propping up the country’s crumbling banking sector — apart from the last few remaining crumbs of public faith in the system — are two inadequately capitalized bad bank funds, Atlante I and the imaginatively named Atlante II. Both funds are operated by a deeply opaque Luxembourg-based private firm called Quaestio SGR. The firm is a wholly owned subsidiary of Quaestio Holding S.A, which is itself jointly owned by a bizarre mishmash of organizations, including Fondazione Cariplo (37.65%), an influential “charitable” banking foundation; Fondazione Cassa dei Risparmi di Forlì (6.75%), a regional savings bank; Cassa Italiana di Previdenza e Assistenza dei Geometri liberi professionisti (18%), a bank for professional freelance surveyors (no, seriously); Locke S.r.l. (22%), an obscure Milan-based holding company; and Direzione Generale Opere Don Bosco (15.60%), a Roman Catholic religious institute. No surprises there. Atlante I’s funds are largely privately sourced, coming primarily from Italy’s largest banks. The two biggest banks, Unicredit and Intesa San Paolo,both pledged around a billion euros a piece. A further €500 million was provided by a gaggle of smaller banks and another €500 million was pledged by Cassa Depositi e Prestiti (CDP for short), an almost wholly state-owned financial institution. With a little extra help from certain foreign investors, Atlante was able to claw together some €4.8 billion — to help solve a €360 bad-debt problem.

Will Italy Leave the EU? Follow the Money - Will Italy follow the U.K.'s example and leave the European Union? Far-fetched as it may seem, capital flows suggest that some people aren’t waiting to find out. To keep the euro area's accounts in balance, Europe's central banks track flows of money among the members of the currency union. If, for example, a depositor moves 100 euros from Italy to Germany, the Bank of Italy records a liability to the Eurosystem and the Bundesbank records a credit. If a central bank starts building up liabilities rapidly, that tends to be a sign of capital flight. Lately, Italy's central bank has been building up a lot of liabilities to the Eurosystem. As of the end of September, they stood at about 354 billion euros, up 118 billion from a year earlier -- and up 78 billion since the end of May, before the U.K. voted to leave the EU. The outflow isn't quite as large as during the sovereign-debt crisis of 2012, but it's still significant. The main beneficiary seems to be Germany, which has seen its credits to the Eurosystem increase by 160 billion over the past year. Here's a chart showing the cumulative six-month flows between Italy and Germany and the rest of the euro area:Why the accelerating outflows from Italy? One explanation is that people are worried about the state of the country’s banks, which are suffering the consequences of bad lending, poor governance and a new euro-area oversight system that makes rescues difficult. Another is political: Italian Prime Minister Matteo Renzi has staked his fate on a December government-reform referendum that, if it goes against him, could strengthen opponents who want to force a vote on whether Italy should remain in the EU. In that context, it's not surprising that some depositors prefer not to hold Italian euros, given the chance that they might eventually be converted into lira. Either way, the capital flight doesn’t speak well of confidence in the European project -- something EU leaders will have to keep in mind as they negotiate the terms of Britain's exit.

Euro 'house of cards' to collapse, warns ECB prophet: The European Central Bank is becoming dangerously over-extended and the whole euro project is unworkable in its current form, the founding architect of the monetary union has warned. "One day, the house of cards will collapse,” said Professor Otmar Issing, the ECB's first chief economist and a towering figure in the construction of the single currency. Prof Issing said the euro has been betrayed by politics, lamenting that the experiment went wrong from the beginning and has since degenerated into a fiscal free-for-all that once again masks the festering pathologies. “Realistically, it will be a case of muddling through, struggling from one crisis to the next. It is difficult to forecast how long this will continue for, but it cannot go on endlessly," he told the journal Central Banking in a remarkable deconstruction of the project. The comments are a reminder that the eurozone has not overcome its structural incoherence. A beguiling combination of cheap oil, a cheap euro, quantitative easing and less fiscal austerity have disguised this, but the short-term effects are already fading. The regime is almost certain to be tested again in the next global downturn, this time starting with higher levels of debt and unemployment, and greater political fatigue. Prof Issing lambasted the European Commission as a creature of political forces that has given up trying to enforce the rules in any meaningful way. "The moral hazard is overwhelming," he said. The ECB is now buying corporate bonds that are close to junk, and the haircuts can barely deal with a one-notch credit downgrade The European Central Bank is on a "slippery slope" and has in his view fatally compromised the system by bailing out bankrupt states in palpable violation of the treaties. "The Stability and Growth Pact has more or less failed. Market discipline is done away with by ECB interventions. So there is no fiscal control mechanism from markets or politics. This has all the elements to bring disaster for monetary union. "The no bailout clause is violated every day,"

  The unwise war against low interest rates Martin Wolf, FT - Many influential interests and opinion-formers de­test today’s ultra-low interest rates. They are also clear who is to blame: central banks. Theresa May, UK prime minister, has joined the fray, arguing that “while monetary policy … provided the necessary emergency medicine after the financial crash, we have to acknowledge there have been some bad side effects. People with assets have got richer. People without them have suffered. People with mortgages have found their debts cheaper. People with savings have found themselves poorer. A change has got to come.” So how might the government deliver such change? The answer is not obvious. A sBen Broadbent, deputy governor of the Bank of England, notes, real long-term interest rates have fallen to zero (or below) over the past quarter of a century. Furthermore, as the International Monetary Fund points out, core consumer price inflation has been persistently weak in high-income economies. Mr Broadbent argues: “With inflation relatively stable in all these countries, it’s hard to believe central banks were doing much else than … following a similar decline in the neutral rate of interest.” At first glance, then, central banks are just following real economic forces while taking account, as they should, of recent demand weakness caused by the financial crisis and the excessive build-up of private debt that preceded it. An indication of this demand weakness is the persistence of financial surpluses (excesses of income over spending) in the private sectors of high-income economies — notably in Japan, Germany and the eurozone — despite ultra-low interest rates. This is why the Bank of Japan and the European Central Bank have remained particularly aggressive. Given this background — the sustained declines in real interest rates, chronically low inflation and feeble private demand — does a credible alternative set of policies exist?

How Do the French Do it? - Tim Taylor -- From an economic point of view (and doubtless from other points of view, as well), the French present a puzzle. France is often perceived as having a government that practices heavy-handed intervention into the economy, sometimes known as dirigisme, but it is also obviously a high-income economy and has been a high-income economy for decades. So does this mean that France is less heavy-handed in economic interventionism than its reputation suggests? Or that the French have discovered an especially growth-friendly version of heavy-handed interventionism? How does France manage this balancing act? Pierre Lemieux tackles this question in his essay "France: The end of the road, again?" in the Fall 2016 issue of Regulation magazine  (pp. 34-41). As a starting point, here's some evidence on the higher degree of regulation in the French economy. Lemieux notes: "Public expenditures amount to 57% of French gross domestic product, the fourth-highest percentage in the OECD, after Greece, Slovenia, and Finland. This compares to 45% for the OECD unweighted average and 39% for the United States." In measures of "economic freedom" for the countries of the world, the US tends to rank around 10th, while France tends to rank around 70th. However, Lemieux also offers some evidence on the other side: "Not all industries are more regulated in France than in America. The OECD’s Services Trade Restrictiveness index shows France as less regulated than the United States in commercial banking, insurance, broadcasting, and many modes of transport. Even the labor market is less regulated in France with regard to many trades and professions. In the United States, nearly 30% of jobs require a license." Moreover, France (like many other economies) has gradually been moving in the direction of less regulation.

 Scenes From The Apocalypse - Mass Immigration Ruins The Streets Of France -- The Paris you know or remember from adverts or brochures no longer exists. While no part of Paris looks like the romantic Cliches in Hollywood movies, some districts now resemble post-apocalyptic scenes of a dystopian thriller. This footage, taken with a hidden camera by an anonymous Frenchman in the Avenue de Flandres, 19th Arrondissement, near the Stalingrad Metro Station in Paris as well as areas in close proximity, shows the devastating effects of uncontrolled illegal mass immigration of young African males into Europe. If it weren't for the somewhat working infrastructure, the scene might as well have been the setting of movie shooting - or a slum in Mogadishu. The streets are littered in garbage, the sidewalks are blocked with trash, junk and mattresses, thousands of African men claim the streets as their own - they sleep and live in tents like homeless people. If no portable toilets are in reach, open urination and defecation are commonplace. Tens of thousands of homeless Illegal immigrants, undocumented or waiting for a decision of their asylum application, waste away trying to pass the time in the city. Although their prospects of being granted asylum as Africans are bleak, they're hoping for a decision that would grant them an apartment, welfare and make France their new home. The conditions are absolutely devastating. The police have given up trying to control these areas, the remaining French people avoid the areas at all cost, crime and rape is rampant, just recently mass brawls and riots made the news as fights broke out near the Stalingrad metro station. If current trends continue and the French become minority in their own capital in even more areas, scenes like this might spread to areas frequented by tourists, forever changing the last romantic parts of Paris that match what most people have in mind when they think of the iconic city.

 Huge increase in Britons seeking citizenship in EU states as Brexit looms -- The number of Britons seeking citizenship in other EU countries has surged as a result of the Brexit vote, with some member states recording near tenfold increases on 2015 figures. Denmark, Italy, Ireland and Sweden have all reported a spike in applications from British citizens eager to secure proper status in the EU following the 23 June vote that has set the UK on course to leave. Across 18 European countries, at least 2,800 Britons applied for citizenship in the first eight months of 2016 – a more than 250% increase on numbers recorded in 2015. Compared with last year’s figures, numbers have surged almost tenfold in Denmark and threefold in Sweden. Several applicants told the Guardian that it was the Brexit vote that prompted them to take action. “I started the application process on 24 June, the day after the EU referendum,” said Ravi Bhatiani, 33, who has been living and working in Brussels for nine years. “As soon as there was a risk to the freedom of movement and therefore a risk to my ability to work in Belgium and do the job I enjoy doing, I decided to apply for citizenship.” In order to find out how the number of citizenship applications has changed, the Guardian contacted the 27 other EU member states requesting figures on applications made by British nationals and received relevant data from 18. Of the countries that responded, the numbers were highest in Sweden, where more than 1,100 applications were received from British nationals between January and August 2016, more than three times that received in the same period in 2015. They peaked in the week of the referendum (129 applications) and the week after (150 applications).

Britain can't get full single market access with free movement concessions: Merkel | Reuters: German Chancellor Angela Merkel said on Saturday that Britain could not get concessions on the freedom of movement while retaining full access to the European single market, or other countries would want the same. Britain, which is leaving the European Union, faces the challenge of securing a new trading deal with the EU while also giving London more control over migration from the bloc, potentially falling foul of the EU's freedom of movement principle that is key for accessing its single market. "If I start making concessions on the freedom of movement, then another country will tomorrow come and say: 'I don't want so many Bulgarians and Romanian workers either'," Merkel told a conference of the youth wing of her Christian Democrats (CDU). "And then a third country will come and then the extreme forces from Europe will come and then we'll soon all be closing our borders again and not having any freedom at all and then that's no longer Europe," she added. She said whether Britain would get access to the European single market depended on whether it accepted the EU's four freedoms, including the freedom of movement of people. "If Britain says no, it can't get full access to the European single market," she said.

Big Winner From London’s Brexit Exodus Isn’t Even in Europe - The ultimate winner if Brexit forces banks to flee London may lie 3,500 miles away, far beyond the borders of Europe. New York, even more than Frankfurt or Paris, is emerging as a top candidate to lure banking talent if London’s finance industry is damaged by Britain’s divorce from the European Union, according to politicians and industry executives. Follow @Brexit for the latest news, and sign up to our Brexit Bulletin for a daily roundup. That’s because the largest U.S. city, rather than European finance hubs, is the place that rivals the depth of markets, breadth of expertise or regulatory appeal boasted by London. Continental Europe will win some bank operations to satisfy regional rules ensure time-zone-friendly access to its market, but more may eventually shift across the Atlantic to the only other one-stop shop for business. “There is no way in the EU there is a center with the infrastructure or regulatory infrastructure to take the role London has," particularly in capital markets, John Nelson, chairman of Lloyd’s of London, said in an interview. "There is only one city in the world that can, and that is New York." For many global investment banks, London is their largest or second-biggest headquarters. If the benefits of scale are diminished by having to move roles to Europe, banks may look to shrink their London operations even further by moving any workers able to do their job just as well from a different time zone, including global-facing roles in merger advisory, trading and back-office technology and finance. Additional jobs may move as specific trading activities seek a new epicenter. London Stock Exchange Group Plc Chief Executive Officer Xavier Rolet was blunt, saying that if Brexit strips London of the ability to clear euro derivatives trades, the entire business would move to the only other city able to clear all 17 major currencies: New York.

Clean Brexit boost as Theresa May rightly includes all cabinet Brexiteers in EU negotiation planning | BrexitCentral: A leaked Government list obtained by POLITICO has revealed the full makeup of Theresa May’s Brexit cabinet committee – the sub-committee within the cabinet which will take the lead on the Government’s Brexit negotiations. In a development which gives one of the clearest signals to date that the Government does intend to implement a clean Brexit, the committee includes all of the current cabinet ministers who campaigned for a Leave vote in the referendum – Brexit Secretary David Davis, International Trade Secretary Liam Fox, Transport Secretary Chris Grayling, Environment Secretary Andrea Leadsom, International Development Secretary Priti Patel, and Foreign Secretary Boris Johnson. The other six permanent positions on the committee are filled by ministers who backed Remain, including Chancellor Philip Hammond, Home Secretary Amber Rudd and Theresa May herself, whilst the Secretaries of State for Scotland, Wales and Northern Ireland are each listed as attending “as required”. Its decisions carry the same authority as full cabinet decisions, and it is believed to have met at least three times already, according to POLITICO. The committee will play a crucial role in the Brexit negotiations, as well as looking at the wider issue of Britain’s global trade strategy after leaving the European Union. The inclusion of all the prominent Leave campaigners now in the cabinet ensures an even balance between Leavers and Remainers at the heart of the Government’s decision making process on Brexit.

Will Brexit cause a sterling crisis? - The sharp decline in sterling since the UK voted for Brexit has been widely viewed by economists as inevitable and, for the most part, desirable. Brexit will probably reduce UK productivity and competitiveness, so living standards will be lower than otherwise. The decline in sterling raises domestic inflation, which is the main route for the necessary decline in living standards to be imposed on the population. It also repairs the loss in the UK’s international competitiveness. The IMF has estimated that a drop of 5-15 per cent in sterling should be sufficient to do the job. Sterling is now 16 per cent lower than it was on referendum night. What appeared to be an orderly decline in the exchange rate has shown signs of getting out of hand in the wake of the Prime Minister’s speech at Conservative Party conference, in which she appeared to favour a hard Brexit. This could be a negotiating stance, or it could be a genuine political preference: we will not find out until mid 2019. But markets are saying that a hard Brexit will require a larger drop in sterling to restore equilibrium. This will result in higher inflation than previously contemplated. Separately, the Governor of the Bank of England appears more willing than before to accept a “temporary” rise in inflation, while keeping domestic interest rates close to zero. The combination of hard Brexit with a super-easy central bank is not a recipe for a strong currency. There has been some loose talk that this loss of confidence could develop into something really nasty – a sterling crisis. Although the UK has been a serial offender in this regard since leaving the Gold Standard in 1931, I doubt it will happen this time.  Even mentioning the term “sterling crisis” will strike many readers as alarmist. Past crises have usually occurred because Britain was part of a fixed exchange rate system (the Gold Standard, Bretton Woods or the ERM) that was in danger of breaking apart.

U.K. Government Concession on Brexit Sends the Pound Surging: The British pound has jumped to its highest level in over a week Tuesday after a lawyer for Theresa May’s government said parliament will “very likely” have to ratify an eventual agreement between the U.K. and the European Union when the country leaves the bloc.The comments are significant because the majority of MPs are opposed to leaving the EU, and are upset at indications that the government will not even try to keep the U.K. in the EU’s Single Market as it tries to negotiate the ‘Brexit’ settlement.The U.K. sends over 40% of its exports to the EU, and the financial services sector, which accounts for over 10% of gross domestic product, is particularly dependent on unconstrained access to the Single Market. The pound has plunged in the last two weeks on fears that this access would be lost. If parliament were to reject the government’s draft settlement (and public opinion were to swing back behind Remaining), it is possible that the U.K. may stay in the EU after all. James Eadie, who is representing May’s government in a High Court challenge over who has the right to trigger divorce talks, said members of parliament would very probably be allowed a say on the final exit deal.“The government view at the moment is it is very likely that any such agreement will be subject to ratification” Eadie said.Somewhat confusingly, Attorney General Jeremy Wright–also arguing the government’s case–however maintained that once the government formally notifies the rest of the EU of its decision to leave, the process would be irrevocable. That’s not only at odds with Eadie’s comments, but also with a broad hint from EU Council President Donald Tusk last week that “no Brexit” was still an option–“even if today hardly anyone believes in such a possibility.”

May told to expect tough Brexit talks -- Theresa May received a polite but cool welcome on her European summit debut on Thursday, with France and Germany warning of a rough ride for Britain as it makes its break from the EU. At her first Brussels gathering of EU leaders, the British prime minister made a confident first intervention on migration, exchanged some sharp words with the chair and turned her hand at drafting a compromise text on Russia policy. Finally, well after midnight, she made a short presentation on Brexit that ran for little more than five minutes and elicited no response.While there was no pushback to her conciliatory Brexit briefing — reassuring the room that Britain would remain a “dependable partner” — leaders both before and after the summit made plain their concerns over the tough divorce negotiations that lie ahead. “Basically it was a repetition of what we have heard so far. Nevertheless, it was important for us to have it repeated in that format,” said Angela Merkel, the German chancellor, as she praised Mrs May for promising not to let Brexit come at the expense of the unity of the remaining 27 EU members.“As far as the practical terms are concerned, it is going to be rough going,” Ms Merkel added. “It will not be that easy. But what she said today is OK. It is a good foundation.” French president François Hollande expressed himself more bluntly as he arrived at the summit: “I say very firmly: if Mrs May wants a hard Brexit she will get a hard negotiation.” He later pointedly stressed accepting free movement of people was a condition of securing access to the single market.  Mrs May’s one moment of light friction came during an exchange with Donald Tusk, the European Council president, over the EU27’s parallel discussions on the future of the union to which Mrs May was not invited.While the British prime minister said it was appropriate for the EU to work as 27 in the context of Brexit, she emphasised Britain would need to be involved when pan-EU issues were concerned.  This drew a stern response from Mr Tusk. “We have to expect the dual reality from now on. It is a fact of life and we have to live with it.”

May’s Ministers Rush to Smooth Bankers’ Ruffled Brexit Feathers - Prime Minister Theresa May’s government is seeking to quell fears among bankers that it won’t fight for the finance industry as it prepares to pull Britain out of the European Union.  Brexit Secretary David Davis said Thursday that he is “determined to get the best possible deal” for London-based banks after privately clashing with Chancellor of the Exchequer Philip Hammond over how to balance the conflicting goals of curbing immigration and accessing the single market. Meantime, Trade Secretary Liam Fox is planning to meet finance executives to soothe their concerns over Britain’s future relationship with the bloc, according to an official who spoke on condition of anonymity. The two-fronted charm offensive by top-ranking government figures who campaigned for Brexit aims to soften the perception of May’s first 100 days in office that she is ready to sacrifice Britain’s role as a global financial hub to cut back on immigration. May’s office has ordered a leak inquiry after briefings against the chancellor appeared in newspapers last week, an official said.  “Everyone realizes that financial services is a key part for the Brexit negotiations," Anthony Browne, chief executive officer of the British Bankers’ Association, told Bloomberg Television on Thursday. "If you’re going to make a success of Brexit, part of that is making sure we continue as a financial services center for Europe.”

 Bill Black: Bank of England Says Authorities Mustn’t Fine Banks Because Growth - Elite bankers and the pathetic economists who serve as apologists for their frauds specialize in proving our family saying that it is impossible to compete with unintentional self-parody. The subtitle of the WSJ article providing the latest proof is “Fines on banks translate into $5 trillion of ‘reduced lending capacity,’ bank says.” The “bank” referred to is the Bank of England, which is supposed to be the UK’s primary bank regulator. To be kind, the “study” by BOE is so embarrassing that a better descriptor of the BOE would be “fraud enabler.”  BOE’s methodology and “logic” (which it did not make public) are easy to guess. It is not sufficient that elite banksters are able to become wealthy from leading the worlds’ most destructive financial frauds with impunity from prosecution, civil suits, and enforcement actions. It is vital that the banks no longer be fined for conducting these massive frauds. When banks are fined they lose some of their profits from these epidemics of frauds, bid-rigging cartels, predatory lending, aiding and abetting elite tax fraud, and money laundering for terrorists and violent drug cartels. For the sake of brevity, I will call these collectively “fraud proceeds.” Banks remain highly leveraged despite modest increases in capital requirements, so the BOE’s staff is assuming that each dollar of fraud proceeds that the banks lose to fines reduces total bank size by $18.18. They are assuming that the typical bank has a miserably inadequate capital requirement of slightly over five percent. There are a number of fatal problems with BOE’s “logic” and (unstated) methodology. First, under the BOE’s “logic” the more profitable banks become by defrauding their customers the faster the economy will grow. The bank CEOs who led the three most destructive epidemics of financial fraud in history were apparently Soviet-style (pun intended) “Heroes of Capitalism.” Except, of course, what they actually drove was a massive financial bubble that produced the Great Recession. The projected loss of GDP in the U.S. due to the Great Recession is $24.3 trillion – and the loss of eurozone GDP is far larger because their economic losses have occurred over a far longer time and have been far deeper than in the United States. Only central bank economists would be so dogmatically divorced from reality and so moral challenged that they would think that allowing banksters to keep their fraud proceeds and avoid all accountability for their crimes would be good for the economy.

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