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

Saturday, August 27, 2016

week ending Aug 27

  Fed, Eager to Show It’s Listening, Welcomes Protesters - — When a dozen protesters in green T-shirts showed up two years ago at the Federal Reserve’s annual conference in Jackson Hole, Wyo., they were regarded by many participants as an amusing addition. Two years later, they have won a place on the schedule.The protesters, who want the Fed to extend its economic stimulus campaign, are scheduled to meet on Thursday with eight members of the central bank’s policy-making committee. At the start of a conference devoted to esoteric debates about monetary policy, officials will hear from people struggling to make ends meet.The Fed’s effort to show that it is listening to its critics reflects the central bank’s broader struggle to find its footing in an era whose great challenge is not the strength of inflation, but the weakness of economic growth.Officials are wrestling with the limits of monetary policy, the focus of the conference, even as they try to address simmering discontent among liberals who want stronger action and among conservatives who say the Fed has done too much. The meeting also represents an unlikely victory for Ady Barkan, the 32-year-old lawyer who decided in 2012 that liberals should pay more attention to monetary policy. He now heads the “Fed Up” campaign, a national coalition of community and labor groups that plans to bring more than 100 protesters to Jackson Hole. “We want to make sure that regular voices are being heard,” Mr. Barkan said in beginning the campaign two years ago. The American economy, he said, was not working for all Americans — particularly not for blacks and other minority groups. Fed officials so far have chosen to accommodate the group by applauding its efforts at public education, not by seriously engaging its arguments that interest rates should be raised more slowly. Esther George, the president of the Federal Reserve Bank of Kansas City, which hosts the Jackson Hole conference, arranged Thursday’s meeting with the activists. She said in an interview earlier this year that the Fed must balance job growth with other issues, like financial stability.

What the Fed Chief's Next Message Should Be - - Kocherlakota - In December, Federal Reserve officials indicated that they planned to raise interest rates by a quarter percentage point every three months for the next three years. That framework is already in disarray, leaving investors and the general public guessing about how the Fed plans to manage the economy. When Chair Janet Yellen speaks later this week at the Kansas City Fed's annual conference in Jackson Hole, she'll have to offer a much more durable and convincing plan. She could start by repudiating the idea that future interest rate moves will follow any kind of timeline. In a constantly changing economic environment, the Fed cannot promise to act according to a pre-set calendar. Suggesting otherwise has harmed the Fed's credibility in the markets and, no less importantly, with Congress.The Fed’s practice of releasing official forecasts of rate changes to the public every three months doesn’t help in this regard. Yellen should dismiss any idea that these forecasts have any relevance for the evolution of actual policy. If not the calendar, then what should influence the Fed's decisions? It's not enough to say that officials will take into account a wide range of economic indicators. Instead, Yellen should identify a few important drivers. The minutes of the central bank's July policy-making meeting suggest that Fed staff expect inflation to remain below 2 percent through 2018 -- a situation that hardly justifies a rate increase. The unemployment rate, the Fed’s traditional measure of labor market slack, has been stuck at around 5 percent for nearly a year. That kind of stability -- at near historical lows -- would normally suggest that the economy is near full employment, the point beyond which inflation tends to become a problem. Yet, despite the aging of the population, nonfarm employment has kept increasing at a rate of 200,000 a month and participation in the labor force has been rising over the past year - all of which indicates that the labor market has room to improve. Why not let it do so by holding off on rate increases? In light of these three factors, the Fed's decision to keep rates low in 2016 makes a lot of sense. Yellen should explain this connection and stress that such indicators are likely to remain central in the central bank's decision-making over the next two years.

Fed Chair Janet Yellen Says Case for Interest Rate Hike Stronger — The case for raising U.S. interest rates has strengthened in recent months because of improvements in the labor market and expectations for moderate economic growth, Federal Reserve Chair Janet Yellen said on Friday.Yellen did not indicate when the U.S. central bank might raise rates, but her comments reinforced the view that such a move could come later this year. The Fed has policy meetings scheduled in September, November and December.Speaking at a three-day international gathering of central bankers in Jackson Hole, Wyoming, Yellen said the “U.S. economy was nearing the Federal Reserve’s statutory goals of maximum employment and price stability.”“In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months,” Yellen said in prepared remarks.She added that the Fed still thinks future rate increases should be “gradual.”The Fed raised rates in December, its first hike in nearly a decade, but it has held off further increases so far this year due to a global growth slowdown, financial market volatility and generally tepid U.S. inflation data.Investors currently see an 18 percent probability the Fed will raise rates at its September policy meeting and a 53 percent chance of an increase in December, according to CME Group’s FedWatch tool.Yellen’s comments, by failing to lay out a clear roadmap for what the Fed needs to see to raise rates, will likely not convince some investors that a rate increase is imminent, in part because Fed policymakers are seen as sharply divided over whether to increase rates soon or take a more cautious approach.

Yellen: "Case for an increase in the federal funds rate has strengthened"  - From Fed Chair Janet Yellen: The Federal Reserve's Monetary Policy Toolkit: Past, Present, and Future. Excerpt:  Looking ahead, the FOMC expects moderate growth in real gross domestic product (GDP), additional strengthening in the labor market, and inflation rising to 2 percent over the next few years. Based on this economic outlook, the FOMC continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives. Indeed, in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months. Of course, our decisions always depend on the degree to which incoming data continues to confirm the Committee's outlook...And, as ever, the economic outlook is uncertain, and so monetary policy is not on a preset course. Our ability to predict how the federal funds rate will evolve over time is quite limited because monetary policy will need to respond to whatever disturbances may buffet the economy. In addition, the level of short-term interest rates consistent with the dual mandate varies over time in response to shifts in underlying economic conditions that are often evident only in hindsight. For these reasons, the range of reasonably likely outcomes for the federal funds rate is quite wide ...

8 Of 12 Regional Feds Voted To Hike Discount Rate In July, One Shy Of The 9 Last November -- Back in April, when the world was still reeling from the China devaluation inflicted market slump, the Fed's discount rate minutes for the months of March/April showed that 4 regional Feds wanted a 25 bps rate hike, up from just two  - the Richmond Fed and Kansas City - in the Feb/March meeting. One month ago the Fed released its May/June Discount Rate Minutes which revealed that both the St. Louis and Boston Feds joined four other regional Feds, Cleveland, Richmond, Kansas City and San Francisco, in seeking a quarter point increase in Fed discount rate to 1.25% prior to the June 14-15 FOMC meeting. Then moments ago the Fed released its latest July 25 Discount Rate Minutes which revealed that two more regional Feds, Dallas and Philadelphia joined the six previously noted, in seeking a quarter point increase in Fed discount rate to 1.25 percent prior to the July meeting. This means that as of a month ago, two thirds of all regional Feds were urging Yellen to hike the discount rate; they were the following: Boston, Cleveland, Dallas, Kansas City, Philadelphia, Richmond, San Francisco and St. Louis. Those who voted to keep discount rate at 1% cited argument that outlook and below-target inflation supported keeping current accommodation in place; banks were Atlanta, Chicago, Minneapolis, and especially the New York. Clearly they dominated the discussion. Obviously, there was no rate hike, as the Fed chose to maintain its primary credit rate at 1%. The regional directors who supported a rate hike increase did so in light of a "strengthening economy and expectations that inflation would move to 2% target." They also saw saw the "economy continuing to expand at moderate pace, yet reports varied somewhat across sectors and districts." Other factors listed included:

  • Several cited improvements in housing, on top of steady or increasing levels of consumer spending
  • Many said initial impact of Brexit vote and global financial developments on U.S. economy was limited; even so, some saw increased uncertainty about U.S. outlook
  • Several mentioned continued weakness in export-related industriesd

While labor mkt indicators improved, some directors saw variability in recent job gains; increasing tightness seen for certain positions, such as those in construction

Janet Yellen, Once the Challenger, Is Now the Challenged - Twenty years ago, Janet Yellen was the unorthodox one. As a governor under then-Federal Reserve chairman Alan Greenspan, she was one of the first Fed officials to challenge central banking consensus that the right inflation rate is zero, arguing instead for 2%. Today, 2% is orthodoxy. The Fed formally committed to 2% inflation in 2012, during Ms. Yellen’s second tour of duty. Like in 1996, there are growing rumblings that orthodoxy is outdated. This time, though, Ms. Yellen is on the other side of the debate. Whether it’s the right side is perhaps the most important question facing the Fed right now. This year’s Jackson Hole conference, sponsored by the Federal Reserve Bank of Kansas City, is devoted to “monetary policy frameworks,” in other words, what should central banks aim for, and how. Before the financial crisis, the answer could be summed in one line: They should aim for 2% inflation by adjusting the short-term interest rate. The first part of that formula, the 2% inflation target, has never changed. The second part went out the window once the Fed’s policy rate fell effectively to zero in 2008. Policy makers then turned to a variety of unorthodox tools, most notably quantitative easing—the purchase of bonds with newly printed money—and commitments to keep rates near zero (“forward guidance”). They had, however, always hoped one day they could return to just using the short-term interest rate. The world, however, has not cooperated. As most economists, including the preponderance of Fed officials, now agree, slow growth and low interest rates may be here to stay.   John Williams, who succeeded Ms. Yellen as president of the Federal Reserve Bank of San Francisco, recently said the Fed should consider either raising its inflation target or targeting something else, such as the growth of nominal gross domestic product, or the price level.

Yellen on negative rates: we do not speak its name -- Janet Yellen opened the festivities at this year’s Jackson Hole economic symposium by musing on what central bankers had learned since the crisis and how they can deal with future recessions in a world where interest rates are far lower than in the past. Yellen argued no additional central bank innovation should be necessary to respond to future recessions, even though Fed policymakers expect the average level of short-term interest rates to be just 3 per cent. (Markets think it’s closer to 2 per cent.) Emphasis ours: Would an average federal funds rate of about 3 percent impair the Fed’s ability to fight recessions?   On average, the FOMC reduced rates by about 5-1/2 percentage points, which seems to suggest that the FOMC would face a shortfall of about 2-1/2 percentage points for dealing with an average-sized recession.  A large portion of the rate cuts that subsequently occurred during these recessions represented the undoing of the earlier tight stance of monetary policy. Of course, this situation could occur again in the future. But if it did, the federal funds rate at the onset of the recession would be well above its normal level, and the FOMC would be able to cut short-term interest rates by substantially more than 3 percentage points. A recent paper takes a different approach to assessing the FOMC’s ability to respond to future recessions by using simulations of the FRB/US model…The study concludes that, even if the average level of the federal funds rate in the future is only 3 percent, these new tools should be sufficient unless the recession were to be unusually severe and persistent.

The Fed Knows How to Hit Its Target - - Kocherlakota -- My former Federal Reserve colleague Kevin Warsh has penned an article in the Wall Street Journal that assails the central bank for its "deeply flawed" management of the economy. I disagree with many elements of his argument, but I want to focus on one: that the Fed doesn’t know how to achieve its inflation objective.  Warsh suggests that the below-target inflation of the past several years has come as a surprise to the Fed -- a belief that, judging from comments I have received by email and on Twitter, many people share. Yet as he should know from his five years as a Fed governor, this impression is completely false. The evolution of both consumer prices and unemployment over the past five years is entirely consistent with what the central bank's staff predicted, and (more arguably) consistent with what officials intended. Consider the November 2010 meeting of the policy-making Federal Open Markets Committee, where officials (with guarded support from both Warsh and me) initiated a second round of bond-buying known as quantitative easing in an effort to boost a lackluster recovery. At the time, Fed staff predicted that inflation would accelerate steadily but very gradually from its 2010 level of 1 percent back toward the 2 percent target. That's pretty much what happened: the core measure of inflation remained below 2 percent in each of the next five years, and was running at 1.4 percent in 2015, just one tenth of a percentage point below the forecast made five years earlier. The unemployment rate stood at 5 percent in late 2015, just 0.2 percentage point below what staff had predicted.

Fed Admits Another $4 Trillion In QE Will Be Needed To Offset An "Economic Shock" - In a Fed Staff working paper released over the weekend titled "Gauging the Ability of the FOMC to Respond to Future Recessions" and penned by deputy director of the division of research and statistics at the Fed, the author concludes that "simulations of the FRB/US model of a severe recession suggest that large-scale asset purchases and forward guidance about the future path of the federal funds rate should be able to provide enough additional accommodation to fully compensate for a more limited [ability] to cut short-term interest rates in most, but probably not all, circumstances."So far so good, however, there are some notable problems with the paper's assumptions, as Citi head of G10 FX, Steven Englander, observes.  He writes that the paper’s basic framework is to take the standard US economic model used by the Fed, give it a negative shock big enough to p ush the unemployment rate up by 5 percentage points (big but not unprecedented over the last 50 years) and deploying the Fed’s policy rate, QE and forward guidance tools to see if they are adequate to get the economy back on track. Negative rates and helicopter money are not used. The two simulations assume:

  1. the economy is in equilibrium initially with inflation at 2%, r* at 1%, so equilibrium nominal fed funds is 3%
  2. the economy is in equilibrium initially with inflation at 2%, r* at zero (secular stagnation) and equilibrium nominal fed funds at 2%

He compares three policy approaches. The first assumes a linear world where fed funds can go into negative territory but there is no breakdown in the structure of economic relationships. It is probably not a realistic view of policy ineffectiveness at negative rates, but it is mean to be a baseline. The second just takes fed funds down to zero and keeps it there long enough for unemployment to return to baseline. The third takes fed funds down to zero and augments it with additional USD2trn of QE and forward guidance. A variation on the third policy response function doubles the amount of QE in the second simulation.

Former Fed Staffer, Activists Detail Plan to Overhaul Central Bank --  A former top Federal Reserve staffer joined with activists on Monday to lay out the mechanics of a plan to overhaul the structure of the U.S. central bank. Dartmouth College’s Andrew Levin, who was a top adviser to former Fed Chairman Ben Bernanke, Jordan Haedtler of the left-leaning Center for Popular Democracy’s Fed Up campaign and the Economic Policy Institute’s Valerie Wilson say in a paper that their proposals amount to an important modernization of the Fed. “The Fed’s structure is simply outdated, and that makes it harder for its decisions to serve the public,” Ms. Wilson said in a press call. “We are well aware we can’t create a dramatic shake-up” of the Fed, she said, explaining what she and her colleagues are calling for is “pragmatic and nonpartisan.” The linchpin of the overhaul is bringing the 12 quasi-private regional Fed banks fully into government. The paper’s authors also repeated calls for bankers to be removed from regional Fed bank boards of directors, while proposing nonrenewable terms for top central bank officials and greater government oversight over Fed actions. The paper Monday fleshed out the specifics of how the overhaul would happen, building on ideas first made public in April. “We had a ‘why,’ and now we have a ‘how,’” Mr. Levin told reporters. Mr. Levin and Fed Up have seen successes in their campaign to overhaul the central bank. Earlier this year, congressional Democrats and the campaign of Democratic presidential nominee Hillary Clinton endorsed their push to remove bankers from the boards overseeing the 12 regional Fed banks. Fed Up’s effort to promote diversity in a central bank that is still dominated largely by white males, not withstanding the current leadership of Chairwoman Janet Yellen, also has gained traction among Democrats.

 Why nominal gdp targeting is an especially good idea right now - Tyler Cowen - I’ve been hearing plenty of calls for a higher inflation target, perhaps four percent. I do understand the case for this, and furthermore it is not obvious that the higher rate of inflation would bring significant social costs. The thing is this: whether rationally or not, the American public hates higher rates of price inflation. Perhaps they mis-sample or mis-estimate prices, or perhaps the higher prices really do erode their real wages in a way they can’t get back through a new labor market bargain. So a higher price inflation target would mean that everybody would hate the central bank. It would not shock me if the first thing they did was to dismantle…the higher price inflation target. Under nominal gdp targeting, the rate of price inflation would not have to significantly rise until worse times were upon us. That is precisely when such upward price pressures would be most useful.

Why Do We Talk About “Helicopter Money”? -  Brad DeLong : Why do we talk about “helicopter money”? We talk about helicopter money because we seek a tool for managing aggregate demand–for nudging the level of spending in an economy up to but not above the economy’s current sustainable productive potential–that is all of:

  1. Effective and successful–even in the very low interest rate world we appear to be in.
  2. Does not excite fears of an outsized central bank balance sheet–with its vague but truly-feared risks.
  3. Does not excite fears of an outsized government interest-bearing debt–with its very real and costly amortization burdens should interest rates rise.
  4. Keeps what ought to be a technocratic problem of public administration out of the mishegas that is modern partisan politics.

Right now the modal projection by participants in the Federal Reserve’s Open Market Committee meetings is that the U.S. Treasury Bill rate will top out at 3% this business cycle. It would be a brave meeting participant who would be confident that we would get there–if we would get there–with high probability before 2020. That does not provide enough room for the Federal Reserve to loosen policy by even the average amount of loosening seen in post-World War II recessions. Odds are standard open market operation-based interest rate tools will not be able to do the macroeconomic policy stabilization job when the next adverse shock hits the economy.

 There has not been an increased demand for money - Kevin Erdmann - Sometimes, the need for QE is defended as meeting a sudden demand for money.  Scott Grannis has a recent post along these lines.  This graph is from that post:  And, I think his description is generally correct, as far as it goes. But, I'm not sure that demand for money has actually increased that much. I think, instead, it is more accurate to say that the demand for money has continued to grow at a normal pace, and we have prevented that money from entering the economy in the ways that it normally would have, mostly from shutting down much of the mortgage market. In the M2/NGDP ratio he shows here, it isn't M2 that has been unusual. It's NGDP. Source M2 has grown between 5% and 8% - basically in the same range as past growth - but NGDP, which also used to grow between about 5% and 8% annually has shifted down to 2.5% to 5%. Source At the end of 2007, the private securitization market collapsed. But, at the same time, bank lending and GSE lending also levelled out. As I have pointed out, most of the decline in lower priced homes came well after the mortgage market for those areas was practically shut down. Low priced zip codes in places like Texas and Georgia were losing value in 2009 and after, even though they had never been particularly high, especially considering the low interest rate levels. But, interest rates don't matter much if you can't get past underwriting. Interest rates, and relative costs in general, clearly are not the constraint at the low end of the buyer market, and any analysis that pretends such seems to me like an effort to fit the square peg of past housing constraints into the round hole of the current context.

The Fed’s Disastrous Facebook Page Launch - When the Federal Reserve Board finally launched its own Facebook page last week, the response was as swift as it was predictable. The page was quickly overrun by critics, who angrily denounced the central bank as a tool of Wall Street and accused it of working against the American public. "The Federal Reserve is the root of all problems in the United States," Luke Peets, a libertarian, wrote in a response that earned nearly 500 likes on its own and was typical of the commentary on the page. Although the Fed racked up "likes" for the page — topping 11,000 by Monday afternoon — the comments it received were almost universally negative, leaving some to wonder how long it would be before the central bank would decide to retreat. "Really surprised you still have this page up! Considering no one wants you around anymore!" wrote Zipper Stix, a Facebook user.  The Fed’s move surprised more than internet trolls, however, but also social media experts, who questioned what the central bank was trying to accomplish and its overall commitment to social media. To some, the page appeared to take a particularly clueless approach. All of the postings — eight by deadline — were either press releases, speeches by officials or general explainers on the nature of the Fed system. Essentially, the Fed is using Facebook as one more way in which it releases its standard public relations material. That fundamentally misunderstands the nature of Facebook, which is a social network designed for interaction and conversation — not the simple spouting of PR. The Fed is "checking a box," said Frank Eliason, the head of customer experience for Zeno Group and formerly head of global social media at Citigroup. " 'We were told we should be in social media.' This is the biggest mistake I see."  Social media experts universally faulted the Fed for failing to respond to any comments it received. No one expected the central bank to take on trolls opposed to, say, the existence of the Fed itself. But failing to even generally respond is a big mistake, they said.

 Negative Nominal Interest Rates (again) -- There is an obsession with negative nominal interest rates. People seem to think that they make no sense. And, there is a fixation with keeping track of the fraction of sovereign debt that is trading at negative nominal rates. (At this writing, the number is approaching one-third of the total outstanding.) Clearly many central bankers believe that setting the policy rate below zero is a legitimate use of this conventional instrument, a point that we have supported in the past. But the fact that people are so disturbed prompts us to ask why. In this post, we first discuss why we are confused by this reaction, and then try to identify what might account for it. From a purely economic perspective, what matters is the real interest rate, not the nominal interest rate. The gap between the two is expected inflation. Borrowers and lenders ought to care about the purchasing power of the money they pay out and receive, not the number of currency units. That means that it is important to adjust nominal borrowing and lending rates for expected inflation: the more prices are expected to rise, the less the future purchasing power of any future loan repayment (or, for that matter, of any fixed nominal quantity). And it is the real interest rate that is the primary means by which monetary policy influences the economy. Faced with the threat of a recession in a world of low inflation and slow potential economic growth, monetary policymakers probably will seek to drive the real interest rate below zero. For example, a simple, textbook Taylor rule with a neutral real rate of 1% and an inflation target of 2% suggests that if the unemployment rate were to rise even 2 percentage points above its full-employment level, policymakers would aim to drive the real interest rate to zero or below (see our earlier post here.) Today’s neutral real rate may be less than 1%, raising the odds that, with a 2% inflation target, policymakers will seek to drive real rates negative.

Chicago Fed: The US Macro Trend Firmed Up In July -- US economic growth strengthened for the second month in a row in July, according to this morning’s update of the three-month average of the Chicago Fed National Activity Index (CFNAI-MA3). Last month’s reading ticked up to -0.10, the highest level since February. Today’s update effectively confirms that the recession risk remained low last month.  Only values below -0.70 for CFNAI-MA3 signal the start of recession, according to Chicago Fed guidelines for this benchmark. As such, the probability is low that an NBER-defined contraction is near, based on published data to date.  The improvement in US economic activity falls in line with the econometric outlook in the US Business Cycle Risk Report, which has been projecting a firmer trend for months. For example, here’s how yesterday’s update of the near-term estimate for the Economic Trend and Momentum indices compare through September 2016. (Keep in mind that the last full month with a complete set of economic data at the moment is May 2016.) In contrast with the relatively weak reading through June, the third-quarter trend is on track to post a moderate improvement.

Chicago Fed’s national economic activity index improves to 12-month high - One measure of national economic activity recovered mid-summer as production industries ramped up their output, but the three-month average of the indicator shows an economy still churning below its potential, the Chicago Federal Reserve said Monday. Led by improvements in production-related indicators, the Chicago Fed national activity index rose to +0.27 in July from +0.05 in June. That’s a 12-month high. Three of the four broad categories in the index increased from June, and three of the four categories made positive contributions to the index in July. The Chicago Fed index is a weighted average of 85 different economic indicators, designed so that zero represents trend growth and a three-month average below negative 0.70 suggests a recession has begun. The index’s three-month moving average, which tends to offer a clearer picture of the trend in economic activity than the monthly reading alone, improved to negative 0.10 in July from negative 0.19 in June. The three-month average fell as deep as negative 0.36 in May, the weakest reading in nearly four years, but has improved slightly in the two months since. With the negative reading, July’s three-month average suggested that growth in national economic activity was slightly below its historical trend and reflects subdued inflationary pressure from economic activity over the coming year, economists at the Chicago branch said.

July 2016 CFNAI Super Index Moving Averages Improves But Remains Below Historical Trend Rate of Growth.: The economy's growth improved based on the Chicago Fed National Activity Index (CFNAI) 3 month moving (3MA) average - but remains below the historical trend rate of growth (but well above levels associated with recessions). NOTE: This index IS NOT accurate in real time (see caveats below) - and it did miss the start of the 2007 recession. Low Personal Consumption has been a headwind on the index for the last two years. The other three elements of the CFNAI have taken turns dragging the index down. The Chicago Fed's explanation of the movement this month: Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.27 in July from +0.05 in June. Three of the four broad categories of indicators that make up the index increased from June, and three of the four categories made positive contributions to the index in July. The index's three-month moving average, CFNAI-MA3, increased to -0.10 in July from -0.19 in June. July's CFNAI-MA3 suggests that growth in national economic activity was slightly below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year. The CFNAI Diffusion Index, which is also a three-month moving average, moved up to -0.02 in July from -0.16 in June. Fifty-three of the 85 individual indicators made positive contributions to the CFNAI in July, while 32 made negative contributions. Forty-nine indicators improved from June to July, while 36 indicators deteriorated. Of the indicators that improved, 11 made negative contributions. The contribution from production-related indicators to the CFNAI rose to +0.23 in July from +0.07 in June. . The sales, orders, and inventories category made a contribution of +0.01 to the CFNAI in July, up slightly from -0.01 in June. Employment-related indicators contributed +0.09 to the CFNAI in July, up from +0.05 in June.  The contribution of the personal consumption and housing category to the CFNAI was steady at -0.06 in July.

Econoday Economic Report: GDP August 26, 2016: Second-quarter GDP proved very soft, at only a plus 1.1 percent annualized rate for the second estimate following even softer rates in the prior two quarters of 0.8 and 0.9 percent. But masked in the latest quarter is a very strong 4.4 percent annualized growth rate for consumer spending which is 2 tenths higher than the first estimate. Inventory draw is the quarter's culprit, pulling down GDP by a very steep 1.3 percentage points. But, in a counter-intuitive twist, lighter inventory in times of slow economic growth is a major positive for future production and employment and is a major plus for the ongoing quarter. Residential investment is a disappointment in the second-quarter data, falling at a 7.7 percent annualized rate but following large gains in prior quarters. And building strength in new home sales points to a rebound for this reading in the third quarter. The biggest disappointment in the quarter is another decline, at a 0.9 percent rate, in nonresidential fixed business investment which points to business caution and continuing problems ahead for worker productivity. Price data show some pressure tied to oil with the GDP price index up 1 tenth from the first estimate to a year-on-year 2.3 percent. The major takeaway from the second quarter is not the headline growth rate but the strength of the consumer, evident in the solid 2.4 percent rise in final sales, which is double the pace of the two prior quarters. The early outlook for the third quarter is positive, with estimates trending at about 3 percent growth.

Q2 GDP Revised Down to 1.1% Annual Rate -- From the BEA: Gross Domestic Product: Second Quarter 2016 (Second Estimate) Real gross domestic product increased at an annual rate of 1.1 percent in the second quarter of 2016, according to the "second" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.8 percent.  The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 1.2 percent. With this second estimate for the second quarter, the general picture of economic growth remains the same; revisions to the components of GDP are small ... Here is a Comparison of Second and Advance Estimates. PCE growth was revised up from 4.2% to 4.4%. (Solid PCE).  Residential investment was revised down from -6.1% to -7.7%. This was close to the consensus forecast.

U.S. second-quarter growth trimmed to 1.1 percent; consumer spending raised (Reuters) - U.S. economic growth was a bit more sluggish than initially thought in the second quarter as businesses aggressively ran down stocks of unsold goods, offsetting a spurt in consumer spending. Gross domestic product expanded at a 1.1 percent annual rate, the Commerce Department said on Friday in its second estimate of GDP. That was slightly down from the 1.2 percent rate reported last month. The revision also reflected more imports than previously estimated as well as weak spending by state and local governments. The economy grew at a 0.8 percent pace in the first quarter. It grew 1.0 percent in the first half of 2016. The revision to second-quarter GDP growth was in line with economists' expectations. The economy has struggled to regain momentum since output started slowing in the last six months of 2015, which puts it in danger of stalling. While data so far for the third quarter has been mixed, a strong labor market should continue to support consumer spending and underpin growth in the coming quarters. Output will also likely get a boost as businesses restock warehouses after liquidating inventories in the second quarter. The government also reported that after-tax corporate profits fell at a 2.4 percent rate last quarter after increasing at an 8.1 percent pace in the first quarter. Weak profits could limit an anticipated rebound in business spending.With profits declining, an alternative measure of growth, gross domestic income, or GDI, increased at only a 0.2 percent rate in the second quarter, the weakest since the first quarter of 2013. GDI measures the economy's performance from the income side. It increased at a 0.8 percent pace in the first quarter. Business inventories fell $12.4 billion in the second quarter, the first drop since the third quarter of 2011, instead of the $8.1 billion reported last month. As a result inventories sliced off 1.26 percentage points from GDP growth, the largest drag in more than two years, and up from the 1.16 percentage points subtraction in last month's estimate.

Second Estimate 2Q2016 GDP Revised Insignificantly Downward to 1.1%: The second estimate of second quarter 2016 Real Gross Domestic Product (GDP) is a positive 1.1 %. This is an insignificant decrease from the advance estimate's +1.2 % if one looks at quarter-over-quarter headline growth. Year-over-year growth declined from the previous quarter. There was no major reason for the decline in GDP - just minor downward adjustments to inventories and government spending.•Headline GDP is calculated by annualizing one quarter's data against the previous quarters data. A better method would be to look at growth compared to the same quarter one year ago. For 2Q2016, the year-over-year growth is 1.2 % (unchanged from the advance estimate) - moderately down from the 1Q2016's 1.6 % year-over-year growth. So one might say that the rate of GDP growth decelerated 0.4% from the previous quarter.   The table below compares the previous quarter estimate of GDP (Table 1.1.2) with the this quarter which shows:

  • consumption for goods and services improved.
  • trade balance improved
  • there was significant inventory change removing 1.26% from GDP
  • there was slower fixed investment growth
  • there was less government spending

The table below highlights the significant differences the previous quarter and current quarter's estimate (green = improvement, red = decline).

Q2 GDP Revised Lower To 1.1%, As Expected, Even As Personal Consumption Rises -- In what has been called the economic equivalent of hitting 00 on roulette, moments ago the BEA announced that Q2 GDP eased off from the original estimate of 1.2%, declining fractionally to 1.09%, and right on top of consensus estimates, which also expected a 1.1% print in the second quarter. This means that following the disappointing Q1 print of 0.83%, the first half economic growth is now officially just below 1%, or 0.096% to be precise. There was little change in the constituents, with Personal Consumption revised modestly higher from an already questionable 2.83% to 2.94%, translating into 4.4% sequential increase in personal consumption, above the 4.2% expected, and higher than the pre-revised 4.2%. Also improving was fixed investment which is said to have dipped by "only" -0.42%, modestly better than the -0.52% reported a month ago. However, this was offset by a downward revision to private inventories which subtracted -1.26% from Q2 GDP, worse than the -1.16% reported previously, while trade now contibuted only 0.1%, down from 0.22% last quarter. Finally, government was also revised lower from -0.16% to -0.27%. While there were no major surprises in the report, we urge readers to keep an eye on consumption, which as we showed one month ago, inexplicably soared in the first quarter. In fact, as shown below, after today's revision it is just shy of the highest print reported over the past five years. Considering recent commentary from dollar stores which plunged most on record yesterday on the back of a collapse in low-income spending, we doubt that this seasonally adjusted and goalseeked number is even remotely close to reality. Finally, with real GDP now rising at just 1.2% Y/Y, entirely propped up by the consumer, any incremental weakness to US spending in the current quarter would push the US into a technical contraction.

What Changed in Second-Quarter U.S. GDP – At A Glance -- The U.S. economy grew at a slightly slower pace in the second quarter than previously thought, the Commerce Department said Friday. Gross domestic product grew at a 1.1% annual rate, instead of the previously reported 1.2%. Government spending was revised down big time, offsetting an upward revision to consumer spending. Meanwhile, a key measure of corporate profits rose for the second consecutive quarter after crashing in 2015. There were two big factors that led to the lower reading on GDP. Government spending and residential investment—a proxy for new-home construction and home renovations—were weaker than previously thought, new data showed. Overall spending by federal, state and local governments fell at a 1.5% annual rate in the second quarter instead of the previously estimated 0.9%. Residential investment fell at a 7.7% rate instead of 6.1%.  The U.S. economy relies mostly on consumers for growth, and households boosted spending as the stock market rebounded and gasoline prices remained weak. Consumer spending climbed at a 4.4% pace in the second quarter, up from the previously reported 4.2% rate and the biggest increase since late 2014. Consumers likely won’t continue to spend at that pace, but the bounce points to rising confidence that could support stronger economic growth in the second half of the year. Household spending grew 3.2% last year.  A key measure of corporate profits has risen for two consecutive quarters, rebounding from a sharp decline in 2015. Corporate profits after taxes, but without inventory valuation and capital consumption adjustments, rose 4.9% in the second quarter after rising 8.9% in the first quarter. Profits fell 8.5% in 2015. Profits still haven’t fully recovered, as they were 2.2% lower in the second quarter compared with the same period in 2015. The boost in corporate profits hasn’t led businesses to increase spending on big-ticket equipment. A proxy for business spending on equipment and facilities—nonresidential fixed investment—fell at a 0.9% rate in April through June. The one good piece of news: The drop was far less than the initially reported 2.2% decline. The revision largely reflected a big increase in spending on intellectual property products. Consumer prices picked up in the quarter, but inflation remained weak overall. The price index for personal-consumption expenditures—the Federal Reserve’s preferred gauge of inflation—rose at a 2% annual rate in the second quarter, the biggest jump since early 2014. The rise largely reflects a bump in energy costs. Core prices, which exclude volatile food and energy components, grew at a 1.8% rate in the quarter, weaker than the 2.1% gain the first quarter.

US GDP Growth Is Projected To Accelerate in Q3 -- Economic output in the US is on track to rebound sharply in the third quarter, according to several estimates. Some analysts are looking for growth in excess of 3% when the Bureau of Economic Analysis publishes the “advance” Q3 report on Oct. 28. Even the cautious forecasts are generally anticipating a solid bounce of 2%-plus, which represents a healthy improvement over Q2’s sluggish 1.2% increase (seasonally adjusted annual rate). The Wall Street Journal’s mid-August survey has an average Q3 GDP estimate of 2.7%, based on 61 predictions. Only two analysts are looking for growth below 2.0%.  Federal Reserve Vice Chairman Stanley Fisher earlier this week said that the economy is approaching the central bank’s targets for inflation and job growth. “I expect GDP growth to pick up in coming quarters, as investment recovers from a surprisingly weak patch and the drag from past dollar appreciation diminishes,” he said in prepared remarks in a speech at the Aspen Institute. Many analysts are inclined to agree at the moment, including BlackRock Global Bond Strategist Marilyn Watson. Earlier today she told Bloomberg TV that “the US economy remains on a very robust path.” Most Q3 GDP projections fall in line with that rosy outlook. The Capital Spectator’s average GDP forecast (based on several econometric estimates), for instance, is calling for a 2.8% increase, which is more than double Q2’s pace (blue bar in chart below).

Markit Chief Economist Estimates 3rd Quarter GDP at “Just Under 1.0 Percent” -- Ahead of the advance (first) report of 2nd quarter GDP, Markit Chief economist Chris Williamson estimated second quarter at 1.0%. The reported result was 1.1% and it’s likely to be downgraded tomorrow in the second estimate coming up tomorrow. Today, Williamson forecasts “just under 1.0%” for the third quarter. Williamson’s third quarter estimate comes in a comment to today’s Markit Flash U.S. Services PMI™ report that shows Service sector growth remains sluggish in August. Key Findings:

  • Weakest rise in services activity since February
  • Payroll numbers expand at slowest pace for 20 months
  • Business expectations remain stronger than the survey-record low seen in June

Comments from Chris Williamson, Chief Business Economist:

  1. “The ongoing lacklustre economic growth signalled by the flash PMI suggests GDP growth is failing to accelerate in the third quarter from the weak 1.2% pace seen in the second quarter.”
  2. Historical comparisons indicate that the PMI is signalling an annualised GDP growth rate of just under 1% in the third quarter, based on the data for July and August.
  3. “With job creation also waning alongside subdued price pressures (the August PMI is consistent with non-farm payrolls rising by just under 130,000), the survey data will fuel expectations that the Fed will be in no rush to tighten policy again.”
  4. “However, as anecdotal evidence from the survey suggests that business activity is being dampened by uncertainty due to the upcoming presidential election, there’s a good chance that the economy will pick up speed again after the vote, leaving a December rate hike on the table.”

Business Economists Say Hillary Clinton Is Best for the Economy -  A majority of business economists in a new survey said Hillary Clinton is the best choice to oversee the U.S. economy as president. Her Republican rival, Donald Trump, didn’t even come in second. The National Association for Business Economics surveyed its members ahead of the Nov. 8 presidential election. Roughly 55% said Mrs. Clinton, the Democratic nominee, would do the best job of managing the economy. About 14% picked Mr. Trump—slightly less than the 15% who selected Libertarian presidential nominee Gary Johnson and the 15% who said they didn’t know or had no opinion. ( The figures didn’t add up to exactly 100% due to rounding.) The survey of 414 NABE members, released Monday, was conducted July 20 to Aug. 2. Mr. Trump’s hostility to trade deals like the North American Free Trade Agreement and his calls to deport illegal immigrants may be costing him support among economists. In the NABE survey, 65% said U.S. trade policy should be more open and free versus 9% who said it should be more protectionist. Only 8% said the U.S. should deport all unauthorized immigrants while 64% backed a program to legalize undocumented immigrants already living in the U.S. The NABE survey also found that 62% of business economists said uncertainty about the election is holding back economic growth at least somewhat, versus 35% who didn’t see election-related uncertainty as a headwind for the economy. That’s in line with the 57% of business and academic economists surveyed by The Wall Street Journal this month who said the economy has suffered due to election-related uncertainty.

CBO Budget Update: Slower USA Growth Over Next 10 Years, Higher Debt In 2016 from the Congressional Budget Office:  In fiscal year 2016, the federal budget deficit will increase in relation to economic output for the first time since 2009, CBO estimates. If current laws generally remained unchanged - an assumption underlying CBO's baseline projections - deficits would continue to mount over the next 10 years, and debt held by the public would rise from its already high level. CBO's estimate of the deficit for 2016 has increased since the agency issued its previous estimates in March, primarily because revenues are now expected to be lower than earlier anticipated. In contrast, the cumulative deficit through 2026 is smaller in CBO's current baseline projections than the shortfall projected in March, chiefly because the agency now projects lower interest rates and thus lower outlays for interest payments on federal debt. Nevertheless, by 2026, the deficit is projected to be considerably larger relative to gross domestic product (GDP) than its average over the past 50 years. CBO's economic forecast - which serves as the basis for its budget projections - indicates that, after a tepid expansion in the first half of 2016, economic growth will pick up in the second half of the year. That faster pace is expected to continue through 2017 before moderating in 2018. In CBO's estimation, the faster growth over the next two years will spur hiring, increase employment and wages, and put upward pressure on inflation and interest rates. In the latter part of the 10-year projection period, however, output will be constrained by a relatively slow increase in the nation's supply of labor. The growth in GDP that CBO now projects is slower throughout the 2016 - 2026 period than the agency projected in January. Weaker-than-expected economic growth indicated by data released since January, recent developments in the global economy, and a reexamination of projected productivity growth contributed to that downward revision. The reduction to CBO's projections of interest rates reflects the revisions to projected economic growth as well as CBO's reassessment of the future demand for Treasury securities.

Does Government Spending Create Jobs? - via St Louis Fed -- The most recent U.S. expansion, however lackluster, entered its eighth year in June.1 In anticipation of the possibility (or perhaps inevitability) of another recession, observers have remarked on how and whether countercyclical fiscal policy should be used to combat an economic downturn. In response to the last recession, the federal government undertook a large fiscal stimulus, the American Recovery and Reinvestment Act (ARRA). When all was said and done, the act cost $2,760 per capita, making it the largest program of its kind since the New Deal of the 1930s. It increased the U.S. federal debt by $840 billion. Research Analyst Rodrigo Guerrero and I took up the issue of the efficacy of government spending at increasing employment. We looked specifically at over 120 years of U.S. military spending, which provides a kind of "natural experiment" for our analysis. Looking at government spending more generally suffers from the problem that the spending may be correlated with economic activity: The government may spend more during a recession (as with ARRA) or more during an expansion (when tax revenues are high). This might bias the results, which economists call "an endogeneity bias." Military spending, on the other hand, is likely to be determined primarily by international geopolitical factors rather than the nation's business cycle. Specifically, we used a dataset developed in pioneering work by Valerie Ramey and, on several of the papers, her co-authors.

CBO’s New Way to Evaluate Fiscal Consolidation Plans -  John Taylor - In its recently released budget outlook, the Congressional Budget Office projects that this year’s federal deficit will increase by 35% from last year to $590 billion, and that the debt will rise from $14 trillion to $23 trillion by 2026, or from 77% to 86% of GDP. Clearly it’s time for a fiscal consolidation plan. Yet we’re not hearing about any such a plan on the campaign trail. If anything candidates are proposing more, not less, federal government spending because many people think reducing the deficit is bad for the economy, even though modern economic models show this need not be the case. It would help the political debate if CBO would employ such state-of-the-art models, as I recommended here based on research with John Cogan, Volker Wieland and Maik Wolters. Actually the CBO might be getting closer to such a recommendation. This year the CBO estimated the impact of a fiscal consolidation plan proposed by the House Budget Committee. The plan, which was used in developing a budget resolution, would reduce the deficit mainly by reducing non-interest spending as a share of GDP compared to the baseline (from 22% to 17% by the year 2040), while increasing revenues as a share of GDP by a much smaller amount (.2%).  Here is a graph showing the multi-year plan for non-interest spending (labeled Budget Resolution); it is unclear how much is discretionary versus mandatory spending, but based on the 2016 budget resolution (see summary here) it is mainly mandatory.

U.S. Army fudged its accounts by trillions of dollars, auditor finds | Reuters: The United States Army’s finances are so jumbled it had to make trillions of dollars of improper accounting adjustments to create an illusion that its books are balanced. The Defense Department’s Inspector General, in a June report, said the Army made $2.8 trillion in wrongful adjustments to accounting entries in one quarter alone in 2015, and $6.5 trillion for the year. Yet the Army lacked receipts and invoices to support those numbers or simply made them up. As a result, the Army’s financial statements for 2015 were “materially misstated,” the report concluded. The “forced” adjustments rendered the statements useless because “DoD and Army managers could not rely on the data in their accounting systems when making management and resource decisions.” Disclosure of the Army’s manipulation of numbers is the latest example of the severe accounting problems plaguing the Defense Department for decades. The report affirms a 2013 Reuters series revealing how the Defense Department falsified accounting on a large scale as it scrambled to close its books. As a result, there has been no way to know how the Defense Department – far and away the biggest chunk of Congress’ annual budget – spends the public’s money. The new report focused on the Army’s General Fund, the bigger of its two main accounts, with assets of $282.6 billion in 2015. The Army lost or didn’t keep required data, and much of the data it had was inaccurate, the IG said. “Where is the money going? Nobody knows,” said Franklin Spinney, a retired military analyst for the Pentagon and critic of Defense Department planning.

The enemy is us. - Your government is on red alert: between 2006 and 2014, the Animal and Plant Health Inspection Service (APHIS), an agency of the Department of Agriculture, spent nearly $4.8 million to purchase shotguns, propane cannons, liquid explosives, pyro supplies, drones, thermal imaging cameras, and more. This is one of many revelations found in a new investigative report titled “The Militarization of America: Non-Military Federal Agencies Purchases of Guns, Ammo, and Military-style Equipment” published by American Transparency, a nonpartisan watchdog group. Former U.S. Senator Tom Coburn (R-OK), chairman of the organization, points out that, “In the nine years until 2014, we found 67 agencies unaffiliated with the Defense Department bought $1.48 billion in weapons and ammunition. Of this total, $335.1 million was spent by agencies traditionally viewed as regulatory or administrative, such as the Smithsonian Institution and the US Mint.”The Department of Veterans Affairs -- which is responsible for a number of fatalities due to medical care incompetence -- has acquired nearly $11.7 million in defensive weaponry. The report also notes that, “The Environmental Protection Agency (EPA) spent $3.1 million on guns, ammunition, and military-style equipment. The EPA has spent $715 million on its ‘Criminal Enforcement Division’ from FY2005 to present even as the agency has come under fire for failing to perform its basic functions.” Military supplies have reinforced the basic functions of the Bureau of Public Debt in the amount of $2,792,060; the Energy Department amassed an armory worth $15,625,114 for its dangerous work; and the Office of Policy, Budget, and Administration strengthened its mission with $25,849,568 in firearms and military gear. The report makes for scary reading: from 2006-2014, the Internal Revenue Service, with its 2,316 special agents, secured over $85,000 worth of guns, ammunition, and military supplies every single month -- for 108 months straight -- accumulating an armory worth more than $11 million.

Obama Readies One Last Push for Trans-Pacific Partnership - — His successor, whether Democrat or Republican, opposes it, as does most of his party. Delegates at the Democratic National Convention waved signs saying “T.P.P.” slashed by a bold line, while the Republican Party platform opposed any vote on it in Congress this year.Yet President Obama is readying one final push for approval of the Trans-Pacific Partnership, the largest regional trade agreement ever, between the United States and 11 other Pacific Rim nations. And though the odds may be long, a presidency defined by partisan stalemate may yet secure one last legacy — only because of Mr. Obama’s delicate alliance with the Republicans who control Congress.“Both parties have candidates who have very strong rhetoric against trade,” said Representative Kevin Brady, Republican of Texas and chairman of the House Ways and Means Committee, which is responsible for trade. “Nonetheless, we can’t grow America’s economy unless we’re not merely buying American but selling American all throughout the globe.”Still, he added, timing a vote “is absolutely dependent on support for the agreement.” Although the administration’s push will begin in September, no vote on the accord will occur before the election. Just as the White House and congressional Republican leaders mostly agree on the economic benefits of trade, they have parallel political interests in delaying debate. Republicans do not want to provoke attacks from their presidential nominee, Donald J. Trump, who called the trade accord “a rape of our country,” or hurt other Republican candidates. Mr. Obama does not want to make trouble for the Democratic nominee, Hillary Clinton, who has struggled to persuade voters of her sincerity in switching from support of the pact to opposition. This month, during an economic address in Michigan, she declared, “I oppose it now, I’ll oppose it after the election and I’ll oppose it as president.”

The national security case against TPP | TheHill - The Republican and Democratic conventions showcased an extraordinarily rare point of bipartisan consensus: stopping the Trans-Pacific Partnership (TPP).  Yet, in the dog days of summer, Americans have received a rude awakening that the unpopular 12-nation trade deal is still on the table. This past Friday, President Obama put Congress on notice that a vote on TPP is coming in the lame duck period after the election.  While the President recently conceded that TPP critics are “coming from a sincere concern about the position of workers and wages in this country,” he's also been hammering home a familiar and often-unchallenged fallback case for trade agreements: that TPP is essential for foreign policy and national security priorities. While I respect President Obama and the pact’s military backers, I believe these arguments miss a crucial point: By facilitating the further offshoring of America’s manufacturing base, the trade pact would actually undermine America’s military readiness and global economic standing. TPP would hurt our national security interests more than it would help. In 2013, the Pentagon’s Defense Science Board put forward a remarkable report describing one of the most significant but little-recognized threats to US security: deindustrialization. The report argued that the loss of domestic U.S. manufacturing facilities has not only reduced U.S. living standards but also compromised U.S. technology leadership “by enabling new players to learn a technology and then gain the capability to improve on it.” The report explained that the offshoring of U.S. manufacturing presents a particularly dangerous threat to U.S. military readiness through the “compromise of the supply chain for key weapons systems components.” I’ve seen these offshoring risks firsthand.

‘Fast track’ Dems mostly undecided on TPP -- More than 10 months after the conclusion of talks on the TPP, most of the 28 Democrats in House and the 13 in the Senate who voted in favor of trade promotion authority still have not taken a public position on the landmark 12-nation agreement — but they say they’re working on it. Story Continued Below The good news for the administration is that only one of those 41 lawmakers is publicly opposed to the agreement. That’s Sen. Tim Kaine, who announced his opposition upon being selected by Hillary Clinton to be her running mate. The vast majority of the rest are undecided, and even some of those inclined to say “yes” to the deal say they need to see implementing legislation before taking a final position. "Congressman [Ron] Kind supports the Trans-Pacific Partnership,” a spokeswoman for the leader of the New Democrat Coalition told Morning Trade. “He believes that for our workers, businesses, and farmers the United States must be at the table writing the rules of trade. He is reserving final judgment on the TPP implementing legislation until he has seen the final bill and confirms that it meets the high standards reflected in the agreement." Rep. Derek Kilmer made a similar point. “Congressional Republicans are demanding further changes before agreeing to bring TPP up for a vote, so I want to see the final details of those negotiations before making a decision,” Kilmer said.  Click here to see a summary table of survey results and here to view responses from congressional offices.

McConnell: Senate won't take up TPP this year | TheHill: Senate Majority Leader Mitch McConnell (R-Ky.) appeared to close the door Thursday on the Senate taking up the Obama administration's signature Asia-Pacific trade deal during what's left of the president's term. "The current agreement, the Trans-Pacific [Partnership], which has some serious flaws, will not be acted upon this year," McConnell said at the Kentucky State Farm Bureau breakfast Thursday. But McConnell said that while the trade agreement won't get approved in its current form, it could pass next year with some changes. "It will still be around. It can be massaged, changed, worked on during the next administration," he said. Republican presidential nominee Donald Trump and Democratic nominee Hillary Clinton have both come out against the agreement. The trade fight has also spilled over into the battle for the Senate as Republicans defend 24 Senate seats, with vulnerable GOP Sens. Rob Portman (Ohio) and Pat Toomey (Pa.) coming out against the deal. McConnell helped spearhead the Trade Promotion Authority (TPA) through the Senate last year. The law allows any future trade deal to be fast-tracked through Congress without changes. The Kentucky Republican joked Thursday that passing the TPA was a "rather unusual experience.

How Trade Affects the Vote for President -  Global trade can produce winners and losers in the marketplace—and also in politics, according to a new paper.. The study finds the share of the vote decreases for the incumbent party in counties that have higher concentrations of jobs in low-skill manufacturing, such as apparel. But the incumbent’s vote share rises in those with greater concentrations of jobs in high-skilled tradable services and goods. (Think petrochemical manufacturing and software.) Moreover, the study shows that incumbent parties are especially vulnerable in presidential swing states, which have higher concentrations of jobs in low-skilled manufacturing. This negative effect on the incumbent vote share is nearly three times as large as it is in nonswing states, which leads to a stronger incentive to protect this sector. The study may help explain why candidates for national office often run against trade, only to embrace trade deals once they’re elected. Authors examined county-level election results since 1992 and national-level results since 1936. It’s the first study to demonstrate that increasing employment in high-skilled industries affects voting, showing the divergent distributional effects for both winners and losers in trade. The researchers’ biggest surprise “is the extent to which low-skilled manufacturing, and particularly low-skilled and high-wage manufacturing, in the U.S. is concentrated in the swing states,”

Economists Who’ve Advised Presidents Are No Fans of Donald Trump -- Republican presidential nominee Donald Trump, who has broken with many of the GOP’s traditional positions on economic policy, garners no support from any of the White House economists who have advised U.S. presidents for the past half-century. The Wall Street Journal this month reached out to all 45 surviving former members of the White House Council of Economic Advisers under the past eight presidents, going back to Richard Nixon, to get their views on this year’s presidential election. Among 17 Republican appointees who responded to Journal inquiries, none said they supported Mr. Trump. Six said they did not support Mr. Trump and 11 declined to say either way. An additional six did not respond to repeated messages. Among the 20 Democrats who responded to the Journal, 13 said they supported Mrs. Clinton, none said they opposed her and seven declined to say either way. Two Democratic appointees didn’t respond to messages.  Some expressed unease about the anti-free trade policies espoused by both candidates. “I have known personally every Republican president since Richard Nixon,” said Harvard University economist Martin Feldstein, who chaired the council under President Ronald Reagan. “They all showed a real understanding of economics and international affairs….Donald Trump does not have that understanding and does not seem to be concerned about it. That alone disqualifies him in my judgment.”

Corporate Tax Cuts: More Debunking of the Claim that They Spur Growth  -- Last month Pascal Saint-Amans, head of tax for the OECD, spoke to the Wall Street Journal, in an article subtitled The argument against taxing capital income relatively more than wages is losing its force. He said: “For the past 30 years we’ve been saying don’t try to tax capital more because you’ll lose it, you’ll lose investment. Well this argument is dead, so it’s worth revisiting the whole story,” Pascal Saint-Amans, the OECD’s tax chief, said in an interview.” This particular article came to our attention via the Fair Skat blog, which sketches out the implications – and they are highly significant.  The usual story goes something like this: “It’s important to cut taxes on capital because this promotes investment and growth. This is because higher taxes create incentives to shift profits overseas or into different forms, including secret forms, to escape the tax, whether legally or not. Lower taxes also put more hands in the hands of investors, which creates productive investment.” That’s the conventional wisdom. Fair Skat goes into a bit of economese to look at the research evidence that’s being used to buttress these arguments: “The ‘go to’ for empirical evidence on this is De Mooij & Ederveen’s 2008 “reader’s guide”. Their literature review finds that, in an average situation surveyed by the literature, the total semi-elasticity of the corporate tax base for these effects (i.e. the % change in the tax base from a 1% increase in the relevant tax, see below) is -3.1, with profit shifting (-1.2) the largest single effect.”  In short, the story goes, cut taxes, and more stuff will come into the tax net, counteracting the effect of the tax cut. And sometimes policy-makers cut taxes on the basis of these kinds of conclusions. Now we’ve been challenging this conventional wisdom for a long time. As Fair Skat puts it:  For example, our Ten Reasons to Defend the Corporate Income Tax outlines a range of reasons why relentless corporate income tax-cutting is generally a bad idea.  For example there’s ‘investment’ and there’s ‘investment’ – and the good stuff that countries need is embedded in their economies, with local supply chains and managers with their kids in local schools: this stuff won’t fly away at the first whiff of tax. And there’s a more profound reason why policy-makers shouldn’t pay much attention to the kind of evidence we’ve highlighted above. From a policy-maker’s perspective, attracting investment should not be an end goal. It is at most an intermediate target. An end goal would be to benefit your broad population, for example by sustainably raising the number of productive jobs overall. Corporate tax cuts may hurt other sectors, leaving your own economy no better off, or attract mobile investment with few local roots or benefit.

Treasury to EU: Back off on tax probes of US companies: There's a giant pot of corporate gold sitting outside the United States, and the U.S. Treasury and the European Commission are squabbling over how to get their hands on it. American multinational corporations have stashed more than $2 trillion in profits and assets outside to avoid paying what many companies argue are unduly high U.S. corporate tax rates. Over the past few years, the European Commission has opened investigations into a handful of those companies, including Apple, Starbucks and Amazon, to determine whether they owe taxes to European countries. But the Treasury Department, in a "white paper" released Wednesday, said those investigations have gone too far. The paper attacked the legal approach the EU is using to determine tax liabilities on American companies, saying it targets "income that (European) Member States have no right to tax under well-established international tax standards." The paper also argued that taxes collected by European countries could, in effect, come right out of the pockets of American taxpayers. That's because taxes collected by European countries could be deducted from any future payments to the Treasury."That outcome is deeply troubling, as it would effectively constitute a transfer of revenue to the EU from the U.S. government and its taxpayers," the paper said.

US Treasury slams EU tax probes ahead of possible Apple verdict – - The Treasury Department upped the ante in a growing U.S.-EU corporate tax battle Wednesday, slamming the European Commission’s tax investigations into multiple U.S.-based companies and taking the unusual step of releasing a 26-page white paper detailing its concerns. The Treasury paper reflects an unprecedented attack on a spate of European competition investigations involving transfer pricing and U.S. companies. The aggressive U.S. move came ahead of a possible Commission verdict this fall on whether Apple’s tax arrangement with Ireland violates EU “state aid” rules. In a blog post accompanying the white paper, Deputy Assistant Treasury Secretary for international tax affairs Robert Stack said if the Commission required U.S.-based companies involved in the probes to pay retroactive taxes to European governments, it “could create an unfortunate international tax policy precedent” and have “an outsized impact on U.S. companies. Furthermore, it is possible that the settlement payments ultimately could be determined to give rise to creditable foreign taxes. If so, U.S. taxpayers could wind up eventually footing the bill for these State aid recoveries in the form of foreign tax credits that would offset the U.S. tax bills of these companies.” Stack warned that the Commission’s use of state aid rules to go after alleged tax avoidance “is new and was unforeseeable by the relevant companies and EU Member States. … We emphasize that the Commission should not seek to impose recoveries under this new approach in a retroactive manner because it sets a bad precedent for tax policymakers around the world. Finally, we explain that the Commission’s approach undermines U.S. tax treaties and international transfer pricing guidelines already accepted broadly in the global tax community, and undermines the work done as part of the [OECD Base Erosion and Profit Sharing] project.”

Eliminating the marriage penalty would only help affluent couples  -- The Independent Women’s Forum (IWF) recently released a policy agenda purporting to focus on improving women’s lives. The tax policies included are par-for-the-course right-wing talking points focused on lower taxes for the rich. But there is one policy proposal in particular I’d like to focus on—eliminating the marriage penalty, since it shows an incomplete understanding of tax brackets and the incentives they create.  In order to eliminate the marriage penalty, IWF suggests adjusting all tax brackets so that married couples are allowed twice the income before crossing into the next tax bracket. This might strike some as a good-faith, technocratic tax change that fixes a flaw in the tax code. It’s not. Instead it’s an over-simplification that reduces taxes for relatively affluent couples, period.  What the IWF proposal ignores is that our tax system cannot treat marriage in a tax neutral way. This is because we have a progressive tax system where taxes depend on total household income, rather than taxation at the individual level. In such a system, there will always be either a marriage penalty or a penalty to being single. To see this, let’s consider a simple example.

The richest 10% hold 76% of the wealth -- The rich are still getting richer in the U.S., with the wealthiest 10% controlling three-quarters of all family wealth in the country. U.S. family wealth totaled $67 trillion in 2013. But slices of that pie were far from equal, according to a report released Thursday from the Congressional Budget Office. The top 10% of families -- those who had at least $942,000 -- held 76% of total wealth. The average amount of wealth in this group was $4 million. Everyone else in the top 50% of the country accounted for 23% of total wealth, with an average of $316,000 per family. That leaves just 1% of the total pie for the entire bottom half of the population. The average held was $36,000 for families that fell in the 26th to 50th percentiles. But if they fell in the bottom quarter, they had zero wealth and in fact, were $13,000 in debt on average, CBO found. Age and education made a difference in wealth accumulation. Not surprisingly, wealth was higher for households headed by someone 65 or older. Median wealth for these families was $211,000, or almost three-and-a-half times higher than the median for households run by someone 35 to 49. Families run by adults with college degrees, meanwhile, had a median wealth of $202,000, or nearly four times that of families headed by someone who only had a high school diploma.

Bill Gates Net Worth Tops $90 Billion For First Time: 0.5% Of US GDP -- The richest man in the world... just got richer. The net worth of the world's richest person - Bill Gates - reached $90 billion on Friday for the first time in history, thanks to gains in his holdings such as Canadian National Railway Co., and Ecolab... Source: Bloomberg. He is now almost $14 billion richer than the second richest person in the world - Amancio Ortega - Spanish mogul behind the fashion retailer Zara; and a shocking $23 billion richer than biggest loser Warren Buffett who is now worth just $67bn... For some context:

    • If Bill Gates was a company, he would be 'bigger' than 440 of the S&P 500 components
    • If Bill Gates was a country, he would be 'bigger' than 125 nations by GDP tracked by The IMF (bigger than Ukraine and almost as big as Puerto Rico)
    • If Bill Gates collected cars, he could buy 18 Koenigsegg CCXR Trevitas (and have change to pay for the insurance... but not the gas)

Powell has 'no recollection' of Clinton email dinner conversation - POLITICO: Former Secretary of State Colin Powell "has no recollection of the dinner conversation" recounted by Hillary Clinton to FBI agents, as documented by journalist Joe Conason in a forthcoming book. Conason's anecdote, reported Thursday night by The New York Times, recounts a small dinner party at Clinton's Georgetown home toward the beginning of her time as secretary of state, with former secretaries Madeleine Albright, Henry Kissinger and Condoleezza Rice also in attendance. During that dinner, Conason reports, Albright asked the former secretaries to impart advice to Clinton. Story Continued Below “Powell told her to use her own email, as he had done, except for classified communications, which he had sent and received via a State Department computer," Conason wrote in his book "Man of the World: The Further Endeavors of Bill Clinton,” of which the Times said it acquired an advance copy. Powell, according to Conason's account, told Clinton that "his use of personal email had been transformative for the department" and “thus confirmed a decision [Clinton] had made months earlier — to keep her personal account and use it for most messages.” A spokeswoman for Powell's office issued a statement following the Times' story: "General Powell has no recollection of the dinner conversation. He did write former Secretary Clinton an email memo describing his use of his personal AOL email account for unclassified messages and how it vastly improved communications within the State Department."

Colin Powell on Clinton's email scandal: 'Her people have been trying to pin it on me' -  Former Secretary of State Colin Powell over the weekend dismissed reports that Democratic US presidential nominee Hillary Clinton told federal investigators that it was at his suggestion that she used a personal email account, according to a media report. Powell, who served as the nation's top diplomat under Republican president George W. Bush, told People magazine that while he did send Clinton a memo about his own email practices, Clinton had already chosen to use personal email rather than a government account while she had the job. Clinton, who faces Republican Donald Trump in the Nov. 8 US presidential election, has been dogged for more than a year about questions over her use of private email account and a personal computer server while she was secretary of state from 2009-2013, during President Barack Obama's first term. "Her people have been trying to pin it on me ... The truth is, she was using [the private email server] for a year before I sent her a memo telling her what I did," Powell told People on Saturday.

FBI Uncovers Over 15,000 More Emails In Clinton Probe, Judge Orders State To Expedite Release (Before Election) -- Updating our earlier note, it appears The State Department's stalling has been disallowed... (as Bloomberg reports) A judge ordered the State Department to expedite its review of almost 15,000 previously undisclosed documents recovered by the FBI from Hillary Clinton’s private e-mail servers. U.S. District James Boasberg on Monday ordered the State Department to process those recovered records by Sept. 22 and report back to him that day. He didn’t set a schedule for public release. The department raised the possibility of a phased release starting Oct. 14, which left open how many would be disclosed before the Nov. 8 presidential election. As we detailed earlier, in yet another incident pointing to Hillary's 'above the law' persistent lies, WaPo reports The FBI’s year-long investigation of Hillary Clinton’s private email server uncovered tens of thousands more documents from her time as secretary of state that were not previously disclosed by her attorneys. Worse still, as Judicial Watch details,“it looks like the State Department is trying to slow roll the release of the records." Having suffered blowback from throwing Colin Powell under the bus over the weekend, The Clinton campaign is likely back in panic mode as The Washington Post reports the number of emails to be released is nearly 50 percent more than the 30,000-plus that Clinton’s lawyers deemed work-related and returned to the department in December 2014...

From Soccer Stars To Bahrain Princes: New Emails Reveal Hillary Clinton Gave Special Access To Foundation Donors -- The farce continues as detailed reckoning of Hillary Clinton's State Department emails reveal former Hillary Clinton’s top aide Huma Abedin provided influential Clinton Foundation donors special, expedited access to the secretary of state. In many instances, as Judicial Watch exposes, the preferential treatment provided to donors (from a British soccer player to the crown prince of Bahrain) was at the specific request of Clinton Foundation executive Douglas Band. As JudicialWatch.com details, the new documents included 20 Hillary Clinton email exchanges not previously turned over to the State Department, bringing the known total to date to 191 of new Clinton emails (not part of the 55,000 pages of emails that Clinton turned over to the State Department).  These records further appear to contradict statements by Clinton that, “as far as she knew,” all of her government emails were turned over to the State Department. The Abedin emails reveal that the longtime Clinton aide apparently served as a conduit between Clinton Foundation donors and Hillary Clinton while Clinton served as secretary of state. In more than a dozen email exchanges, Abedin provided expedited, direct access to Clinton for donors who had contributed from $25,000 to $10 million to the Clinton Foundation. In many instances, Clinton Foundation top executive Doug Band, who worked with the Foundation throughout Hillary Clinton’s tenure at State, coordinated closely with Abedin. In Abedin’s June deposition to Judicial Watch, she conceded that part of her job at the State Department was taking care of “Clinton family matters.”

Clinton faces late summer scandal wave - POLITICO: The scandals swirling around Hillary Clinton kicked up a notch on Monday, with the release of more emails showing the sway Clinton Foundation donors held at the State Department and an order by a federal judge that could result in a dump of thousands more emails before the election. Clinton managed to coast through the conventions and the resulting weeks, gaining momentum in the polls as Donald Trump suffered through numerous self-inflicted controversies. But on Monday, Clinton was delivered a rude reminder that her long-running woes will likely persist all the way to November — and potentially beyond. A federal judge ordered that the State Department must review 14,900 documents discovered by the FBI as investigators probed Clinton’s use of a private email server during her four years at the agency, and he set a hearing date for next month about the “production” of such emails. That means Clinton could be a hit by a wave of fresh emails — possibly including deleted emails the FBI recovered — right before the election.  Adding to her woes, Judicial Watch — the same conservative group who is behind that litigation — on Monday released 725 emails from Clinton’s top aide Huma Abedin, some of which showed the influence peddling that flowed between the Clinton Foundation and Hillary Clinton’s State Department. One such exchange showed Abedin, who was Clinton’s deputy chief of staff at State, working as a go-between as Clinton Foundation executive Doug Band pushed a meeting between Clinton and Crown Prince Salman of Bahrain in 2009.

More than half of private interests who met with Clinton at State department made donations (AP) -- More than half the people outside the government who met with Hillary Clinton while she was secretary of state gave money - either personally or through companies or groups - to the Clinton Foundation. It's an extraordinary proportion indicating her possible ethics challenges if elected president. At least 85 of 154 people from private interests who met or had phone conversations scheduled with Clinton while she led the State Department donated to her family charity or pledged commitments to its international programs, according to a review of State Department calendars released so far to The Associated Press. Combined, the 85 donors contributed as much as $156 million. At least 40 donated more than $100,000 each, and 20 gave more than $1 million. Donors who were granted time with Clinton included an internationally known economist who asked for her help as the Bangladesh government pressured him to resign from a nonprofit bank he ran; a Wall Street executive who sought Clinton's help with a visa problem and Estee Lauder executives who were listed as meeting with Clinton while her department worked with the firm's corporate charity to counter gender-based violence in South Africa.

Over Half Of Hillary's Private Meetings As Secretary Were With Donors Who Paid $156 Million - In the latest confirmation that Hillary's receipt of donations while Secretary of State was a conflict of interest at best and criminal cronyism and "favor peddling" at worst (it would be ideal if the DOJ could chime in here, however the just as conflicted Department of Justice, whch is headed by a 1999 Bill Clinton appointee, has decided to avoid the topic of the Clinton Foundation for obvious reasons), AP reports that more than half, or at least 85 of 154 people from private interests who met or spoke to Clinton while she led the State Department, donated to her family charity or pledged commitments to its international programs. Combined, the 85 donors contributed as much as $156 million. At least 40 donated more than $100,000 each, and 20 gave more than $1 million.  The 154 number did not include U.S. federal employees or foreign government representatives:separately, Hillary met with representatives of at least 16 foreign governments that donated as much as $170 million to the Clinton charity, but they were not included in AP's calculations because such meetings would presumably have been part of her diplomatic duties, but most likely resulted in such "quid pro quo" as the fast-tracking of weapons deliveries for countries such as Saudi Arabia. Getting the information was, understandably, not easy. Despite the data being technically public, Hillary did not want the world to know just how many wealthy "donors" she is beholden to. As a result, the AP first sought Clinton's calendar and schedules three years ago, but delays led the AP to sue the State Department last year in federal court for those materials and other records. The AP's findings represent the first systematic effort to calculate the scope of the intersecting interests of Clinton foundation donors and people who met personally with Clinton or spoke to her by phone about their needs.

Who Cares About the Clinton Foundation? --James Kwak -- Imagine that while George W. Bush was governor of Texas and president of the United States, various people and companies decided to write him checks for hundreds of thousands of dollars, just because they thought he was a great guy. Those people and companies, just coincidentally, happened to have interests that were affected by the policies of Texas and the United States. You would be suspicious, right? Now, that’s roughly what has been happening with the Clinton Foundation. Various people and companies have been writing checks for millions of dollars to the Foundation during the same time that Hillary Clinton was secretary of state and, following that, the most likely next president of the United States—a title she has held since the day Barack Obama’s second term began. (The Clintons finally decided to  scale back the Foundation earlier this week.) There are two main defenses for Clintons’ actions. Both are distressingly naive. One, made by Kevin Drum among others, is that Clinton didn’t actually do any favors for her Foundation donors. So even if people were trying to buy access and influence, they didn’t get any, and there’s nothing to see here. First of all, there is evidence, some compiled by Jeff Stein, that Foundation donors were more likely to gain access to the secretary of state.  Donating to the Clinton Foundation is a great way to signal that you might donate more money in the future. And that means that, somewhere in the corner of her massive brain, Hillary knows that making a certain decision will reduce her foundation’s future revenues. That’s why we worry about campaign contributions, remember? If you want to argue that Hillary Clinton is so incorruptible that the standards we apply to other politicians shouldn’t apply to her—well, be my guest. The second defense is: The Clinton Foundation is a charity, for God’s sake! It helps people! This is even more naive, for a simple reason that I don’t think has been emphasized enough.

Clintonite Conspiracy Theories | Black Agenda Report -  It is surreal to hear the Clinton campaign and its vast army of surrogates, including virtually the entirety of the corporate media, howl about “conspiracy theories” timed to sabotage her triumphal procession to the White House. Shaken by this summer’s Wikileaks disclosure of the Democratic National Committee’s subversion of Bernie Sanders’ leftish insurgency, Clinton is attempting to inoculate the public against the “October Surprise” they fear is coming from Julian Assange, the Wikileaks founder holed up in the Ecuadorean embassy in London. With Donald Trump’s electoral prospects diminishing by the day, the only thing the Clinton camp has to fear is the facts. Therefore, the campaign’s mission is to poison the well of public discussion in order to immunize Clinton from future factual disclosures. From now to Election Day, all facts are to be deemed suspect, no matter how verifiably true, since they might have bubbled to the surface through the machinations of “conspiracy theorists.”  Who is feeding such destructive facts to these conspirators? Why, the Russians, of course -- although there is no evidence that the Kremlin had anything to do with the hack-work released by Wikileaks. Nevertheless, facts remain facts, including truths that might have been passed along by Eurasian Slavs, as Donald Trump recognized before not-really-sarcastically retracting his request that Vladimir Putin do the American public additional informational services regarding Hillary Clinton’s emails. After all, no patriot wants to hear the truth from a Russian!

FBI Admits Clinton Used Software Designed To "Prevent Recovery" And "Hide Traces Of" Deleted Emails -- South Carolina Representative Trey Gowdy appeared on Fox News today and disclosed new details about the Clinton email scandal that seem to indicate intent to destroy evidence.  Per the clip below, Gowdy reveals that Clinton used "BleachBit" to erase the "personal" emails from her private server.  For those not familiar with the software, BleachBit is intended to help users delete files in a way to "prevent recovery" and "hide traces of files deleted."  Per the BleachBit website: Beyond simply deleting files, BleachBit includes advanced features such asshredding files to prevent recovery, wiping free disk space to hide traces of files deleted by other applications, and vacuuming Firefox to make it faster. During his appearance on Fox, Gowdy clearly indicates that Clinton's use of BleachBit undermines her claims that she only deleted innocuous "personal" emails from her private server.    “If she considered them to be personal, then she and her lawyers had those emails deleted.  They didn’t just push the delete button, they had them deleted where even God can't read them.

Shawn Lucas Cause of Death Still Unknown as Clinton’s Campaign Lawyer Tries to Move DNC Lawsuit into the Weeds -  Pam Martens -- According to the Office of the Chief Medical Examiner for Washington, D.C., it has still not determined a cause of death for Shawn Lucas, the 38-year old process server who delivered the class action lawsuit against the Democratic National Committee and its then Chair, Debbie Wasserman Schultz, to the DNC headquarters on July 1. One month later, the girlfriend of Lucas came home to find him dead on the bathroom floor. It has now been more than three weeks since Lucas died with no cause of death announced. We asked the Chief Medical Examiner’s office if the delay was a result of toxicology tests being conducted. We were told it can make no comment beyond the fact that the cause of death is “pending.” A video of the service of process, which has garnered over 474,000 views as of this morning, shows Shawn Lucas saying he was “excited” and “thrilled” to be the process server on this lawsuit. He comments later in the video that it is like his “birthday and Christmas” rolled into one. At the time the lawsuit was filed, the attorneys for the Sanders’ plaintiffs already had significant evidence that the DNC and Wasserman Schultz had put their fingers on the scale to tip the primary results in favor of Hillary Clinton while overtly undermining the campaign of Senator Bernie Sanders.  The lawsuit (Wilding et al v DNC Services Corporation and Deborah ‘Debbie’ Wasserman Schultz) was filed in the Federal District Court for the Southern District of Florida. The Case Number is 16-cv-61511-WJZ.  The complaint makes the following charges: fraud, negligent misrepresentation, deceptive conduct, unjust enrichment, breach of fiduciary duty, and negligence.

FBI Reports Linking Hillary To Vince Foster "Suicide" Go Missing From National Archives -- Vince Foster was a mentor to Hillary when they worked together at the Rose Law Firm in Little Rock, Arkansas.  When Bill was confirmed as the 42nd President of the United States on January 20, 1993, Foster took a role as his Deputy White House Counsel.   6 months later, to the day, Foster was found dead in Fort Marcy Park, along the Potomac River, of a apparent "suicide" resulting from a gun shot from a .38 caliber revolver.  Like a lot of things surrounding the Clintons, Foster's "suicide" has always been shrouded in mystery.  A few months ago, The Daily Mail interviewed former FBI agents Coy Copeland and Jim Clemente who claimed that Hillary "triggered" Foster's "suicide" by "humiliating" him in front of colleagues just a few days before his death.  'Hillary put him down really, really bad in a pretty good-size meeting,' Copeland says. 'She told him he didn't get the picture, and he would always be a little hick town lawyer who was obviously not ready for the big time.' Indeed, Hillary went so far as to blame Foster for all the Clintons' problems and to accuse him of failing them, according to Clemente, who was also assigned by the FBI to the Starr investigation and who probed the circumstances surrounding Foster's suicide. 'Foster was profoundly depressed, but Hillary lambasting him was the final straw because she publicly embarrassed him in front of others,' says Clemente. 'Hillary blamed him for failed nominations, claimed he had not vetted them properly, and said in front of his White House colleagues, 'You're not protecting us' and 'You have failed us,' Clemente says. 'That was the final blow.' After the White House meeting, Foster's behavior changed dramatically, the FBI agents found. On Tuesday, July 13, 1993, while having dinner with his wife Lisa, Foster broke down and began to cry. He said he was considering resigning.

Troops using 'Clinton defense' in classified information cases | TheHill: Lawyers for troops facing charges of mishandling classified information are using the “Clinton defense” to argue for leniency. A lawyer for a 29-year-old sailor facing a felony charge for taking and keeping six photos of a submarine's propulsion system cited Hillary Clinton's mishandling of classified information this week to argue he should get probation instead of jail time.In the case, Petty Officer 1st Class Kristian Saucier was facing up to 78 months in prison for his conviction on mishandling information. But a federal judge on Friday sentenced him to 12 months instead, as well as six months of low-level home confinement, three years post-release supervision and 100 hours of community service. Greg Rinckey, Saucier’s lawyer, said that while the judge indicated Clinton's case did not factor into the sentencing, he believes it played a small, albeit favorable role. “Honestly did it help our case? I’m sure it did,” Rinckey said. “We were very concerned that some people that are in high, powerful positions within the United States are selectively prosecuted. So I think it was a valid rationale,” he said. Clinton will also be mentioned in a separate case involving Maj. Jason Brezler, who is being discharged from the Marine Corps for mishandling classified information, according to his lawyer Michael Bowe. A hearing in federal court is scheduled for October. Brezler used his personal email account in 2012 to send a classified briefing document to fellow Marines in Afghanistan, warning about the potential threat posed by an Afghan police chief. Brezler self-reported his actions to the military.

The Real Scandal of Clinton’s Emails: Conducting Foreign Policy In Secret -- naked capitalism - Yves here. Readers will notice that the Real News Network interviewee Bill Curry’s “Nothing illegal was done” and “The Clintons were careful not to break the law” claims are remarkably strained in light of the fact that the FBI let Hillary off the hook as far as her State Department e-mails were concerned. That’s not proof that she was innocent. That’s proof we have a two-tier justice system. Readers who had security clearances have said in comments and via e-mail they would have been fired and almost certainly faced additional sanctions for lesser misconduct. It is also instructive to see Curry try to defend Clinton as a candidate while acknowledging that she is deeply corrupt The argument seems to be “The system is corrupt” without acknowledging that differences in degree can amount to differences in kind.

NSA Whistleblowers: NSA Hack Was Likely An Inside Job -- The mainstream press is accusing Russia of being behind the release of information on NSA hacking tools.  Washington’s Blog asked the highest-level NSA whistleblower in history, William Binney – the NSA executive who created the agency’s mass surveillance program for digital information, who served as the senior technical director within the agency, who managed six thousand NSA employees, the 36-year NSA veteran widely regarded as a “legend” within the agency and the NSA’s best-ever analyst and code-breaker, who mapped out the Soviet command-and-control structure before anyone else knew how, and so predicted Soviet invasions before they happened (“in the 1970s, he decrypted the Soviet Union’s command system, which provided the US and its allies with real-time surveillance of all Soviet troop movements and Russian atomic weapons”) – what he thinks of such claims. Binney told us: The probability is that an insider provided the data. I say this because the NSA net is a closed net that is continuously encrypted.  Which would mean, that if someone wanted to hack into the NSA network they would not only have to know weaknesses in the network/firewalls/tables and passwords but also be able to penetrate the encryption. So, my bet is that it is an insider.  In my opinion, if the Russians had these files, they would use them not leak them or any part of them to the world.

Commentary: Evidence points to another Snowden at the NSA | Reuters: Where the Watergate burglars came away empty-handed and in handcuffs, the modern- day cyber thieves walked away with tens of thousands of sensitive political documents and are still unidentified. Now, in the latest twist, hacking tools themselves, likely stolen from the National Security Agency, are on the digital auction block. Once again, the usual suspects start with Russia – though there seems little evidence backing up the accusation. In addition, if Russia had stolen the hacking tools, it would be senseless to publicize the theft, let alone put them up for sale. It would be like a safecracker stealing the combination to a bank vault and putting it on Facebook. Once revealed, companies and governments would patch their firewalls, just as the bank would change its combination.  A more logical explanation could also be insider theft. If that’s the case, it’s one more reason to question the usefulness of an agency that secretly collects private information on millions of Americans but can’t keep its most valuable data from being stolen, or as it appears in this case, being used against us. In what appeared more like a Saturday Night Live skit than an act of cybercrime, a group calling itself the Shadow Brokers put up for bid on the Internet what it called a “full state-sponsored toolset” of “cyberweapons.” “!!! Attention government sponsors of cyberwarfare and those who profit from it !!!! How much would you pay for enemies cyberweapons?” said the announcement.  The group said it was releasing some NSA files for “free” and promised “better” ones to the highest bidder. However, those with loosing bids “Lose Lose,” it said, because they would not receive their money back. And should the total sum of the bids, in bitcoins, reach the equivalent of half a billion dollars, the group would make the whole lot public. 

 Bill Black: Why Whistleblowers’ Disclosures Need Protection Under the Law - James Stewart has written a column about Roger Ailes’ alleged sexual predation on female Fox News personnel over the course of many years. I write to show how two concepts Stewart did not employ would aid the analysis and to suggest a fundamental change in the law that would make the world a far better place. The two concepts I add to Stewart’s analysis are “control fraud” and whistleblowing.  Stewart’s column applies as its sole lens sexual harassment.  That is the obvious lens to employ and it is helpful.  By supplementing this lens, however, we can provide additional useful insights and frame generalized policies of broader applicability. The concepts of “control fraud” and whistleblowing are related and also have obvious application to the Ailes case if you are familiar with the concepts.  The many women who risked their careers to blow the whistle on Ailes were classic whistleblowers.  Stewart, sensibly, quotes the University of Michigan Law School professor who was instrumental in creating a civil remedy for sexual harassment. Victims of sexual harassment can see what happens to other victims who came forward. “It’s career suicide to come forward,” said Professor MacKinnon. “You’re roadkill. Women know this, yet some come forward. That’s what courage looks like.” The people, overwhelmingly women, who bring complaints of sexual harassment in the workplace are whistleblowers.  As a co-founder of Bank Whistleblowers United (BWU) I can vouch professionally and personally that it takes “courage” to blow the whistle.  The sexual harassment context can call for the particularly great courage among whistleblowers because blowing the whistle will provide highly personal information about the victim and inevitably leads to “slut shaming” abuse and trolls. MacKinnon also rightly emphasizes the inherent role of the harasser’s power over the harassed. “A lot of men have gotten away with sexual harassment with absolutely no consequences,” . No matter what companies say, she added, “the real rule is that the more powerful a man is, the more he gets away with.”

To Crack Down on Securities Fraud, States Reward Whistle-Blowers - Gretchen Morgenson --In the aftermath of the financial crisis, a growing army of confidential informants — better known as whistle-blowers — has helped federal securities regulators identify and prosecute wrongdoers. Now the same thing is happening at the state level: Securities regulators in two states (so far) are enlisting the aid of these informants to enforce their own fraud statutes and protect residents from financial harm. And the whistle-blowers are reaping rewards. On Aug. 19, for example, an informant was awarded $95,000 for helping Indiana securities regulators bring an enforcement action against JPMorgan Chase for failing to disclose certain conflicts of interest to clients about the way the bank invested their money. The monetary award was the first given under that state’s whistle-blower program aimed at securities law violators. The informant supplied information about improprieties in JPMorgan Chase’s asset management unit, including its practice of steering clients to in-house funds that carried higher costs or generated greater fees to the bank. In a July settlement, the bank paid $950,000 to Indiana, whose officials characterized JPMorgan’s practices as “outside the standards of honesty and ethics generally accepted in the securities trade and industry.” Indiana’s program was created in 2012 by the state legislature and is overseen by Ms. Lawson. State officials can award up to 10 percent of monetary sanctions received in an enforcement action to a person who provided original and significant information that led to the case. Utah is the other state with a whistle-blower program aimed at identifying securities law violations. Lawyers who represent whistle-blowers say such programs allow states to leverage their limited resources to crack down on fraud.

Wall Street’s Protection Racket: Mandatory Arbitration by Pam Martens --- What people across Wall Street cannot figure out is why the Board of JPMorgan Chase, America’s biggest bank by assets, didn’t sack its CEO, Jamie Dimon, at some point between the bank’s first two felony counts in 2014 and its third felony count in 2015. Or, as two trial lawyers, Helen Davis Chaitman and Lance Gotthoffer point out on their web site, during the past five years as JPMorgan Chase racked up $35.7 billion in fines and settlements for “fraudulent and illegal practices.”  JPMorgan Chase’s abuses of its own customers are so vast that Chaitman and Gotthoffer had to create a Wheel of Misfortune to catalog the scams for ease of viewing by the public.  And here’s the worst part: those are just the frauds that the public is allowed to read about. JPMorgan Chase, along with other notoriously abusive banks on Wall Street, is allowed to force claims against it into a private justice system called mandatory arbitration. This system allows systemic abuses to avoid detection for years because claims made by both employees and customers are ushered into Star Chamber tribunals which lack the judicial protections afforded in a court of law. JPMorgan Chase must be proud of its mandatory arbitration agreement for its employees because we found it at its web site. These are some of the salient points which show the stark contrasts between mandatory arbitration and a public courtroom proceeding where both the public and the press can observe the proceedings:

SEC Probes Silver Lake Over Fees - WSJ: The Securities and Exchange Commission is investigating whether private-equity firm Silver Lake properly disclosed fees it earned when selling companies or taking them public, part of the regulator’s expansive push to make sure buyout firms are being upfront with investors. The SEC is looking into one-time “accelerated monitoring fees” that Silver Lake collected when it sold companies or took them public, according to people familiar with the matter and Silver Lake investor letters reviewed by The Wall Street Journal. Buyout firms like Silver Lake collect a range of fees from both portfolio companies and directly from the funds they raise to buy the companies. The SEC has pressured firms to disclose more about these fees to fund investors, typically pensions, endowments and wealthy individuals. The SEC’s Silver Lake investigation is continuing and may not result in any action, but the inquiry is another sign that the agency is taking a broad view of its ability to monitor the $4.2 trillion private-equity industry.  “We believe the SEC’s review of Silver Lake is consistent with the SEC’s industry-wide approach to private equity firms generally, and Silver Lake is voluntarily responding to the SEC’s request for information about these issues,” the company wrote in a letter to investors earlier this year. In recent years, the SEC has stepped up its surveillance of buyout firms over fees the agency says weren’t sufficiently disclosed to investors. The agency began looking into the issue after the 2010 Dodd-Frank Act granted the regulator increased oversight of hedge funds and private-equity firms.

Even Matt Levine Feels Compelled to Say Sorta Bad Things About Apollo’s Conduct in $52.8 Million SEC Settlement  - Yves Smith - If Andrew Ross Sorkin had the self awareness to realize that pretty much everyone with an operating brain cell sees him as a stenographer for Wall Street, he would want to grow up to be Matt Levine. Levine is an extremely clever and engaging writer who has the considerable advantage of being an attorney with expertise in derivatives. Thus when he adopts his usual posture of “Oh, I’ve looked at the details [and he really does] and there’s nothing to see here,” he can paper over any cracks in his argument with far greater success than Sorkin and his ilk. Mind you, as much as I abhor Levine’s default posture of minimizing financial services industry misconduct as business as usual among consenting adults, what makes him so dangerous is that he’s so damned good at it. He’s enormously entertaining and has the rare ability to give apt yet accurate 50,000 foot overviews of complex transactions, and regularly provides footnotes to satisfy the geeks.  So it’s noteworthy that Levine’s article earlier this week on SEC’s biggest private equity settlement to date, in which Apollo agreed to pay $52.8 million, including $12.5 million in fines, had an unusually critical undertone for a Levine genre piece. Is it because everyone knows that Apollo’s Leon Black makes Mike Milken look like a choirboy, and being too dismissive of Apollo’s wrongdoing would undermine Levine’s posture of being oh so knowing? Or is it that Levine has come to recognize that the sort of grifting that the private equity industry has engaged in so gross (for instance, how it taking unauthorized fees any different than stealing?), that he can only go so far in prettying it up? Having said that, the SEC order (embedded at the end of this post) is, as usual, weak tea. The agency cites three types of misconduct: charging so-called accelerated monitoring fees, which was responsible for the overwhelming majority of the charges paid by Apollo, issuing fund financial statements that misrepresented a loans made by Apollo funds for the purpose of deferring capital gains taxes by Apollo principals, and roughly $200,000 of personal expenses charged to funds by an Apollo partner who was eventually fired, allegedly over these expenses.

SEC To Crack Down On "Excessive" Hedge Fund Expenses -- Hedge funders have a bit of an "image" issue on main street where their behavior is often viewed as "excessive".  Not to put words in anyone's mouth but we think phrases like "arrogant," "self-obsessed," and "detached from reality" have been tossed around.   But, apparently the SEC is starting to take notice with plans to crack down on hedge fund and private equity expense reimbursements.  We're all aware that hedge fund and private equity fees, equal to 2% of assets plus 20% of profits, are obscene, particularly in light of the inconvenient fact that a substantial portion of them consistently under-perform broader markets.  But what get less attention is how other "perks" are billed through to clients to boost fees even more.  These perks can include a variety of things like private jet charters, lavish hotel stays, and week-long conferences at exotic beach resorts.  Or it could be the private equity manager that sets up ancillary service firms, like a headhunting agency for example, and then pushes all hiring activities of portfolio companies through that internally owned entity rather than larger more established agencies...sure we see no conflict there. According to the Wall Street Journal, the SEC is taking notice of these fees and plans to scrutinize them more in the future. The Securities and Exchange Commission is closely scrutinizing the fees and expenses, including travel and entertainment, that hedge funds and private-equity firms charge to their investors. As part of the Dodd-Frank financial law, the SEC now oversees more than 1,500 additional such advisers that were required to register with the agency. In that capacity, the SEC is checking to ensure they are charging their investors reasonable expenses. "Exotic" expenses like travel, entertainment and consulting arrangements are more likely to attract the agency's attention than routine charges like legal and accounting fees, say compliance consultants who advise funds on registration and reporting requirements.

Investors Have Pulled $109 Billion From Active Equity Funds In 2016: Here's Why - 2016 has been another bad year for the hedge funds community in particular, and active managers in general (despite the previously noted rebound in performance since the end of Q2 on the back of short covering and major releveraging). The best representation of this comes courtesy of JPM's Dubravko Lakos-Bujas, who shows that investors have pulled more than $109 billion from active US equity funds YTD. While they are the clear losers in the capital allocation race, the winners are passive equity funds which have captured a whopping $35 billion of inflows, as more and more investors seek to take the simpler, cheaper-managed option (even if it is one which assures their investing career will on day end in tears). So what is the reason for this ongoing rotation out of more expensive, active managed strategies? Simple: performance, or lack thereof, no matter how active managers would like to spin it. According to JPM, only 33% of fundamental funds and 26% of quantitative funds are outperforming their benchmarks YTD.

'Flash Boys' IEX stock exchange opens. Its goal: Rein in high-frequency traders - At mutual fund giant Capital Group, investment managers study stocks, looking to buy when they’re underpriced and sell when they’re overpriced. That’s how the downtown L.A. firm has made healthy returns for its millions of investors since the 1930s. But over the last few years, Capital Group has been looking toward something else to help boost its returns: a new stock exchange founded by a group of Wall Street evangelists, lauded in a bestselling book and powered by a spool of 38 miles of fiber-optic cable tucked away in a New Jersey data center. That new exchange, the Investors Exchange or IEX, the subject of Michael Lewis’ 2014 book “Flash Boys: A Wall Street Revolt,” was founded on the premise that ordinary investors — particularly the middle-class ones whose money is managed by big firms like Capital Group — need protection from high-speed trading firms that manipulate the market.After a nearly yearlong struggle for approval from the Securities and Exchange Commission, IEX today becomes a public stock exchange, like the New York Stock Exchange and Nasdaq, marking a victory for both the upstart exchange’s founders and Capital Group. . Unlike other exchanges, IEX intentionally slows down trading, requiring all trades to go past what the firm calls a speed bump — hardware that adds a tiny delay just long enough to stymie some of the strategies the exchange’s founders say high-speed traders use to prey on big investors like Capital Group.

Bullard's Bubble Warning: "We Are On The High Side Of Fairly Valued, I Could See This Getting Away From Us" -- While it has been a relentless jawboning session from various Fed speakers this morning, what caught our attention was an interview between CNBC's Steve Liesman and the Fed's recently converted uber-dove, St. Louis Fed president James Bullard on the topic of Fed mistakes, policy and "unintended" consequences such as asset bubbles. When asked what he thinks about bubbles in risk assets, and specifically if the Fed's ultra low rates have caused them, Bullard says "the Fed model has nothing about asset price bubbles, most models don't have anything about that", and as a result no Fed model ever forecasts asset bubbles, which incidentally explains why the traditional side-effect of Fed policy over the past decade has been, drumroll, asset bubbles. When Liesman continues to press, Bullard says that any opinion on the issue one "has to make a judgment." So when asked "what is your judgment" on asset bubbles, Bullard replies "I think we are on the high side of fairly valued, I could see the process getting away from us, maybe tech stocks, maybe others."  As to his "judgment" on the global bond bubble, he justifies it with a "big liquidity premium globally and that is pushing the yield lower. For forecasting purposes, do you think that is going to turn around any time soon, no - so you should take that as a parameter and then go ahead and make the right policy." Finally, while Bullard does not see the Fed's credibility being hurt by creating asset bubbles which its model does not account for, what he does see as hurting Fed credibility is its high forecast of future rates, i.e., forward guidance and the dot plot "and that's affecting global pricing. We want to allign that with what's a more realistic assessment of what's going to happen over the forecast horizon."

The hidden risk to the economy in corporate balance sheets (AP) — America has a debt problem, but it’s not what you think. Yes, the federal government owes trillions of dollars more than it did a few years ago. Yes, Americans are still struggling to pay off mortgages and student loans. But it’s the buildup in debt elsewhere that is most worrying some experts, and the big borrower this time may come as a surprise: Corporate America. You might think big U.S. companies, if anything, have been too conservative with their finances. They’ve collectively hoarded hundreds of billions of dollars in cash, instead of spending it to hire workers or expand their operations. The reality is different, and more worrisome. Much of the cash is held by just a precious few companies, while debt is ballooning at other, weaker businesses as investors desperate for income rush to lend to them. These investors could face losses, perhaps steep, if economic growth falters. The broader economy is also vulnerable because companies with more debt have to cut back further and lay off more whenever downturns hit. “There’s a misconception that companies are swimming in cash,” says Andrew Chang, a director at S&P Global Ratings. “They’re actually drowning in debt.” It turns out there’s a wealth gap among companies, just like among people. Of the $1.8 trillion in cash that’s sitting in U.S. corporate accounts, half of it belongs to just 25 of the 2,000 companies tracked by S&P Global Ratings. Outside of Apple, Google and the rest of the corporate 1 percent, cash has been falling over the last two years even as debt has been rising. It now covers only $15 of every $100 they owe, less than it did even during the financial crisis in 2008 when finances were crumbling.

Big Oil Companies Binge on Debt - WSJ: Some of the world’s largest energy companies are saddled with their highest debt levels ever as they struggle with low crude prices, raising worries about their ability to pay dividends and find new barrels. Exxon Mobil , Royal Dutch Shell, BP and Chevron hold a combined net debt of $184 billion—more than double their debt levels in 2014, when oil prices began a steep descent that eventually bottomed out at $27 a barrel earlier this year. Crude prices have rebounded since, but still hover near $50 a barrel. The soaring debt levels are a fresh reminder of the toll the two-year price slump has taken on the oil industry. Just a decade ago, these four companies were hauled before Congress to explain “windfall profits” but now can’t cover expenses with normal cash flow. Executives at BP, Shell, Exxon and Chevron have assured investors that they will generate enough cash in 2017 to pay for new investments and dividends, but some shareholders are skeptical. In the first half of 2016, the companies fell short of that goal by $40 billion, according to a Wall Street Journal analysis of their numbers. “Eventually something will give,” said Michael Hulme, manager of the $550 million Carmignac Commodities Fund, which holds stakes in Shell and Exxon. “These companies won’t be able to maintain the current dividends at $50 to $60 oil—it’s unsustainable.” The debt is piling up despite cuts of billions of dollars on new projects and current operations. Repaying the loans could weigh the companies down for years, crimping their ability to make investments elsewhere and keep pumping ever more oil and gas.

Liquidity Crisis? What The New SEC Money Market Fund Regulations Mean For The Financial System - On Oct. 17th a new SEC rule finally comes into play that will affect money market funds and liquidity across the financial sphere. There’s potential for some really big moves here.Most investors don’t know this is coming, making it a giant surprise when it finally happens. And that’s because SEC rules tend to get complicated, and their knock on effects get even muddier. We’ll do our best to simplify exactly what’s happening and what it means for the markets. The story starts with money market funds — the open-ended mutual funds that invest in short-term debt such as US Treasury bills and commercial paper. These funds have always been a popular alternative to bank deposits because they were considered just as safe, while also providing a higher yield. But the key to their “safety” was the funds’ promise to keep their net asset value (NAV) fixed to $1-a-share. This guaranteed that you would at least get back as much as you put into the fund. And it was widely believed that this $1 level would always hold. Whenever the value of the fund went above $1-a-share, you would be paid out in dividends. This all changed in the 08’ financial crisis. The entire financial system, from fiat currencies to debt, is based on confidence. And when this confidence falters, you start having serious problems. Now the key here is liquidity. Liquidity is the lifeblood of the financial sphere, and without it, the system chokes up. Here’s where our October SEC rule comes into play. They decided, “damn, we don’t want this happening again”, and set some new standards that are finally coming online on October 17th. These new rules basically say that prime and municipal money market funds (the funds invested in riskier assets than T-bills) will have to float their NAV’s. They would also be required to impose liquidity fees and redemption gates when times get rough like in 08’.

Big Banks Want to Use Digital Cash to Cut Costs and Speed Transactions – Bloomberg -  UBS Group AG and peers on both sides of the Atlantic plan to seek regulatory approval to use a new form of digital cash to settle financial transactions, cutting costs and time. UBS, which pioneered the “utility settlement coin,” is joining forces with Deutsche Bank AG, Banco Santander SA, ICAP Plc and Bank of New York Mellon Corp. to test the system in a “real-market” environment, the Zurich-based bank said in a statement on Wednesday. The project uses blockchain, the technology underpinning bitcoin, to let firms pay for securities without waiting to complete traditional money transfers. “Today’s settlement and clearing is a process involving many institutions,” Paul Maley, managing director at Deutsche Bank’s Institutional Client Group, said in the statement. “It’s vital that we collaborate with our peers to develop viable alternatives to current models, creating new digital capabilities for the financial services industry.” The idea of using digital cash on a blockchain ledger has captivated Wall Street executives because it could speed transactions and free up capital. Investment banks including Citigroup Inc. also have projects in the works, hoping to improve upon the financial industry’s existing system, which can take days to move money across town or around the world, tying up billions of dollars. The consortium will argue the system would improve transparency for regulators. They will continue the dialogue with central banks and regulators to ensure USC is compliant with regulation. The companies plan to add more firms as the project progresses, UBS said in the statement.

Big Banks’ Blockchain: Boondoggle? --naked capitalism - Richard Smith - Suits join the hoodies with blockchain push, the FT informed us on Tuesday, adding, on Wednesday, in case we missed it, pretty much the same article again: “Big banks push forward with blockchain technology“, From the first one:The latest example of big banks organising themselves to exploit the potential of blockchain technology came this week with the announcement that four big lenders have teamed up to develop a “utility settlement coin” — a new form of digital cash.The four banks — UBS, Santander, Deutsche Bank and BNY Mellon, which are working with UK broker ICAP and developer Clearmatics Technologies — stress that they are not creating a new cryptocurrency.The aim is to speed up clearing and settlement in financial markets by allowing institutions to pay for securities, such as bonds and equities, without waiting for traditional money transfers to be completed in the so-called delivery-versus-payment process.By switching clearing and settlement of financial markets on to a distributed ledger, the banks hope to do away with much of their costly back office operations that process trades and keep records up to date. Quicker settlement should also free up capital that banks hold against trading risk.  Yet the banks don’t seem to be using blockchain’s key feature at all: Some sceptics reckon the banks are missing the point. “This is banks talking to each other and the point of blockchain is to establish consensus in the presence of potentially untrusted actors, as with bitcoin, on the internet,” says Dave Birch, of payments consultancy Consult Hyperion. “It’s a sorry state of affairs, that technology is not going to fix, if the banks don’t trust each other.“

Blockchains? Where we’re going, we don’t need blockchains --  Izabella Kaminska - In today’s daily blockchain bulletin we bring you news that next big thing in financial back-office technology isn’t actually the blockchain. Apparently it’s something called a “distributed concurrence ledger”.   We’re not yet convinced that’s a thing, but the white paper outlining the DisLedger DCL concept does at least provide a refreshingly honest account of the core problems with blockchains. Of note (our emphasis throughout): The blockchain and consensus protocols are artifacts of the Bitcoin system where their use made sense, but their continued use will keep blockchains from being implemented in some applications. Issues with consensus protocols center on four main areas: an organization is forced to rely on its direct competitors to process every business transaction; it is expensive to prove the non-repudiability of the system during a legal dispute; transaction processing times can’t be guaranteed and the order of transactions can vary unpredictably due to system usage; and intelligence about the organization’s business dealings are provided to its competitors in the network. Distributed concurrence ledgers are designed for situations where these issues aren’t acceptable. Yup. Yup. And yup. Couldn’t agree more. And there’s more:Blockchains utilize a single ledger that is replicated and redundantly processed by all the members of a network. Consequently over time the file of every transaction can become large and unwieldy to transmit and process. . The massive, but unnecessary, redundancy requires computer processing and data storage of large amounts of transactions to which the organization is not a party with direct impact on IT, electrical and cooling expenses. In distributed concurrence ledgers the parties only process and store the transactions in which they are involved and do so rapidly and in sequential order without chance for frontrunning. So what’s the DCL solution to all these blockchain problems?  It’s this: DisLedger™ is a distributed concurrence ledger that provides more secure, faster and more scalable transaction processing than consensus blockchain systems. The same benefits of immutable records, and regulatory transparency are provided, however the transactions are processed only by the actual counterparties involved and not by a consensus of the crowd.

How Many Banking Jobs Will Bots Kill? | American Banker: Financial companies such as Bank of New York Mellon, BBVA and American Express have become early adopters of a new generation of artificial intelligence and robotic-process-automation technology that automate human tasks. Their efforts resemble the higher-profile work of Google, Ford and others with self-driving cars and BAE Systems with drones. Specifically, the banks are creating tech to do chores previously performed by people in operations, wealth management, algorithmic trading, risk management and other areas. Though it holds great promise in improving efficiency and cutting costs, many worry that low-level jobs will be irretrievably lost in the process. McKinsey predicted in 2013 that AI and robotic banking will displace 110 million full-time workers around the world by 2025. "I don't think people realize that so many of our jobs will be automated and a lot of manual labor and not terribly intellectual jobs will be replaced," said Christine Duhaime, a Toronto attorney with a practice in anti-money-laundering, counterterrorist financing and foreign-asset recovery and founder of the Digital Finance Institute. "When the average person starts to realize that bank teller jobs are gone, it's going to freak people out." . "At some point, computers can do enough to displace an entire profession like travel agents or bank tellers, then a whole bunch of people lose their jobs, [and] then there's a lot more discussion of it," "This is usually part of a long-term trend of more and more lowly jobs getting displaced, but they're small enough that people who are displaced are a small fraction of the whole marketplace; they have some pain and they find new jobs and go on."

AI's Disruption of Banking Is Inevitable, & For Better or Worse | Bank Think -- It is surprising how much ink is spilled on theories that banking is about to be wiped out by a tsunami called fintech, resulting in the alleged mass closure of banks and unemployment of financial services professionals. Last time I was in New York, Wall Street was intact and thriving and specialized financial crime lawyers like myself were busier than ever. Those fintech theories surprise me for two reasons. First, the law stands in the way of fintech displacing even one dollar of financial services. A fintech company is not a Brooklyn pizza stand – it cannot survive without being connected to the financial system, which requires a banking partner and a banking relationship. In other words, fintech cannot disrupt anything unless the banks and lawyers (as regulators) let them. The second reason is that banks face a bigger threat than fintech. Financial services are indeed about to be disrupted everywhere in the world and transformed by a tsunami. But rather than being caused by fintech, the disruption will be the combination of artificial intelligence and automated banking by machines – for better or worse. The promises of AI and robotic banking are impressive. The ability to have core banking functions run entirely by machines that automate functions and learn to self-improve will transform bank back offices and systems. If combined with the ability to interact with customers – including learning their typologies and meeting their banking needs – the potential is incredibly powerful and lucrative. According to an article in Banking Technology, Sweden's national bank has an app that already handles more than 30,000 customer conversations per month, resolving their issues 78% of the time. AI and robotic banking let banks eliminate bank tellers and customer service employees, and therefore, physical infrastructure.

State Regulators Balk at OCC Fintech Charter | American Banker: — The Office of the Comptroller of the Currency appears willing to consider the creation of a federal fintech charter, but one group is raising a red flag: state regulators. Bank supervisors in several states, which already oversee many examples of tech firms that provide financial services, say a federal charter could provide regulatory favor to still-unproven firms. They also worry that a national charter could weaken states' own established authority to enforce consumer protection and licensing laws for tech companies in the financial sphere. "We believe a federal one-size-fits-all framework for fintech is neither possible nor appropriate," said Maria Vullo, New York State's superintendent of financial services. Fintech firms have pressed the OCC to develop a limited-purpose charter so they can be governed by a single regulatory framework rather than have to comply with all the different sets of rules that exist in the states they operate. In several pronouncements, OCC officials have indicated the agency is exploring the idea. But state regulators say a federal charter could be seen as validating business models on a national basis before they have proven they can withstand a crisis. They also raise concerns reminiscent of the federal preemption battles before the 2008 financial crisis, saying that a federal fintech charter could undermine state authority.

Bank Cybersecurity No Stronger than Weakest Link - American Banker: (video) High-profile hacks such as the attack on the Swift messaging system highlight how banks depend on each other to have top-notch cybersecurity. "Everyone's security is at risk, because everyone is communicating with each other," says Andre McGregor, director of security at Tanium.

Regulators Respond to SWIFT Hacking: Rep. Carolyn B Maloney (NY-12), Ranking Member of the House Financial Services Subcommittee on Capital Markets and GSEs, released a letter from the Board of Governors of the Federal Reserve System (Federal Reserve Board), the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) that outlines the agencies’ responses to recent cyber-attacks involving the SWIFT financial messaging network resulting in the theft of millions of dollars. The agencies’ letter was in response to a May 2016 letter from Rep. Maloney that she sent as part of an inquiry into a series of reported cyber attacks in which hackers stole banks’ SWIFT credentials and initiated fraudulent fund transfers, including the theft of $81 million from the Bangladesh central bank’s account at the New York Fed. Rep. Maloney released the below statement in response to the agencies’ letter: “I appreciate the regulators’ response to my inquiry and am encouraged by the initial steps they have taken in response to the recent cyber attacks involving the SWIFT international payment system. However, as recent hacks demonstrate, our cybersecurity is only as strong as our weakest link. I remain concerned about the potential for future attacks and will be asking for regular updates from our banking regulators on the steps being taken address the risks that these cyber attacks pose to the safety and soundness of U.S. banks and the international payment system. Cybersecurity is posing a greater and greater risk to the safety and soundness of our financial system, and banks and regulators both need to remain vigilant in order to protect against these types of cyber attacks.” In their letter, the agencies described a series of actions that they’ve taken, both individually and collectively, in response to the cyber attacks, including:

  • Sending internal alerts to their examiners on the cyber attacks, with instructions for examiners to conduct expanded reviews of cyber controls for banks that are members of SWIFT, similar to the cybersecurity review ordered by the Bank of England and suggested by Rep. Maloney in her May letter;
  • Issuing a joint statement, Cybersecurity of Interbank Messaging Payment Networks, urging U.S. banks to review their risk management and cybersecurity systems to ensure that they are adequately prepared in the event of a breach; and
  • Monitoring SWIFT’s response to the cyber attacks.

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

It Should Be Obvious Now that Marketplace Lending Is Unsustainable | Bank Think: The company I'm pitching to you has revenues that rise and fall as much as 50% or more on a quarter-to-quarter basis. Its quarterly earnings and losses are equally volatile. Almost all its revenue comes from new product sales — it has very little continuing revenue. Operating expenses generally increase a little more slowly than revenue when sales are rising, but when sales fall, expenses keep increasing anyway because of accounting charges for layoffs and office closures when management downsizes. Management can't plan ahead because the company sells most of its products to a few large customers. Those customers dictate sales volume and product pricing and their purchases determine whether the company makes or loses money in any given period. Management's only lever for controlling the company's earnings volatility is to try to guess how much and at what price those customers may buy in the future. The company increases or decreases personnel and marketing expenses based on that guess. The company also has a large ongoing technology investment program that it can't afford to cut much if it wants to compete. Oh, and the company isn't growing — sales in the most recent quarter were flat compared to the same quarter two years earlier — and it is only marginally profitable even when things are going well. The company I just described is Prosper Marketplace, a fintech "unicorn" with a billion-plus private market valuation and the granddaddy of the marketplace lenders. Prosper reported second quarter 2016 results in a 10-Q filing last week that included a $35 million net loss and a $37 million cash burn on a 56% quarter-to quarter reduction in loan originations. The Prosper announcement followed fellow marketplace lender Lending Club's equally dismal quarterly earnings report earlier this month.

Deutsche Bank’s $10-Billion Scandal - The New Yorker: Almost every weekday between the fall of 2011 and early 2015, a Russian broker named Igor Volkov called the equities desk of Deutsche Bank’s Moscow headquarters to place two trades simultaneously. In one, he would use Russian rubles to buy a blue-chip Russian stock, such as Lukoil, for a Russian company that he represented. Usually, the order was for about ten million dollars’ worth of the stock. In the second trade, Volkov—acting on behalf of a different company, which typically was registered in an offshore territory, such as the British Virgin Islands—would sell the same Russian stock, in the same quantity, in London, in exchange for dollars, pounds, or euros. Both the Russian company and the offshore company had the same owner.  Deutsche Bank earned a small commission for executing the buy and sell orders, but in financial terms the clients finished roughly where they began.  These transactions had nothing to do with pursuing profit. They were a way to expatriate money. Because the Russian company and the offshore company both belonged to the same owner, these ordinary-seeming trades had an alchemical purpose: to turn rubles that were stuck in Russia into dollars stashed outside Russia. On the Moscow markets, this sleight of hand had a nickname: konvert, which means “envelope” and echoes the English verb “convert.” In the English-language media, the scheme has become known as “mirror trading.”  Mirror trads are not inherently illegal.  Viewed with detachment, however, repeated mirror trades suggest a sustained plot to shift and hide money of possibly dubious origin. Deutsche Bank’s actions are now under investigation by the U.S. Department of Justice, the New York State Department of Financial Services, and financial regulators in the U.K. and in Germany. In an internal report, Deutsche Bank has admitted that, until April, 2015, when three members of its Russian equities desk were suspended for their role in the mirror trades, about ten billion dollars was spirited out of Russia through the scheme. The lingering question is whose money was moved, and why.

Restoring Glass-Steagall Won't Solve Anything | Bank Think -  It's a rare occasion when both major political parties converge on a particular platform or issue — and rarer still when said platform involves the resurrection of an outdated law born of the Depression era. Yet today, in 2016, we find ourselves in such a scenario. Current discussions around the potential reinstitution of the Glass-Steagall Act — enacted in 1933 to prohibit commercial banks from engaging in the investment business as a response to the Great Depression — are headline-grabbing and emotional. However, Glass-Steagall ultimately has no merit in our current financial environment. It is a relic of an ancient world that no longer exists, where the U.S. was the supreme world power in financial services. Today, this is far from the case. As of 2015, of the world's 25 largest banks, only four are in the U.S. Quite simply, the “massive” financial institutions we have in the U.S. are not so massive on the global scale. To reinstate a law that further breaks down these large institutions would put the U.S. at a huge competitive disadvantage, forcing some of the largest American companies to seek out non-U.S. financial institutions for their banking services. We can't disregard the fact that the most sophisticated large borrowers want and expect to have all their financial services in one place, and they will not hesitate to look elsewhere if circumstances require them to. While it may conjure up nostalgic sentiment or conciliate those who fear another financial crisis, the bottom line is that Glass-Steagall would do nothing to provide for our banking system today. Furthermore, had it been in place in 2007, it would not have prevented the recession or the collapse of financial institutions like AIG, Lehman Brothers or Bear Stearns — none of which were banks, and therefore, not included under Glass-Steagall's legislation.

There Are Real Reasons to Bring Back Glass-Steagall | Bank Think: When both major parties endorsed restoring the Glass-Steagall Act in their campaign platforms last month, they reaffirmed the powerful hold that the Glass-Steagall principle of separating commercial and investment banking has on the public imagination. Glass-Steagall has become politically popular for good reason. The public understands that reducing the size and (especially) the complexity of our major publicly supported banking institutions is crucial to a healthier financial system. Restoring some version of the Glass-Stegall firewall between commercial and investment banking is a direct and powerful means to that end. There's also an understanding that the financial system was generally more stable during the 60 years in which Glass-Steagall was in force. Unfortunately, much of the inside-the-beltway commentary on Glass-Steagall does not add depth and substance to the public debate and is often inappropriately dismissive and shallow. A number of respected experts on the banking system, such as Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig, are strong supporters of Glass-Steagall. But too many other commenters dismiss Glass-Steagall for reasons that are at best half-truths and at worst censor the robust debate that we need to have about our current system of universal banking. The worst offenders are those who dismiss Glass-Steagall by asserting that the dismantling of Glass-Steagall and the rise of giant universal banks were unrelated to the 2008 financial crisis. The argument goes that since many of the entities at the center of the crisis, such as investment banks like Bear Stearns and Lehman Brothers, and insurance companies like AIG, were not commercial banks, Glass-Steagall had little to do with the crisis, and restoring it would not address issues revealed in the crisis.This argument makes little sense just on its face. The 2008 crisis was catastrophic for the global economy not simply because nonbank financial institutions failed, but because the problems in nonbanks spread throughout the financial system and threatened to bring down giant megabanks that combined commercial and investment banking, such as Citigroup, JPMorgan Chase and Bank of America. Glass-Steagall firewalls between Wall Street trading markets and ordinary commercial banking are directly relevant to stopping this kind of contagion.

 Clinton Pledges to Cut Small Bank Regs, Embrace Fintech – Democratic presidential nominee Hillary Clinton renewed her pledge Tuesday to cut regulations for community banks and credit unions while also signaling plans to embrace the burgeoning fintech sector.  In an op-ed on LinkedIn, Clinton specifically cited the need to cut red tape for smaller institutions, emphasizing that doing so will expand access to credit for small businesses.  "We also need to make it easier for small businesses to get financing," Clinton wrote. "My plan will reduce unnecessary regulations on local community banks and credit unions, while defending tough the new rules on big Wall Street banks. And we'll make it a priority to expand access to credit and capital for underserved communities, from inner cities to Coal Country to Indian Country." She provided further details in a fact sheet released alongside the op-ed, calling community banks and credit unions the "backbone of small-business lending in America."  The fact sheet highlighted the fintech industry, saying Clinton wants to "harness the potential of online lending platforms and work to safeguard against unfair and deceptive lending practices." While Clinton has previously pledged to cut regulations for small banks, the op-ed is her most high-profile statement on the issue to date – and comes after the Democratic National Convention pushed her agenda in other areas further to the left. Privately, some bankers have wondered how committed Clinton is to regulatory relief. By making it a core piece of her plan to help small businesses, she appears wedded to the proposal. Her mention of online lending is also significant. The fintech sector has been expanding by leaps and bounds during the past few years – but neither Clinton nor Republican presidential nominee Donald Trump has appeared to pay any attention to it.

Can Clinton Deliver Reg Relief to Small Banks? Don't Bet On It | American Banker: — Regulatory relief is arguably one of the most popular ideas in Congress — embraced by most Republicans and plenty of Democrats — but it has also proven to be frustratingly difficult for lawmakers to enact. Democratic presidential nominee Hillary Clinton again pledged Tuesday to grant relief to small banks and credit unions if elected president, making her most high-profile commitment to the idea yet. Yet analysts and industry representatives were skeptical of her ability to help get it over the finish line. Trapped between Republican lawmakers who are likely to push further than Clinton wants to go and progressive Democrats like Sen. Elizabeth Warren, D-Mass., who appear skeptical of the need for relief, a Clinton administration doesn't have much leeway. "They don't have a lot of wiggle room," said Ed Mills, a financial policy analyst and managing director at FBR. "We've gone eight years without really differentiating between the size of banks. In D.C., they think banks are bad. We have a liberal wing of the party that views [Clinton] with skepticism in reference to banks. … I don't see anything legislatively happening."

August 2016: Unofficial Problem Bank list declines to 184 Institutions -- This is an unofficial list of Problem Banks compiled only from public sources. Here is the unofficial problem bank list for August 2016.  During the month, the list declined by a net 12 institutions from 196 to 184. The net change of 12 institutions results from 14 removals and two additions. Assets dropped by $2.3 billion to an aggregate $56.5 billion, with $350 million of the decline coming from updated figures for the second quarter. A year ago, the list held 282 institutions with assets of $82.7 billion. This week, we were anticipating for the FDIC to release second quarter industry results and an update on the Official Problem Bank List, but that will have to wait until next month's update. Several banks merged to find their way off the problem bank list including Hopkins Federal Savings Bank, Baltimore, MD ($229 million); Harvard Savings Bank, Harvard, IL ($142 million); and The Bank of Oswego, Lake Oswego, OR ($61 million). In the very hard to believe category, another bank headquartered in Georgia -- The Woodbury Banking Company, Woodbury, GA ($22 million) – found its way off the list through failure. Since the on-set of the Great Recession, 91 institutions headquartered in Georgia have failed. Of the 352 institutions open at year-end 2007 in Georgia, 91 or nearly 26 percent have failed, which is more than four times the national failure rate of 6 percent. It begs the question, how is it possible for there to be any banks left in the state that could fail. Nationwide, since the on-set of the Great Recession, 533 institutions with assets of nearly $4 trillion have failed or received open-bank assistance. To put this in context, there were 8,544 institutions with assets of $13.1 trillion open in the U.S. at year-end 2007. Thus, 6.2 percent of institutions that held 30.3 percent of assets have failed or received open-bank assistance. In comparison, from 1980 through 1994, a period most consider as the most severe banking crisis since the Great Depression, 9.1% of institutions holding nearly 9.0% of assets failed or received open-bank assistance. So while the failure rate is lower in this episode, the share of assets is significantly greater.

Wells Fargo hit with $4M penalty for 'illegal student loan servicing practices' - The Consumer Financial Protection Bureau (CFPB) imposed a $4 million penalty against Wells Fargo & Co. for what it termed “illegal student loan servicing practices” that it said increased costs and unfairly penalized certain borrowers. Among the accusations made in the order were that the bank impaired customers’ ability to minimize costs and fees, misrepresented the value of making partial payments, charged illegal late fees and failed to update and correct inaccurate information reported to credit reporting companies. (The full order can be found here.)  The order requires Wells Fargo to improve its consumer billing and student loan payment processing practices, provide $410,000 in relief to borrowers and pay a $3.6 million civil penalty to the CFPB. “Wells Fargo hit borrowers with illegal fees and deprived others of critical information needed to effectively manage their student loan accounts,” CFPB Director Richard Cordray said in a statement. “Consumers should be able to rely on their servicer to process and credit payments correctly and to provide accurate and timely information and we will continue our work to improve the student loan servicing market.” The order comes as the CFPB has focused its attention on problems with student loan servicing. Last year, it released a report outlining what it called “widespread servicing failures” reported by both federal and private student loan borrowers and published a framework for reforms. Earlier this year, the CFPB called for market-wide reforms and announced that it was prioritizing taking action against companies that engage in illegal servicing practices.

Joint Trades Letter to CFPB re Notice of Proposed Rulemaking on Arbitration Agreements | Consumer Bankers Association: The undersigned associations and organizations, which collectively represent hundreds of thousands of businesses that employ millions of Americans and serve millions of customers, welcome the opportunity to offer the following comments for consideration by the Consumer Financial Protection Bureau (the “Bureau”) in connection with its proposed rule on arbitration agreements (the “Proposal”).1 For the reasons set forth in this letter, we respectfully request that the Bureau withdraw the Proposal because it would have the practical effect of eliminating the availability of low-cost, efficient, and fair arbitration programs for consumers. If the Bureau will not go back to the drawing board, we respectfully encourage the Bureau to consider adopting in any final rule a more tailored approach to regulating arbitration agreements that preserves consumers’ access to arbitration.

Business Groups Aim to Strong-arm CFPB on Arbitration - naked capitalism by Jerri-lynn Scofield - Business interests have launched a pre-emptive broadside against the Consumer Financial Products Bureau’s (CFPB) long-awaited regulations covering the use of forced arbitration clauses in consumer financial contracts.   Financial institutions use such clauses to require consumers to use arbitration procedures to resolve a dispute, rather than allowing them  bring class action or other types of lawsuits. The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act mandated that the CFPB study the use of such clauses. This task was one of many slowed by the two-year stalemate over confirmation of CFPB director Richard Cordray. The CFPB arrived at its proposed rule after extensive study of the issue, first releasing public preliminary results in December 2013 and culminating in its May 2015 Arbitration Study. The bureau published its rule in May and solicited public comments. Now the bureau must wade through the more than 13,000 largely duplicative comments received before the comment period closed last week.The rule contains two key parts. The first would prohibit financial companies from using an agreement that would bar a consumer from participating in a class action concerning a financial product or service covered by the agreement. The second would introduce a modicum of greater transparency into arbitration proceedings, and require financial firms to submit records of arbitration proceedings to the bureau. Consumer advocates and others concerned about openness have long considered arbitration proceedings problematic as there’s little transparency, records are not made public, past decisions have little precedential value, and there are limited grounds for appeal. In addition, since parties on one side of transactions tend to be repeat customers, this pattern may skew decisions to one side. The lack of transparency in the system means it is impossible to evaluate how fair an arbitration system is. The CFPB notes that although tens of millions of consumers enter into agreements using such clauses, little empirical research has been conducted on the subject. Nearly all the arbitration clauses it examined disallow class arbitration; 75% of consumers it surveyed were unaware that their consumer and financial contracts contain such clauses; and fewer than 7% of consumers understand that these clauses eliminate any right to litigate.

Screen-Scraping Angst Is Overblown | Bank Think: When consumers use a service like Quicken or Mint, they aren't just using a single piece of software. Rather, they are using a complex set of software and services operated independently by a dozen or more companies – some supplied by banks, others supplied by nonbanks. Sometimes customers ask if there's a durable business and technical basis for these connections and software services.  In the mid-to-late 1990s, consumers were right to wonder whether the rivalry between financial institutions and tech companies with financial offerings would get in the way of their ability to access and analyze their personal financial data. Today, there are still some areas of tension between financial institutions and tech companies. However, the ground rules for making account data available to consumers for use in external software products and apps are in place and the so-called rivalry is overblown. Over the last 20 years, the companies have established a modus vivendi that affords consumers a choice between bank-supplied software and third-party software that downloads transaction data without compromising security and privacy. Both parties understand the importance of privacy and security and use techniques such as advanced encryption and multifactor authentication to protect customer data. Regardless of whether data is being downloaded from a bank website, via file download or using a purpose-built protocol such as the Open Financial Exchange, the user credentials and the data itself are protected by encryption. In fact, the same verification steps that apply to the bank's website and mobile app access will typically also protect interactions with third-party products (for example, requesting that users answer personal background questions only the user would know).

A Secure Alternative to Screen Scraping | Bank Think: For more than a decade, screen scraping has been the traditional method for moving bank transaction data into an app like Mint. But the technique, which involves a computer attempting to read and interpret the data on a web page, isn't ultimately helping the consumer or the bank.  Furthermore, both banks and nonbanks can agree that screen scraping is not a secure practice. Consumers typically provide a sensitive piece of information, like their bank usernames and passwords, to a third-party provider. That third-party provider passes the credentials to an aggregator before the data is passed to the bank to login. Multi-factor authentication — requiring a one-time code or special answer after the password — helps with security but is ultimately a poor outcome. App providers don't want to interfere with users' passwords. Some banks have attempted to provide account aggregation tools themselves, such as Bank of America's My Portfolio product. However, consumers want more. They're seeking tools that help them make smarter financial decisions and reach their goals, and they aren't limiting themselves to one institution. Consumers need to be able to safely aggregate their financial data into a single portal. When you take a look outside of the financial services industry, standard-based authentication structures used by Google, Facebook, LinkedIn and Twitter point us toward a clear solution: OAuth, an open standard for authorization. Under this system, the third-party provider can request an authorization token or key from the bank. Then, the bank provides its own form of authentication — without the third party seeing any customer data. After the user authenticates successfully, the token is provided to enable the customer access to the software for a period of time — from 30 to 60 or even 365 days.

Allowing Overdraft Fees Undermines Benefit of Prepaid Cards | Bank Think: Approximately 37 million adults in the United States do not have a checking account. Some of those individuals have never relied on traditional banking. However, our research shows the majority previously had bank accounts. The primary reason these "unbanked" consumers gave up on traditional bank accounts? Overdraft penalty fees. Instead of accounts associated with surprise fees, unbanked consumers have been using prepaid cards....prepaid cards have predictable, upfront costs without unexpected charges such as overdraft fees. The pricing model needs to stay that way. As the Consumer Financial Protection Bureau prepares to finalize its rule on prepaid cards, there have been many comments — including in the media — on whether to allow overdraft fees on prepaid products. Some of the discussion concerning the bureau's impending rule has underestimated the impact of overdraft fees on consumers. Industry advocates argue that overregulation has limited free checking options, thereby causing consumers to abandon checking accounts. However, once consumers leave the banking system — either because they don't want to pay the high fees or because their account is delinquent — their options for affordably and safely managing their finances are limited. This is supported with data. For a typical fee of $35, most U.S. banks allow consumers to overdraw their accounts — often referred to as a negative balance — when they don't have sufficient funds to cover debit card point-of-sale and ATM transactions. However, the CFPB has shown that most debit card purchases that incur the fee are under $25.Prepaid card products with transparent pricing and no risk of overdraft fees can help solve this problem. In nationally representative surveys, consumers say they rely on prepaid accounts to avoid debt, manage their spending, and — notably — escape overdraft fees. Allowing overdraft programs on prepaid accounts would not level the playing field or ensure consumer access to needed financial products. Rather, it would endanger consumers' ability to use prepaid cards as a way to get back on track and build a secure financial future. It is essential for the agency to follow through on its proposal that effectively bans overdraft fees on prepaid cards.

 U.S. banks want to cut branches, but customers keep coming | Reuters: Despite banks' nudging toward online tools, many U.S. customers are not ready to give up regular visits to their nearest branch, complicating the industry's efforts to slim down. U.S. banks have trimmed the number of branches by 6 percent since it peaked in 2009, according to Federal Deposit Insurance Corp data. The 93,283 branches open at the end of last year was the lowest level in a decade. (tmsnrt.rs/2b66WKY) Yet analysts who have examined the data say banks should have done more to offset the pressure on revenue from low interest rates and regulatory demands. The number of FDIC-insured banks has fallen by more than 25 percent over that time even as industry assets have grown, indicating room for greater branch consolidation. Bank executives argue, however, that branches remain crucial for acquiring new customers and doing more business with existing ones. Closures, they say, would hurt revenue more than help reduce costs.

Why Risk Retention Rules May Give Big Banks the Edge in CMBS | Asset Securitization Report: If the pricing of a recent commercial mortgage-backed security deal is any indication, risk-retention rules are giving large banks a competitive advantage in this market. The rules don't take effect until Dec. 24. But the first CMBS deal designed to comply with the Dodd-Frank Act requirement to keep “skin in the game” closed on Thursday. The $870.6 million transaction was well received by investors, and market participants credit the way in which the three sponsoring banks – Wells Fargo, Bank of America and Morgan Stanley – chose to retain the risk. However, few other lenders in the so-called conduit market, where loans on commercial properties are originated for securitization, are in a position to use the same strategy, since it requires a large balance sheet. That means future bank-sponsored CMBS deals may command superior pricing to others' transactions, which in turn would allow the banks to offer more competitive rates to borrowers. The three banks will collectively retain 5% of each class of securities issued by Wells Fargo Commercial Mortgage Trust 2016-BNK1, or about $43.5 million, according to Fitch Ratings and Kroll Bond Rating Agency. This is known as the vertical option. Other issuers are expected to take advantage of a concession, unique to the CMBS market, allowing sponsors to satisfy risk retention rules by selling the risk of first loss to a designated third party. In industry parlance, this is the horizontal option, because these investors would hold the riskiest 5% of securities in a deal. It’s also possible that some deals will comply with risk retention via an “L” shaped strategy that combines features of the vertical and horizontal strategies. The yield spread on the junior-most triple-A rated tranche of the deal was several basis points less than even initial market chatter had indicated, according to the research firm Trepp. (There are senior classes that feature more protection than the rating agencies require for a triple-A grade.) At 94 basis points over the swap rate, it was also the tightest spread for this particular class of securities so far this year and some 14 basis points tighter than the comparable tranche of the previous CMBS deal, which did not comply with risk retention.

 FHA: Take a Page from PMI Playbook to Clarify Defect Rules: As private mortgage insurance companies revoked coverage on a growing number of defective loans that defaulted during the financial crisis, new rules were put in place to standardize the claim review process. The Federal Housing Administration continues to face similar issues today and should look to the PMI companies to model their response. The vast majority of loans are not reviewed for eligibility until a claim is submitted. During this process, loan defects were discovered that made mortgage loans ineligible for insurance, both leaving the insurer on the hook for the buyback, as well as retroactively open to a lawsuit from Department of Housing and Urban Development and the Department of Justice via the False Claims Act. The recent push by mortgage lenders for clarity on the FHA's loan defect taxonomy reflects mortgage lenders' concerns about how ineligible loans are handled. Rather than reviewing loans for eligibility prior to insuring, the Department of Housing and Urban Development essentially uses the honor system, relying on the certification provided by the mortgage lenders participating in the FHA Direct Endorsement program that the loan is eligible for insurance.  During the mortgage meltdown, PMI companies encountered multiple disputes with mortgage lenders regarding coverage eligibility. In many cases, when a claim was submitted for a defaulted loan, the issuing PMI company would re-underwrite the loan as part of the claim review process. In some of these reviews the PMI company would find eligibility and/or underwriting defects. As defaults continued to rise, mortgage lenders were counting on these PMI policy payouts to cover their losses, and to have these policies negated years after the loan was closed created very real problems. To address the issue, the Federal Housing Finance Agency issued new regulations effective Oct. 1, 2014, requiring all private mortgage insurers to revise their master policies with Fannie Mae and Freddie Mac to provide more uniform, industry-wide insurance standards. As part of this directive, PMI companies must provide mortgage lenders the option to have loans reviewed prior to insuring to receive enhanced rescission relief for loan eligibility and conformity to mortgage insurance guidelines.

Regulators and Policymakers Need to Address Liquidity: Kroll: Liquidity is waning in markets for residential mortgages and related securities, and regulators and policymakers need to address this issue before it turns into a crisis, according to a report from Kroll Bond Rating Agency. Kroll identified a number of factors that could be contributing to a serious liquidity crisis. Among them are regulations on credit creation, increases in banks' capital and liquidity requirements, and the deflationary effect that low interest rates have had. "Indeed, without relief in terms of higher interest rates and meaningful regulatory reform, smaller nonbank seller/servicers operating in the U.S. mortgage market could fail," Kroll analysts wrote in the report released Wednesday. The result then could be that these entities' creditors may abandon the leftover mortgage servicing portfolios and simply obtain any available collateral before walking away in light of the dwindling profits from servicing. In such a situation, the government agencies that guarantee affected mortgages would be forced to subsidize the servicing of these portfolios, which Kroll noted has only occurred in the 1980s and 1930s. "Regulators and policymakers need to take notice of the dwindling liquidity in and capital available to support the markets…and consider what it says about the economic model for lending, loan servicing and securities dealing in the current regulatory environment," the analysts wrote. "The cumulative effect of monetary policy actions, and prudential and consumer regulations, may be creating the circumstances for a future liquidity crisis."

Lenders Caught in Crossfire Between HUD and Its Watchdog: Housing and Urban Development and the agency's Office of Inspector General over down payment assistance programs is beginning to have an impact on lenders. Some institutions, including Wells Fargo, are exiting the program, while others are hoping the disagreement will be resolved soon. "Lenders are carefully weighing the risks regarding whether to make loans involving down payment assistance," said Krista Cooley, a partner at the law firm Mayer Brown in Washington, D.C. "This is another example in the [Federal Housing Administration] program that is creating uncertainty for lenders, which could negatively impact access to credit for those borrowers who rely on these FHA down payment assistance programs to obtain a loan." At issue is a battle over whether the down payment assistance programs run by state and local housing finance agencies are consistent with the National Housing Act. HUD maintains they are, but its inspector general, David Montoya, claims the programs are harming borrowers. He argues that borrowers who sign up for such loans pay higher interest fees that could ultimately impact their ability to repay the loan. Lenders are effectively caught in the middle — and getting "gun shy," according to one source who spoke on condition of anonymity. Wells Fargo suspended its down payment assistance program, while other lenders are cutting back.

HARP extended into 2017; FHFA plans new refinance program - HousingWire: The Federal Housing Finance Agency announced it extended the Home Affordable Refinance Program until Sept. 30, 2017 in order to create a smoother transition period for a new refi product it is planning to launch toward the end of 2017. According to the FHFA, Fannie Mae and Freddie Mac will implement a new refinance offering aimed at borrowers with high loan-to-value ratios. “The new refinance offering will provide much-needed liquidity for borrowers who are current on their mortgage but are unable to refinance through traditional programs because their LTV ratio exceeds the Enterprises’ maximum limits,” the release stated. Since the new high LTV streamlined refinance offering will not be available to borrowers until October 2017, the FHFA said it “created a bridge” to ensure that high LTV borrowers who are eligible for HARP will not be without a refinance option. Currently, the FHFA estimates there are more than 300,000 U.S. homeowners that could still refinance through HARP. Both the Home Affordable Modification Program and HARP were originally launched in 2009 to provide relief to borrowers by lowering their monthly payments and were set to expire on Dec. 31, 2013.

New Plan Would Let FHLBs Accept Expanded Collateral: — The Federal Housing Finance Agency is seeking to make it easier for Federal Home Loan Banks to accept certain kinds of collateral for advances. Since 2000, some Home Loan banks have accepted "other real estate-related collateral" including commercial real estate loans, commercial mortgage-backed securities and home equity lines of credit. They also have accepted "community financial institution collateral" such as small business and small farm loans and community development loans. The FHFA said Tuesday that there is "little risk associated" with this collateral. As a result, it is opening the door for all 11 Home Loan banks to accept this collateral without seeking prior approval. It released a proposal Tuesday under which FHFA would simply review a bank's acceptance of the collateral through the examination process. "Those types of collateral are no longer new, and the remaining universe of new types of collateral that might potentially fall into the ORERC category is small," the proposal said. The FHFA is taking comments until Oct. 24.

Nightmare On Main Street - WHAT are the most dysfunctional parts of the global financial system? China’s banking industry, you might say, with its great wall of bad debts and state-sponsored cronyism. Or the euro zone’s taped-together single currency, which stretches across 19 different countries, each with its own debts and frail financial firms. Both are worrying. But if sheer size is your yardstick, nothing beats America’s housing market. It is the world’s largest asset class, worth $26 trillion, more than America’s stockmarket. The slab of mortgage debt lurking beneath it is the planet’s biggest concentration of financial risk. When house prices started tumbling in the summer of 2006, a chain reaction led to a global crisis in 2008-09. A decade on, the presumption is that the mortgage-debt monster has been tamed. In fact, vast, nationalised, unprofitable and undercapitalised, it remains a menace to the world’s biggest economy.The reason the danger passes almost unnoticed is that, at first sight, the housing market has been improving. Prices in America have crept back up towards their all-time high. As a result, the proportion of households with mortgage debts greater than the value of their property has dropped from a quarter to under a tenth. In addition, while Europe has dithered, America has cleaned up its banks. They have $1.2 trillion of core capital, more than double the amount in 2007, which acts as a buffer against losses. The banks have cut risk and costs and raised fees in order to grind out decent profits. Bosses and regulators point to chastened lenders and boast that the problem of banks “too big to fail” has been solved. Taxpayers, they say, are safe.

  Robo-Testifying In a Nutshell: The Triumph of Expediency Over Due Process in Foreclosure Cases --What is a robo-testifier or robo-witness? A person with little or no prior banking experience hired by the banks (servicers) for the job of testifying at hundreds of often back-to-back foreclosure trials who are specially trained by the servicers to give hearsay testimony on the banks’ behalf. After the great robo-signing controversy (which involved the rapid signing of summary judgment affidavits under oath by individuals without personal knowledge of the truth of the statements in the affidavits), new rules were put in place that required greater supervision of the creation of summary judgment affidavits to ensure that the signers actually had personal knowledge of the matters to which they were attesting. As a result, the banks stopped seeking summary judgment and instead went to trial. In Florida, foreclosure cases are tried to a judge, not a jury, so the only practical difference for the banks was that what was formerly proven by a summary judgment affiant would now be proven by a live witness.  The servicers trained an army of testifiers whose sole job was to testify in court. These witnesses generally had no experience with the recordkeeping matters they would testify to. They go from trial to trial, usually reading the records related to a particular case just days before the trial.  Why should we care about that? – The triumph of expediency over the due process protection of the hearsay rule.  Foreclosure trials are about the servicers’ paperwork—documents that usually speak to three main issues:

1. Standing—proof that the bank either owned or “held” (possessed) the promissory note before it filed the case;
2. Conditions precedent—proof that the bank sent the borrower the required notice of acceleration; and
3. Damages—proof of what the borrower did not pay and what the bank paid on the borrower’s behalf, such as taxes and insurance.

All of this evidence is in documents and documents are hearsay, meaning they are statements made outside of court by someone who is not under oath and which are being introduced into evidence to prove the truth of the matters asserted in them.  In summary:  The servicers feed their employee robo-testifier hearsay (about recordkeeping procedures) so that he or she can regurgitate it in court under oath in order to establish an exception for other hearsay (the documents). And they are being fed the least trustworthy kind of hearsay because it is being told to them for a litigation purpose. The entire hearsay rule has been eviscerated because there is no document that will not meet the exception if the party that needs to use that document in court can just tell its witness to say that it does. And because the ability to cross-examine those testifying against you is the central reason for the hearsay rule, its complete destruction in foreclosure cases is a fundamental due process violation.

 California Assembly Approves Survivor’s Rights Bill: The California State Assembly approved legislation Monday that would expand the rights of a deceased homeowner's surviving loved ones, including widows, widowers and other heirs. SB 1150, also known as the Survivor Homeowner Bill of Rights, defines a mortgage servicer's responsibility in cases where a borrower dies and the surviving homeowner was not included on the loan. The bill, which is co-written by California State Sens. Mark Leno and Cathleen Galgiani, was approved by the State Senate in June. Now, the bill will go back to the California State Senate for a concurrent vote. If that vote is successful, it will then go to Gov. Jerry Brown for his approval or veto. The bill takes its inspiration from the California Homeowners Bill of Rights, which became law in 2013. SB 1150 works to prevent servicers from recording a default notice once they have been notified of the borrower's death until they meet certain requirements, including providing a successor with information about the loan no later than 10 days after determining who the successor is. The bill was co-sponsored by the California Alliance of Retired Americans, Housing and Economic Rights Advocates and the California Reinvestment Coalition, and received backing from 50 organizations and California Attorney General Kamala Harris. "The assembly approval of SB 1150 is an important step forward in California leading the nation when it comes to protecting homeowners from unscrupulous foreclosure practices," Maeve Elise Brown, executive director of Housing and Economic Rights Advocates, said in a news release Monday. "SB 1150 is a pragmatic way to stop widows, widowers and other heirs from needlessly losing their homes to foreclosure and we hope Gov. Brown signs it quickly."

Black Knight's First Look at July Mortgage Data -- CR Note: The month-to-month increase in delinquencies is mostly seasonal (happens every July).  From Black Knight: Black Knight Financial Services’ First Look at July Mortgage Data: Delinquencies Continue Seasonal Climb; Prepayments Defy Historically Low Interest Rates, Growing Refinanceable Population   -- The Data & Analytics division of Black Knight Financial Services reports the following “first look” at July 2016 month-end mortgage performance statistics derived from its loan-level database representing the majority of the national mortgage market. Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure): 4.51% Month-over-month change: 4.78% Year-over-year change: -3.38% Total U.S. foreclosure pre-sale inventory rate: 1.09% Month-over-month change: -1.68% Year-over-year change: -28.36% Total U.S. foreclosure starts: 61,300 Month-over-month change: -11.54% Year-over-year change: -14.27% Monthly Prepayment Rate (SMM): 1.26% Month-over-month change: -11.98% Year-over-year change: -1.00% Foreclosure Sales as % of 90+: 1.99% Month-over-month change: -13.65% Year-over-year change: 1.05% Number of properties that are 30 or more days past due, but not in foreclosure: 2,286,000 Month-over-month change: 108,000 Year-over-year change: -70,000 Number of properties that are 90 or more days past due, but not in foreclosure: 695,000 Month-over-month change: 3,000 Year-over-year change: -147,000Number of properties in foreclosure pre-sale inventory: 550,000 Month-over-month change: -8,000 Year-over-year change: -214,000. Number of properties that are 30 or more days past due or in foreclosure: 2,836,000 Month-over-month change: 100,000 Year-over-year change: -284,000Ca

Prepayment Speeds Drop in July Despite Low Rates -- Prepayment activity declined during July in spite of the low rates that added to the number of borrowers who could refinance, Black Knight Financial Services said in its "First Look" data release. The monthly prepayment rate dropped 12% from June and 1% year over year to 1.26%, Black Knight said Monday. In June, prepayment speeds had reached a 12-month high. The total U.S. delinquency rate ticked up to 4.51%, representing a 4.8% month over month increase but a 3.4% decline from last year. Black Knight added that a decrease is expected in August based on past history. The total pre-sale foreclosure inventory continued its descent, dropping by 8,000 properties month over month and 214,000 properties year over year to roughly 550,000 homes. Foreclosure starts also went down 11.5% month over month and 14.3% year over year to 61,300, representing the second lowest monthly total in a decade.’

 Fannie, Freddie Bring Mortgage Application into Digital Age -- New specifications for Fannie Mae and Freddie Mac's common mortgage application unveiled Tuesday add data points and remove obsolete questions, as well as include additional capabilities to promote digital mortgage workflows. The completely redesigned Uniform Residential Loan Application — commonly referred to as the Fannie Mae Form 1003 or Freddie Mac Form 65 — won't be effective until Jan. 1, 2018, the same implementation date for collecting expanded demographic information under the Home Mortgage Disclosure Act. In addition to collecting the expanded HMDA data, the new application requests information like the borrower's email address and cell phone number — details that lenders gather today, but weren't commonplace when the form was first implemented more than 20 years ago. When a borrower is completing a digital version of the application, certain sections can be expanded or collapsed based on the circumstances of the loan. Borrowers will also be able to use drop-down menus to provide information like types of assets and liabilities.

MBA: "Mortgage Applications Decrease in Latest Weekly Survey" -- From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey Mortgage applications decreased 2.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 19, 2016.... The Refinance Index decreased 3 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.3 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 8 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 3.67 percent from 3.64 percent, with points increasing to 0.34 from 0.31 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Fixed Mortgage Rates Unchanged in US, Still Near Record Low -- Freddie Mac's latest Primary Mortgage Market Survey is showing this week that the average fixed U.S. mortgage rate remained unchanged from the previous week, while still remaining near their all-time record lows. Sean Becketti, chief economist of Freddie Mac said, "Treasury yields were little changed from the prior week and the 30-year fixed-rate mortgage held steady at 3.43 percent this week. This marks the ninth consecutive week that mortgage rates have been below 3.5 percent. Markets are erring on the side of caution ahead of the second estimate for second-quarter GDP and Fed Chair Janet Yellen's speech on Friday".  Freddie Mac News Facts:

  • 30-year fixed-rate mortgage (FRM) averaged 3.43 percent with an average 0.6 point for the week ending August 25, 2016, unchanged from last week. A year ago at this time, the 30-year FRM averaged 3.84 percent.
  • 15-year FRM this week averaged 2.74 percent with an average 0.5 point, unchanged from last week. A year ago at this time, the 15-year FRM averaged 3.06 percent. 
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.75 percent this week with an average 0.4 point, up from last week when it averaged 2.74 percent. A year ago, the 5-year ARM averaged 2.90 percent.

 Existing Home Sales decline in July to 5.39 million SAAR -- From the NAR: Existing-Home Sales Lose Steam in July Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 3.2 percent to a seasonally adjusted annual rate of 5.39 million in July from 5.57 million in June. For only the second time in the last 21 months 2, sales are now below (1.6 percent) a year ago (5.48 million).  Total housing inventory at the end of July inched 0.9 percent higher to 2.13 million existing homes available for sale, but is still 5.8 percent lower than a year ago (2.26 million) and has now declined year-over-year for 14 straight months. Unsold inventory is at a 4.7-month supply at the current sales pace, which is up from 4.5 months in June.  Sales in July (5.39 million SAAR) were 3.2% lower than last month, and were 1.6% below the July 2015 rate.  According to the NAR, inventory increased to 2.13 million in July from 2.11 million in June.   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.  Inventory decreased 5.8% year-over-year in July compared to July 2015.    Months of supply was at 4.7 months in July.  This was below consensus expectations (but not a surprise for CR readers). For existing home sales, a key number is inventory - and inventory is still low

July 2016 Existing Home Sales Not Good: The headlines for existing home sales say "Slowed by frustratingly low inventory levels in many parts of the country, existing-home sales lost momentum in July and decreased year-over-year for the first time since November 2015". Our analysis of the unadjusted data is much worse than the headlines. Econintersect Analysis:

  • Unadjusted sales rate of growth decelerated 8.5 % month-over-month, down 6.7 % year-over-year - sales growth rate trend was rapidly declining using the 3 month moving average.
  • Unadjusted price rate of growth accelerated 0.2 % month-over-month, up 3.6 % year-over-year - price growth rate trend was unchanged using the 3 month moving average.
  • The homes for sale inventory improved this month, but remains historically low for Julys, and is down 5.8 % from inventory levels one year ago).

NAR reported:

  • Sales down 3.2 % month-over-month, down 1.6 % year-over-year.
  • Prices up 5.3 % year-over-year
  • The market expected annualized sales volumes of 5.420 M to 5.650 million (consensus 5.520 million) vs the 5.39 million reported.

levels.

Existing Home Sales Crush Recovery Narrative, Plunge Most Since Nov 2015 - Following yesterday's 7 standard deviation beat in New Home Sales, Existing Home Sales for July missed expectations by 2 standard deviations dropping 1.64% YoY - the first annual decline since Nov 2015. The blame for this collapse - according to NAR's Larry Yun - is "frustratingly low inventory levels." Lawrence Yun, NAR chief economist, says existing sales fell off track in July after steadily climbing the last four months. Slowed by frustratingly low inventory levels in many parts of the country, existing-home sales lost momentum in July and decreased year-over-year for the first time since November 2015, according to the NAR. Only the West region saw a monthly increase in closings in July.  “Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month,” he said. “Realtors® are reporting diminished buyer traffic because of the scarce number of affordable homes on the market, and the lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historical lows.” “Furthermore, with new condo construction barely budging and currently making up only a small sliver of multi-family construction, sales suffered last month ascondo buyers faced even stiffer supply constraints than those looking to purchase a single-family home.” We warned that a slowdown loomed last week...noting three prominent "red flags" that the US housing market was starting to roll over. Among these were a report by real-estate advisory RealtyTrac, which cited by Bloomberg, said that "almost nine years after the housing-market bust helped trigger the most recent recession,RealtyTrac senior vice president Daren Blomquist sees the industry waving a red flag." He was referring to house flipping by third party investors at auction which was back with a vengeance, and what's worse, the share of foreclosures snapped up by inexperienced mom-and-pop buyers at auction had hit a record 31% in June. As he said, "this a redux of the same fervent speculation that pushed the housing bubble."

Home Values Keep Climbing, Still Short of Pre-Crisis Peak: Zillow: Home values rose for the 48th consecutive month in July, but not enough to close the gap with the peak set in 2007, according to Zillow's Real Estate Market Reports. Zillow said Thursday that home values rose 5.1% nationwide from a year ago to $187,300, per the Zillow Home Value Index. A similar group of cities — Portland, Dallas, Denver and Seattle — led the country in terms of year-over-year home value gains. "In most areas, the market is being driven mainly by a strong labor market and tight supply, especially among entry-level homes that first-time buyers are after," Zillow chief economist Svenja Gudell said in a news release. "But some markets — especially the red-hot Pacific Northwest — are adding more jobs and attracting more residents, putting the pressure on home values and rents." Despite the yearly increase, home values still remain 4.7% below their peak in April 2007 at $196,000. Rents are also going up across the country. The Zillow Rent Index recorded a 2% increase year-over-year to $1,408, representing the 47th straight month of appreciation.

Real Estate Price Bubble Is the Work of Media, Not Foreign Money: Massive monetary experimentation has sent price-signalling in our asset markets haywire as speculative temperatures fluctuate sometimes violently. Yet market commentators overwhelmingly cling to the notion that any big swing in price stems mainly from a specific cause, which is their job to discover and reveal. In doing so, they resort to powerful exaggeration. An example is today's popular hypothesis regarding sky-high prices, whether for real assets or bonds, easily summarized as "the foreigner is coming!" Superficially, the theme that U.S. housing prices are being driven higher by investors from other countries seems to make sense, but is largely balderdash, even though embraced by financial journalists and their audiences. Why? Tales of foreign black money hoards seeking refuge in U.S. real estate as the "new Switzerland," or Chinese billionaires making real estate agents in Vancouver rich, or fund managers fleeing negative interest rates in Europe and Japan and flooding into U.S. long-term fixed rate markets (both corporate and government) are more engaging and readable than analytical investigation into the root causes of monetary malaise and related irrational speculation. Billionaires and income famine victims make a better story than survey evidence about the "silent majority" of investors who allow their existing exposure to the given asset class to simply rise or fall with the price. Finance 101 tells us that market prices are determined in stock, not flow equilibrium, but tell that to the news editors. They want clicks and eyeballs.

U.S. New-Home Sales Unexpectedly Surge to Almost Nine-Year High - Bloomberg: Purchases of new U.S. homes unexpectedly jumped in July to the highest level in almost nine years, led by soaring demand in the nation’s south and adding to signs of persistent housing-market strength. Sales increased 12.4 percent to a 654,000 annualized pace, the fastest since October 2007, Commerce Department data showed Tuesday in Washington. That exceeded the most optimistic forecast in a Bloomberg survey. Purchases in the South were the strongest since before the start of the last recession. Employment gains and historically low borrowing costs are providing firm support for housing demand, helping reduce inventory, which will probably keep new construction elevated. The report showed an increase in the share of homes sold for less than $300,000, indicating builders are turning their sights to entry-level buyers.The increase “makes perfect sense when interest rates are low, credit continues to ease, and the consumer is in decent shape given the jobs market,” . “You’re seeing finally that builders are responding with more supply, and that’s been one of the big problems in the current cycle.” The median forecast of 72 economists surveyed by Bloomberg called for the pace of sales to decelerate to 580,000. Estimates ranged from 540,000 to 610,000. The Commerce Department revised the June reading lower to a 582,000 pace from a previously estimated 592,000. It’s still less than half the record pace of 1.39 million sales in 2005, before the housing bubble burst.

July 2016 New Home Sales Significantly Improves On Lower Median Sales Prices.: The headlines say new home sales again dramatically improved. The median sales price for homes was down - and inventory was also down. This was a very good month as sales were well above expectations. This data series is suffering from methodology issues. Econintersect analysis:

  • unadjusted sales growth accelerated 12.1 % month-over-month.
  • unadjusted year-over-year sales up 32.6 %.. Growth this month was was above the range of growth seen last 12 months.
  • three month unadjusted trend rate of growth accelerated 5.8 % month-over-month - is up 21.6 % year-over-year.

US Census Headlines:

  • seasonally adjusted sales up 12.4 % month-over-month
  • seasonally adjusted year-over-year sales up 31.3 % (last month was reported at 25.4 %)
  • market expected (from Bloomberg) seasonally adjusted annualized sales of 556 K to 590 K (consensus 580 K) versus the actual at 654 K.

The quantity of new single family homes for sale remains well below historical

 New Home Sales increased to 654,000 Annual Rate in July, Highest since October 2007  --The Census Bureau reports New Home Sales in July were at a seasonally adjusted annual rate (SAAR) of 654 thousand.  The previous three months were revised down by a total of 12 thousand (SAAR). "Sales of new single-family houses in July 2016 were at a seasonally adjusted annual rate of 654,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 12.4 percent (±12.7%)* above the revised June rate of 582,000 and is 31.3 percent (±19.9%) above the July 2015 estimate of 498,000." The months of supply decreased in July to 4.3 months.  The all time record was 12.1 months of supply in January 2009. This is now in the normal range (less than 6 months supply is normal). "The seasonally adjusted estimate of new houses for sale at the end of July was 233,000. This represents a supply of 4.3 months at the current sales rate" This was well above expectations of 580,000 sales SAAR in July.   This was a strong report. 

New Home Sales Soar Most Since 2007 Driven By Southern Sales Surge -- While the accuracy of the new home sales data is notorious volatile, with regular revisions wiping out both up and down-side outlier prints, moments ago the Census reported that in July, the US saw a whopping 654K new home sales, up 12.4%, from the prior month and higher by 31% from a year ago, smashing expectations of a 580K print, and a -2% decline from last month's pre-revision print of 592K (since revised lower to 582K). What was most notably about the series is that while there was no sequential change in houses sold in the West, which were flat at 137K in July, the south posted a massive 18.1% jump in the month, up 40% from a year ago, surging to 398K in July from just 337K a month ago. It was not immediately clear what may have prompted this dramatic surge in home construction in the south, especially following our last week post hinting that the housing slowdown is accelerating when looking at such data points as plunging mortgage purchase applications, the Credit Suisse survey of realtors and spending on home improvement. Perhaps the Census pushed forward the inevitable home construction that will follow as a result of the Louisiana floods, which however took place in August. Finally, one potential catalyst for the spike in sales is that the median home price dropped from $311K in June to $294K in July, reverting to its recent average range.

Comments on Home Sales in July -- The new home sales report for July was very strong at 654,000 on a seasonally adjusted annual rate basis (SAAR) - the highest since October 2007 - however combined sales for April, May and June were revised down by 12 thousand SAAR. Sales were up 31.3% year-over-year (YoY) compared to July 2015. And sales are up 12.4% year-to-date compared to the same period in 2015.The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate. As always, I wouldn't read too much into data for any one month - this series is volatile and the revisions are frequently significant.  However it does appear new home sales are approaching normal levels (I've been expecting sales to increase to at least 800 thousand - but I expected the recovery to be slow).  The second graph shows new home sales for 2015 and 2016 by month (Seasonally Adjusted Annual Rate).  Sales to date are up 12.4% year-over-year, mostly because of the solid growth starting in Q2.There will probably be solid year-over-year growth in Q3 this year too.Overall  I expected lower growth this year, in the 4% to 8% range.  Slower growth seemed likely this year because Houston (and other oil producing areas) will have a problem this year.  So far new home sales have been stronger than my forecast.The third graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.  Sales in July (5.39 million SAAR) were 3.2% lower than last month, and were 1.6% below the July 2015 rate.

 Demographic HomeMageddon Underway...Will Last Until at Least 2035 --91% of all US home buying is done by those aged 20-69yrs/old, according to NAR data. In 2015, Millennials (20-35yrs/old) made up 35% of home purchases, Gen X (36-50yr/olds) bought 26%, Boomers (51-70yr/olds) 31%, and the Silent Generation (70+yrs/old) 9%. I'm no great fan of the NAR, but this makes basic sense as most homebuyers need an income to be homebuyers and most 70+yr/olds are retired and have the lowest average incomes of all the above groups. Here's the very big problem for residential real estate...the chart below shows that over 70% of all the population growth among potential home buyers (20+yrs/old) from 2017-->2030 will be among the 70+yr/olds (chart shows average annual growth for the two groups from 2000-->2016 (left) and 2017-->2030 (right)). This is simply unprecedented in US history.  To put it in a broader context, the chart below shows annual growth in the 20-69yr/old population (red line) vs. annual growth in the 70+yr/old population (blue line) since 1980.  That unprecedented, impending crossover in the lines means everything for real estate and the economy in general.  The impending nosedive in the growth of potential buyers vs. surge in elderly (those more likely to downsize or out-right sell than buy) should be quite disconcerting considering:

  • Home prices are at or near '07/'08 bubble peaks meaning any new investments require far more cash down to achieve a positive cash flow
  • Mortgage rates can effectively go no lower and a marginal increase is probable (unless the Fed reinitiates QE and implements NIRP)
  • Present lending standards are far more stringent than during the '07/'08 fog-a-mirror NINJA free for all
  • The dollar is likely to continue appreciating making foreign buying continually more expensive...and less likely (unless the Fed reinitiates QE and implements NIRP)
  • Rents and rent to income ratios are off the charts to new records well above '08...maintaining the pace of rent appreciation is highly unlikely and rent declines may be the more probable course.

       Millennials aren’t buying homes. Good for them. - Millennial homeownership rates are way, way down. And believe it or not, that’s probably a good thing. Across all age groups, the U.S. homeownership rate — at 62.9 percent — has now fallen to its lowest level in more than five decades. Among younger Americans only, things look especially paltry. Homeownership rates among Americans under age 35 are barely more than half the national number, at just 34.1 percent. This too is a record low and about a fifth below its peak from the go-go years of the mid-2000s. Young people, it seems, are finding themselves falling further and further away from the American dream of homeownership. As you’ve surely heard by now, not only are they not buying their own houses, but they’re also increasingly not even renting their own places. Instead, they’re returning to — or perhaps, never leaving — the nest. Today about a third of 18-to-34-year-olds live with their parents. And for the first time since at least 1880, a greater share of this age group is bunking up with Mom and Dad than living in any other arrangement (such as dwelling alone, with a roommate, or with a spouse or romantic partner).Recent survey data show that young people very much still aspire to buy a home, and moreover expect to do so one day. Among people ages 25 to 34 who rent, 93 percent say they are likely to buy a home someday, according to Fannie Mae’s National Housing Survey. That compares with just 81 percent of renters overall. The Demand Institute has found similar results. So why are young people delaying getting that deed? One, they’re putting off getting married, which many still see as a prerequisite to homeownership. (Though a large chunk of millennials, I should note, instead view homeownership as a prerequisite to marriage.) Two — and this is part of the reason they’re delaying marriage, too — is that they’re poor.

    Why Millennials Aren't Buying Houses - This much is obvious: Young people don’t buy homes like they used to.  In the aftermath of the recession and weak recovery, the share of 18- to- 34 year olds—a.k.a.: Millennials—who own a home has fallen to a 30-year low. For the first time on record going back more than a century, young people are now more likely to live with their parents than with a spouse. It’s become en vogue to argue that young people’s turn against homeownership might be a good thing.  After all, houses are not always dependable investment vehicles, a lesson the country learned all too painfully after the Great Recession. Without being anchored to any one city from their mid-20s and into their 30s, young people who don’t own are free to roam about the country in search of the best jobs. What’s more, given the copious advantages of a college degree in this economy, perhaps many young people could be commended for investing in their intelligence, professional networks, and abilities rather than devote that same income to a roof, floor, and furniture.  But in the noble rush to overturn tired stereotypes about Millennials being an undifferentiated blob of privileged mewling, some analysts are missing a deeper story, which is that the decline in homeownership is a bifurcated phenomenon, with two extreme adulthood tracks that have emerged in the last few years: the supermobile and the stuck. And each has its own deleterious effect on the housing market. On the first track, there are high-achieving students, who disproportionately come from richer districts. This group is more likely to move away to go to college and then settle in one of a handful of dense cities, where they delay buying a house (and delay starting a family) in order to rent throughout their 20s and focus on their careers. The second track is different in almost every way. Millennials who grow up in poor neighborhoods are less likely to move, less likely to go to college, and even if they go to college, they are less likely to leave their zip code.

    Most Millennials Have Less Than $1,000 In Savings, Live Paycheck-to-Paycheck -- The majority of millennials are living paycheck to paycheck. A recent survey of millennials by HowMuch.net found that 51.8% of those aged 18-34 have less than $1,000 held between bank accounts and cash savings. As Visual Capitalist's Jeff Desjardins notes, this echoes previous data we’ve seen – not just on millennials, but Americans in general. For example, we know that 14% of Americans have “negative” wealth. We also know that 62% of Americans don’t have emergency savings that could cover a $1,000 hospital visit or a $500 car repair. Taking that into consideration, let’s dive deeper into this more recent millennial data... The broad survey data can be further divided into “younger” and “older” millennial segments: those aged 18-24, vs. those between 25-34. Based on the survey question, an intuitive expectation would be that younger millennials are much more likely to have less than $1,000 in savings. After all, many of the people in this group would still be in school, and many are struggling with student debt. However, the difference is far less than one may expect. While it is true that 57.6% of the younger demographic has less than $1,000 in savings, the older group is not much better off with almost half (47.1%) of them being in the same boat. This shows that many millennials in their late 20s and early 30s are still not able to generate substantial savings. There is also a significant divide between male and female millennials here, with 56.7% of females having less than $1,000 in savings. Compare this number to the male percentage of 46.5%, and it is clear there is a substantial divide between genders. Lastly, males are also more likely to have a substantial amount stored away in their bank account. According to the survey, 21.5% of males have more than $20,000 of savings, while only 11.9% females can say the same.

    How Facebook can affect your credit score - FT.com: There are three major credit scorers in the UK — but it is likely that most millennials are blissfully unaware of them. They were not something that concerned me until, in my early twenties, I tried to switch from using a pay-as-you-go mobile contract to a fully fledged grown-up pay-monthly smartphone — only to be told I could not. The computer, apparently, had said no. No further explanation was available. It seemed ridiculous — all right, I had a few unpaid university library fines but I’d always paid my rent on time (sort of) and I’d never even had a credit card. So I just gave up. It seemed boring — and it was only when a colleague was turned down for a mortgage thanks to a years-old unpaid water bill that I realised my credit score really did matter. I was struck by the opacity. Who are these credit scoring companies? How do they have so much power? And what exactly do they do anyway? The idea that there were people out there watching my every move and making what seemed quite a moral judgment about my financial trustworthiness was grim. But it is important to note that with a bit of time and effort, you can basically game the system.In this age of unlimited data you might expect a credit check firm to be stalking you quite comprehensively. Millennials put an enormous amount of information out there and a whole host of apps will merrily download photos from your phone and demand access to your entire email inbox. Seeing a targeted ad in your news feed is often quite spooky. But while our social media posts can be a guide to our spending preferences, are they a reliable gauge of our creditworthiness? Credit scoring companies in the US and China are already experimenting with data from social media profiles. Counting how many times someone says “wasted” in their Facebook status can help to predict whether they will repay their debts on time, according to a trial by US credit analyst FICO.

     The average American family had the same amount of wealth in 2013 as it did in 1989 -- The Great Recession and the subsequent recovery from it have deepened the wedge between the very wealthy and everyone else in America, plunging the poor deeper into debt and wiping out two-fifths of the wealth held by families in the heart of the middle class. The wealthiest Americans, meanwhile, appear close to regaining all their losses over the same period, according to a new analysis released Thursday by the Congressional Budget Office. The analysis shows the wealthiest 10 percent of Americans now hold three-quarters of the nation's wealth, up from two-thirds in 1989, and a three percentage-point increase from the start of the recession. Most Americans found themselves with less wealth in 2013 than Americans of a similar age had in 1989; the only age group doing better than its counterparts from a quarter-century ago was senior citizens. The report was commissioned at the request of Sen. Bernie Sanders of Vermont, who made inequality a central theme of his run for the Democratic presidential nomination this year. In a statement, he said the analysis "makes clear that since the 1980s there has been an enormous transfer of wealth from the middle class and the poor to the wealthiest people in this country.”CBO shows that the median family had about the same amount of wealth — roughly $80,000 — in 2013 as it did in 1989, after adjusting for inflation. The average family in the top 10 percent had $4.1 million in wealth, up from $2.15 million in 1989. Both groups had substantially more wealth before the recession hit, but those at the top have seen theirs bounce back at a much faster rate than those in the middle. The story at the very bottom is much worse. From 1989 to 2007, the average family in the bottom 25 percent of the wealth distribution found itself with around $1,000 in debt. After the recession that average debt ballooned to $13,000 per family.

    How Do People Revise Their Inflation Expectations? - The New York Fed started releasing results from its Survey of Consumer Expectations (SCE) three years ago, in June 2013. The SCE is a monthly, nationally representative, internet-based survey of a rotating panel of about 1,300 household heads. Its goal, as described in a series of Liberty Street Economics posts, is to collect timely and high-quality information on consumer expectations about a broad range of topics, covering both macroeconomic variables and the households' own situation. In this post, we look at what drives changes in consumer inflation expectations. Do people respond to changes in recent realized inflation, and to expected and realized changes in prices of salient individual commodities—like gasoline? Understanding what drives inflation expectations is important for the conduct of monetary policy, since it improves a central bank’s ability to assess its own credibility and to evaluate the impact of its policy decisions and communication strategy.

    Consumer Confidence Slumps As Inflation Expectations Crash To All-Time Lows -- The "disinflationary mindset" remains as UMIch-reported medium-term inflation expectations plunge back to record lows.  Headline consumer confidence also dropped to its lowest since 2016 lows in April driven by drop in 'hope' from the flash print - stuck at lowest levels since 2014.

     U.S. Gasoline Consumption On Target For A Record Year - In last month’s Short Term Energy Outlook (STEO), the Energy Information Administration (EIA) projected that it now expects record U.S. gasoline consumption this year: Motor gasoline consumption is forecast to increase by 130,000 b/d (1.5 percent) to 9.29 million b/d in 2016, which would make it the highest annual average gasoline consumption on record, beating the previous record set in 2007 by 0.1 percent. The increase in gasoline consumption reflects a forecast 2.5 percent increase in highway travel (because of employment growth and lower retail gasoline prices) that is partially offset by increases in vehicle fleet fuel economy. This projected increase follows several years of lower gasoline demand that resulted from persistently rising gasoline prices over the past decade. From 2002 to 2012 the average retail price of gasoline rose nearly every year, from an annual average of $1.39/gal in 2002 to $3.68/gal in 2012. Consumers responded to these higher prices in multiple ways, which cumulatively led to falling gasoline demand. Some even suggested that U.S. gasoline demand had permanently peaked, as a result of more fuel efficient vehicles and increasing adoption of electric vehicles (EVs). We can now say those predictions were premature. Gasoline prices have fallen over the past two years. With the oil price collapse that began in the second half of 2014, the average retail price of gasoline fell to $3.44/gal in 2014 and then plunged to $2.52/gal in 2015. The average retail price fell to under $2.00/gal earlier in 2016, and is on pace to average even lower this year than in 2015. As recently as February of this year the EIA was forecasting that this year’s gasoline demand would be below the 2007 peak, but demand has surged since then. In fact, I have analyzed the EIA’s estimates for Product Supplied – Finished Motor Gasoline and found that the average for the first six months of 2016 was the highest ever recorded for the first half of a year at 9.38 million bpd. The previous record for the first six months of a year was in 2007 at 9.30 million bpd. Following that, July’s average gasoline demand of 9.75 million bpd was the highest monthly demand ever recorded by the EIA.

    Vehicle Sales Forecast: Sales to Weaken in August, Still Around 17 Million SAAR -- The automakers will report August vehicle sales on Thursday, Sept 1st. Note:  There were 26 selling days in August, the same as in August 2015. From WardsAuto: Forecast: U.S. Light Vehicles Sales Weaken in August A WardsAuto forecast calls for August U.S. light-vehicle sales to reach a 17.4 million-unit seasonally adjusted annual rate, less than like-2015’s 17.7 million and July’s 17.8 million, but ahead of the 17.2 million recorded over the first seven months of this year. From J.D. Power: August Decline in New-Vehicle Sales Fourth in Last Six Months The SAAR for total sales is projected at 16.8 million units in August 2016, down from 17.7 million units a year ago. Vehicle sales are moving more sideways now.

    Trucking Data Sending Mixed Messages in July 2016: Truck shipments were rmixed in July (depending on whose data one uses) - even the BLS employment data remained weak but did improve relative to the previous month. There is no question that the data here is soft, but the trend lines are mixed. ATA Trucking The American Trucking Associations' (ATA) trucking index decreased 2.1 % in June, following a 1.6 % decline in June. From ATA Chief Economist Bob Costello: On a monthly basis, tonnage has decreased in four of the last five months and stood at the lowest level since October during July. This prolonged softness is consistent with a supply chain that is clearing out elevated inventories. Looking ahead, expect a softer and uneven truck freight environment until the inventory correction is complete. With moderate economic growth expected, truck freight will improve the further along the inventory cycle we progress, Compared with one year ago, seasonally adjusted tonnage increased 0.3 %.  Econintersect tries to validate ATA truck data across data sources. It appears this month that jobs growth says the trucking industry employment levels were up month-over-month. Please note using BLS employment data in real time is risky, as their data is normally backward adjusted (sometimes significantly). FTR's Trucking Conditions Index (TCI) for June, at a reading of 2.92, continues from the previous month in a low trough due to slow freight and a lull in new regulations. Even with negatives affecting the trucking sector, the reading remains above zero which is the break point between good and bad conditions. The TCI is currently forecast to rise into next year as the capacity constraining effects of new regulations are calculated in.

    Rail Week Ending 20 August 2016: Remains In Contraction And Rate Of Improvement Slows: Week 33 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 13 week rolling averages' contraction continues to moderate - but the 4 week and 52 week rolling average contraction worsened. The contraction began over one year ago, and now rail movements are being compared against weaker 2015 data - and this is the cause some 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 531,484 carloads and intermodal units, down 6.4 percent compared with the same week last year. Total carloads for the week ending August 20 were 270,464 carloads, down 6.4 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 261,020 containers and trailers, down 6.4 percent compared to 2015. Four of the 10 carload commodity groups posted an increase compared with the same week in 2015. They included grain, up 36.5 percent to 24,944 carloads; motor vehicles and parts, up 4.9 percent to 18,974 carloads; and miscellaneous carloads, up 4.8 percent to 10,558 carloads. Commodity groups that posted decreases compared with the same week in 2015 included petroleum and petroleum products, down 24.2 percent to 10,933 carloads; coal, down 16.6 percent to 89,599 carloads; and forest products, down 14.3 percent to 9,869 carloads. For the first 33 weeks of 2016, U.S. railroads reported cumulative volume of 8,126,642 carloads, down 11.4 percent from the same point last year; and 8,506,957 intermodal units, down 3 percent from last year. Total combined U.S. traffic for the first 33 weeks of 2016 was 16,633,599 carloads and intermodal units, a decrease of 7.3 percent compared to last year.

     US Trade Deficit Shrinks On Biggest Spike In Food & Beverage Exports In History -- Forget the new economy, it appears - judging by July's preliminary trade data - that USA's great export is 'food and beverage'. Thanks to a 31.3% surge month-over-month in this category - the biggest MoM gain in history - the US trade deficit 'improved' to -$59.3bn (from -$64.5bn revised lower) and beat expectations of -$63bn.   Does that look sustainable?  Overall, non-seasonally-adjusted, things don't look quite as rosy...  Charts: Bloomberg

      August 2016 Chemical Activity Barometer Continues to Signal Improving Economic Growth: The Chemical Activity Barometer (CAB) expanded 0.4 percent in August following an upward revision for July. This marks the barometer's sixth consecutive monthly gain. Accounting for adjustments, the CAB is up 3.2 percent over this time last year, the strongest year over year growth since January 2015. All data is measured on a three-month moving average (3MMA). On an unadjusted basis the CAB climbed 0.3 percent in August, following a 0.6 percent jump in July. Stated ACC's Chief Economist Kevin Swift: The CAB is signaling higher, and possibly accelerating, U.S. business activity into 2017. The services sectors have begun to improve and likely accelerated during recent months, and manufacturing appears to be gathering momentum. The Chemical Activity Barometer has four primary components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators. In August, three of the four core categories for the CAB improved. Production-related indicators were positive, with goods reports on housing trends strengthening. Equity prices continued to gain and inventory remained positive. Product prices slipped slightly in August.

    Inventory Growth Slowdown Dashes Hopes For Q3 GDP Bounce Back-- Following the surge in sales (on higher petroleum costs) in June (and modest build in inventories), the sales-stock ratio fell back from cycle highs (though remained deep in recessionary territory). July's preliminary data showed a notable slowdown in inventories (-0.02% vs a 0.1% expected gain and revised lower 0.2%) confirming recent PMI data of no pickup in growth in Q3. For 32 months straight, inventory growth has outpaced sales growth yeaSimply put - as slow as Q2 was, that was the inventory bounceback... and Q3 has slowed already, breaking the extrapolators narrative...r-over-year with 18 straight months of wholesale sales declines.

    Industrial Production Soared in July -  Robert Oak - The Federal Reserve Industrial Production & Capacity Utilization report shows industrial production had a 0.7% blowout for July.  This is the largest increase since November 2014.  Manufacturing production by itself increased 0.5% and was the biggest advance since July 2015.  Even mining increased 0.7% for the month.  Utilities' 2.1% increase was due to the very warm weather.  The G.17 industrial production statistical release is also known as output for factories and mines. Total industrial production is still below -0.5% from what it was a year ago. July industrial production was 4.9 percentage points above the 2012 average. Industrial production is still way below the very long term 1972-2015 average by -4.1 percentage points. Below is graph of overall industrial production's percent change from a year ago. Notice how closely industrial production follows the grey recession bars. Here are the major industry groups industrial production percentage changes from a year ago.   For the month manufacturing overall increased by 0.5%. June saw a 0.3% increase while May showed a -0.2% drop. Manufacturing output is 3.6 percentage points above its 2012 Levels and is shown in the below graph.Within manufacturing, durable goods had a 0.6% monthly increase. Machinery gained 2.0% and Motor vehicles & parts increased 1.9% for the month. Primary metals, on the other hand, declined by -1.1%.Nondurable goods manufacturing increased 0.5% for the month. Petroleum and coal products categories plus the Plastics and rubber category had a 1.0% monthly increase. Food, beverages and tobacco had a 0.2% increase, plastics 0.4% while others decreased. Apparel and leather declined -0.4% for the month and is down -10.4% for the year. Printing and support decreased by -1.3% and is down -3.2% for the year. Mining increased by 0.7% and is now down -10.2% for the year. Mining includes gas and electricity production and oil and gas extraction declined by -1.7% for the month while coal mining soared by 15.3%. Oil well drilling and servicing increased by 5.5%. The Fed have a special aggregate index for oil and gas well drilling. Oil and gas well drilling increased 4.9% for the month and for the year is down -46.9%. Coal by itself declined over -40% in the past year. Below is oil and gas well drilling to show the incredible bust in production. Utilities increased by 2.1%. Utilities are often volatile due to changes in weather, as shown below.

    U.S. Durable-Goods Orders Rebounded in July, Jumping 4.4% - —Demand for long-lasting factory goods rebounded in July, a sign the manufacturing sector could continue to stabilize in the second half of the year. Much of the uptick was due to civilian aircraft orders, but orders for core capital goods—the kind of business investment that has been conspicuously absent for the past few years——posted their largest gain since January, suggesting firms may finally feel comfortable making the large-scale investments that signal confidence in future demand.  New orders for durable goods—aircraft, industrial machinery, and other products designed to last at least three years—rose a seasonally adjusted 4.4% in July from the prior month, the Commerce Department said Thursday, the largest monthly jump since October. Economists surveyed by The Wall Street Journal had expected a rise of 3.2%. A closely watched proxy for business investment, new orders for nondefense capital goods excluding aircraft, rose for the second-straight month, up 1.6% from June. Back-to-back months of rising orders in this category are “an encouraging sign that business capital investment activity might be on the verge of a long-awaited rebound,” said Millan Mulraine, deputy chief U.S. macro strategist at TD Securities USA LLC. “The sharp rise in core orders and modest gain in inventories to start the quarter suggest that business investment will likely provide a modest boost to the economic recovery,” he said. Investment in capital goods, such as machine tools or robotics equipment, is a key ingredient in boosting workers’ wages and productivity, as well as corporate profits. Productivity, or output per hour worked, fell in the second quarter for the third consecutive period, the longest streak of falling productivity since 1979. But other economists cautioned against reading too much into the short stretch of increased investment. Orders in that category were still down 4.3% over the first seven months of the year, compared with the same period a year before.

    Durable Goods New Orders Improved in July 2016?: The headlines say the durable goods new orders improved significantly this month. The unadjusted three month rolling average declined significantly this month and remains in contraction. . In the seasonally adjusted data, the big surge this month was civilian aircraft and defense. Econintersect Analysis:

    • unadjusted new orders growth decelerated 0.4 % (after decelerating a revised 11.3 % the previous month) month-over-month , and is down 6.4 % year-over-year.
    • the three month rolling average for unadjusted new orders decelerated 2.6 % month-over-month, and down 2.6 % year-over-year.
    • Inflation adjusted but otherwise unadjusted new orders are down 9.9 % year-over-year.
    • Backlog (unfilled orders) decelerated 0.2 % month-over-month, but is still contracting 2.2 % year-over-year.
    • The Federal Reserve's Durable Goods Industrial Production Index (seasonally adjusted) growth decelerated 0.2 % month-over-month, up 0.6 % year-over-year [note that this is a series with moderate backward revision - and it uses production as a pulse point (not new orders or shipments)] - three month trend is decelerating, but the trend over the last year is relatively flat.

    Capital Goods Shipments Collapse Most Since 2009 As Durable Goods Orders Bounce In July (Thanks To Revisions) - Following June's disappointing relapse in Durable Goods Orders (which was revised lower), July's preliminary headline rose 4.4% (ahead of 3.4% exp) - the biggest MoM gain since Oct 2015. However, due to the revisions durable goods orders fell 6.4% year-over-year - the second big annual drop in a row. Under the hood most of the headline data beat expectations MoM as follows:

    • New durable goods new orders rose 4.4%, vs Exp. 3.3%
    • New orders ex-trans. rose 1.5% vs Exp. 0.5%,
    • Non-defense capital goods orders ex-aircraft rose 1.6%, Exp. 0.3%

    ... but we note that Capital Goods Shipments non-defense Ex-Aircraft fell 0.4% MoM... which led to a 9.5% collapse in year-over-year core capex unadjusted orders.  However, when applying the now controversial seasonal adjustments, which on a Y/Y basis should not impact the number substantially, we get the following modestly better picture.

    US Manufacturing Flashes "Warning Light" As New Orders, Employment Tumble -- Following the eurozone's disappointing drift lower in Manufacturing PMI (and weakness in German Services), August's US preliminary manufacturing PMI printed a disasppointing 52.1 (against expectations of 52.6). Weakness in Employment (lowest in 4 months) and New Orders underpin the drop from 52.9 to 52.1 as the 2 month hope-fueled bounce has faded...  Renaissance over...Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said: “The August drop in the PMI is a disappointment but less worrying when looked at in the context of July’s better than expected reading. Taking the July and August readings together suggests that manufacturing is enjoying its best growth so far this year in the third quarter, and should help drive stronger GDP growth. “With August seeing the largest rise in exports for almost two years, the improved trade performance should also help drive faster economic growth. “However, a slowdown in overall order book growth is a warning light that domestic demand has waned in August, and the pull-back in hiring suggests manufacturers have become increasingly cautious about the outlook. Inflationary pressures have meanwhile eased. “Policymakers will therefore be pleased to see signs that the economy may have picked up speed in the third quarter, but the Fed looks unlikely to tighten policy again until the upturn has stronger foundations, suggesting any interest rate rise looks unlikely before December.” Charts: Bloomberg

    Richmond Fed Manufacturing Disaster: Activity, New Orders, Shipments Plunge - The regional manufacturing reports are not having a good go of it this month. The Richmond Fed Region took a huge dive from +10 to -11. New orders lead the collapse, down a whopping 35 points to -20. The Empire State and Philly Fed reports were also weak.  Disastrous Numbers:

    • Index Down 21 points to-10
    • Shipments down 21 points to -14
    • New orders down 35 to -20
    • Order Backlog down 22 points to -1
    • Capacity utilization down 22 points to -19
    • Wages Up 7 points to +21
    • Finished goods inventories up 9 points to+21
    • Raw materials inventories up 4 points to +27

    Inventories up, employment up, wages up. Shipments and new orders plunged. What a disaster, and it’s not just this regional report.

    Richmond Fed Manufacturing Survey Collapses By Most On Record - Following flash PMI's drop, another early August indicator has collapsed as Richmond Fed's manufacturing survey plunges to -11 (lowest since Jan 2013) missing expectations of +6. The plunge from July's +10 to August's -11 is the largest on record - back to 1993.  Biggest drop on record...Weakness was across the board with new orders crashing from +15 to -20, order backlogs and capacity utilization crashing, and average workweek slumping. The only thing stopping this from being a monumental crash was hope that sent future shipment expectations from +19 to +41 - the highest in a year.

     August 2016 Kansas City Fed Manufacturing Remains In Contraction -  Au: Of the four regional manufacturing surveys released for August, three are in contraction with one in expansion. There were no market expectations reported from Bloomberg - and the reported value was -4. Any value below zero is contraction.  Tenth District manufacturing activity continued to decline modestly. Expectations for future activity remained solid, and the price indexes were mixed. In a special question this month, most firms reported no plans to change employee benefits for next year, but more firms expect decreases in benefits than expect increases. The month-over-month composite index was -4 in August, up from -6 in July but down from 2 in June (Tables 1 & 2, Chart). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Non-durable goods production continued to grow modestly, while durable goods activity was less negative than last month, particularly for machinery and electronic equipment. Most month-over-month indexes were similar to levels posted the previous month. The production index improved from -15 to -7, and the shipments index also rose somewhat. The new orders and order backlog indexes remained moderately negative, while the employment and new export orders indexes fell slightly. The raw materials inventory index increased from -7 to -1, while the finished goods inventory index fell back into negative territory. Year-over-year factory indexes improved slightly but remained below zero.

     Services PMI Tumbles To 6-Month Lows: "GDP Growth Is Failing To Accelerate In Q3" -- Following Manufacturing PMI's drop from a two-month bounce, Services PMI also tumbled. Against expectations of a rise from 51.4 to 51.8, Services dropped to 50.9 - lowest since Feb 2016. With the lowest jobs data in 20 months, new orders at their weakest since May,as Markit warns, "GDP growth is failing to accelerate in the third quarter from the weak 1.2% pace seen in the second quarter."  Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at Markit said: “The ongoing lacklustre economic growth signalled by the flash PMI suggests GDP growth is failing to accelerate in the third quarter from the weak 1.2% pace seen in the second quarter. “Historical comparisons indicate that the PMI is signalling an annualised GDP growth rate of just under 1% in the third quarter, based on the data for July and August.

    Weekly Initial Unemployment Claims decreased to 262,000 --The DOL reported: In the week ending August 20, the advance figure for seasonally adjusted initial claims was 261,000, a decrease of 1,000 from the previous week's unrevised level of 262,000. The 4-week moving average was 264,000, a decrease of 1,250 from the previous week's unrevised average of 265,250. There were no special factors impacting this week's initial claims. This marks 77 consecutive weeks of initial claims below 300,000, the longest streak since 1970.  The previous week was unrevised. The following graph shows the 4-week moving average of weekly claims since 1971.

    Teens Land 492,000 Jobs In July, 1.4M This Summer: With strong hiring in June and July, the number of teenagers finding summer employment in 2016 increased by more than 15 percent to its highest level since 2013. Employment among teens increased by 1,339,000 between May and July. That was 15.4 percent more than a year ago, when 1,160,000 16- to 19-year-olds were added to the employment rolls. The summer total was helped by heavier-than-usual teen employment gains in July. A total of 492,000 teenagers found jobs in July, according to non-seasonally adjusted data released by the U.S. Bureau of Labor Statistics last Friday. The July teen job gains were 33 percent higher than last year's 369,000. Last month's gains were 25 percent higher than the 392,900 July job gains averaged over the previous 10 years. The strong summer hiring brought total employment among 16- to 19-year-olds to 6,040,000, which is the highest number of employed teens since August 2008, when 6,142,000 teenagers were working. "This year saw the strongest teen employment market since 2013, when 1,355,000 young people between the ages of 16 and 19 found jobs. We may be seeing a turnaround in the teen job market as more and more cities approach full employment," said John A. Challenger, chief executive officer of Challenger, Gray & Christmas. "When the unemployment rate drops down into the 3-percent to 4-percent range, older and more experienced workers who might have been settling for employment in retail and food service are able to move into higher-skilled, higher-paying jobs. This leaves opportunities for younger job seekers. The biggest challenge may be attracting teen job seekers," said Challenger. Teen employment has been declining since the 1970s. At its peak, in July 1978, more than 10 million teenagers were employed. Much of the decline appears to be by choice, as a growing number of teenagers participate in summer sports and education programs, volunteer, travel or work in jobs that fall below the standard employment measures.

     What It Means to Be a Senior in the Gig Economy -- More than 400,000 Americans ages 65 and older earn income from digital platforms such as Uber and Airbnb. and those seniors are more reliant on such gigs than their younger peers, according to a new report from the JPMorgan Chase Institute.The report, which uses anonymized data from millions of JPMorgan Chase customers, found that just less than 1% of those older than 65 used apps and other online platforms to earn income during the year ended in September 2015. That’s a smaller share than the 3.1% of the general population earning at least a portion of their income from what’s often called the gig economy. But seniors who do participate count on the earnings for a larger share of their total income. Those 65 and older working through labor platforms such as Lyft and TaskRabbit relied on those jobs for 28% of their income, slightly higher than the 26% share for all workers. Similarly, seniors using capital platforms such as Airbnb or eBay, tapped such apps and websites for 11.5% of their total income, versus 10.7% for all workers. “For most people, online platforms provide a supplemental form of income,” said Diana Farrell, chief executive officer of the institute. “Seniors are less likely to have other jobs, and therefore have the flexibility to spend more time on this work, and derive more income from it.” Many older Americans are not fully retired, still relying on work to provide some income. The JPMorgan data showed that 25% of income for Americans 65 or older came from labor. Social Security checks provided 43% of their income. Older Americans working in the gig economy are most frequently involved in capital-intensive platforms. That could suggest seniors are in a better position to leverage existing assets, such as a vacation home, to earn additional income, compared with seeking to provide physical labor, Ms. Farrell said.

    We’re Working Harder Than Ever, So Why Is Productivity Plummeting? - Most of us feel more productive than ever. ­Between wi-fi and mobile data, smartphones and apps that let us do every­thing from hail a ride to order groceries, we can get more done, in more places, more of the time—­whether we want to or not. So why does the Bureau of Labor Statistics (BLS) keep telling us that’s an illusion?  The slowdown in productivity is now widely seen as one of the big factors in America’s tepid economic recovery. (The U.S. is not alone here: the number of other countries growing by less than 2% a year has been steadily rising over the past few years, as productivity decreases.) Why is productivity down? Theories range from the retirement of highly skilled baby boomers to a lack of productivity-­enhancing investment by private companies to a failure to correctly measure productivity itself. One of the most provocative reasons has been put forward by Northwestern University’s Robert Gordon in a new book, The Rise and Fall of American Growth. According to Gordon, the digital-­technology boom just isn’t all it’s been cracked up to be—­especially when compared with world-­beating shifts like indoor plumbing, electricity and the combustion engine. Gordon’s work is a 700-page-plus doorstop. But in a nutshell, Gordon argues that the Industrial Revolution at the turn of the 19th century had a much bigger effect on economic growth than the PC revolution in the 20th. He points out that productivity growth actually began shrinking after the 1970s, when digital technology really began to take off. Gordon says the big productivity payoff from digital technology has already come and gone, concentrated mostly from 1996 to 2004.

    Worker Hours Are More Unpredictable Than Ever -- What a job looks like has changed for many people since the recession. In general, things are looking up: Both unemployment and jobless claims are falling. But a good chunk of job creation has come at the highest and lowest ends of the spectrum, a trend that has only recently started to change with gains for middle-wage earners. Many people who lost well-paying jobs have found work, but for less money, doing hourly retail and food services jobs. These new hourly workers not only make less money, but they have much less predictable schedules than hourly workers had before the recession, according to a new study from the University of California, Davis. "The jobs replacing the ones that were lost after the recession ended were a lot of low-wage hourly jobs with really variable schedules," said Ryan Finnigan, an assistant professor at U.C. Davis and one of the researchers who worked on the study.  Workers in these new economy jobs might work 38 hours one week and 15 the next. "Even though unemployment has sunk down, the quality of the jobs that replaced the ones that were lost were not quite the same," Finnigan added.  Finnigan looked at "work variability" for hourly workers from 2001 through 2013, using Survey of Income and Program Participation data from the Census Bureau of more than 30,000 civilian workers between the ages of 25 and 55. Using three separate measures, he found that workers reported less stability in their schedules in the years following 2009. Around 13 percent of hourly workers in 2001 and 2004 reported an "irregular schedule," for example. After 2009, that number increased to more than 15 percent. The proportion of workers who reported "varying hours" jumped to 29 percent after the recession, from 21 percent before.

     Paid Sick Leave Reduces the Flu Rate ‘Significantly,’ Paper Says - Everyone knows staying home from work when you have the flu helps protect your co-workers from getting sick. Unfortunately, not everyone does it. A new National Bureau of Economic Research paper argues that one reason for that is access to paid sick leave.. The paper argues that the general flu rate “decreases significantly” when employees have access to paid time off due to illness. It also found that more people play hooky, or stay home when they aren’t actually contagious. Unlike most industrialized countries, U.S. workers are not guaranteed pay when they take off from work due to an illness. Messrs. Pichler and Ziebarth say half of American workers don’t have access to paid sick leave. In the U.S., the fight over access to paid sick leave has largely been about income inequality. Labor Department data from 2015 shows that only around 31% of the lowest-earning quarter of private-sector workers had access to paid sick leave, while 84% of the highest-earning quarter did. While some cities and states have implemented sick leave schemes, there has been a simultaneous effort by some Republican-dominated state legislatures to preemptively ban cities from implementing rights to paid sick leave. The NBER study says it is the first to look at the implementation of these regional sick pay schemes in the U.S. Using Google Flu data, the researchers said they found that when American workers gain access to paid sick leave, the general flu rate goes down by a lot. It also suggests that the absence of paid sick leave causes contagious people to go into work and infect their co-workers or customers.

    How Abusive Employers Combined With Job Insecurity Lead to Suicides -- naked capitalism - Yves here. It’s hardly a secret that employers have become more abusive towards employees because they can get away with it. The difficulty of finding new employment, particularly for mid and senior level jobs, combined with the fact that most workers (even comparatively well paid ones) are only a paycheck or two away from financial desperation, means bosses have tremendous leverage over workers. And more and more firms embrace coerciveness as a virtue. In the past, it’s more often taken the form of cultishness, which is a very effective business model, as Goldman and Bain attest, but more recently, outright mistreatment is becoming common. For instance, Amazon has so successfully cultivated a “culture of fear” that the overwhelming majority of employees cry at work.  Note the claim in the article about elevated suicide rates at Apple supplier Foxconn is contested; some contend that statistically, its rate of suicides is no higher than for other employers. However, many of the dorms apparently had mesh canopies to prevent suicides, so one wonders if direct comparisons are apt.

    Los Angeles County Seeks “Millionaires’ Tax” To Fund Homeless Programs For The Poor - The most populous county in the United States, the County of Los Angeles (LA County), is hoping to institute a new law that will ensure that millionaires living in the county will be taxed to fund homeless programs for the poor. The law, nicknamed the “millionaires’ tax” will pay for housing and other services for the homeless in the county. The County Board of Supervisors has already voted to pursue the new legislation at the state level. LA County has a population of more than 10 million people. However, the county has one of the highest homeless populations in the United States. According to the Los Angeles Homeless Services Authority, the county is home to almost 47,000 homeless people. The staggering number of the homeless dents the image of the county, which is also considered one of the richest in the United States. In 2012, the Guardian reported that the city of Los Angeles alone in the county, was home to 126,000 millionaires.  County officials have estimated that about $500 million a year would be needed to take care of the homeless situation in the whole of the county. In early 2016, the city and county of Los Angeles made plans to reduce the growing problem of homelessness in the area. The county then approved $150 million in initial funding to build new houses and provide basic services for the homeless. However, funding for the program has become difficult, hence this new proposal by the County Board of Supervisors to sustain and broaden it to cover more of the homeless.

    Los Angeles Wants Governor to Declare Homelessness State of Emergency — The Los Angeles City Council joined Los Angeles County in trying to get California Gov. Jerry Brown to declare a state of emergency for the problem of homelessness. Brown rejected a similar appeal from the county Board of Supervisors in June. The City Council voted Tuesday to ask Brown to declare homelessness a statewide emergency. Brown has said he believes programs are best developed at the local level, but the state is engaged in multiple efforts to deal with housing including a $3 billion bond ballot measure that would provide low-income housing. The California Emergency Services Act "explicitly grants the governor complete authority over all agencies of the state government to promulgate, issue, and enforce such orders and regulations as he deems necessary," Los Angeles Chief Legislative Analyst Sharon Tso wrote in a report recommending the City Council encourage the governor to take such action. "Should the governor declare a State of Emergency as it relates to homelessness and exercise the powers enumerated under the Act, authority could be given to waive existing state statutes or local laws that will help expeditiously deal with homelessness in local municipalities," Tso wrote. California has roughly 21% of the nation's homeless people and Los Angeles has the greatest density of the homeless population in the nation, Tso wrote. Of the 115,000 homeless people in the state, 28,000 reside in Los Angeles, Tso wrote. The city has experienced an 11% growth in homelessness in a year, she said. The city is working in partnership with Los Angeles County and the Housing Authority of the City of Los Angeles to more effectively coordinate the funding of services and project-based vouchers for permanent supportive housing projects. The city's Housing and Community Investment Department is also advancing a parallel effort to develop 13 city-owned parcels for affordable and permanent supportive housing.

    Judge orders $15 minimum wage to be put on Mpls. ballot - A Hennepin County judge on Monday overruled the Minneapolis City Council's decision to block a $15 minimum wage charter amendment, ordering that the issue be placed on the November ballot. Judge Susan Robiner issued her decision more than a week after she heard arguments from advocates who gathered enough signatures to send the issue to voters. The City Council, following the legal opinion of City Attorney Susan Segal, previously had voted to prevent the proposal from reaching the ballot. A majority of council members said they believed the issue was not a proper subject for a charter amendment, the only type of action allowed to be put to a direct vote. In her opinion, Robiner wrote that the city's interpretation of the language in its own charter — the document that outlines the framework for municipal government — was too narrow. Segal had argued that only a limited number of issues could be considered as charter amendments, while other questions would require the council to vote directly to create or change an ordinance. Attorneys for the wage-amendment supporters, meanwhile, contended that a wage increase would amount to a matter of the general health and welfare of the city and should be considered as part of the charter. Robiner agreed, noting that no previous legal cases have validated the city's arguments.

    Epic state budget shortfall to be announced: Virginia could be facing a larger-than-expected budget deficit. The Washington Post reports it could be as high as $1.5 billion.The Post cited two sources with information on the state budget situation. They say the governor will make the announcement Friday, Aug. 26. The Post said it would be among the biggest shortfalls in Virginia history. The year 2010 had the biggest at $4.5 billion, while 2014 had a $1.9 billion shortfall, according to the Post. Such a budget gap could have an impact on some services the state provides. This is a developing story.

    What You Need to Know About the Private Prison Phase-Out -- The Justice Department announced plans Thursday to phase out the use of privately-run federal prisons.  Last week, the federal Inspector General released a report concluding that federal prisons run by private companies are substantially less safe and secure than ones run by the Bureau of Prisons, and feature higher rates of violence and contraband. The report, which followed years of pressure by advocacy groups, highlighted a series of riots at these facilities in recent years, often sparked by substandard food and medical care and generally poor conditions.  The new policy affects a relatively small portion of the federal prison population, roughly 22,000 of 193,000 prisoners. These inmates are housed at 13 privately-run federal “contract” prisons, which primarily house “criminal aliens,” or noncitizens convicted of crimes, many of whom may be deported at the end of their sentences. They’re in California, New Mexico, Texas, Oklahoma, Georgia, Mississippi and North Carolina. The Bureau of Prisons, by contrast, runs more than 100 prisons.  According to the memo, as each of these contracts comes up for renewal over the next five years, the bureau will “either decline to renew that contract or substantially reduce its scope.”  The policy shift has no bearing on the private operation of immigrant detention facilities. As of December, 62 percent of the 34,000 beds for people detained by Immigration and Customs Enforcement are in privately-run facilities. They are under the authority of the Department of Homeland Security, not the Department of Justice. The vast majority of privately-run prisons in the U.S. are at the state level, and will be unaffected by the DOJ announcement. As of 2014 they housed 91,244 state prisoners, or 6.8 percent of the total state prison population, according to the Bureau of Justice Statistics.

    Ramen noodles supplanting cigarettes as currency among prisoners -- Ramen noodles are supplanting the once popular cigarettes as a form of currency among state prisoners, but not in response to bans on tobacco products within prison systems, finds a new study. Instead, study author Michael Gibson-Light, a doctoral candidate in the University of Arizona School of Sociology, found that inmates are trying to figure out ways to better feed themselves as certain prison services are being defunded. The rise of ramen as currency in prison signals "punitive frugality," indicating that the burden and cost of care is shifting away from prison systems and onto prisoners and their support networks, said Gibson-Light, who will present his research at the 111th Annual Meeting of the American Sociological Association (ASA). "Punitive frugality is not a formal prison policy, but rather an observable trend in prison administration practice in institutions throughout the country," Gibson-Light said. "Throughout the nation, we can observe prison cost-cutting and cost-shifting as well as changes in the informal economic practices of inmates," he said. "Services are cut back and many costs are passed on to inmates in an effort to respond to calls to remain both tough on crime and cost effective."

    The US Has A Huge Rate Of Whites In Incarceration (But Nobody's Talking About It) - Data provided by PrisonStudies.org is helping shed light on America’s incarceration problem, demonstrating that only the small archipelago of Seychelles, located in the Indian Ocean off East Africa, has a higher incarceration rate than the U.S.  But when studied carefully, the rates demonstrate yet another trend: America’s white prison population has been increasing in recent years while the number of blacks in prison has been dropping — and nobody is talking about it. According to the Prison Policy Initiative, America holdsmore than 2.3 million people in 1,719 state prisons, 102 federal prisons, 942 juvenile correctional facilities, 3,283 local jails, and 79 Indian Country jails.” And while the racial disparities in the American justice system are well reported — especially considering one in every five people in jail is arrested for breaking drug-related laws — we are seldom asked to review imprisonment rates among other ethnic groups. Data provided by the U.S. Department of Justice shows 0.5 percent of white U.S. residents were in prison in December 2013, placing the rate of incarceration among whites in America at 466 per 100,000 citizens. When compared to the incarceration rates of other countries without regard for other ethnic groups, the rate of white prisoners in America is still higher than most. At 466 per 100,000 citizens in jail, America still has a place in the top ten list of countries with the largest prison population in the world if only the white population is taken into account.  Despite the trend, the media seldom discusses the high incarceration rate among whites. In an article published earlier this year by the Washington Post, Keith Humphreys writes that“[t]here’s been a big decline in the black incarceration rate [in America], and almost nobody’s paying attention.

    Police Misconduct in Bankrupt Cities - Melissa Jacoby -- Bankruptcy filings by major cities have reinvigorated attention to municipal bankruptcy. As chapter 9 and its application have become more like chapter 11, a wide range of creditors are being swept into the process. As written before, city cases now have classes of general unsecured creditors. Those classes also have been including plaintiffs in civil rights lawsuits alleging unconstitutional police conduct. The proposed payouts vary.  San Bernardino's bankruptcy plan, which seeks to release the liability of non-debtor officers as well as the debtor, has been proposing a 1% payout. The confirmation hearing is currently set for October 2016.  Some cities with systemic police practice problems - Ferguson, Chicago - also are known to have pervasive financial difficulties. I am not suggesting or predicting they will end up in bankruptcy, but it is another reminder that civil rights advocates need to be up to speed on the impact of chapter 9, if only to be able to bargain in its shadow as other types of creditors do. I have just posted a paper on this topic (revised and updated from a version posted earlier this summer). It walks through the issues and gives three brief case studies. Feedback from the Credit Slips readership would be very welcome, and/but please also pass along the link to civil rights lawyers who do § 1983 litigation. Here is the brief abstract: When a financially distressed city files for bankruptcy, recovery for civil rights violations is at risk. This article examines the impact of bankruptcy on civil rights claims, with an emphasis on allegations of police misconduct resulting in lawsuits under 42 U.S.C. § 1983. We walk through how a bankruptcy filing affects civil rights plaintiffs, starting with the immediate injunction against litigation and debt collection activity, and ending with the legal release of debt and a restructuring plan. Using primary source materials, we offer three brief case studies: Detroit, Vallejo, and San Bernardino. We conclude with suggestions on where to go from here in research and advocacy.

    Another study finds that diversity lead to mistrust and lack of community cohesion -- Urbanists and planners like to imagine and design for a world of diversity. Diversity, we like to think, is both a social good and, as I’ve argued, a spur to innovation and economic growth. But to what degree is this goal of diverse, cohesive community attainable, even in theory? That’s the key question behind an intriguing new study, “The (In)compatibility of Diversity and Sense of Community,” published in the November edition of the American Journal of Community Psychology. The study develops a nifty agent-based computer model to test this question. Their simulations of more than 20 million virtual “neighborhoods” demonstrate a troubling paradox: that community and diversity may be fundamentally incompatible goals. As the authors explain, integration “provides opportunities for intergroup contact that are necessary to promote respect for diversity, but may prevent the formation of dense interpersonal networks that are necessary to promote sense of community.” Their models focus on the emergence of the “community-diversity dialectic” based on two simple principles: homophily – the tendency of people to bond with others like themselves – and proximity – the tendency of people to bond with those nearby. Their models look at how the strength of these basic tendencies affect the evolution of neighborhoods comprised of two distinct populations (say by race, class, ethnicity and so on). In these simulated neighborhoods, the possible levels of integration ranged from 0 percent (totally segregated) to 50 percent (totally integrated). In the images below, the authors show three sample neighborhoods with low, medium, and high levels of integration. Notice how much denser the resulting social networks are (in the bottom row) in the highly segregated neighborhood at far left.

    Making whole-child education the norm: How research and policy initiatives can make social and emotional skills a focal point of children’s education -- Summary: Traits and skills such as critical thinking, creativity, problem solving, persistence, and self-control—which are often collectively called noncognitive skills, or social and emotional skills—are vitally important to children’s full development. They are linked to academic achievement, productivity and collegiality at work, positive health indicators, and civic participation, and are nurtured through life and school experiences. Developing these skills should thus be an explicit goal of public education. This can be achieved through research and policy initiatives involving better defining and measuring these skills; designing broader curricula to promote these skills; ensuring that teachers’ preparation and professional support are geared toward developing these skills in their students; revisiting school disciplinary policies, which are often at odds with the nurturing of these skills; and broadening assessment and accountability practices to make the development of the whole child central to education policy. [...] But support for noncognitive skills—also commonly referred to as social and emotional skills—extends far beyond this casual recognition of their impact. Empirical research finds clear connections between various noncognitive skills and positive life outcomes. Indeed, researchers have focused on assessing which skills matter and why, how they are measured, and how and when these skills are developed, including the mutually reinforcing development of noncognitive and cognitive abilities during students’ years in school.1

    Study Shows Racial Pay Gaps Among Early Childhood Educators - Advocates for workers who care for children before kindergarten have repeatedly groused this mostly female workforce is underpaid. Now, they’re pointing to inequities among the underpaid. A report being released Friday says African-American female teachers who work full time in the early childhood workforce make 84 cents for every dollar earned by their white counterparts, on average. The 16% wage gap amounts to $366 less a month and $4,395 less a year on average, according to the study from the left-leaning Center for American Progress. The study’s authors say part of the gap for these workers, who teach millions of kids in child-care centers and preschools, is due to differences in education attained, years of experience and workplace characteristics. African-American workers are less likely to have a bachelor’s degree and less likely to work for school-sponsored centers where average hourly wages are highest, for example. The authors attribute those factors at least in part to systemic barriers that hinder access to higher education and training for people of color. But even after accounting for those differences, African-American women who teach full-time make just 93 cents for every dollar white full-time female teachers earn, on average, the study found. That amounts to $163 less a month, or $1,995 less a year—a meaningful difference for a workforce that averages less than $30,000 a year, the study’s authors said.

    School-Based Police Are Using Tasers on Students -- and No One Knows How Often It Happens: -- It was just a dumb fight. Two boys, both juniors, lurching through the hallway of Knightdale High School, slamming into a row of lockers and tripping over a trashcan. A video shot by another student shows a teacher breaking up the fight after a few seconds, and both teens ending up on the ground, hurt only in pride. One student was ushered away. But 17-year-old Scott, whose name has been changed to protect his privacy, didn't have a chance to get up. A school police officer rushed over, and pinned one of Scott's arms behind his back.  Seconds later, Scott felt a piercing electric jolt in his right shoulder that sent convulsions running through the rest of his body.  The five-second zap sent thousands of volts through Scott's body.  In the moments after he was struck by the Taser, Scott's legs bounced up and down uncontrollably on his 6-foot-3, 260-pound frame. After getting up, he couldn't stop shaking from the pulsing waves of electricity, he said. Later that day he was charged with disorderly conduct and resisting an officer. He had never been in trouble with the police before. This is one of at least 84 incidents of children being Tasered or shot with a stun gun by a school police officer since September 2011, according to media reports tracked by The Huffington Post. The number is a gross underestimation because not every incident is reported, and no state or federal organization track how often children are zapped at schools. The children, who were all hit by a Taser or stun gun by school-based police officers, also called school resource officers, were 12 to 19 years old when the incidents occurred. They were shocked by a Taser or stun gun for mouthing off to a police officer. For trying to run from the principal's office. For, at the age of 12, getting into a fight with another girl.

    CPS wants approval for $1.5 billion in short-term loans - In addition to passing a $5.4 billion operating budget, approving up to $945 million in bonds for capital projects, and voting to raise property taxes by more than $250 million, Chicago’s Board of Education on Wednesday also will consider authorizing a 45 percent increase on Chicago Public Schools’ line of credit to $1.5 billion.  All of the district’s financial proposals to the seven appointed board members are expected to pass.  Appearing with the mayor at a South Side elementary school, CEO Forrest Claypool chalked up the increase in the line of credit — up from just over $1 billion in the last fiscal year — to a “huge mismatch between revenues and expenses” between February, when an annual debt service payment for $373 million is due, and March, when property tax revenue begins to roll in. “Last year the district did what’s called ‘scoop and toss’ where they took debt payments that were coming due and got a one year $200 million-plus source of revenue by pushing that debt into the future longterm debt. Because we’re not doing that this year, that payment . . . is significantly higher, hundreds of millions of dollars higher,” Claypool said after Mayor Rahm Emanuel touted the completion of installing air conditioners in all schools, an idea he had belittled during the 2012 teachers strike. And without any remaining cash reserves it used to rely on, CPS now leans on costly short-term borrowing to cover such gaps.

    Taxpayers hit again under Emanuel as CPS hikes property taxes - Chicago Tribune: The Chicago Board of Education on Wednesday approved a $5.4 billion budget that relies on a trio of property tax hikes, the latest in a series of increases Mayor Rahm Emanuel has hit city taxpayers with in recent years. Buffeted for years by financial crises, mass school closings and a teachers strike, Chicago Public Schools' new spending plan again relies on borrowing and a financial windfall from a gridlocked state government coming to fruition. With the Chicago Teachers Union again threatening a walkout after working without a new contract for more than a year, CPS leaders billed the district's finances as improving, but still dire. The Rev. Michael Garanzini, one of the mayor's most recent appointees to the school board, framed up the situation. "St. Jude is the patron of impossible causes," said the priest when asked about who he prays to for contingencies. "I suppose I've never prayed more to anyone than St. Jude this year, because it seems pretty impossible at times to balance everything." If $215 million in potential state pension help gets caught up in the partisan gridlock between Republican Gov. Bruce Rauner and Democratic House Speaker Michael Madigan, CPS will have to make up the difference.

    Rauner's office warns teachers' pension change could be 'devastating' -  -- Gov. Bruce Rauner's administration says a pending move by Illinois' largest public-pension fund would increase the state's required payment by hundreds of millions of dollars, potentially leading to higher taxes or massive cuts to education and social services already suffering amid a budget crisis. The board of the Teachers Retirement System, which serves more than 400,000 teachers outside of Chicago, is scheduled to vote Friday on whether to lower its expected rate of return on investments. A reduction would trigger a larger contribution from the state, where the Republican governor and Democrat-led Legislature have gone more than a year without agreeing on how to close a multibillion-dollar budget hole or address a $111 billion unfunded pension liability. The retirement system won't make public the recommended change or its impact on Illinois' payment for the next fiscal year until Friday's meeting, spokesman Dave Urbanek said Wednesday. When the system last changed its assumption - from 8 percent to 7.5 percent in 2014 - it cost Illinois an additional $200 million. That's almost the total combined state funding for six public universities last year, Rauner's senior adviser for revenue and pensions warned. "Unforeseen and unknown automatic cost increases will have a devastating impact on the state's ability to provide adequate resources to social service programs and education," Michael Mahoney stated in a memo sent Monday to Rauner's chief of staff. He also called the lack of public discussion ahead of Friday's vote "troubling."

     Condemnation of Charter Schools Exposes a Rift Over Black Students - With charter schools educating as many as half the students in some American cities, they have been championed as a lifeline for poor black children stuck in failing traditional public schools.But now the nation’s oldest and newest black civil rights organizations are calling for a moratorium on charter schools.Their demands, and the outcry that has ensued, expose a divide among blacks that goes well beyond the now-familiar complaints about charters’ diverting money and attention from traditional public schools.In separate conventions over the past month, the N.A.A.C.P. and the Movement for Black Lives, a group of 50 organizations assembled by Black Lives Matter, passed resolutions declaring that charter schools have exacerbated segregation, especially in the way they select and discipline students. They portray charters as the pet project of foundations financed by white billionaires, and argue that the closing of traditional schools as students migrate to charters has disproportionately disrupted black communities. Black leaders of groups that support charter schools have denounced the resolutions, saying they contradict both the N.A.A.C.P.’s mission of expanding opportunity and polls showing support for charters among black parents. The desire for integration, the charter school proponents say, cannot outweigh the urgent need to give some of the country’s poorest students a way out of underperforming schools.

    Attending Texas Charter Schools Hurt Students’ Future Wages, Study Finds - Texas charter schools on average have a negative effect on students' future earnings, according to a new working paper by two economists. Although attending a "no excuse" charter school, which the study describes as having stricter rules, uniforms, and longer school days and years, leads to higher test scores and four-year college enrollment, it has no meaningful effect on earnings. Other types of charter schools, however, stumble on all three measures: hurting test scores, four-year college enrollment, and earnings. These findings are almost the opposite of another study of Florida charter school students released in April from Mathematica Policy Research. It found that attending a charter school had little impact on test scores, but students went on to earn higher salaries than their peers in district schools. Both studies found that charter school graduates were more likely to stay in college. And they agreed on another point: there's a lack of research on the long-term effects of attending a charter school and more needs to be done.

    A convicted felon whose record exempted him from washing dishes at Uno Pizzeria is about to open a college  -- When Dan Geiter was 15 years old, he stole a few checks from the handbag of a faculty member at his high school. He forged them and cashed them, easily making a few bucks. That landed him in jail for the first time. Throughout his teenage years, Geiter continued to commit similar crimes of fraud and theft, with intermittent periods of time behind bars. Such was the pattern for the next 17 years of Geiter's life.Once released in 1999, Geiter stayed true to his word; he has never been back in prison. But he soon learned the label he carries as a convicted felon tarnished many of his future opportunities.  Geiter relocated to Chicago, Illinois in 2007 in search of better employment opportunities and a fresh start. Immediately, he encountered difficulty finding a place to live.  "Statistically, 80% of all the housing in Chicago is off limits to individuals convicted of a felony, and they don't discriminate on what type of felony," he explained.   Additionally, using criminal background as a reason to turn down applicants was legal until recently.  "There is still a lifetime of incarceration even after you served your time, and you've paid back what supposedly is your debt to society," he said. Nearly two decades after Geiter was released from prison, he defied the odds and earned a doctoral degree in education, all while continuing to fight the stigma being an ex-felon carries. Now, with the help of a few non-profits, he's creating a college for those in a similar predicament.

    How statistics are twisted to obscure public understanding --In every industry, from education to healthcare to travel, the generation of quantitative data is considered important to maintain quality through competition. Yet statistics rarely show what they seem. If you look at recent airline statistics, you’ll think that a far higher number of planes are arriving on schedule or early than ever before. But this appearance of improvement is deceptive. Airlines have become experts at appearance management: by listing flight times as 20-30 per cent longer than what the actual flight takes, flights that operate on a normal to slightly delayed schedule are still counted as arriving ‘early’ or ‘on time’. A study funded by the Federal Aviation Administration refers to the airline tactic as schedule buffering. This example of airlines twisting meaning – and, consequently, public perception – might be irritating, but it is by no means the only industry where semantic manipulation of statistics is found. University rankings are especially prominent: numerous publications rank universities on a variety of metrics, relying on factors such as a university’s acceptance rate, average student test scores and job placement, to name a few. But in recent years the competition among universities has become so intense that several have admitted to dishonestly manipulating the stats. In August 2012, Emory University admitted, after an internal investigation, that the administration had misreported incoming students’ test scores for a decade. And Emory was not the only culprit: in 2013, Forbes magazine removed three other major colleges from its rankings for similar infractions. The quantitative data weighed by rankings publications determine how we, ordinary people, understand phrases such as ‘the best universities’. But how can a system that rewards semantical manipulation be said to explain where students receive the best education?

    A misleading claim about who enrolls in elite public colleges -- Ronald Brownstein writes in The Atlantic about the problems with free public college proposals like the one Hillary Clinton has advanced in her bid for the presidency. He argues that those plans further tilt the public university systems in favor of the wealthy, quoting an expert who asserts the US has “probably the most stratified college system in the world.” Brownstein is right about the effects of free college but undercuts his case when he uses a statistical sleight of hand to support that “most stratified” claim. Citing a Washington, D.C. think tank, he writes that “kids from families earning $106,000 or more comprise 37 percent of all students in ‘very selective’ public colleges while those from families earning less than $30,000 represent only 18 percent.” Very selective public colleges in this case include schools like Ohio State, the University of California, Berkeley or the University of Texas, Austin. A quick check of the data shows something is not right with Brownstein’s statistic. The data from which it was likely drawn actually show no enrollment gap between rich and poor students. In fact, 29.0% of students at very selective public colleges are from families earning less than $30,000 while 28.2% are from families earning $106,000 or more. That would appear to contradict Brownstein, but it does not mean he is wrong. Rather it appears he has cherry picked — unwittingly or otherwise — the figure that best supports his claim.

    University to Freshmen: Don't Expect Safe Spaces or Trigger Warnings -  Incoming first-years received a letter from the College today making clear that the University of Chicago does not condone safe spaces or trigger warnings. “Our commitment to academic freedom means that we do not support so-called ‘trigger warnings,’ we do not cancel invited speakers because their topics might prove controversial, and we do not condone the creation of intellectual ‘safe spaces’ where individuals can retreat from ideas and perspectives at odds with their own,” reads the letter from Dean of Students Jay Ellison. In May, Student Government (SG) passed on an opportunity to reaffirm the University’s commitment to free speech when members voted to indefinitely table a resolution that would have condemned any student who “obstructs or disrupts” free speech. The resolution, which was presented to SG by the president of the College Republicans club, second-year Matthew Foldi, came in the wake of three high-profile incidents in which speakers invited to campus were shut down or interrupted by protesters. In February, Cook County State’s Attorney Anita Alvarez had to leave the Institute of Politics (IOP) after she was confronted by Black Lives Matter protesters in the audience who held up signs started chanting.  The next day, the University of Chicago Police Department had to end an event with Bassem Eid, a Palestinian human rights activist and critic of the Boycott, Divest, and Sanctions movement, after protesters disrupted his speech.  Then in April members of the Armenian Students Association interrupted an event with a scholar who they say denies the Armenian Genocide. Other students criticized the letter, saying that the University disguises hate speech as “discourse.”

    University of Chicago Warns Incoming Students That They Will Not Be Shielded From Opposing Views Or Given “Safe Spaces” - As we have been discussing how various schools have eradicated free speech protections on campus in a national trend toward speech regulation. UChicago has decided to stand its ground and reaffirm its commitment to free speech on campus. The letter warns students that they will not shielded from views that upset them or given “safe spaces” on campus. In doing so, UChicago has recommitted itself to the very touchstone of education: the free and robust exchange of ideas. The letter states “Our commitment to academic freedom means that we do not support so-called ‘trigger warnings,’ we do not cancel invited speakers because their topics might prove controversial, and we do not condone the creation of intellectual ‘safe spaces’ where individuals can retreat from ideas and perspectives at odds with their own.” That line is especially welcomed with nearby schools like DePaul caving into the heckler’s veto and allowing the mob to silence voices with which they disagree. Speakers (particularly conservatives) are routinely shut down by protesters as universities respond with relative passivity:  We have seen protester’s screaming profanities while claiming to be injured from events that they voluntarily attended:  Universities have an obligation to preserve the right of free speech and students who prevent others from speaking should be suspended from the university. Instead, schools like Dartmouth have officials who actually apologize to the protesters who shutdown libraries and prevented students from leaving. There is now a leading university that is defying the trend against free speech and that is the University of Chicago. Hopefully the position of the university will be replicated by other schools.

    Dildos descend on UT Austin in 'Cocks Not Glocks' protest of guns on campus - Surrounded by a sea of of dildos, the organizer of the Cocks not Glocks protest at the University of Texas at Austin spoke Wednesday to hundreds of students and supporters carrying sex toys through campus in opposition to Senate Bill 11, which allows those with concealed handgun licenses to carry at public universities. "It seems that I have cracked an enormous dick joke on the internet," said Jessica Jin, speaking of the protest she launched all the way back in October 2015 that is now being heralded as possibly the largest anti-gun protest in Texas history.  Jin did not prepare a speech for the big day—she was too tired from carrying 55-pound boxes of sex toys around all week in preparation for  the protest that has brought The Daily Show to campus to film the flamboyant event. "Let's put a dildo in the hands of every pissed off college student who hasn't been heard in this safety conversation," Jin said. "Strap it on, feel the discomfort, feel the weird looks. Wear it loud, wear it proud, and don't take them off until people take their guns home." The idea of "cocks, not glocks" was spawned when Jin realized her university's code of conduct prohibits obscene devices as it is defined in the Texas Penal Code. The Texas Penal Code defines obscene devices as anything "including a dildo or artificial vagina, designed or marketed as useful primarily for the stimulation of human genital organs." And thus, a dildo-baring movement was born. "You would receive a citation for taking a dildo to class before you would get in trouble for taking a gun to class," Jin wrote on the event page. "Heaven forbid the penis."

    Sexual harassment of students by university staff hidden by non-disclosure agreements - Universities’ use of non-disclosure agreements (NDAs) in sexual harassment cases involving staff and students is allowing alleged perpetrators to move to other institutions where they could offend again, according to academics, lawyers and campaigners. They warn that the prevalence of harassment is being masked because of the use of confidentiality clauses in settlements, which prevent any of the parties discussing what has happened. Universities that find themselves at the centre of sexual harassment allegations are accused of prioritising their own reputations in an increasingly competitive higher education marketplace over their duty of care to vulnerable students. Those who described concerns include:Ann Olivarius, a leading lawyer in the area of sexual harassment in UK and US universities, who said: “Young women are terrified about the consequences if they make a complaint, then when they do, the university’s chief concern is to protect its own reputation by keeping the whole thing quiet.” Alison Phipps Dr Alison Phipps, director of gender studies at Sussex University, who said her research had taken her into 10-15 universities and it was the same story every time. “The system comes into operation to protect itself.” Universities are operating like businesses, she said, and these types of problems “are thought of in terms of the economic cost, of reputation management, and: ‘What happens if we lose our star professor and his grant income?’” Ruth Lewis Ruth Lewis, coordinator of the Universities Against Gender Based Violence network and senior lecturer in sociology at the University of Northumbria, who raised concerns that NDAs were concealing the true extent of the problem of harassment and violence in UK universities. “They make it very difficult to know how often complaints about harassment or violence from staff or from students are resolved by a private settlement that makes the problem invisible.”

    Grad Students Win Right to Unionize in an Ivy League Case - Punctuating a string of Obama-era moves to shore up labor rights and expand protections for workers, the National Labor Relations Board ruled Tuesday that students who work as teaching and research assistants at private universities have a federally backed right to unionize.The case arose from a petition filed by a group of graduate students at Columbia University, who are seeking to win recognition for a union that will join the United Automobile Workers and allow them a say over such issues as the quality of their health insurance and the timeliness of stipend payments.Echoing longstanding complaints from blue-collar workers that they have become replaceable cogs in a globalized economic machine, the effort reflects a growing view among more highly educated employees in recent decades that they, too, are at the mercy of faceless organizations and are not being treated like professionals and aspiring professionals whose opinions are worthy of respect.“What we’re fundamentally concerned about isn’t really money,” said Paul R. Katz, one of the Columbia graduate students involved in the organizing efforts. “It’s a question of power and democracy in a space in the academy that’s increasingly corporatized, hierarchical. That’s what we’re most concerned about.”Columbia and other universities that weighed in with the board before the ruling argued that collective bargaining would lead to a more adversarial relationship between students and the university that would undermine its educational purpose.The decision reverses a 2004 ruling by the board involving graduate student assistants at Brown University. The ruling held that the assistants could not be considered employees because they “are primarily students and have a primarily educational, not economic, relationship with their university.”

    Hillary Clinton's for-profit university problem - After Hillary Clinton became secretary of state, Bill Clinton received $17.6 million in payments from a for-profit university. Since that time, another organization with a connection to that university received almost $90 million in grants from an agency that's part of the State Department. Critics of the Clintons have cried foul. But is there really something shady going on? There is no shortage of connections between the Clintons and Laureate International Universities. Laureate is a for-profit university -- the same kind Hillary Clinton has railed against for saddling students with huge debts. "[Students] find little support once they actually enroll, or they graduate and discover that, when it comes to finding a job, their degree isn't worth what they thought," she told an audience last year. Laureate has about one million students worldwide, mostly in Latin America, with five schools in the United States. Laureate has faced investigations in Brazil over whether students were getting what they paid for, and in Chile concerning its for-profit status. U.S. students have complained the school failed to deliver on its promised degree programs. In addition, three of the five schools Laureate operates in the United States are under what the U.S. Department of Education calls "heightened cash monitoring" because of potential problems with its "financial responsibility." The school told CNN it disagrees with the government's methodology. The Clinton campaign told CNN that the candidate intends to hold for-profit colleges accountable.

    Credentialism and Corruption: Vile College Administrators Edition - naked capitalism by Lambert Strether - There is no better proof of Kenneth Arrow’s thesis that college degrees signal salary expectations (“conveying information to the purchasers of labor”) — and not actual education[1] — then the way college and university administrators treat the great majority of people actually doing the educating: Like garbage. I discovered this in my first years up here, when I did some adjunct teaching at the university; I worked out my hourly rate, including not just classroom time, but prep, meetings, and grading, and it came to $8.00 an hour, before taxes; that is, when I caffeinated myself with a large latté for class, I used up a little over a quarter of what I made for that class. As a rational economic actor [snort], I would have been better off as a barista. “This is the value we place on educating our children,” I thought[2]. No health insurance, of course (until after, IIRC, three years). The degradation of the university under neoliberalism has been obvious for decades to anyone except, well, the top 10% who have directly benefited from it[3]. MIT’s Noam Chomsky summarizes the process well, in terms that will be very familiar to readers: When universities become corporatized, as has been happening quite systematically over the last generation as part of the general neoliberal assault on the population, their business model means that what matters is the bottom line. The effective owners are the trustees (or the legislature, in the case of state universities), and they want to keep costs down and make sure that labor is docile and obedient. The way to do that is, essentially, temps. Just as the hiring of temps has gone way up in the neoliberal period, you’re getting the same phenomenon in the universities… Crucially, by not guaranteeing employment, by keeping people hanging on a limb than can be sawed off at any time, so that they’d better shut up, take tiny salaries, and do their work; and if they get the gift of being allowed to serve under miserable conditions for another year, they should welcome it and not ask for any more…. Graduate students are even more vulnerable, for obvious reasons. The idea is to transfer instruction to precarious workers, which improves discipline and control but also enables the transfer of funds to other purposes apart from education.

    Student Loan Debt Slaves Get the Runaround Seeking Promised Relief -- Pam Martens -  Last Thursday the Consumer Financial Protection Bureau Student Loan Ombudsman released a report detailing the hurdles and outright barriers that college students who took out student loans face when they attempt to get Income-Driven Repayment (IDR) plans.  The report found that the debt holders are reporting that they are facing prolonged processing delays and wrongful rejections by their private student loan servicing companies. Some facets of the report suggested that student debt holders are intentionally getting the runaround by the outside servicing company. The report noted: “Borrowers report being rejected because their application had missing information or because their servicer lost paperwork, without ever being notified by their servicer or being given a chance to fix the problem. Other borrowers report being rejected simply for checking the wrong box, without being given the opportunity to submit a corrected form. These errors discourage borrowers from restarting the application process, and some borrowers may choose to walk away from their loan, instead of remaining on the road to repayment.” We looked through the actual student complaints on which the report was based. One individual, calling him or herself, American Patriot, posed some important issues. We have excerpted from that complaint letter below. After you read these current complaints, you may want to browse through our related articles listed below to gain a fuller understanding of how many of today’s finest young people have been turned into student debt slaves by the same Wall Street banks that blew up the U.S. economy in 2008 and were then bailed out with more than $13 trillion in cumulative secret Federal Reserve loans, frequently below 1 percent interest, a fraction of what student loans charge:

    Student Debt-Crushed Millennials Shift Support From Bernie To Hillary -- Anxious young Millennial college students overwhelmingly threw their support behind Bernie during the Democratic Primary.  As a student, why wouldn't you support a candidate offering to pay for your school and socialize your existing student loan debt?  Bernie seemed like the "logical" choice.  But, now that the "obvious" choice is no longer in the race, the folks at LendEDU conducted an online poll of 1,500 people, who currently have student loan debt, to figure out to whom the Bernie voters will be shifting their support. Unsurprisingly, a lot of Bernie supporters with student loan debt are tossing their support behind Hillary.  And why not?  Hillary's "deal" for students, though not quite as good as Bernie's, is also very enticing.  Per Hillary's website:

    • Every student should have the option to graduate from a public college or university in their state without taking on any student debt
    • All community colleges will offer free tuition
    • A $25 billion fund will support historically black colleges and universities, Hispanic-serving institutions, and other minority-serving institutions
    • Borrowers will be able to refinance loans at current rates, providing debt relief to an estimated 25 million people. They’ll never have to pay back more than 10 percent of their income, and all remaining college debt will be forgiven after 20 years.
    • Delinquent borrowers and those in default will get help to protect their credit and get back on their feet
    • To reduce the burden for future borrowers, Hillary will significantly cut interest rates so the government never profits from college student loans.
    • Aspiring entrepreneurs will be able to defer their loans with no payments or interest for up to three years. Social entrepreneurs and those starting new enterprises in distressed communities will be eligible for up to $17,500 in loan forgiveness.
    • Hillary will take immediate executive action to offer a three-month moratorium on student loan payments to all federal loan borrowers.

    Illinois governor's office warns of crippling pension payment hike | Reuters: Potential action this week by Illinois' biggest public pension fund could put a big dent in the state's already fragile finances, Governor Bruce Rauner's administration warned. A Monday memo from a top Rauner aide said the Teachers' Retirement System (TRS) board could decide at its meeting this week to lower the assumed investment return rate, a move that would automatically boost Illinois' annual pension payment. "If the (TRS) board were to approve a lower assumed rate of return taxpayers will be automatically and immediately on the hook for potentially hundreds of millions of dollars in higher taxes or reduced services," Michael Mahoney, Rauner's senior advisor for revenue and pensions, wrote to the governor’s chief of staff, Richard Goldberg. When TRS lowered the investment return rate to 7.5 percent from 8 percent in 2014 the state's pension payment increased by more than $200 million, according to the memo. Illinois' fiscal 2017 pension payment to its five retirement systems was estimated at $7.9 billion, up from $7.617 billion in fiscal 2016 and $6.9 billion in fiscal 2015, according to a March report by a bipartisan legislative commission. The country's fifth-largest state's unfunded pension liability stood at $111 billion at the end of fiscal 2015, with TRS accounting for more than 55 percent of that gap. The funded ratio was a weak 41.9 percent.

    IPERS fund, facing $5 billion shortfall, misses investment goal - Iowa's largest public employee pension fund has reported an investment return of 2.15 percent for the past state fiscal year, falling short of a key investment target and likely increasing long-term unfunded liabilities that already exceed $5 billion. The Iowa Public Employees' Retirement System, which has 325,000 members, had a market value of $28.27 billion for the 12 months that ended June 30, state officials said Monday. "It’s been a challenging couple of years with the continued low interest rate environment," IPERS' Chief Executive Officer Donna Mueller said in a statement. While IPERS’ return is well below its long-term goal, she added, "we must remember that IPERS looks at decades-long time periods of its fund performance." Mueller noted that over the past 30 years, IPERS has had an annualized investment return of 8.6 percent, which she described as a key indicator of strength and sustainability. The Iowa pension fund system has actuarial assumptions that require an annualized investment return of 7.5 percent. Other public employee pension funds in the United States also struggled to register investment gains for the 12 months ending June 30. The California Public Employees' Retirement System, the nation's largest, reported an investment return of just under 1 percent. Similarly, the Wilshire Trust Universe Comparison Service reported that the median return for the universe of public funds of more than $1 billion was also nearly 1 percent for the one-year period. An actuarial report released late last year by Cavanaugh MacDonald Consulting LLC, showed that IPERS was 83.7 percent funded, leaving Iowa taxpayers on the hook for $5.45 billion in unfunded liabilities, although that was down from $5.91 billion in 2012.

    Puerto Rico’s Pensions: $2 Billion in Assets, $45 Billion in Liabilities - WSJ —One of the thorniest tasks awaiting a seven-member board charged by Washington with cleaning up Puerto Rico’s debt crisis is deciding how to balance a $70 billion debt load with nearly $43 billion in unfunded pension liabilities. The issue is coming to a head now because the White House is set to name as soon as next week the members of that oversight board, drawn from lists of candidates submitted by congressional leaders in both parties. Puerto Rico’s constitution calls for the island to pay its general-obligation bonds ahead of public services or pensions, but a law signed by President Barack Obama in June clouds that hierarchy by directing the new board to ensure pensions are adequately funded. For the oversight board, “there are no good options here,” said Matt Fabian, a partner at research firm Municipal Market Analytics. Cutting payouts to debtholders ahead of pensions will inflame creditors, but cutting pension payments to plan members could accelerate the migration and economic decline that the oversight board is tasked with stemming. Creditors fired a pre-emptive volley last month when they sued the island’s government in federal court after it passed a budget that increases funding for pensions without setting aside money for debt payment. The budget diverts “vast resources to purposes that apparently enjoy political favor but are indisputably junior to constitutional debt,” the complaint said.

    The crumbling assumptions of US public pension plans - FT.com: The governor’s office for Illinois, a state with notoriously weak finances, this week issued a stark warning about what might happen if it reduced the assumed rate of return for its Teachers’ Retirement System. “If the board were to approve a lower assumed rate of return taxpayers will be automatically and immediately on the hook for potentially hundreds of millions of dollars in higher taxes or reduced services,” the state’s senior adviser for revenue and pensions wrote in a memo.Unlike corporate pensions, US public pensions discount their liabilities using the rate of return they expect to generate on their investments. Some experts complain that these rates have been set unrealistically high. Lower return expectations would push up the cost of liabilities on their balance sheet, and force Illinois to make higher contributions. If costs to the pension were to increase by $250m it would nearly equal an entire year’s appropriation for six universities. In spite of the warning, the board on Friday reduced the retirement system’s assumed rate of return to 7 per cent from 7.5 per cent. Illinois highlights one of the most hotly debated issues facing state and local governments in the US: how to value pension liabilities and, in turn, what is the true nature of the deficits they face. As governments are already cash-strapped, these questions are now highly politicised. Raising taxes and scaling back pension benefits are painful and difficult measures. It leads to a third issue: to justify these high expected rates of return plans are taking on more risk with money they are obliged to pay out. ”The attractiveness of assuming a high discount rate is that you tell the taxpayers, unions and the public that the liabilities are lower, but the only way to maintain that kind of discount rate is to have risky assets”

    Top 25 Corporate Pension Plans Alone Are Underfunded By Over $225 Billion --Massively underfunded public and private pensions, and all the risks inherent therein, have been a frequent topic of conversation for us recently.  Today, Tobias Levkovich at Citigroup published a report pointing out just how dire the situation is for the S&P 500's largest corporate pension funds.  The study found that pensions of just the companies in the S&P 500 alone were over $375BN underfunded at the end of 2015 with the top 25 underfunded plans accounting for over $225BN of the underfunding.  Moreover, Citi pointed out that pensions don't seem to be participating in the massive equity rally that has grown ever so "bubbly" since 2009 (and issue we explained in detail here: "Pension Duration Dilemma - Why Pension Funds Are Driving The Biggest Bond Bubble In History"). The S&P 500 has appreciated by more than 200% at the end of 2015 since the low in March 2009 but the aggregate underfunded status of $376 billion in December 2015 is now 22% higher than the $308 billion under-funding peak seen in December 2008 (see Figure 1). While the funding status in 2013 recovered by more than $225 billion versus 2012 alongside strengthening equity market performance and a higher discount rate, this trend reversed in 2014 and only improved moderately in 2015. Specifically, the slightly higher discount rate contributed to the progress in 2015’s pension funding status, not higher equity prices. Per the table below, S&P 500 corporate pensions went from being fully funded in 2007, in aggregate, to $375BN underfunded in just 8 years.  The primary problem, of course, is the Fed's low interest rate policies which are crushing both sides of the pension equation.  Pension assets have basically stagnated since 2007, up less than 10%, as pensions struggle to "find yield."  Meanwhile, lower yields on corporate bonds have driven discount rates through the floor causing the present value of liabilities to skyrocket over 40% over the same period.

      It Is Monday And The Washington Post Wants To Cut Social Security Benefits (Again): To be more specific, Robert J. Samuelson on the editorial page, and I am posting this because for some reason Dean Baker did not post about this, perhaps bored with yet another round of WaPo and its columnists doing the same old same old over and over again, especially on Mondays. This one draws on a new study of the impact of aging on economic growth, specifically per capita growth, using US states as the data sources by Nicole Maestas, Kathleen Mullen, and David Powell, the first in the Harvard Medical School and the latter two at the RAND Corporation. A main finding is that a 10% increase in the percent of a state population that is over 60 implies a 5.5% decline in real per capital income growth. They find a third of this due to fewer workers, but the other two thirds due to unexplained productivity changes, with RJS recognizing that the paper does not provide completely convincing explanations for this, although there are some, such as that the retirement of older workers with their experience reduces the productivity of those left behind still working. Of course, when it comes to the end of the column Samuelson does that old Monday WaPo thing, dragging out Social Security as a big problem. Now indeed, it is certainly the case that anything that damages future economic growth damages the future status of Social Security, although apparently this paper has nothing to say about this, and Samuelson does not provide any specific estimates. But this does not hold him back from the following: "As a society, we need a better balanceof obligation between the older and younger generations. Until now, policy has favored the elderly. The remedies to shift the balance are well-known: higher eligibility ages for government benefits; less generous benefits and tax breaks for wealthier retirees. None is politically easy."

    CareFirst CEO says cost of health care is 'unsupportable' for consumers, insurers - CareFirst BlueCross BlueShield CEO Chet Burrell said on Monday the cost of health care is at "unsupportable levels" for both consumers and providers, speaking at a state hearing on the insurer's proposal to increase 2017 rates by as much as 37 percent. Burrell fielded questions from community members, small business owners, state lawmakers and the Maryland Insurance Administration, which approves rates. Baltimore-based CareFirst, the region's dominant health insurer, initially requested a 12 percent increase for HMO plans and 15.3 percent hike for PPOs. The insurer later refiled its request after seeing an increase of "morbidity rates" or the frequency with which a disease occurs in patients, in new data. The refiling requests a 27.8 percent rate increase for HMO plans and a 36.6 percent increase for PPOs. The increased morbidity rates are a product of the growing cost of health insurance, Burrell said on Monday. As it has become more expensive to stay insured, healthy individuals have terminated their policies and only those with a constant need for insurance have stayed or joined, leaving the pool "older, sicker and poorer." CareFirst has also said the proposed hikes come as it continues to absorb losses covering individual Affordable Care Act members in Maryland. Burrell said CareFirst has lost hundreds of millions of dollars over the past three years in the individual market. "We are in a situation, all of us, where the rules of the game have largely been prescribed in federal law and regulation as per how we are to offer what we can offer and how it is to be priced," Burrell said. CareFirst is one of six health insurers operating in Maryland to request rate increases for individual and small group health plans for the coming year.

    Tennessee clears steep Obamacare rate hikes -- Tennessee's insurance regulators approved increases of more than 40 percent for Obamacare plans next year, according to the Tennessean. Blue Cross-Blue Shield has the highest rate hike for 2017 at 62 percent, nearly double the 36 percent increase adopted for 2016, the newspaper said. Cigna's boost of 46 percent was approved, as was Humana's boost of 44 percent. Both insurers had asked for increases of about 20 percent but then asked the insurance regulator for higher rates after looking at what expected claims were. Tennessee is likely to not be the only state facing higher Obamacare premiums in 2017. An analysis from consulting firm Avalere Health projected that average increases for the silver plan, the middle tier of plans, would be more than 20 percent. Sen. Lamar Alexander, R-Tenn., previously criticized the healthcare law after the new proposed rates were announced, saying that Obamacare is "spiraling out of control." The rate increases aren't the only bad news for Obamacare on Tuesday. The insurance startup Oscar said on Tuesday that it will pull out of two Obamacare marketplaces next year in Dallas and New Jersey due to "uncertainties that will make it challenging for us to operate effectively."

    Tennessee Insurance Commissioner Warns Obamacare "Very Near Collapse" -- Last week we highlighted how insurers participating in Obamacare exchanges around the country were set to lose $2BN in 2016 prompting many to impose substantial 2017 rate hikes and/or withdraw from the exchanges altogether.  In fact, we also noted the chart below, from independent analyst Charles Gaba, who analyzed the rate hikes proposed for each of the 50 states.  Per the chart, Tennessee was specifically highlighted as a state expecting 2017 rates to rise an astonishing 59% in just 1 year.   Today we have new reports from the commissioner of the Tennessee Department of Commerce and Insurance, Julie Mix McPeak, who is saying that the Obamacare exchange in her state is "very near collapse" as she struggles provide at least 1 insurance option in each Tennessee county.  Per The Tennessean: “I would characterize the exchange market in Tennessee as very near collapse ... and that all of our efforts are really focused on making sure we have as many writers in the areas as possible, knowing that might be one," McPeak told The Tennessean. "I’m doing everything I can to prevent a situation where that turns to zero.”

    State officials under pressure to OK ObamaCare premium hikes | TheHill: State insurance officials say they are feeling pressure to approve large ObamaCare premium increases to prevent more insurers losing money from dropping out of the market altogether. Tennessee’s insurance commissioner, Julie Mix McPeak, this week announced the approval of premium hikes of 62 percent, 46 percent and 44 percent, respectively, for the three insurers on the state’s marketplace.She said her department’s actuaries had found the rate increases to be justified. “I didn't feel like I had any choice but to approve those rates when it came back to be actuarially justified,” she said. Tennessee is unlikely to be alone in authorizing premium hikes, either. In Maryland, officials are expecting a hike. “There are going to be significant increases in the individual market,” said Al Redmer, the insurance commissioner in Maryland, where the rates are still being reviewed. It is unclear how many other states may allow large premium hikes. An early estimate from ObamaCare analyst Charles Gaba finds that for nine states the average approved premium increase for next year is 27.6 percent.

    States Start to Approve Steep Increases in Health Premiums – WSJ —The first handful of states have released approved 2017 rates for people who buy health insurance on their own and the results so far are consistent with what many expected: There are significant increases in premiums for next year. The Obama administration, seeking to reassure consumers who could be concerned by increases in more states in the coming weeks, released an analysis showing financial help from the government could soften the blow for people who qualified. Some insurance regulators have begun announcing their approval of rate increases, including an average jump of 62% for the biggest plan in Tennessee and increases of around 43% in Mississippi and 23% in Kentucky for large carriers. The Department of Health and Human Services said in an analysis issued on Wednesday that tax credits available to some lower- and middle-income Americans, which are pegged to the cost of insurance in a particular area, would blunt the impact and ensure that around three-quarters of the people who obtained insurance through HealthCare.gov would pay less than $75 a month for coverage. “Headline rate increases do not reflect what consumers actually pay,” said Kathryn Martin, acting assistant secretary for planning and evaluation at the department, which also said the federal government was still on track to spend less on the law than originally forecast by the Congressional Budget Office. Health plans, stung by large losses in the rocky early years of implementation of the 2010 health law, say they need to raise prices substantially to keep their offerings afloat. Federal officials say some increases reflect the planned end of provisions in the law designed to cushion insurers. They say other shifts are predictable as plans adjust to the law’s overhaul of insurance pricing to require it to be sold equally to all customers regardless of medical history or risk.

    Some premiums for Ky. health exchange to skyrocket in 2017: (WKYT) - Kentuckians who rely on the state's health exchange for insurance should brace themselves for premiums that could skyrocket as much as 47 percent in 2017. The Kentucky Department of Insurance approved the increases requested by insurance companies selling individual and small group health benefit plans in Kentucky. While Golden Rule Insurance Company wanted a 65.11 percent increase in its rates, it was only granted one for 47.18 percent. The next highest approved increases were 31 percent for Humana Health Plan individual customers; 29.3 percent for CareSource Kentucky's individual customers; and 27.9 percent for Baptist Health Plan's individual customers; and "The Department of Insurance carefully reviewed each request to ensure its compliance with Kentucky law, pushed back where possible and sought to ensure each request was properly supported," said H. Brian Maynard, commissioner of the Department of Insurance. The department blames the increases on "national trends, market forces, an aging population and the general instability injected in the state health insurance market by Obamacare, insurance companies had requested rate increases."

    Obamacare premium increases may hurt Ohioans more | WKYC.com: Ohioans buying insurance through the marketplace for President Barack Obama's health care law could be among the hardest hit in the country if insurance premiums were to rise by 10 percent in 2017, according to a U.S. Department of Health and Human Services report released Wednesday. The report stated that if premiums were to increase by 10 percent, 56 percent of Ohioans would still be able to purchase insurance through the Affordable Care Act marketplace for $75 a month or less, if tax credits are considered. Average marketplace premiums in Ohio are expected to increase by 12.6 percent in 2017 compared to 2016, the Ohio Department of Insurance found in data released Tuesday. Nationally, if premiums for the health care law rise 10 percent, 71 percent of participants would be able to buy insurance for $75 per month or less, with tax credits. The study looked at 38 states that use the HealthCare.gov platform to offer health insurance through the program, also known as Obamacare. Of the states studied, 31 would fare better than Ohio, the study stated. The study found 65 percent of people using the health care law in Ohio would be able to purchase coverage for $100 a month or less if marketplace premiums were to go up by 10 percent in 2017, compared with 77 percent nationally. The report comes in the wake of growing concerns that the health care law's premiums will increase more in 2017 than in recent years amid poor financial results from some insurers. A widely publicized Aug. 14 study by Affordable Care Act analyst Charles Gaba, of ACAsignups.net, found that insurers submitted premium increase requests to insurance regulators asking to raise premiums by an average of 24 percent across the U.S. in 2017.

    As federally run health care insurance's costs skyrocket, it is becoming more unaffordable for some Oklahomans - Tulsa World: Health: - Even if premiums rise 50 percent next year on Oklahoma's individual policies for health insurance, 84 percent of Oklahomans who buy policies on the federally run healthcare.gov marketplace will be able to buy coverage for $100 or less per month, according to analysis released Wednesday by the federal government. That's due to two factors: tax credits correspondingly will increase along with premiums, and consumers can shop around to find the best plan, said spokespersons for the U.S. Health and Human Services Department. Last year, premiums for policies bought on healthcare.gov — under which 130,178 Oklahoma are currently covered — increased only $4 per month, and more than 32 percent of returning Oklahoma healthcare.gov consumers saved an average of $26 per month by switching plans, according to the HHS.  But state insurance agents and consumers stress the analysis doesn't account for the skyrocketing costs incurred by tens of thousands who don't qualify for subsidies and buy individual policies off the exchange. For them, policies under the Affordable Care Act, also know as Obamacare, are becoming more and more unaffordable, they said.

    The Affordable Healthcare Act is getting expensive in Oklahoma | KTUL: The State of Oklahoma could face a healthcare crisis in 2017. There will only be one insurance company offering policies on the Healthcare Exchange and premiums are expected to go up by at least 50%. There are concerns that many who already have policies under the Affordable Care Act, will drop their coverage because of the costs. Medical facilities like Morton Comprehensive Health Care and the Community Health Connection have worked hard to get their uninsured patients signed up with policies. So they don't want people to give up their coverage. Owen Cowdery does Marketing, Public Relations and Outreach for the Health Connection. He said people may need to find more work or make drastic cuts to keep their policies. "If you don't have health insurance, you can hope that you don't get sick, or your kids don't get sick. But that's a pretty big gamble to take," said Cowdery. Everyone agrees that a state with chronic health problems doesn't need things to get worse because the taxpayers will foot the bill. Dr. Laura Dempsey, of Morton, says we all save when people are insured. "It's seven to ten times higher to go into an emergency room and wait," said Dempsey. "If they are covered and they come into us, we can help them and we can manage that care and keep them working." Dempsey added that no one is sure how people will respond to higher premiums.

    Obamacare Options? In Many Parts of Country, Only One Insurer Will Remain - So much for choice. In many parts of the country, Obamacare customers will be down to one insurer when they go to sign up for coverage next year on the public exchanges.A central tenet of the federal health law was to offer a range of affordable health plans through competition among private insurers. But a wave of insurer failures and the recent decision by several of the largest companies, including Aetna, to exit markets are leaving large portions of the country with functional monopolies for next year.According to an analysis done for The Upshot by the McKinsey Center for U.S. Health System Reform, 17 percent of Americans eligible for an Affordable Care Act plan may have only one insurer to choose next year. The analysis shows that there are five entire states currently set to have one insurer, although our map also includes two more states because the plans for more carriers are not final. By comparison, only 2 percent of eligible customers last year had only one choice. A similar analysis by Avalere Health, another consulting firm, also highlighted the increase in areas with only one insurance carrier. The market is still in some flux. Final contracts between insurers and the federal government won’t be signed until late September. That means it is still possible that additional insurers will choose to enter new markets between now and then, and the competitive picture could improve. It is also possible that some carriers will decide to exit. It was just this week that Aetna surprised regulators and others with the news that it was leaving most of the markets where it offered policies on the exchange, leaving it in just four states.

    This Princeton health economist thinks Obamacare’s marketplaces are doomed - Sarah Kliff -- I’ve spent the past week talking to lots of health care experts and economists about the future of the Affordable Care Act. Of all the people I spoke with, Princeton University health economist Uwe Reinhardt offered the most dire and pessimistic assessment of the marketplaces' future. Namely, he believes they’ve already entered a death spiral and are heading toward total collapse. This seems to be a minority view among those who follow the marketplaces closely, but not one completely out of the mainstream. And Reinhardt offers an especially thoughtful explanation of why he believes the Obamacare marketplaces won’t work. Much of his work looks at international health care systems, and he was able to discuss what makes the United States different from other countries that have created universal coverage with private insurance, like Switzerland and Germany. I quoted Reinhardt in my story yesterday on the health care law, but I felt the interview was interesting enough to share in full. What follows is a transcript of our conversation, lightly edited for clarity and context.

    The Obamacare Death Spiral -- Obamacare is in big trouble. Major insurers—Aetna, Humana, and United Health (the nation’s largest)—are pulling out of most exchanges. Remaining companies are seeking double-digit premium increases (at least 25% in 20 different states, some over 60%), while increasingly offering only “narrow network” plans that severely restrict available doctors and hospitals. With these developments, the scam of Obamacare, and its inevitable failure, are becoming too obvious for even the mainstream media to ignore. The scam of Obamacare was that its main purpose was to ensure, or at least “move toward” healthcare coverage for everyone. Its real primary purpose, however, was to protect and extend the healthcare “market”—the for-profit private health insurance industry and its co-dependent for-profit health delivery system. Obamacare was not designed to, and does not, provide healthcare to anyone. The subsidies it pays go to health insurance companies; not to doctors or patients. It does not, and cannot, ensure universal healthcare coverage. It can only enhance “access” to healthcare—which means actually forcing everyone to purchase whatever profitable insurance plans the private companies decide to provide, at whatever price they decide to charge. Of course, this set of priorities is justified, in the minds of neo-liberal elites, by the self-satisfied embrace of the capitalist ideology that “markets” are the best way to provide healthcare (and everything else) to—well, kinda-sorta, asymptotically-approaching, “everyone.” And the liberal sector of those neo-liberal elites knew that, to solicit any public support for continuing a system that everyone has come to despise, it was necessary to mask the inevitable failures fine-tune the magical mechanism of the market. So the chiefs of the $3 trillion fo-profit healthcare cabal agreed with their favorite (by $3 to $1 over his 2008 opponent) customer representative politician, Obama, to exclude any trace of a public health insurance program, to provide those tens of millions of forced new customers with minimal standards of coverage, and to accept paying customers with pre-existing conditions. Thus, the Affordable Care Act (ACA), christened Obamacare, was begat. It is—as its Republican ancestry makes clear, and the smartest conservatives understood—based on the capitalist, anti-social imperative to reject the possibility of taking public responsibility for the common good, in favor of insisting on a program of dispersed, “mandated” individual private purchases.

    The EpiPen, a Case Study in Health System Dysfunction -- Three times in the last two weeks, people — a patient, a colleague and my wife — told me stories about how out of control the price of EpiPens were. Monday, my New York Times colleagues recounted in detail how expensive the devices have become in recent years. All tell the tale of how much even basic health care can cost in the United States. But by digging a bit further, the story of EpiPens can also explain so much of what’s wrong with our health care system. When people think of allergies to drugs, food or a bee sting, they often think of a rash. And in fact that’s how many allergic reactions develop and proceed. Most can be treated with diphenhydramine (Benadryl) and careful observation. But some are more serious. Between 1 and 2 percent of peoplecan develop what’s known as anaphylaxis, when the airways you need to breathe swell and close. Luckily, there’s a simple treatment for such reactions. Epinephrine — or adrenaline — is a hormone naturally produced by the adrenal glands. It’s part of your “fight or flight” response, and it causes your heart to beat faster, your blood vessels to constrict, your pupils to dilate and — most important here — your airways to open. Epinephrine is very, very cheap. Even in the developing world, it costs less than a dollar per milliliter, and there’s less than a third of that in an EpiPen.

    Mylan CEO's Pay Rose Over 600 Percent as EpiPen Price Rose 400 Percent - NBC News: EpiPen prices aren't the only thing to jump at Mylan. Executive salaries have also seen a stratospheric uptick. Proxy filings show that from 2007 to 2015, Mylan CEO Heather Bresch's total compensation went from $2,453,456 to $18,931,068, a 671 percent increase. During the same period, the company raised EpiPen prices, with the average wholesale price going from $56.64 to $317.82, a 461 percent increase, according to data provided by Connecture. In 2007 the company bought the rights to EpiPen, a device used to provide emergency epinephrine to stop a potentially fatal allergic reaction and began raising its price. In 2008 and 2009, Mylan raised the price by 5 percent. At the end of 2009 it tried out a 19 percent hike. The years 2010-2013 saw a succession of 10 percent price hikes.  And from the fourth quarter of 2013 to the second quarter of 2016, Mylan steadily raised EpiPen prices 15 percent every other quarter.  The stock price more than tripled, going from $13.29 in 2007 to a high of $47.59 in 2016. And while sales of the life-saving drug rose to provide 40 percent of the company's operating profits in 2014, as Bloomberg reported, salaries for other Mylan executives also went up. In 2015, President Rajiv Malik's base pay increased 11.1 percent to $1 million, and Chief Commercial Officer Anthony Mauro saw his jump 13.6 percent to $625,000.

    REVEALED: American taxpayers funded 100% of research used to develop Big Pharma’s EpiPen: Even though Heather Bresch has called the EpiPen her “baby,” its creation was only made possible through a contract with the Defense Department.   According to USUncut, the Pentagon approached the device’s inventor, Sheldon Kaplan, in 1973 to enlist his help in developing a way for soldiers to administer a nerve gas antidote. Before being made available to consumers as the EpiPen, Kaplan’s device was known as the ComboPen.  However, members of his family told the Tampa Bay Times that Kaplan never made royalties off of his creation, since he left the company where he developed it, Survival Technology, before it hit the market. “He was not famous; he was not wealthy,” said Kaplan’s son Michael Kaplan. “And I don’t think he would’ve liked to be. I don’t think he expected that.” Kaplan died on Monday, about a month after being diagnosed with liver cancer. The EpiPen garnered national attention this week following reports that Bresch, CEO of the pharmaceutical company Mylan NV, hiked the price of the device from $47 for a single pen nine years ago to the current price of $284. As STAT reported, Bresch — the daughter of Sen. Joe Manchin (D-WV) — faces a possible Senate investigation.

    How Veterans are Victims of Big Pharma - naked capitalism - Yves here. While this post makes an important point about the degree to which veterans are targets for opioid marketing, as well as the creation of a large and multiheaded “pain lobby” to promote the idea that pain was undertreated (which may have been true, but not to the degree suggested). However, the article also tries to pin the promotion of opioids in the VA system to Koch Brother via a single lobby where they were allegedly power players.   This making one of the pet targets of Team Dem the alleged moving force behind a particularly nasty form of rent extraction from vulnerable vets hangs on thin evidence. While as the article indicates, the Kochs player a role, it seems to be a stretch to describe them as the moving force. The lead actor has been the maker of Oxy-Contin, Purdue Pharma, and its owners, the Sackler family (note that there was a new Sackler building build to expand Harvard’s Fogg Art Museum back in the 1980s, so they have long been wealthy). Purdue Pharma has engaged in brazen and effective marketing strategies, like targeting not-well-educated MDs in districts with high concentrations of older people and/or blue collar workers, meaning patients more likely to suffer from orthopedic problems, and also high patient loads. The drug detail men d were very effective in persuading them these doctors that OxyContin was a good way to treat a wide range of problems quickly, ie, get patients in and out quickly.

    76-Year-Old Veteran Kills Himself In VA Parking Lot After Being Denied Treatment --A 76-year-old military veteran killed himself outside a Long Island Veteran Affairs facility Sunday after being denied treatment. He was reportedly seeking help for mental health issues at the Northport Veterans Affairs Medical Center but was turned away, an unfortunately common experience plaguing veterans seeking healthcare in recent years. According to the New York Times, two people connected to the hospital spoke about the incident on the condition of anonymity. They explained “he had been frustrated that he was unable to see an emergency-room physician for reasons related to his mental health,”the Times reported. “He went to the E.R. and was denied service,” one anonymous source said. “And then he went to his car and shot himself.” Peter A. Kaisen of Islip, New York, committed suicide in the parking lot of the Northport facility, where he had been a patient. He was in the parking lot outside Building 92, the facility’s nursing home, when he shot himself. One of the Times’ anonymous sources questioned why Kaisen had not been referred to Building 64, the mental health center at Northport. “The staff member said that while there was normally no psychologist at the ready in the E.R., one was always on call, and that the mental health building was open ‘24/7,’” the Times reported. “Someone dropped the ball. They should not have turned him away,” the source said.

    Childhood trauma leads to lifelong chronic illness — so why isn’t the medical community helping patients? When I was twelve, I was coming home from swimming at my neighbor’s dock when I saw an ambulance’s flashing lights in our driveway. I still remember the asphalt burning my feet as I stood, paralyzed, and watched the paramedics take away my father. It was as if I knew those flashing lights were a harbinger that my childhood was over. At the hospital, a surgeon performed “minor” elective bowel surgery on my young dad. The surgeon made an error, and instead of my father coming home to the “welcome home” banners we’d painted, he died. The medical care system failed my father miserably. Then the medical care system began to fail me. At fourteen, I started fainting. The doctors implied I was trying to garner attention. In college I began having full seizures. I kept them to myself, fearful of seeming a modern Camille. I’d awaken on the floor drenched in sweat, with strangers standing quizzically over me. Then, I had a seizure in front of my aunt, a nurse, and forty-eight hours later awoke in the hospital with a pacemaker in my chest. In my early forties I developed Guillain Barre Syndrome, a neurological autoimmune disorder that causes paralysis from the neck down. I found myself in Johns Hopkins Hospital, on the exact anniversary of my father’s death, in the same hospital wing where he had died, unable to move. I was a few days shy of turning forty-two, the very age at which my dad had passed away. It wasn’t until I was fifty-one-years old that a physician sat me down and asked me the most important question of my life – one that would lead me to better health than I’d had for decades: “Were there any childhood traumas or stressors that might have contributed to the extreme level of inflammation you’re experiencing as an adult?” My physician explained that ongoing adversity in childhood leads to a chronic state of “fight, flight or freeze.” Researchers at Yale had recently shown that when inflammatory stress hormones flood a child’s body and brain, they alter the genes that oversee our stress reactivity, re-setting the stress response to “high” for life. This increases the risk of inflammation, which manifests later in cancer, heart disease, and autoimmune diseases like mine.

    Hay fever from ragweed pollen could double due to climate change: Climate change could cause new hay fever misery for millions of people across Europe - according to a new report from the University of East Anglia in collaboration with several European institutes. Research published today reveals that the number of people suffering hay fever from ragweed pollen could double in just 35 years. Researchers believe climate change will be responsible for two thirds of this increase. Higher ragweed pollen concentrations and a longer ragweed pollen season may also increase the severity of ragweed symptoms, with populations across most of Europe likely to be affected in the next 35 years. Hay fever is a common allergic condition that is estimated to already affect 40 per cent of Europeans at some point in their life. "This is the first study to quantify what the consequences of climate change on pollen allergy may be." The research team investigated the potential impacts of climate change on ragweed plant distribution, plant productivity, pollen production and dispersal, and the resulting allergy impacts across Europe. Ragweed is a highly invasive plant and its pollen is a common allergen. A single plant may produce around a billion grains of pollen per season, which is carried on the wind and its potential to cause allergies is high.

    Is Toothpaste Dangerous to Your Health? --naked capitalism - Jerri-Lynn here. This article summarizes the sad state of affairs of Food and Drug Administration (FDA) regulation of personal care products, with companies allowed to practice self-regulation. The article also embeds a link to a New York Times article describing legislation that would give the FDA authority to initiate recalls of such products and describes the lobbying muscle, both pro and anti, that has lined up around this initiative (click on current problems below to access that article). The average American will use 20 gallons of toothpaste in their lifetime, and a new study by the Cornucopia Institute, a non-profit organization that studies ecological best practices, makes clear we should all be concerned about exposure to toxic ingredients found in toothpastes. Chemicals in toothpaste are readily absorbed through the membrane that lines the mouth (oral mucosa), meaning that, regardless of whether you swallow toothpaste or not, you are exposing yourself to some level of absorption. Children, who we know often do swallow toothpaste, are even more at risk. When we use personal care products, we make the assumption that what we have purchased is safe and won’t harm us. We might be assuming wrong. Look no further than the current problems faced by some users of Wen hair products. Unlike pharmaceuticals, which are regulated closely by the Food and Drug Administration, the cosmetic industry, which includes personal care products like shampoos, hair care and toothpaste, is free from scrutiny from the FDA. The regulatory agency has no power of review or recall over products, nor are industry products required to even list all of their ingredients. Instead, the $71 billion industry regulates itself. And that always works out great!

    A new divide in American death - White women have been dying prematurely at higher rates since the turn of this century, passing away in their 30s, 40s and 50s in a slow-motion crisis driven by decaying health in small-town America, according to an analysis of national health and mortality statistics by The Washington Post.  Among African Americans, Hispanics and even the oldest white Americans, death rates have continued to fall. But for white women in what should be the prime of their lives, death rates have spiked upward. In one of the hardest-hit groups — rural white women in their late 40s — the death rate has risen by 30 percent.  The Post’s analysis, which builds on academic research published last year, shows a clear divide in the health of urban and rural Americans, with the gap widening most dramatically among whites. The statistics reveal two Americas diverging, neither as healthy as it should be but one much sicker than the other. In modern times, rising death rates are extremely rare and typically involve countries in upheaval, such as Russia immediately after the collapse of the Soviet Union. In affluent countries, people generally enjoy increasingly long lives, thanks to better cancer treatments; drugs that lower cholesterol and the risk of heart attacks; fewer fatal car accidents; and less violent crime. But progress for middle-aged white Americans is lagging in many places — and has stopped entirely in smaller cities and towns and the vast open reaches of the country. The things that reduce the risk of death are now being overwhelmed by things that elevate it, including opioid abuse, heavy drinking, smoking and other self-destructive behaviors. White men are also dying in midlife at unexpectedly high rates. But the most extreme changes in mortality have occurred among white women, who are far more likely than their grandmothers to be smokers, suffer from obesity or drink themselves to death.

    Texas Has Highest Maternal Mortality Rate in Developed World, Study Finds - The rate of Texas women who died from complications related to pregnancy doubled from 2010 to 2014, a new study has found, for an estimated maternal mortality rate that is unmatched in any other state and the rest of the developed world. The finding comes from a report, appearing in the September issue of the journal Obstetrics and Gynecology, that the maternal mortality rate in the United States increased between 2000 and 2014, even while the rest of the world succeeded in reducing its rate. Excluding California, where maternal mortality declined, and Texas, where it surged, the estimated number of maternal deaths per 100,000 births rose to 23.8 in 2014 from 18.8 in 2000 – or about 27%. But the report singled out Texas for special concern, saying the doubling of mortality rates in a two-year period was hard to explain “in the absence of war, natural disaster, or severe economic upheaval”. From 2000 to the end of 2010, Texas’s estimated maternal mortality rate hovered between 17.7 and 18.6 per 100,000 births. But after 2010, that rate had leaped to 33 deaths per 100,000, and in 2014 it was 35.8. Between 2010 and 2014, more than 600 women died for reasons related to their pregnancies. No other state saw a comparable increase.

     U.S. warning: Zika could spread to Gulf States, persist for one to two years -- The National Institutes of Health’s Anthony Fauci warned that Texas and Louisiana could be next for Zika. In the weeks since mosquitoes carrying the virus hit U.S. borders, they have already spread from a small suburban community in South Florida to Miami’s most popular tourist spot, South Beach. The development prompted a travel advisory from the Centers for Disease Control and Prevention on Friday urging pregnant women to avoid the area. Fauci, director of the Institute of Allergy and Infectious Diseases, speaking Sunday on ABC’s “This Week,” said the situation is likely to get worse soon. “I would not be surprised if we see cases in Texas and Louisiana, particularly now where you have the situation with flooding in Louisiana,” he said. “There are going to be a lot of problems getting rid of standing water.”Over the past year, infections from the virus have reached epidemic proportions in parts of the world. The World Health Organization has said that Zika may be responsible for thousands of babies being born with a severe birth defect known as microcephaly and for some adults coming down with neurological conditions. More than 50 countries have been impacted, with Brazil being the epicenter of the outbreak. The United States had been mostly spared until now, but officials had said that the arrival of Zika in the country was inevitable because of the way the mosquitoes travel north during the summer months. The officials have been making preparations on numerous fronts.

    Storms devastate monarch butterflies’ forest habitat in Mexico - Storms earlier this year blew down more than a hundred acres of forests where migrating monarch butterflies spend the winter in central Mexico, killing more than 7% of the monarchs, according to conservationists. Rain, cold and high winds from the storms caused the loss of 133 acres (54 hectares) of pine and fir trees in the forests west of Mexico City, more than four times the amount lost to illegal logging this year. It was the biggest storm-related loss since the winter of 2009-10, when unusually heavy rainstorms and mudslides caused the destruction of 262 acres (106 hectares) of trees. This year’s storm also appears to have frozen or killed about 6.2m butterflies, almost 7.4% of the estimated 84m butterflies that wintered in Mexico, said Alejandro Del Mazo, the attorney general for environmental protection.“Never had we observed such a combination of high winds, rain and freezing temperatures,” Two big storm losses within five years may suggest changes in the climatic conditions that have allowed the survival of patches of mountaintop forests. An additional 16 acres (6.5 hectares) of trees were lost to drought this year.  The monarchs depend on finding relatively well-preserved forests, where millions of the orange-and-black butterflies hang in clumps from the boughs. The trees, and the clumping, help protect the butterflies from cold rains and steep drops in temperature.

    China: U.S. Approves Syngenta Deal to Bring GMO Closer: On Monday, China National Chemical Corp. (ChemChina) received approval from U.S. national-security officials for its $43 billion takeover of Swiss agrochemical company Syngenta AG. Although the deal still needs to be reviewed by antitrust regulators worldwide, getting the Committee on Foreign Investment in the U.S. (CFIUS) the green light was seen as the final hurdle for what looks like the biggest Chinese overseas acquisition of all time. Syngenta shares jumped 10% upon the news. “The proposed transaction is expected to close by the end of the year,” read a statement by the Basel-based firm, which has 28,000 employees in over 90 countries. The deal has been controversial in the U.S. for national-security implications. “The fact that a [Chinese] state-owned enterprise may have yet another stake in U.S. agriculture is alarming,” said Iowa Senator Charles Grassley. But the deal has arguably been more controversial in China: Syngenta has pioneered the manufacture of genetically modified (GMO) crops, and ChemChina’s interest is seen as spurred by the Beijing government eyeing Syngenta’s valuable GMO-seed patents. However, the Chinese public remains vehemently against GMO. A recent survey in the state-backed China Daily revealed 84% of respondents consider GMO unsafe. It remains illegal for locally grown food.

    Monsanto Weed Killer Wiping Out Valuable Crops, Agrochemical Giant Looks to be ‘Amazon of Agriculture’ | Global Justice Ecology Project -- Monsanto in the news this week with a report by Mother Jones titled Monsanto Just Made a Massive Mistake. The report follows up on EPA data indicating 117 complaints “alleging misuse of pesticide products containing dicamba,” affecting more than 42,000 acres of crops, including peaches, tomatoes, cantaloupes, watermelons, rice, peas, peanuts, alfalfa, cotton, and soybeans. From the Mother Jones piece: The trouble appears to stem from decisions made by the Missouri-based seed and pesticide giant Monsanto. Back in April, the company bet big on dicamba, announcing a $975 million expansion of its production facility in Luling, Louisiana. The chemical is the reason the company launched its new Roundup Ready Xtend soybean and cotton seeds, genetically engineered to withstand both dicamba and Monsanto’s old flagship herbicide, glyphosate (brand name: Roundup). Within a decade, the company wrote, the new GM crops will proliferate from the US Midwest all the way to Brazil and points south, covering as much as 250 million acres of farmland (a combined land mass equal to about two and a half times the acreage of California)—and moving lots of dicamba. Meanwhile, Forbes reports that Monsanto’s Climate Corporation “is building a network of in-field sensors to expand the scope of soil, weather and other data flowing into its digital agriculture tools that help farmers increase crop yields and reduce costs.” “We see it as the Amazon of agriculture, where we’re bringing additional apps up onto that platform and where the best apps win,” Monsanto CEO Hugh Grant said.

    USDA Will Buy $20 Million of Cheese to Reduce Surplus -- The U.S. Department of Agriculture (USDA) will buy $20 million of cheese from private inventories to reduce a cheese surplus currently at an all-time high. The cheese, which amounts to about 11 million pounds, will go to food banks and pantries across the country to assist families in need, the USDA said on Tuesday. The purchase also helps dairy farmers who have asked the government to assist with the massive cheese glut, which has left more than a billion pounds of cheese locked away in storage, the Wall Street Journal reported. The cheese surplus is at its highest level in 30 years, the USDA said. Dairy producers have had trouble making money recently, as overseas buyers have stopped purchasing from the U.S. due to the high dollar and more milk production in Europe, the Journal reported. Revenues have dropped 35 percent for dairy farmers over the past two years, according to the USDA. “This commodity purchase is part of a robust, comprehensive safety net that will help reduce a cheese surplus that is at a 30-year high while, at the same time, moving a high-protein food to the tables of those most in need,” Agriculture Secretary Tom Vilsack said in a statement. “USDA will continue to look for ways within its authorities to tackle food insecurity and provide for added stability in the marketplace.”

    Bayer weighs hostile takeover of Monsanto - After months of unsuccessful courting, German chemicals giant Bayer is reportedly considering making an unsolicited bid for the US seed specialist, which rejected an improved offer from the Germans in July.German business daily Handelsblatt reported Tuesday that the Bayer management was preparing a plan to "turn directly to shareholders" to secure the planned merger. Citing sources close to management, the option could materialize if Monsanto continued to insist on a price that Bayer saw as "too risky." Monsanto has already rejected two offers from Bayer, calling an increased bid of $125 (111 euros) per share in July "financially inadequate" because it continued to undervalue the biotech seed giant. However, Monsanto left the door open to further talks. "In the coming weeks, chief executive Werner Baumann will make a decision: namely whether a friendly merger is still possible, or whether Bayer must choose an alternative path," the sources told Handelsblatt. By merging the two companies, Baumann hopes to create a globally dominant agrochemical firm with revenues of up to $25 billion. Bayer's last offer valued Monsanto at around $64 billion.

    America’s rice crop threatened by Louisiana flooding, Arkansas rain - CBS News: – High water in Louisiana and Arkansas has put a damper on the nation’s rice harvest. While much of Louisiana’s crop was in before record floods this month, Arkansas farmers had just started harvesting before rainy weather began last weekend. So far, the biggest losers are farmers whose fields are inundated and may not be able to harvest. Those who do succeed will find slightly higher prices. But economists say that the weather isn’t bad enough to push up consumer prices for food rice, or for beer and cereal that use rice as an ingredient. Arkansas produces half the nation’s rice, while Louisiana produces about 15 percent. Farmers fear that continued bad weather, or a Gulf Coast hurricane, could worsen problems before the rest of the crop is brought in. At least 13 people died in the flooding that swept through partsof southern Louisiana after torrential rains lashed the region. An estimated 60,000 homes have been damaged, and 102,000 people have registered for federal assistance so far.

    The majority of Louisianans didn't have flood insurance, and now they could lose everything : (Reuters) - Quenton Robins watched on Sunday morning as a giant metal claw clamped down on his mother's ruined belongings, snapping wooden cabinets with an audible crack as the operator of a giant mechanized arm slowly cleared a mound of debris from her yard in Baton Rouge. Five feet (1.5 meters) of water swept through the homes in the quiet Park Forest neighborhood just over a week ago, shocking residents who had been told they did not live in a flood zone. "It's not a flood zone," said Robins, a 27-year-old Navy veteran. "At least it didn't used to be." As efforts in Louisiana turn from rescue to recovery, renters and homeowners who do not have flood insurance are facing an uncertain financial future. Private insurers do not cover flood damage and flood insurance in the United States is underwritten by the Federal Emergency Management Agency. Homeowners who live in designated high-risk flood zones are required to carry flood insurance if they have a federally backed mortgage.In Louisiana, an estimated 42 percent of homes in high-risk areas have flood insurance, according to FEMA. Only 12.5 percent of homeowners in low and moderate-risk zones do. Many of the areas hit hard by record rainfall last week were not considered at high risk for flooding. Those residents without flood insurance are eligible for up to $33,000 in FEMA individual disaster assistance funds, although most will likely receive less than that, based on payments following other major disasters.

    Ex–FEMA Director Who Oversaw Katrina Criticizes Obama for Golfing During Louisiana Flood - Former FEMA Director Michael Brown, who ran the federal response to Hurricane Katrina in 2005, said President Barack Obama, who was on a two-week vacation on Martha’s Vineyard in Massachusetts, should have put down his golf clubs last week during the height of the floods ravaging part of Louisiana. “The problem is the optics,” Brown said during an interview today on the Fox Business Network. Obama Unlikely to Halt Vacation to Visit Flooded Louisiana Brown — who received then–President George W. Bush’s infamous praise “Brownie, you’re doing a heck of a job” as thousands of survivors went without food and shelter 11 years ago — said Obama was justified in not descending immediately on Baton Rouge, which would have diverted critical resources from flood recovery. But the president should have adjusted his vacation schedule to demonstrate he was aware of the natural disaster that was unfolding, Brown said. “It doesn’t mean jump on Air Force One and go to every disaster. It means that you need to speak to the American people … You sometimes need to get off the golf course when bad things are happening so you don’t have the two [TV] windows of somebody golfing while people are being rescued from rooftops,” Brown said.

    Vacationing President Obama Dedicates 18th-Hole Birdie To Louisiana Flood Victims —Carrying a 47-over-par performance to the 18th tee at Farm Neck Golf Club during his vacation on the island of Martha’s Vineyard Thursday, President Obama told golfing buddy Larry David that he was determined to “get one back,” sources reported. After utilizing his 10th and final mulligan on an errant slice, the commander-in-chief hit a solid drive down the fairway from the red tees on the 435-yard par 5, leaving approximately 275 yards left to the front of the green. Then “the best couple of 3-woods [he has] ever hit,” along with a very lucky bounce, put him in a situation the leader of the free world has not seen in quite some time: a mere eight feet away from recording a birdie. Recognizing the magnitude of the moment, David asked for permission to hole out his five-footer in order to set the stage for Obama’s birdie attempt, which the President granted. “This one’s for all the poor folks down in the great state of Louisiana,” Obama reportedly said to David, before addressing the ball. The lefty then flawlessly executed his trademark outside-to-inside, wrist-heavy putting stroke, sending his customized Titleist skipping smoothly—right into the center of the cup. After a nanosecond of solemn silence to honor the worst domestic natural disaster in four years, the President celebrated his birdie by dropping his putter and thrusting both fists into the air, whooping loudly, as nearby Secret Service agents applauded. Waving to everyone who had witnessed the magical moment, Obama called out loudly, “That was for Louisiana!” “Ask Larry—I even said it before I putted!” he added.

    Should we abandon Louisiana? - Because we’re Louisiana, people just assume we’re going to flood. One football field of land disappears from Louisiana’s coast every hour. Why rebuild again when the entire state is sinking? If we must blame something for this flood, we should direct our blame at climate change. According to the National Weather Service, there was only a 0.1 percent chance of this flood according to historical models. This storm shouldn’t have happened. Many of the homes that were destroyed weren’t in a flood zone. (Unlike in New York and New Jersey after Hurricane Sandy, where the flooding was well-predicted.) But this won’t be the last unexpected extreme weather event Louisiana will face as the Earth warms. Critics will use this as one more reason to give up on the state. And they’ll use the inevitable next disaster too. After Hurricane Katrina, many non-Louisianians advocated against rebuilding New Orleans. Dennis Hastert, the U.S. speaker of the House at the time, said New Orleans should be “bulldozed.” Jack Shafer, a former Slate editor, wrote that Hastert’s statement was one of “candor and wisdom.”  But abandoning Louisiana wasn’t Dennis Hastert’s decision to make. It doesn’t matter how bad the flooding may seem to outsiders—for residents, this was a freak disaster and not something that will convince us to abandon our homes willingly.  What that decade-old commentary about bulldozing New Orleans missed is that we weren’t looking for opinions, we were looking for help. But Louisiana is viewed as a backwater, so instead we just got paternalistic think pieces about why we didn’t deserve help. We’re too poor, we’re too corrupt, and our schools were failing. “New Orleans puts the ‘D’ into dysfunctional,” Shafer wrote, suggesting residents stay in Texas.

    Washington DC's most famous monuments being slowly covered in black slime | Daily Mail Online: Abraham Lincoln and Thomas Jefferson have been slimed. A mysterious black slime has been steadily oozing over Washington DC's most famous monuments, including the Lincoln and Jefferson Memorials.The Jefferson Memorial's white marble dome is slowly turning gray from the icky substance, which is called biofilm, and not actually a slime, but more of a powder, reports CBS News. The black stuff has also creeped over the Arlington National Cemetery and on the Washington Monument and the tombstones at Congressional Cemetery, according to NPS.gov 'It’s called slime, but when you touch it, it’s dry; it doesn’t come off on your fingers,' noted CBS News’ Mark Albert when he visited the area.  Because of its dryness, it's even more difficult to clean off, said Mike Litterst of the National Park Service.  All biofilm, which is a colony of microscopic organisms, really needs to grow is nutrients and a surface such as stone. Many famous monuments all over the world have the same issue.  Rain can cause pits to form in smooth stone surfaces over time, creating the perfect petrie dish for the slime.  But getting rid of it isn't as easy as soap and water.   Treatment of biofilm is difficult, as there is no known permanent method for removing it, and we have to ensure that any treatment must not do further damage to the soft marble of the memorial nor encourage further growth,' Catherine Dewey, chief of resource management for National Mall and Memorial Parks, told NPS.

    New York Says ‘Work Is Not Done’ on GE’s Hudson River Cleanup - WSJ -- New York’s environmental regulator has notified federal officials that General Electric’s seven-year, $1.6 billion dredging campaign to remove industrial pollutants from the Hudson River has been inadequate.  Commissioner Basil Seggos of the New York Department of Environmental Conservation in a letter released Monday urged the U.S. Environmental Protection Agency to closely scrutinize the effectiveness of dredging in its five-year project review, due to be released by April 2017. “While EPA’s work overseeing the General Electric remedial dredging project has improved the Hudson River, the work is not done,” Mr. Seggos wrote in a letter to the agency. With the letter, New York takes the side of groups, including the National Oceanic and Atmospheric Administration and other environmental organizations, that have warned that the dredging project hasn’t lowered the levels of polychlorinated biphenyls, or PCBs, in the Hudson enough to meet targets set out in the original 2002 cleanup plan. In the letter, Mr. Seggos said state officials agreed to the 2002 plan on the condition that removal of PCB-contaminated sediment would lead to lower concentrations of the chemicals in fish. “That has not happened,” he wrote.

    Flint’s Water Crisis and the ‘Troublemaker’ Scientist - In the history of political graffiti, “We want Va. Tech” may sound like one of the least stirring demands ever spray-­painted on a wall, but in the context of Flint, it was charged with the emotion and meaning of a rallying cry.By “Va. Tech,” the message’s author meant a Virginia Tech professor of civil and environmental engineering, Marc Edwards. Edwards has spent most of his career studying the aging waterworks of America, publishing the sort of papers that specialists admire and the rest of us ignore, on subjects like “ozone-­induced particle destabilization” or the “role of temperature and pH in Cu(OH)₂solubility.” Explaining his research to laypeople, he sometimes describes it as “the C.S.I. of plumbing.” Edwards is a detective with a research lab and a Ph.D. In 2000, after homeowners in suburban Maryland began reporting “pinhole leaks” in their copper pipes, the water authority there brought in Edwards. In 2002, after receiving a report that water in a Maui neighborhood had mysteriously turned blue and was giving people rashes, Edwards took on the case. Until last year, the most famous case Edwards investigated was the lead contamination of the water supply in the nation’s capital — still the worst such event in modern American history, in magnitude and duration. In Washington, lead levels shot up in 2001, and in some neighborhoods they remained dangerously elevated until 2010. Edwards maintains, and spent years working to prove, that scientific misconduct at the Environmental Protection Agency and the Centers for Disease Control and Prevention exacerbated the D.C. crisis. A congressional investigation culminated in a 2010 report, titled “A Public Health Tragedy: How Flawed C.D.C. Data and Faulty Assumptions Endangered Children’s Health in the Nation’s Capital.” It confirmed many of his allegations, but the experience was for Edwards a decade-­long ordeal that turned him into a reluctant activist — or as he prefers to say, “a troublemaker.”

    Vilsack: Iowa will have 'hell to pay' unless water quality addressed soon: Iowa's political leaders should shut themselves in a room until they reach an accord on fixing the state's water quality and soil health problems, U.S. Agriculture Secretary Tom Vilsack said Wednesday. Vilsack, speaking at the Small Business Administration's Small Business Innovation Research road tour, said 2017 is the year for Iowa's leaders to approve a policy fix for addressing water and soil health in Iowa. "Leadership needs to get in a room, lock the door and not come out until they’ve got a plan," he said. The costs of further inaction could be dire, Vilsack said, especially if other states continue to address water quality while Iowa remains idle. Other priorities such as economic development will be moot if Iowa's water deteriorates too much, he said. "If we’re the only state that’s not (addressing this), there’s going to be hell to pay," the former Iowa governor said. "And there’s no better time than 2017. This should be the only thing, in my view, the only thing anybody talks about." Vilsack noted that Minnesota and Wisconsin are addressing water quality, as are other Southern states. "It is irritating to me beyond belief, and I’m serious about this, that I have a damned sign in my office in Washington, D.C., from the Minnesota Water Project," he said. "The former governor of Iowa has got to look at that damned sign every day and know that Minnesota has a clean water initiative."

    Parched Zimbabwe faces dire water shortages as new dry season nears | Reuters: The only dam in this small-scale farming community in eastern Zimbabwe used to provide water for both people and cattle. Now, dried to a dirty puddle, it is a source of competition rather than refreshment. As a small boy tries to fill two containers with the muddy water, a herd of cattle crowd in for a drink. The boy tries to wave them away, but the desperate animals defy him, bellowing and crowding to the edge of the puddle. Though the water is no longer fit for people to consume, farmers depend on it for washing and other uses. "Water is now very scarce in this area. And this dam has water which will last only a few days," said James Jofirisi, a villager. The dam refilled during the recent rainy season, he said, but the water is not sufficient to last until the next rains start in late October or early November. As Zimbabwe prepares for the bleak coming dry season in September and much of October, on the heels of more than a year of El Niño-induced drought, it finds itself running out of water. Boreholes and deep wells in many areas are fast running dry, and rivers and small streams – including those close to Gutaurare – are drying up too. Farmers fear they will not only lose their livestock but their own sources of household water.

    Arable Lands Lost at Unprecedented Rate: 33,000 Hectares… a Day! (IPS) - Humankind is a witness every single day to a new, unprecedented challenge. One of them is the very fact that the world’s arable lands are being lost at 30 to 35 times the historical rate. Each year, 12 million hectares are lost. That means 33,000 hectares a day!Moreover, scientists have estimated that the fraction of land surface area experiencing drought conditions has grown from 10-15 per cent in the early 1970s to more than 30 per cent by early 2000, and these figures are expected to increase in the foreseeable future. While drought is happening everywhere, Africa appears as the most impacted continent by its effects. According to the Bonn-based United Nations Convention to Combat Desertification (UNCCD), two-thirds of African lands are now either desert or dry-lands. The challenge is enormous for this second largest continent on Earth, which is home to 1.2 billion inhabitants in 54 countries and which has been the most impacted region by the 2015/2016 weather event known as El-Niño. IPS interviewed Daniel Tsegai, Programme Officer at UNCCD, which has co-organised with the Namibian government the Africa Drought Conference on August 15-19 in Windhoek. “Globally, drought is becoming more severe, more frequent, increasing in duration and spatial extent and its impact is increasing, including massive human displacement and migration. The current drought is an evidence. African countries are severely affected,” Tsegai clarifies.

    An Inside Look at Utah’s Land Grab Legal Scheme —Back in 2012, upon passing its Transfer of Public Lands Act, the state of Utah laid down a deadline. It told the national government to relinquish ownership of most federal lands within Utah’s borders by December 31, 2014, or face consequences. It was big talk, and for a while there it seemed the state would back its words with action. When Uncle Sam inevitably ignored the deadline, for instance, Utah began laying the groundwork for a pricey lawsuit meant to snatch millions of acres of national forest and other coveted land from the federal government’s grasp. A legal brawl was brewing. Then, suddenly, things changed: Antonin Scalia died, and with him went the conservative Supreme Court majority that land transfer’s proponents need to succeed. Donald Trump, meanwhile, became the GOP presidential nominee, and conservative hopes of re-capturing the White House and the high court withered. Nearly four years after the land transfer act became law, nearly two years since the state’s deadline, Utah’s tough-talking lawyers and legislators have yet to sue. Earlier this month, however, as if to signal the state’s determination not to give up on its quixotic quest, the National Review published an op-ed by two lawyers consulting with Utah on its land transfer scheme. The article is a glimpse into key arguments the state could employ if a lawsuit moves forward, and so it’s worth considering the attorneys’ assertions in detail. After all, should their perspective someday prevail in court, should it create precedent, it will ultimately strip the American people of their stake in the public mountains, forests, and plains of the West.

     Australian dairy farmers slaughter 700 cows a week because the cost of producing milk | Daily Mail Online: Struggling dairy farmers are being forced to send their cattle to 'the choppers' rather than be milked because they are being paid less than it costs to produce the milk.The price of the raw product has plunged since May and farmers, many having to repay their co-operative sellers like Murray Goulburn and Frontera tens of thousands of dollars, have been drastically reducing stock by selling to abattoirs along with suffering serious mental health issues.Victoria is the state which has been hardest hit by the milk crisis sparked when industry giants slashed the raw milk price by up to 10 per cent.At one sale yard alone up to 700 dairy cows are offered to abattoirs each week, according to a report to be aired on the ABC's Four Corners on Monday. Truckloads of cows are being taken to yards for a quick sale while some farmers are even forced to walk their small herds many kilometres to offload them.Many farmers, locked into long-term contracts, are incurring heavy monthly debts after the 'farm-gate prices' dropped by up to 10 per cent earlier in the year.South Australian farmer Lorraine Robertson was asked how much money she'd 'received' in the past four weeks.'It's minus $16,000. That's the debt to Fonterra. So I can't leave, even if I did have somewhere else to go,' she said.

    Climate-related disasters raise conflict risk, study says -- A host of different factors can increase the risk of armed conflict breaking out in a country. Some examples picked out by previous research include poverty, weak governance, a history of conflict, income gaps between rich and poor, and disputes over natural resources. The new study, published in the Proceedings of the National Academy of Sciences, suggests that climate-related disasters should be added to this list. This conclusion stems from a statistical analysis of armed conflicts and the economic damage caused by extreme weather events over the period 1980-2010.  The researchers looked at three categories of climate-related disasters. These include meteorological events (blizzard/snowstorm, hailstorm, tornado, tropical cyclone, winter storm), hydrological events (avalanche, flash flood, general flood, landslide, storm surge), and climatological events (cold wave/frost, drought, heatwave, wildfire). The results suggest that around 9% of all armed conflicts over the past 30 years have occurred during – i.e. in the same month as – an extreme climatological event. Taking all three disaster types together, the researchers only found a link when they added another factor – “ethnic fractionalisation” – into their analysis. This is a measure of how how ethnically diverse a country is. The researchers find that in top-50 most fractionalised countries, around 23% of armed conflicts have occurred at the same time as a climate-related disaster of any kind.

    Think It’s Hot Now? Just Wait - (maps) - July wasn’t just hot — it was the hottest month ever recorded, according to NASA. And this year is likely to be the hottest year on record.Fourteen of the 15 hottest years have occurred since 2000, as heat waves have become more frequent, more intense and longer lasting. A study in the journal Nature Climate Change last year found that three of every four daily heat extremes can be tied to global warming. This map provides a glimpse of our future if nothing is done to slow climate change. By the end of the century, the number of 100-degree days will skyrocket, making working or playing outdoors unbearable, and sometimes deadly. The effects on our health, air quality, food and water supplies will get only worse if we don’t drastically cut greenhouse gas emissions right away. These calculations by Climate Central are based on projections by the World Climate Research Programme that assume that greenhouse gas emission trends will continue unabated through 2100. Daily maximum values for the average of the years 1991 to 2010 are based on meteorological data compiled by Ed Maurer at Santa Clara University.

    Dozens of wildfires rage across arid U.S. West | Reuters --  Dozens of wildfires raged in the arid U.S. West on Tuesday, blackening hundreds of square miles of land and forcing residents from homes in California and Washington state. At least six people have died in Western wildfires this summer. Seven new large fires have flared up since Monday, bringing the total number of blazes burning in the region to 32, according to the National Interagency Fire Center. Combined, the wildfires have charred more than 500,000 acres (200,000 hectares), the agency said. In California's San Luis Obispo County, firefighters have been able to carve containment lines around about a third of the 37,100-acre (15,000-hectare) Chimney Fire by Tuesday morning. That blaze, which started in the county's rugged coastal hills on Aug. 13, has destroyed 36 homes and continued to threaten nearly 1,900 more, according to the California Department of Forestry and Fire Protection (Cal Fire). Evacuation orders were in effect for about 6,000 residents on Tuesday, according to Cal Fire spokesman Aladdin Morgan, up from just 2,500 on Monday. The historic Hearst Castle, a major tourist attraction on California's central coast, will be closed to the public through the week as a safety precaution due to the blaze. The monumental estate, built in the early 20th century for publishing tycoon William Randolph Hearst, was no longer in immediate danger, but the Chimney Fire had crept within three miles (5 km) of the castle over the weekend before shifting direction, authorities said.

    California firefighters stretched thin as blazes sweep state - (AP) -- California's state fire department is stretched thin just as the bone-dry state enters the peak of its wildfire season, with vacancy rates exceeding 15 percent for some firefighters and supervisors. The vacancy rate is more than 10 percent for some fire engine drivers, according to statistics provided to The Associated Press. A five-year drought and changing weather patterns have transformed what once was a largely summertime job into an intense year-round firefight, said California Department of Forestry and Fire Protection spokeswoman Janet Upton. "It's not the old days where we were a seasonal department with a season that lasted a few months," she said. "It's an increasingly challenging job, no thanks to Mother Nature and climate change." The shortage means that the state firefighting department is forced during weather conditions fanning large blazes to keep firefighters on duty for long hours as they do backbreaking, dangerous work trying to put out massive wildfires that have become bigger and more frequent in recent years. Nearly 25 percent of departing employees over the last two years have told officials they quit for better-paying jobs with other firefighting agencies, according to the statistics provided to the AP by CalFire. The union that represents the state firefighters who fight fires outside urban and suburban areas blamed low pay, as more than 100 members, families and representatives of other unions protested in Sacramento on Monday.

    California Drought Claims 66 Million Dead Trees -The Land Report: Four years of punishing drought coupled with a dramatic rise in bark beetle infestation and warmer temperatures has led to record levels of tree die-off. “Tree die-offs of this magnitude are unprecedented and increase the risk of catastrophic wildfires that put property and lives at risk,” said Agriculture Secretary Tom Vilsack. “While the fire risk is currently the most extreme in California because of the tree mortality, forests across the country are at risk of wildfire and urgently need restoration requiring a massive effort to remove this tinder and improve their health.” Continued elevated levels of tree mortality are projected during 2016, particularly in dense forest stands, stands impacted by root diseases or other stress agents, and in areas with higher levels of bark beetle activity.

    Climate change is water change’ — why the Colorado River system is headed for major trouble  -- There’s good news and bad news for the drought-stricken Colorado River system, according to projections just released in a new federal report from the Bureau of Reclamation, manager of dams, powerplants and canals. The report predicts that Lake Mead — the river system’s largest reservoir, supplying water to millions of people in Nevada, Arizona, California and Mexico — will narrowly escape a shortage declaration next year. But a shortage is looking imminent in 2018, and water experts are growing ever more worried about the river system’s future. The Colorado River basin has been plagued with drought for 15 years now, and the effects are starting to show. Earlier this spring, Lake Mead — which feeds 90 percent of the water supply in Las Vegas, alone — dropped to its lowest levels since the Hoover Dam was completed in 1936. Currently, demand on Lake Mead has been removing more water than is being replenished, resulting in a deficit of about 1.2 million acre-feet, or about 400 billion gallons, each year. According to federal guidelines, a shortage is to be declared at the start of any given year if Lake Mead’s water levels have sunk below 1,075 feet above sea level. The new federal projections, spanning the next 24 months, suggest that the elevation will be hovering just below 1,079 feet at the end of this December. By the end of December 2017, however, the report predicts that water levels will have sunk to about 1,074 feet. If this occurs, the federal government will declare a shortage and affected states will be obligated to reduce their water consumption.

    Climate change may extend ozone season in the Southeastern US: Extreme weather conditions associated with climate change may extend the ozone season in the Southeastern United States as drought-stressed trees emit more of the precursor compound that helps form the health-threatening pollutant. July and August have traditionally been peak ozone months, but a new study suggests those peaks could extend well into the fall as weather becomes warmer and drier. In 2010, regional ozone levels reached a peak in October, with higher levels of the pollutant than in July, providing a preview of what may happen as the climate changes. Ironically, the projected extension of ozone season comes at a time when summertime ground-level ozone levels continue to decline as a result of emission reductions mandated by the Clean Air Act. "This study shows that our air quality, particularly ozone in the fall, is becoming more sensitive to the effects of climate change," said Yuhang Wang, a professor in the School of Earth and Atmospheric Sciences at the Georgia Institute of Technology. "The direction of climate change is such that we are likely going to see hotter and drier fall seasons, which may create larger ozone extremes in the Southeast. We are likely to have record ozone days in the fall, and we need to prepare for that." The research, which was sponsored by the U.S. Environmental Protection Agency's Science To Achieve Results (STAR) Program, will be reported August 22 in the Early Edition of the journal Proceedings of the National Academy of Sciences. The paper is believed to be the first to connect variations in ground-level ozone concentrations to the drought stress on trees.

    Obama expands Hawaii marine reserve in final push on climate | Reuters: U.S. President Barack Obama will dramatically expand the Papahānaumokuākea Marine National Monument off the coast of Hawaii on Friday, the White House said, an action that will ban commercial fishing from more than 582,500 sq miles (1.5 million sq km) of the Pacific Ocean. Obama will visit the protected area on Sept. 1 to draw attention to the threat that climate change poses to oceans, traveling to Midway Atoll - a remote coral reef that was the site of a pivotal World War Two battle and is now known for its sea turtles, monk seals, and millions of seabirds. Obama, who was born in Hawaii and spent most of his childhood there, made curbing climate change a central part of his time in the White House, which draws to a close on Jan. 20. Some of his efforts have been blocked by Congress or held up in court challenges. But preserving public space from development has been something Obama can do using his own power, and he had moved to permanently protect more than 265 million acres of land and water even before the expansion in Hawaii. ‘

    Rising seas could ease coral bleaching but will be ‘too little too late’ -- Coral reefs could receive an unforeseen benefit from global sea level rise, a new study suggests. Deeper waters over shallow reefs could alleviate the extreme temperatures that corals are exposed to, the study says, potentially easing coral bleaching caused by ocean warming. But other scientists tell Carbon Brief that coral bleaching is already so widespread that any alleviation from sea level rise is unlikely to counter the impact of increasing temperatures.The global ocean surface is currently warmer than it has been at any point in the observed record. In 2015, for example, global sea surface temperature was 0.33-0.39C higher than the 1981-2010 average, and 0.74C higher than the average for the 20th century.Ocean warming arguably poses the biggest threat to the world’s coral reefs, says the new Science Advances paper, as it increases the likelihood of coral bleaching events. High temperatures stress the corals, to the point that they are forced expel the tiny colourful algae living in their tissues – known as zooxanthellae – leaving behind a stark white skeleton.While a bleached coral reef is not dead, as the algae provide the coral with energy through photosynthesis, the coral cannot grow without them. A coral can recover from a single bleaching event, but persistently high temperatures can kill off entire reefs.Research suggests that a global average temperature rise of 2C above pre-industrial levels could see long-term degradation of virtually all the world’s coral reefs. And even a more ambitious temperature limit of 1.5C could see 90% of coral reefs at risk of bleaching by 2050.

    Bleached Corals In Eastern Pacific Separated From Their Healthy Neighbors In The West By Darwin’s ‘Impassable’ Barrier -- Across the world, coral reefs are currently struggling to recover from record bleaching events triggered by unusually warm ocean temperatures and a climate change-induced rise in ocean acidity. A lot of these imperilled reefs lie in the eastern Pacific region and are part of a population that, according to a new study, has been completely separated from the rest of the Pacific Ocean for at least the past two decades. The study, carried out by a team of researchers who used supercomputers to simulate the movement of coral larvae in the region, supports the view expressed long back by Charles Darwin, who called the over 3,100 mile stretch separating the eastern and western Pacific an “impassable” barrier. “Whether coral reefs can survive the pressure of climate change as well as local stresses will depend to a large extent on the ability of coral to reproduce and disperse; to replenish damaged populations, migrate from deteriorating conditions and colonise new frontiers. So it's important to map where coral are able to get to.” In order to do this, the researchers created a computer model to simulate the movement of over five billion coral larvae — each smaller than a poppy seed — from over 630 reefs throughout the central and eastern Pacific from 1997 to 2011. They found that even during the extreme El Niño event of 1997-1998, when shifting ocean currents promoted long-distance dispersal, the larvae could not survive long enough to cover the vast expanse separating coral colonies in the east and the west. They then compared the results obtained through the simulation with genetic data obtained from coral populations in the eastern and western Pacific Ocean. Based on this, the researchers concluded that the eastern and western populations of some species have been isolated for at least the previous few generations, and maybe even thousands of years for long-lived corals.

    Ocean Slime Spreading Quickly Across the Earth: When sea lions suffered seizures and birds and porpoises started dying on the California coast last year, scientists weren't entirely surprised. Toxic algae is known to harm marine mammals. But when researchers found enormous amounts of toxin in a pelican that had been slurping anchovies, they decided to sample fresh-caught fish. To their surprise, they found toxins at such dangerous levels in anchovy meat that the state urged people to immediately stop eating them. The algae bloom that blanketed the West Coast in 2015 was the most toxic one ever recorded in that region. But from the fjords of South America to the waters of the Arabian Sea, harmful blooms, perhaps accelerated by ocean warming and other shifts linked to climate change, are wreaking more havoc on ocean life and people. And many scientists project they will get worse. "What emerged from last year's event is just how little we really know about what these things can do," says Raphael Kudela, a toxic algae expert at the University of California, Santa Cruz. It's been understood for decades, for example, that nutrients, such as fertilizer and livestock waste that flush off farms and into the Mississippi River, can fuel harmful blooms in the ocean, driving low-oxygen dead zones like the one in the Gulf of Mexico. Such events have been on the rise around the world, as population centers boom and more nitrogen and other waste washes out to sea. But scientists also now see troubling evidence of harmful algae in places nearly devoid of people. They're seeing blooms last longer and spread wider and become more toxic simply when waters warm. And some are finding that even in places overburdened by poor waste management, climate-related shifts in weather may already be exacerbating problems.

    The blob': how marine heatwaves are causing unprecedented climate chaos -- First seabirds started falling out of the sky, washing up on beaches from California to Canada. Then emaciated and dehydrated sea lion pups began showing up, stranded and on the brink of death. A surge in dead whales was reported in the same region, and that was followed by the largest toxic algal bloom in history seen along the Californian coast. Mixed among all that there were population booms of several marine species that normally aren’t seen surging in the same year. Plague, famine, pestilence and death was sweeping the northern Pacific Ocean between 2014 and 2015. This chaos was caused by a single massive heatwave, unlike anything ever seen before. But it was not the sort of heatwave we are used to thinking about, where the air gets thick with warmth. This occurred in the ocean, where the effects are normally hidden from view. Nicknamed “the blob”, it was arguably the biggest marine heatwave ever seen. It may have been the worst but wide-scale disruption from marine heatwaves is increasingly being seen all around the globe, with regions such as Australia seemingly being hit with more than their fair share. It might seem strange given their huge impact but the concept of a marine heatwave is new to science. The term was only coined in 2011. Since then a growing body of work documenting their cause and impact has developed.

    Environmental records shattered as climate change 'plays out before us' - The world is careening towards an environment never experienced before by humans, with the temperature of the air and oceans breaking records, sea levels reaching historic highs and carbon dioxide surpassing a key milestone, a major international report has found.  The “state of the climate” report, led by the National Oceanic and Atmospheric Administration (Noaa) with input from hundreds of scientists from 62 countries, confirmed there was a “toppling of several symbolic mileposts” in heat, sea level rise and extreme weather in 2015.  “The impacts of climate change are no longer subtle,” Michael Mann, a leading climatologist at Penn State, told the Guardian. “They are playing out before us, in real time. The 2015 numbers drive that home.” Last year was the warmest on record, with the annual surface temperature beating the previous mark set in 2014 by 0.1C. This means that the world is now 1C warmer than it was in pre-industrial times, largely due to a huge escalation in the production of greenhouse gases. The UN has already said that 2016 is highly likely to break the annual record again, after 14 straight months of extreme heat aided by a hefty El Niño climatic event, a weather event that typically raises temperatures around the world. The oceans, which absorb more than 90% of the extra CO2 pumped into the atmosphere, also reached a new record temperature, with sharp spikes in the El Niño-dominated eastern Pacific, which was 2C warmer than the long-term average, and the Arctic, where the temperature in August hit a dizzying 8C above average. The thermal expansion of the oceans, compounded by melting glaciers, resulted in the highest global sea level on record in 2015. The oceans are around 70mm higher than the 1993 average, which is when comprehensive satellite measurements of sea levels began. The seas are rising at an average rate of 3.3mm a year, with the western Pacific and Indian Oceans experiencing the fastest increases.

    We have almost certainly blown the 1.5-degree global warming target - The United Nations climate change conference held last year in Paris had the aim of tackling future climate change. After the deadlocks and weak measures that arose at previous meetings, such as Copenhagen in 2009, the Paris summit was different. The resulting Paris Agreement committed to: Holding the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognising that this would significantly reduce the risks and impacts of climate change. The agreement was widely met with cautious optimism. Certainly, some of the media were pleased with the outcome while acknowledging the deal’s limitations. Many climate scientists were pleased to see a more ambitious target being pursued, but what many people fail to realise is that actually staying within a 1.5℃ global warming limit is nigh on impossible. There seems to be a strong disconnect between what the public and climate scientists think is achievable. The problem is not helped by the media’s apparent reluctance to treat it as a true crisis.  The 1.5℃ limit is nearly impossible.  In 2015, we saw global average temperatures a little over 1℃ above pre-industrial levels, and 2016 will very likely be even hotter. In February and March of this year, temperatures were 1.38℃ above pre-industrial averages. Admittedly, these are individual months and years with a strong El Niño influence (which makes global temperatures more likely to be warmer), but the point is we’re already well on track to reach 1.5℃ pretty soon.

    As sea levels rise, nearly 1.9 million U.S. homes could be underwater by 2100 - The real estate data firm Zillow recently published a research analysis that estimated rising sea levels could leave nearly 2 million U.S. homes inundated by 2100, a fate that would displace millions of people and result in property losses in the hundreds of billions of dollars.  More than 100,000 of those homes would be in Maryland and Virginia, according to the analysis. Another 140,000 would be submerged in the Carolinas. And Florida would face the gravest scenario of any state, with one in eight properties in danger of being underwater. . Zillow’s worst-case scenario is based on a study The Washington Post wrote about earlier this year, in which scientists projected that sea levels could be six feet higher by the end of this century — nearly twice as much as previously predicted — if carbon dioxide emissions continue unabated. Sharp cuts in greenhouse gas emissions in coming decades could lessen the impact, however, leaving the increase closer to two feet. And constructed barriers and flood-prevention efforts would help minimize the risk in some areas. Yet there’s near-unanimous agreement among scientists that the seas will rise. Insurance companies are anticipating it. Some cities are already planning for it. The company used maps released by the National Oceanic and Atmospheric Administration to determine what coastal areas would be inundated. The firm then used its nationwide database to determine which properties were most at risk of being flooded — at least on the ground level — by the next century. The results are grim. With six feet of sea level rise, nearly 2 percent of all U.S. housing stock could vanish, accounting for roughly $882 billion worth of homes.

    'It's a lit fuse:' Release of ancient carbon from melting permafrost measured - Researchers have confirmed the widespread release of ancient carbon from melting Arctic permafrost in what could be the lit fuse on a climate-change bomb. A paper published this week in Nature Geoscience has released the first measurements of greenhouse gases from permafrost under Arctic lakes. But while the study confirms those gases locked away in ice for thousands of years are seeping free, it concludes the amounts are not yet large. "It's a lit fuse, but the length of that fuse is very long," said lead author Katey Walter Anthony of the University of Alaska. "According to the model projections, we're getting ready for the part where it starts to explode. But it hasn't happened yet." Scientists have long known that permafrost contains vast quantities of carbon in dead plants and other organic material, about twice as much as the entire atmosphere. Now, that permafrost is melting more quickly as the Arctic warms up faster than anywhere else on Earth.Researchers looked at lakes in Alaska and Siberia, as well as data from Canada. They used aerial photographs and other information to measure how the area had changed over the last 60 years. They found that, across the Arctic, the amount of gas being released from a lake was directly related to its expansion. The more permafrost was melted around the water's edge, the bigger the lake became, and the more greenhouse gases were released. The team captured some of those gases and subjected them to radiocarbon dating. They found the gases had been generated from carbon stored for anywhere between 10,000 and 30,000 years.

    Crystal Serenity’s Northwest Passage cruise is a festival of environmental destruction. - It has been described in the press as “the world’s most dangerous cruise“ and in glossy marketing copy as “the ultimate expedition for the true explorer.” It is a historic voyage, one that marks the opening of one of Earth’s last frontiers.  It is also an abomination—a massive, diesel-burning, waste-dumping, ice-destroying, golf-ball-smacking middle finger to what remains of the planet, courtesy of precisely 1,089 of its richest and most destructive inhabitants. And it’s all made possible by runaway climate change, the existential global crisis that these same people and their ilk have disproportionately helped to create. The $350 million, 68,000-ton Crystal Serenity, operated by the decorated Los Angeles–based line Crystal Cruises, embarked from Anchorage, Alaska, on Tuesday. Its 32-day itinerary will take it to New York by way of the mythical Northwest Passage. Make that the formerly mythical Northwest Passage: Thanks to ocean warming brought on by climate change, the once-impassable shortcut between the Atlantic and Pacific oceans became ice-free in summer 2007 for the first time on satellite record. A growing trickle of recreational and cargo ships have managed the trip in recent years, but the 820-foot, 13-deck Crystal Serenity will be, by far, the largest to do so. On board will be a rarefied set of passengers, each of whom paid between $22,000 and $120,000 for the privilege—plus $50,000 in required “emergency evacuation” insurance, according to National Geographic. At their disposal will be a crew of 600, a spa, a fitness center, a hair salon, multiple swimming pools, six restaurants, a movie theater, a casino, a driving range, and a complimentary “get out of hell free” card.

    Global warming is melting the Greenland Ice Sheet, fast: A new study measures the loss of ice from one of world’s largest ice sheets. They find an ice loss that has accelerated in the past few years, and their measurements confirm prior estimates. As humans emit heat-trapping gases, we expect to see changes to the Earth. One obvious change to be on the lookout for is melting ice. This includes ice atop mountains, ice floating in cold ocean waters, and the ice within large ice sheets or glaciers. It is this last type of ice loss that most affects ocean levels because as the water runs into the oceans, it raises sea levels. This is in contrast to melting sea ice – since it is already floating in ocean waters, its potential to raise ocean levels is very small. So measuring ice sheet melting is important, not only as a signal of global warming but also because of the sea level impacts. But how is this melting measured? The ice sheets on Greenland and Antarctica are huge and scientists need enough measurements in space and time to really understand what’s going on. That is, we need high-resolution and long duration measurements to fully understand trends. In a very recent publication in the journal Geophysical Research Letters, an international team reported on a new high-resolution measurement of Greenland. The lead author, Malcolm McMillan from the Centre for Polar Observation and Modeling, and his colleagues mapped Greenland with incredibly high resolution (5 km distances).  They accomplished this mapping by obtaining data from the Cryosat 2 satellite. This satellite uses a technique called laser altimetry to measure the height of surfaces. It is able to track the elevation of the ice sheets on Greenland with high precision. If the height of the ice sheet is growing, it means the ice is getting thicker. If the heights are decreasing, it means the ice layers are getting thinner.

    Historical documents reveal Arctic sea ice is disappearing at record speed: Scientists have pieced together historical records to reconstruct Arctic sea ice extent over the past 125 years. The results are shown in the figure below. The red line, showing the extent at the end of the summer melt season, is the most critical: Arctic sea ice extent in recent years is by far the lowest it’s been, with about half of the historical coverage gone, and the decline the fastest it’s been in recorded history. Florence Fetterer, principal investigator at the National Snow and Ice Data Center, described the data reconstruction process in a guest post at Carbon Brief: Prof John Walsh, now at the University of Alaska Fairbanks, and Dr Mick Kelly, from the University of East Anglia (now retired), were pioneers at retrieving data. They hand-digitised information from sources, such as aerial surveys, from the US Navy and UK Meteorological Office, and from the Danish Meteorological Institute’s yearbook maps (see examples from 1978 and 1979 – both pdfs). Walsh, along with Prof William Chapman from University of Illinois, used these various sources to make monthly grids in Arctic and Southern Ocean sea ice concentrations, covering the period 1901-95. However, as Fetterer explains, gaps remained in their records, which have now been filled into the NSIDC dataset using a variety of sources:

    • The sea ice edge positions in the North Atlantic, between 1850 and 1978, derived from various sources, including newspapers, ship observations, aircraft observations, diaries and more.
    • Sea ice concentration data from regular aerial surveys of ice in the eastern Arctic by the Arctic and Antarctic Research Institute, St. Petersburg, Russia, beginning in 1933.
    • Sea ice edge positions for Newfoundland and the Canadian Maritime Region from observations, for 1870 to 1962.
    • Detailed charts of ice in the waters around Alaska for 1954 to 1978, originally the property of a consulting firm (the Dehn collection).
    • Arctic-wide maps of ice cover from the Danish Meteorological Institute from 1901 to 1956.
    • Whaling ship logbook entries that noted ship position along with an indication of whether the ship was in the presence of ice.

    Time to listen to the ice scientists about the Arctic death spiral   - Ice scientists are mostly cheerful and pragmatic. Like many other researchers coolly observing the rapid warming of the world, they share a gallows humour and are cautious about entering the political fray. Not Peter Wadhams. The former director of the Scott Polar Research Institute and professor of ocean physics at Cambridge has spent his scientific life researching the ice world, or the cryosphere, and in just 30 years has seen unimaginable change. When in 1970 he joined the first of what would be more than 50 polar expeditions, the Arctic sea ice covered around 8m sq km at its September minimum. Today, it hovers at around 3.4m, and is declining by 13% a decade. In 30 years Wadhams has seen the Arctic ice thin by 40%, the world change colour at its top and bottom and the ice disappear in front of his eyes. In a new book, published just as July 2016 is confirmed by Nasa as the hottest month ever recorded, this most experienced and rational scientist states what so many other researchers privately fear but cannot publicly say – that the Arctic is approaching a death spiral which may see the entire remaining summer ice cover collapse in the near future.The warming now being widely experienced worldwide is concentrated in the polar regions and Wadhams says we will shortly have ice-free Arctic Septembers, expanding to four or five months with no ice at all. The inevitable result, he predicts, will be the release of huge plumes of the powerful greenhouse gas methane, accelerating warming even further. He and other polar experts have moved from being field researchers to being climate change pioneers in the vanguard of the most rapid and drastic change that has taken place on the planet in many thousands of years. This is not just an interesting change happening in a remote part of the world, he says, but a catastrophe for mankind.

    Low Arctic sea ice levels are the "new normal," according to NASA - The current low amount of ice in the Arctic Ocean would have sent shockwaves across the science community decades ago. But according to NASA scientists, climate change means these low ice levels are just "the new normal." "A decade ago, this year's sea ice extent would have set a new record low and by a fair amount," Walt Meier, NASA sea ice scientist at the Goddard Space Flight Center, said in a press release. "Now, we're kind of used to these low levels of sea ice — it's the new normal." The amount of ice melt in the Arctic Ocean and surrounding bodies of water has been all over the board this year. NASA researchers said it started with a record-low maximum ice extent in March and a lot of loss in May. The ice loss rate slowed down in June, only to speed up for the first half of August, reaching a rate higher than average for late summer. Because of that slowdown in June, this year probably won't be a record-breaking melt year, the way it has been for global temperatures. But what's more alarming is that the ice isn't coming back (great news for the luxury cruise liner that recently set out on its inaugural voyage to the Arctic). "Even when it's likely that we won't have a record low, the sea ice is not showing any kind of recovery. It's still in a continued decline over the long term," Meier said in the release. "It's just not going to be as extreme as other years because the weather conditions in the Arctic were not as extreme as in other years."

    These stunning blue lakes just gave us a new reason to worry about Antarctica - In a new study, scientists who study the largest ice mass on Earth — East Antarctica — have found that it is showing a surprising feature reminiscent of the fastest melting one: Greenland. More specifically, the satellite-based study found that atop the coastal Langhovde Glacier in East Antarctica’s Dronning Maud Land, large numbers of “supraglacial” or meltwater lakes have been forming — nearly 8,000 of them in summer between the year 2000 and 2013. Moreover, in some cases, just as in Greenland, these lakes appear to have then been draining down into the floating parts of the glacier, potentially weakening it and making it more likely to fracture and break apart. This is the first time that such a drainage phenomenon has been observed in East Antarctica, the researchers say — though it was previously spotted on the warmer Antarctic Peninsula and was likely part of what drove spectacular events there like the shattering of the Larsen B ice shelf in 2002. When it comes to East Antarctica, however, “that’s the part of the continent where people have for quite a long time assumed that it’s relatively stable, there’s not a huge amount of change, it’s very, very cold, and so, it’s only very recently that the first supraglacial lakes, on top of the ice, were identified,” said Stewart Jamieson, a glaciologist at Durham University in the U.K. and one of the study’s authors.

    Stunning blue lakes spotted in Antarctica could be a sign its giant ice sheet may collapse | Daily Mail Online: (pictures) At first glance, they are a stunning image of the beauty of nature. However, scientists warn that in fact the meltwater ponds spotted in Antarctica may have a chilling message.Researchers say nearly 8,000 dazzling blue lakes appeared on the Langhovde Glacier in East Antarctica between 2000 and 2013 - and they could be a sign the glacier is doomed.  They claim the results show the largest ice mass on Earth is now showing a surprising feature similar to Greenland, which is melting at a far faster rate.Known as supraglacial lakes, the meltwater ponds form as warm air heats the surface of an ice sheet - and are a common sight on Greenland. However, the new study used satellite images to analyse the coastal Langhovde Glacier in East Antarctica’s Dronning Maud Land.It found the lakes appear to have then been draining down into the glacier, weakening it and making it more likely to fracture and break apart.'The parallels between these mechanisms, and those observed on Greenland/the Antarctic Peninsula, suggest that lakes may similarly affect rates and patterns of ice melt, ice flow and ice shelf disintegration in East Antarctica,' they wrote.

    A lengthening crack is threatening to cause an Antarctic ice shelf to collapse: A large rift is widening across an increasingly fragile Antarctic ice shelf, scientists found. The crack is spreading across the Larsen C Ice Shelf at an increased rate, threatening to carve out an iceberg the size of Delaware while destabilizing a larger area of ice roughly the size of Scotland. When this iceberg calving event happens — no one knows exactly when it will occur, except that it's getting closer — it will be the largest calving event in Antarctica since 2000, the third-biggest ever recorded and the largest from this particular ice shelf, scientists say.  About 10 to 12 percent of the Larsen C Ice Shelf is expected to break off during such an event, leaving the larger ice shelf even more vulnerable to melting from increasing air and ocean temperatures. The iceberg and ice shelf melting would not, however, increase sea levels, since the ice is already resting in the ocean, like an ice cube in a glass. However, while the Larsen C Ice Shelf may not be a sea level rise concern, rising temperatures and changes in land and sea ice across the Antarctic Peninsula are affecting native wildlife and may help disrupt regional — and possibly even global — ocean circulation. Scientists with a UK-based program called MIDAS have been monitoring the progress of the rupture since 2011. They found that between March and August of this year, the crack expanded by 22 kilometers, or 14 miles. This was slightly faster than the expansion seen in 2014, when the rift expanded by about 20 kilometers, or 12 miles.

    Delaware-Sized Chunk of Ice Could Dislodge from Antarctic Shelf -  An 80-mile long crack in the Larsen C ice shelf threatens to dislodge a chunk of ice measuring about 2,300 square miles, nearly the size of Delaware and twice the size of the massive Larsen B ice shelf collapse in 2002. As the long Southern Hemisphere polar night is ending, satellites have been able to see that the rift has grown nearly 14 miles, or about three miles per month, since it was last observed in March 2016. The fracture in the ice has also widened from 200 meters (656 feet) to about 350 meters, or 1,148 feet. According to Project MIDAS, a UK-based Antarctic research project, "As this rift continues to extend, it will eventually cause a large section of the ice shelf to break away as an iceberg." Researchers who have reviewed satellite imagery dating back to 1963 have determined that destabilization of the Larsen B ice shelf was already underway at that time, and began accelerating in more recent decades. Prior to that, it had been stable for 12,000 years. Between January and April of 2002, the ice shelf began to break apart, eventually losing a 1,235 square mile area into the sea. At that time, it was the largest collapse ever seen. Antarctic ice shelves, which ride atop ocean waters, ring the continent and hold back land-based glaciers. The most vulnerable regions are in West Antarctica and the Antarctic Peninsula. Ice shelves in this region protect a very large portion of glacial ice. The Earth's crust jumped upward following the collapse of Larsen B. Sensitive GPS instrumentation around the ice shelf show that tectonic uplift is now 1.8 centimeters per year as the disappearance of glaciers allows the Earth below to rebound.

    Billionaire environmentalist ramps up super-PAC spending -  Billionaire environmentalist Tom Steyer threw $7 million of his own money into his green-focused super-PAC, according to July's Federal Election Commission report.  The super-PAC, NextGen Climate Action Committee, is part of Steyer's multimillion-dollar operation  to elect environmentally-friendly lawmakers and to defeat candidates and officials who oppose taking "bold action on climate change." Through July, Steyer's climate change super-PAC spent $10.8 million, bringing the group's total spending this year to almost $22 million — making Steyer one of the biggest financial powerhouses on the left this cycle. Steyer, a California-based former hedge fund manager, bills his climate initiative as non-partisan, but the lawmakers he supports are invariably Democrats and those he opposes Republicans. In an interview with The Hill last October, Steyer said he planned to invest at least as aggressively in the 2016 presidential election as he did in 2014, when he became the biggest individual donor on either side of American politics. During the 2014 midterm cycle — which culminated with Democrats losing the Senate — Steyer spent more than $75 million of his own money supporting Democratic candidates who promised tough action on climate change.   Half of his favored candidates ended up losing, in what was a devastating election for Democrats.

    Clean, Green, Class War: Bill McKibben’s Shortsighted ‘War on Climate Change’: Even those who claim to abhor war still recognize war (and, by extension, force) as both admirable and authoritative. Why else does war function as such a prevalent metaphor for serious commitments? That is, in addition to literal, historical, military wars, one finds the term employed figuratively in such policy campaigns as the war on poverty, the war on cancer, the war on drugs, and the war on terror. Ostensibly no stranger to this sensibility, the famed environmental activist and academic Bill McKibben recently added the latest contribution to this bevy of wars: a war on climate change.While the severity of the catastrophes attending climate change are difficult to overstate, and are no doubt already bombarding us, “the war on climate change” that Bill McKibben proposes does not, however, amount to much more than a proposal to reform (and continue) an other, far less openly discussed, war – i.e., class war. This becomes clear as soon as McKibben identifies his war on climate change’s enemy as the fossil fuel industry – rather than the political economic system designed to exact, extract, and exploit resources (and to reinvest its gains into exacting, extracting, and exploiting more resources, ad mortem). Abetted by the military (the largest polluter on the planet), the laws, rules and institutions governing this society (rather than the fossil fuel industry alone) compel people the world over to perpetrate unprecedented levels of violence against rain forests, rivers, oceans, and human and non-human animals alike, just to survive. To characterize the fossil fuel industry, which merely fuels these ravages, as the primary enemy, and to argue that it should be replaced by a clean, green energy sector, is deeply problematic.

    Climate change could cost millennials trillions of dollars in lifetime income: Americans in their 20s and 30s could lose trillions of dollars in potential lifetime earnings as climate change disrupts the global economy and weakens U.S. productivity, according to a new report by NextGen Climate said. If countries fail to reduce greenhouse gas emissions and limit the amount and pace of global warming, a 21-year-old college graduate today could lose $126,000 in lifetime wages and $187,000 in long-term savings and investments, the report found.  This would outrank the lost income due to student debt or wage stagnation.  As an entire generation, U.S. millennials — all 75.4 million of them — could lose nearly $8.8 trillion in lifetime income without climate action, NextGen said. Those losses could keep climbing for the children of millennials and beyond. “Global warming may very well be the biggest threat over the lifetime of a single generation,” Tom Steyer, the billionaire liberal climate activist and founding president of NextGen, told reporters Monday on a press call. The NextGen report defines millennials as all Americans ages 18-34 in 2015, which is the same definition the Pew Research Center uses.

    Some more costs of climate change adaptation -- More evidence that adaptation is no panacea:  Residents of a small Alaskan village voted this week to relocate their entire community from a barrier island that has been steadily disappearing because of erosion and flooding attributed to climate change. In the unofficial results of an election on Tuesday in the village, Shishmaref, residents voted 89 to 78 to leave. The plan would move the village, which is 120 miles north of Nome, to one of two sites on the mainland about five miles away, officials said. But the village needs an estimated $180 million from a patchwork of sources to complete the move, according to a 2004 estimate. ... Shishmaref is not alone in facing a move because of the effects of climate change. In January, the federal government allocated $48 million to relocate Isle de Jean Charles, La., an island that is sinking into the sea. The effort earned the residents the title of the United States’ first “climate refugees.” As many as 200 million people could be displaced by 2050 because of climate change, according to a study for the British government. In Alaska, 31 villages face “imminent threat of destruction” from erosion and flooding, according to the Arctic Institute, a nonprofit group in Washington that studies issues affecting the Arctic.via http://www.nytimes.com There are about 400 residents of Isle de Jean Charles, LA. The cost of relocation is about $120,000 per resident. There are about 600 residents of Shishmaref and the cost of relocation is about $300,000 per resident (if, gulp, the 2004 estimate is still correct). Taking the midpoint and applying it to 200 million people, the relocation cost of climate change would be about $42 trillion by 2050. More optimistically, that is only $3.5 billion per day between now and then.

    Fiery blowback to Brussels’ climate change plan –  The European Union made big promises to reduce carbon emissions at last December’s Paris climate summit, and on Wednesday the European Commission spelled out how the bloc’s 28 members will share in some of the pain to meet those targets. It didn’t go down well in many corners. The blowback to Brussels’ plan came hottest from richer EU countries, such as Italy and Finland, who were upset at taking the brunt of the economic pain. As much as the EU’s push to tackle climate change enjoys broad popular support on the Continent, far fewer are willing to take the hit from dampening emissions. Environmental groups were also unhappy, arguing that the proposed reductions aren’t ambitious enough to meet the EU’s pledge in Paris to bring down total greenhouse gas emissions by at least 40 percent by 2030. Britain’s coming exit from the EU throws another wrench into the plans. The U.K. is ahead of the pack in the EU in terms of scaling back its emissions. Once it’s gone, other countries will have to make even deeper cuts for the bloc to hit its targets. The plan, called the Effort Sharing Regulation, now goes to the European Parliament and EU countries, which will have to produce on their own versions before the trio hash out a final, binding law. The process is bound to drag on for years.

    Scientists Just Say No to ‘Chemtrails’ Conspiracy Theory - Conspiracy theories can be stubborn, particularly in the echo chamber of the internet.One persistent belief in some quarters is that the government — or business, perhaps — is deploying a fleet of jet aircraft to spray chemicals into the sky to control the population, food supply or other things.As evidence, they point to what they call “chemtrails,” which are more commonly known as contrails, or condensation trails, produced at high altitudes as water vapor in jet engine exhaust condenses and freezes. Adding fuel to the chemtrails theory is the fact that there are a few legitimate reasons for atmospheric spraying — “seeding” clouds to make rain, for example — and in recent years there has been some research on the idea of spraying chemicals as a potential way to fight global warming. But now, scientists have become more organized in their efforts to shoot down the idea, conducting a peer-reviewed study in Environmental Research Letters that debunks chemtrails supporters’ claims. The goal, the researchers say, is not so much to change the minds of hard-core believers, but to provide a rebuttal — the kind that would show up in a Google search — to persuade other people to steer clear of this idea.

    Dieselgate in Europe: How Officials Ignored Years of Emissions Evidence -- Managers at Volkswagen know with whom they have to maintain friendships. After the then EU Commissioner for Industry and Entrepreneurship Antonio Tajani paid a visit to the company in the spring of 2010, he received a package. "We hope to make you happy with this VfL Wolfsburg jersey signed by the players," the head of VW's Brussels office wrote deferentially. Tajani thanked the VW official effusively, writing that VW was "undoubtedly one of the pillars of German industry." Tajani should have had every reason to be asking the people at VW serious questions instead of sending them thank you letters. For instance, he should have asked why their diesel vehicles were emitting much higher levels of toxic exhaust gases on the road than in laboratory tests performed by approval agencies. Meeting minutes, correspondence and conversation records that SPIEGEL ONLINE and the Swedish daily Svenska Dagbladet have obtained now show that the European Commission and member states knew, since 2010 at the latest, that the extremely harmful emissions from diesel cars were strikingly higher than legal levels. But apparently none of the officials wanted the automakers to tell them why this was the case. According to EU officials, pressure from countries with a strong auto industry, most notably Germany, significantly reduced interest in an investigation. Instead of doing something about the environmental policy violation, the Commission and the member states passed the buck to each other. This undignified back-and-forth even continued after the VW scandal about manipulated diesel cars in the United States was exposed in September 2015.

    Climate change: Netherlands on brink of banning sale of petrol-fuelled cars -- Europe appears poised to continue its move towards cutting fossil fuel use as the Netherlands joins a host of nations looking to pass innovative green energy laws. The Dutch government has set a date for parliament to host a roundtable discussion that could see the sale of petrol- and diesel-fuelled cars banned by 2025. If the measures proposed by the Labour Party in March are finally passed, it would join Norway and Denmark in making a concerted move to develop its electric car industry. It comes after Germany saw all of its power supplied by renewable energies such as solar and wind power on one day in May as the economic powerhouse continues to phase out nuclear energy and fossil fuels. And outside Europe, both India and China have demanded that citizens use their cars on alternate days only to reduce the exhaust fume production which is causing serious health problems for the populations of both nations.  The consensus-oriented parties of the Netherlands are set to consider a total ban on petrol and diesel cars in a debate on 13 October. Richard Smokers, principle adviser in sustainable transport at the Dutch renewable technology company TNO, said the Dutch government was committed to meeting the Paris climate change agreement to reduce greenhouse emissions to 80 per cent less than the 1990 level. The plan requires the majority of passenger cars to be run on CO2-free energy by 2050.

    EPA slammed over renewable fuel standard requirements - The EPA’s Office of Research and Development has not complied with the requirement to provide a report every three years to Congress on the impacts of biofuels, a new report by the EPA’s own Office of Inspector General (OIG) has found. In the report, OIG said EPA has not prepared reports on the environmental impact of the renewable fuel standard (RFS), as required by the Energy Information and Security Act of 2007. EPA is behind on compliance with three required reports: a triennial report to Congress on the environmental and conservation impacts of the RFS, a separate anti-backsliding report on the impacts of the RFS on air quality, and a determination as to whether mitigation measures are necessary. The report states that EPA management admitted that they “have not prioritised compliance” with the required reports.EPA's Office of Research and Development (ORD) sent the last of the triennial reports to Congress in December of 2011, and the report says there have been no subsequent reports since. To top that off, “ORD currently has no plans to issue subsequent reports to Congress as required.” ORD says that first report cost $1.7 million and the equivalent of four full-time employees for fiscal 2010 and 2011 to produce. The agency says it received little feedback from Congress about the report and that the three-year window leaves little room for new information. OIG counters that the agency could have issued a report saying as much, saying that the “lack of scientific advances does not eliminate the EPA's reporting requirement.”

     Could a Lithium Shortage De-Rail the Electric Car Boom? -We’ve gone electric, and there’s no going back at this point. Lithium is our new fuel, but like fossil fuels, the reserves we’re currently tapping into are finite—and that’s what investors can take to the bank. You may think lithium got too popular too fast. You may suspect electric vehicles are too much buzz and not enough real future. You may, in short, be a lithium skeptic, one of many. And yet, despite this skepticism, lithium demand is rising steadily and sharply, and indications that a shortage may be looming are very real.  It won’t be a shortage in terms of ‘peak lithium’; rather, it will be a game of catch-up with the electric car boom, with miners hustling to explore and tap into new reserves. Consider the number of battery gigafactories that are being built around the world. We have all heard about Tesla’s Nevada facility that will at full capacity produce enough batteries to power 500,000 electric cars per year by 2020.  This, as the carmaker proudly notes, is more than the global total lithium ion battery production for 2013. That’s a pretty impressive rate of demand growth over just three years—but this growth also represents the culmination of a sea change in the way we think.  Lithium is powering pretty much everything upon which our present depends on and our future is being built. It’s a viable alternative to petrol and in consumer electronics market segment alone, there is no sign of contraction—only expansion. Think the Internet of things, or smart houses, or smart cities, eventually. All these fascinating ideas are powered in some way by lithium.

    Advocates’ Push for Quicker Aircraft Rules Premature, EPA Says | Bloomberg BNA: — Environmental advocates prematurely filed a lawsuit seeking a firm deadline for aircraft emissions rules to be issued and it should now be dismissed, the Protection Agency argued in a motion (Ctr. for Biological Diversity v. EPA, D.D.C., No. 16-cv-681, motion filed 8/19/16 ). The Center for Biological Diversity and Friends of the Earth first filed their lawsuit in April, but the EPA argued no mandatory duty to regulate greenhouse gas emissions from aircraft existed until July 25, when it issued a final determination under Section 231(a) of the Clean Air Act that emissions from aircraft endanger human health and the environment. There is no “plausible unreasonable delay claim” under the Clean Air Act, the agency said, noting it has been “just a few weeks” since that final determination came out. “Plaintiffs cannot pursue an unreasonable delay claim based on a duty that had not been triggered at the time they filed suit, and that even now has existed, at most, for just a few weeks,” said the motion, filed in the U.S. District Court for the District of Columbia Aug. 19. “EPA had no duty to propose and issue aircraft greenhouse gas emission standards when plaintiffs filed their claim alleging EPA had unreasonably delayed in discharging that duty.” The motion goes on to say the environmental advocates “arbitrarily” measure the agency’s delay from the date in 2007 they first filed a petition for the agency to commence the regulatory process for aircraft. But “alleging that EPA has failed to take action that plaintiffs view as desirable, at the time they would have liked” cannot form the basis of an unreasonable delay claim, the agency said.

    This very, very detailed chart shows how all the energy in the U.S. is used -- Adele Peters writes in Fastcoexist.com about a new interactive chart created by MacArthur Fellow Saul Griffith that tracks and quantifies energy use by source within the U.S. Her subheadline: “Take a master’s level course in improving your energy literacy, down to the half a percent of our energy that we use to fly military jets.” Saul Griffith likes numbers. The serial entrepreneur and MacArthur genius once calculated the carbon footprint of every single action in his life—from buying underwear to paying taxes. Now he and a group of colleagues at Otherlab, his San Francisco-based company, have mapped out something else in obsessive detail: all of the energy used in America.  “I think we may be the first three or four people to read every footnote in every energy agency document ever produced,” Griffith said at a recent talk when he presented the new flowchart—which is still in a somewhat rough iteration—at an event run by Reinvent, a company that brings innovators together to talk about how to reshape the world. The data is pulled from sources like the Department of Energy and the census. “This is really the first time that all of this data is brought together in one flow diagram, which is important if you really want to understand the consequences through the whole economy of things like defense,” he says. The left side shows where we get energy—solar, though growing, is still less than 1% of energy production. Most electricity comes from coal. For each source, it’s possible to see how much is lost as waste at the other end; nearly half of the energy from natural gas, for example, ends up wasted. By clicking through the chart, you can see exactly how much energy is used for every activity. Moving newspapers around uses a tenth of a percent of our total energy pie; driving trash to landfills takes about twice as much. Half a percent of U.S. energy is used to fly military jets. Almost 1% is used just to pump natural gas around pipelines; 2% goes to making cardboard and other paper products. Around 16% is used to grow, distribute, and cook food.

    Holding Clean Energy Hostage - Nuclear power is getting a lifeline. On August 1, in a controversial decision, New York State’s Public Service Commission voted to approve subsidies to all nuclear power plants in the state. The estimated eventual cost to electricity customers in the state is over $7 billion. Most of the bailout money will be channeled toward Exelon and Entergy — two large electric utility companies that have threatened to close down some of the reactors they were operating in the state. Plant closures are increasingly common in the nuclear sector these days. Not counting the New York State reactors that have been given a lifeline, over the last three years, electrical utilities have decided to shut down thirteen nuclear reactors deemed economically uncompetitive, and the number of closures is expected to grow. Coal plants are also flagging. The use of coal for electricity generation in the United States has fallen substantially in the last decade, from 50 percent in 2005 to 33 percent in 2015. More than 660 coal units have been retired since 2010, and of the more than 150 new coal plants proposed since 2000, the vast majority has been cancelled. Why are these power plants shutting down? In essence, the costs of maintaining aged nuclear reactors and coal plants are rising while the costs of renewable energy production using solar photovoltaics and land-based wind turbines are declining. Likewise, falling natural gas prices from hydraulic fracturing (fracking) have resulted in gas-fired generating stations producing cheaper electricity. So, is the United States creating a new electricity supply system that will provide affordable energy and mitigate climate change? Unfortunately, no — at least at the moment. The electric utility companies that control electricity generation in the United States are standing squarely in the way of such an energy future.

    India's Installed Solar Capacity Grows By 80% - 3.6GW of solar power has been installed throughout India in the past year, with a single state achieving 1.2GW of that total. Of the 3.6GW, four southern states accounted for 2.7GW – and Tamil Nadu led the pack. Six states now account for 80% of the capacity added in India. Despite the impressive progress, Bridge To India sees some potential clouds on the horizon. “First, where is future demand going to come ffrom?” says the firm. “This is a growing concern for the sector as India faces a unique problem of excess power supply and most of the big power consuming states seem understandably reluctant to set up new solar capacities.” Bridge To India states market growth beyond 2018 will depend on fresh demand coming from states such as Maharashtra and Uttar Pradesh, which are among 23 states accounting for just 20% of current installed capacity. The second issue is grid balancing and management will become a bigger challenge. While transmission infrastructure is being built, it takes far longer to roll out than the rapid clip at which solar projects can be developed.

    Fear of the light: why we need darkness -- Every civilisation we know of has devised a system – scientific, religious, what have you – to make sense of the night sky. The mystery of what’s up there, where it came from, and what it means has been inherited and puzzled over for generations. Those questions may be the most human ones we have. Due to pervasive light pollution – glare from excessive, misaimed and unshielded night lighting – 80% of Europe and North America no longer experiences real darkness. For anyone living near a major metropolis, a satellite image of the Milky Way seems abstract: we understand it to be a document of something true, but our understanding is purely theoretical. In 1994, after a predawn earthquake cut power to most of Los Angeles, the Griffith Observatory received phone calls from spooked residents asking about “the strange sky”. What those callers were seeing were stars.  Darkness is a complicated thing to quantify, defined, as it is, by deficiency. In 2001, the amateur astronomer John Bortle devised a scale to help. His classifications range from “inner-city sky” (class 9), in which the only “pleasing telescopic views are the moon, the planets, and a few of the brightest star clusters”, to a sky so dark “the Milky Way casts obvious diffuse shadows on the ground” (class 1). Most North Americans and Europeans live under class 6 or 7 skies, in which the Milky Way is undetectable and the sky has been smudged by “a vague, greyish-white hue”. In that kind of night, a person can wander outside, unfold a garden chair, open a newspaper, and read the headlines, if not the stories.

    Duke Energy, NC agency disputing fine for coal ash pollution (AP) The nation’s largest electric company is negotiating with North Carolina’s environment agency over a $6.6 million fine to punish Duke Energy for a big spill of liquefied coal ash. Attorneys for both sides said delaying Monday’s scheduled hearing may help resolve the disputed fine for polluting the Dan River in 2014. Duke Energy Corp. has called the proposed fine disproportionate and arbitrary. Spokeswomen for the company and the state Department of Environmental Quality declined comment on the scope of the negotiations. Duke Energy also objected last year when the agency sought an unprecedented $25 million fine for persistent groundwater pollution at the closed Sutton power plant in Wilmington. The agency later reduced that fine to $7 million and agreed it would cover groundwater contamination at all 14 coal-burning Duke Energy plants in North Carolina. Environmental groups called that a sweetheart deal for the company where Republican Pat McCrory had worked for nearly three decades before running for governor. McCrory’s environmental agency said it was forced to reduce the fine because of a policy adopted under McCrory’s Democratic predecessor that favors offenders taking corrective action over paying fines.

    Bankrupt coal companies get break on clean-up costs: Just about every big coal mining company in America is in bankruptcy, or emerging from it. That includes the world’s largest private sector coal firm: Peabody Energy. Peabody won court approval to set aside just a small amount of money for environmental cleanup – a mere 15 cents on the dollar. That leaves the states in which it operates at risk for the rest. The whole question here is, if coal companies wobble and fall down for good, who pays for the cleanup? The process of removing water pollution, planting trees and shrubs and returning the topsoil is expensive and time-consuming. In Peabody’s case, the court and three key mining states agreed to let the company put up just a fraction of the cleanup money that would be required. “They’re trying to shift the costs from the coal mining companies back to the states, and basically onto taxpayers,” Howard Learner, executive director of the Environmental Law and Policy Center, said. “And unfortunately, for example, the state of Indiana seems to have agreed to take 15 to 17 cents on the dollar.” States were never supposed to face this situation. In the 1970s, after decades of failed companies simply walking away from shuttered mines, Congress required firms to purchase bonds and guarantee 100 percent of the money for environmental reclamation. But many states made exceptions. Companies in solid financial condition could simply “self-bond” and put up their own assets as collateral.

    West Virginia permanently halts coal mine by state forest  (AP) — West Virginia environmental regulators have ordered a company to stop mining permanently at a surface coal mine near Kanawha State Forest. Keystone Industries LLC signed the consent order with the Department of Environmental Protection last month to permanently halt Kanawha County mining operations near Marmet. The Kanawha Forest Coalition, which has fought the Keystone Development No. 2 mountaintop removal mine for more than two years, will celebrate with an event Tuesday at the Capitol. The mine was within 588 feet of Kanawha State Forest and 1,500 feet of homes in Loudendale, and its permit allowed explosive blasting, the coalition said. “This is a victory for the people of West Virginia and a powerful demonstration of the impact citizens can have when we take a stand, stay persistent, and don’t back down,” Coalition coordinator Chad Cordell said in a news release Monday. “Many people thought this strip mine was a done deal when the permit was issued over two years ago, however we doubled down in our determination to protect our streams, health, and mountains.”

    Consultant Raised Cash for Hillary Clinton, Used Access for Meeting with Coal Giant, Emails Reveal - In 2009, when St. Louis-based coal company Peabody Energy was aiming for rapid expansion into Mongolia, China, and other international markets, it sought an audience with then-Secretary of State Hillary Clinton to discuss its global vision. Joyce Aboussie, a political consultant working for Peabody, wrote to Clinton aide Huma Abedin to ask that Clinton meet with Peabody executives as a personal favor. “Huma, I need your help now to intervene please. We need this meeting with Secretary Clinton, who has been there now for nearly six months,” Aboussie wrote. “It should go without saying that the Peabody folks came to Dick and I because of our relationship with the Clinton’s,” she added. Aboussie was referring to Dick Gephardt, the former House Democratic Leader who became a lobbyist after leaving public office, taking on Peabody as a client. Aboussie, a former Democratic staffer, has served as a fundraiser for Clinton’s campaigns, raising at least $100,000 for Clinton’s 2008 campaign and at least $100,000 for Clinton’s current bid for the White House. Aboussie also donated between $100,000 – $250,000 to the Clinton Foundation. The emails were released by Judicial Watch, which published 725 pages of new State Department documents from email accounts associated with Clinton’s private server. The emails provide a window into several exchanges that appear to show Clinton donors seeking meetings and other forms of favorable treatment. For instance, one newly disclosed email chain reveals that Doug Band, a Bill Clinton adviser who played a major role in establishing the Clinton Foundation, worked to set up a meeting between then Secretary Clinton and the Crown Prince Salman Al Khalifa of Bahrain after a formal request was denied.

    China’s drive to clean up its coal power, one plant at a time  - China, the world’s top greenhouse gas emitter, is often chided for its carbon-belching, Dickensian-looking coal plants. But it is working to clean up its coal power. While this will reduce overall emissions, critics say it chiefly serves to prolong the use of coal power. Now, a Chinese engineer has re-engineered a Shanghai coal plant to make it one of the world’s most efficient – and a potential model for the country’s coal-burning future. China has limited oil and gas reserves, so high-efficiency coal is “the only way” for the country to meet its energy needs while also reducing its emissions, says Feng Weizhong, general manager of the state-run Shanghai-Waigaoqiao No. 3 Power Plant (pictured above). Advertisement.The plant supplies about 8 per cent of the megacity’s power and is in one of the country’s largest power-generating complexes. China has shut many coal plants over the last decade, and pledged to increase the share of renewables in its energy mix from 13 per cent in 2010 to 20 per cent by 2030, when it plans to peak its emissions. Coal growth The government’s renewable-energy targets will leave “little room” for building new coal plants, and it should do more to incentivise the purchase of untapped wind and solar power, says Ranping Song at the Washington-based World Resources Institute. “The problem now is how to allocate the right to generate electricity,” Ranping says. Yet  still accounts for about two-thirds of China’s energy provision, and more than 200 new coal plants have been given the go-ahead. Globally, too, coal demand and production are forecast to grow until at least 2040.

    Panel: TEPCO’s ‘ice wall’ failing at Fukushima nuclear plant  -- Tokyo Electric Power Co.’s “frozen wall of earth” has failed to prevent groundwater from entering the crippled Fukushima No. 1 nuclear plant, and the utility needs a new plan to address the problem, experts said. An expert panel with the Nuclear Regulation Authority received a report from TEPCO on the current state of the project on Aug. 18. The experts said the ice wall project, almost in its fifth month, has shown little or no success. “The plan to block groundwater with a frozen wall of earth is failing,” said panel member Yoshinori Kitsutaka, a professor of engineering at Tokyo Metropolitan University. “They need to come up with another solution, even if they keep going forward with the plan.” One big problem hampering work at the nuclear plant, which was hit by the Great East Japan Earthquake and tsunami in 2011, has been the tons of groundwater entering the buildings housing the No. 1 through No. 4 reactors every day. The water becomes contaminated with radioactive materials within the reactor buildings. TEPCO’s plan was to create a frozen wall of earth around the reactor buildings to divert the groundwater away from the plant and into the ocean. The company started freezing the ground on March 31, and the project's budget was 34.5 billion yen ($344 million) in taxpayer money as of the end of May. But the amount of groundwater pumped from the ocean side of the frozen wall has shown little change from when there was no icy earth wall.

    Nuclear mishap two years ago in New Mexico among most expensive in US history.  When a drum containing radioactive waste blew up in an underground nuclear dump in New Mexico two years ago, the Energy Department rushed to quell concerns in the Carlsbad desert community and quickly reported progress on resuming operations.  The early federal statements gave no hint that the blast had caused massive long-term damage to the dump, a facility crucial to the nuclear weapons cleanup program that spans the nation, or that it would jeopardize the Energy Department’s credibility in dealing with the tricky problem of radioactive waste.  But the explosion ranks among the costliest nuclear accidents in U.S. history.  The long-term cost of the mishap could top $2 billion, an amount roughly in the range of the cleanup after the 1979 partial meltdown at the Three Mile Island nuclear power plant in Pennsylvania.  The February 14, 2014, accident is also complicating cleanup programs at about a dozen current and former nuclear weapons sites across the U.S. Thousands of tons of radioactive waste that were headed for the dump are backed up in Idaho, Washington, New Mexico and elsewhere, state officials said in interviews.  Washington state officials were recently forced to accept delays in moving the equivalent of 24,000 drums of nuclear waste from Hanford site to the New Mexico dump. The deal has further antagonized the relationship between the state and federal regulators. “The federal government has an obligation to clean up the nuclear waste at Hanford,” Democratic Gov. Jay Inslee said in a statement. “I will continue to press them to honor their commitments to protect Washingtonians' public health and our natural resources.”

     Patterson says fracking regulation bill is dead for 2016 - The Star Beacon — A state bill that would have introduced a host of regulations to the fracking industry is dead for 2016, and lawmakers will have to go back to the drawing board in 2017.  The Ashtabula County League of Women Voters met Tuesday to discuss the state of the hydraulic fracturing industry in the county. The league invited Vanessa Pesec, head of the Network for Oil and Gas Accountability and Protection, to speak.  During the session, State Rep. John Patterson, D-Jefferson, confirmed a bill designed to balance the economic boons and environmental concerns that come with fracking won't go any further in this General Assembly, with only five session days left after the Nov. 8 election. Patterson introduced House Bill 422 last year alongside fellow Democrats 63rd District Rep. Sean O'Brien and 64th District Rep. Mike O'Brien. Since then it's had only one hearing, he said. Patterson urged league members at Tuesday's meeting to review the bill on their own — it's viewable online at www.legislature.ohio.gov — and "see what holes are in it" before it's reintroduced during the next General Assembly in January.  About 1.3 million barrels of toxic fracking wastewater, or brine — that's more than 56 million gallons — were dumped in Ashtabula County injection wells last year. In 2014, the county took in 1.1 million barrels, and remains one of the top 10 Ohio counties with the most brine dumping. Across the state, about 1.3 billion gallons of waste were dumped last year. About half of that waste came from outside the state, according to Pesec's research. Projections show the state could end up taking in more than 120 billion gallons per year. "How high is that going to go?" she said.

    Ohio Residents Clash With State and County Government in Fight to Ban Fracking via the Ballot  - For years, local Ohioans have been told by courts and elected officials that they have no control over fracking — “it is a matter of state law.”  However, groups of determined residents are refusing to accept this argument, taking steps to establish local democratic control over what they see as vital societal questions of health, safety, and planetary survival. But not without resistance from their own governments.  In recent years, Ohio has seen fracking-induced earthquakes, contaminated waterways, and new proposals for natural gas pipelines and compressor stations, all amidst the accelerating march of climate change. Together, these events have brought the fight against fracking to a fever pitch for the Buckeye State.    Fed up, residents have taken to the local ballot initiative process — by which citizens write, petition for, and vote on legislation — to propose “Community Bill of Rights” ordinances to ban fracking, injection wells, and associated infrastructure for natural gas production and transportation. Their efforst are part of a growing nationwide Community Rights movement. This summer, citizens of Medina, Portage, Athens, and Meigs counties collected signatures for county-wide ballot initiatives that would establish new county charters and enshrine rights to local democratic control over fossil fuel development. All four gathered enough signatures to get on their respective November ballots. Normally, that would be enough. But not in Ohio, where Secretary of State and gubernatorial hopeful Jon Husted has done everything he can to stymie the movement’s use of direct democracy.  It is a rematch from last year, which ended in the Ohio Supreme Court pulling three county-wide initiatives — in Medina, Fulton, and Athens counties — from their ballots, just weeks before the November 2015 elections.  The court battle came after Husted claimed “unfettered authority” to determine the legality of local initiatives, before they go to a vote. Though his power grab was struck down by the court, Husted won the case on a technicality, and no votes were cast. The court ruled that the county initiatives failed to define a new “form of government,” a requirement for new county charters, which all the initiatives proposed.

    Supreme Court asked to order county charters to be placed on ballot --  A lawsuit is asking the Ohio Supreme Court to order Secretary of State Jon Husted and the Athens County Board of Elections to place a county charter proposal on the November ballot. The court case, filed Friday, also seeks ballot placement for proposed charters in Meigs County and Portage County. Elections boards in all three counties declared petitions seeking to put the charters on the ballot to be invalid, although it was undisputed that the petitions contained enough valid signatures. Charter supporters filed protests which took the charter petitions before Husted, who last week denied the protests and ruled the charters should not be on the ballots in the three counties. In the Supreme Court filing, the charter proponents argue that Husted and the elections boards improperly delved into the content of the charters when deciding they should not be on the ballot. "Such inquiry or inquiries violated the constitutional prohibition against allowing ballot proposals to be placed on the ballot according to the acceptability of their content to elections officials," the court action argues. Husted disqualified the ballot proposals on grounds that the charters did not fully provide for all the duties that county officeholders are required by law to perform. He called it a "foundational prerequisite" in the Ohio Constitution. The charter proponents argue that providing all the duties is not necessary in order to get the charters on the ballot, and that the charters — which would leave current elected offices in place — contain sufficient description of the form of government that would exist under the charters.

    Pipeline firm touts study that shows economic growth - Toledo Blade -- Kinder Morgan’s proposed $500 million Utopia East pipeline is “emblematic of what’s happening here in northwest Ohio with the changing energy landscape across America and — really — the world,” Allen Fore, the company’s vice president of public affairs, told about 200 people attending a Rotary Club of Toledo luncheon Monday.  Moments later, he gave the audience a sneak peek at results of an economic-impact study being released today that claims Ohio’s economy will reap $237.3 million in benefits over the project’s first five years. That study, generated at Kinder Morgan’s request by Kent State University researchers Shawn Rohlin and Nadia Greenhalgh-Stanley, asserts the pipeline will generate or support $144.9 million in new jobs, income, and local spending; $87.5 million in Ohio residents’ earnings, and $4.9 million in tax revenues.The project is expected to create 2,132 new and indirect jobs, about 900 of which would be in construction in 2017, although only five jobs will be permanent. About 215 miles of pipeline would be laid in Ohio, connecting to existing pipeline. According to the study, the project will spur increased spending during construction, spending by out-of-state workers, spending by permanent workers, and reduced manufacturing costs for Ohio firms in the plastics industry. About half the workers are expected to come from out of state, according to the report.

    NOVA's plan to boost its Marcellus / Utica ethane use in Sarnia -- NOVA Chemicals’ 1.8-billion-pound/year ethylene plant in Sarnia, ON already is one of the largest consumers of Marcellus/Utica-sourced ethane, and plans are in the works to significantly increase the steam cracker’s ethane consumption.  In 2018, NOVA will complete a project that will enable the cracker to be fed 100% ethane; the petrochemical company also is mulling a cracker expansion –– again with ethane as the feedstock –– and a new polyethylene plant next door. All these plans are driven in large part by the availability of low-cost ethane piped from the U.S. Northeast.  From the beginning of the hydrocarbon era in North America, Sarnia has played an outsized role in crude oil, refining and petrochemicals, in large part due to that essential truth of real estate: location, location, location.  First, it was its local oil resource. As we said in Part 1 of this series, an 1858 oil well in nearby Oil Springs, ON, is said to have been the first on the continent. Over time, oil-production, refining and petchem infrastructure was developed in southwestern Ontario (as were railroads and pipelines); that infrastructure made Sarnia a refining/petchem center, a position that continues to this day, decades after most oil production in southwestern Ontario dried up.  Earlier, we looked at the crude oil side of things, describing the three refineries in Chemical Valley, the oil pipelines that supply them, and the petroleum-products pipelines that help move the refineries’ output to market.  Then, we turned to Sarnia’s increasingly important natural gas liquids (NGLs) sector –– the pipelines that transport purity ethane and mixed propane/butane to Chemical Valley, the fractionator that separates the propane/butane mix into purity products, the NGL storage facilities, and the big NOVA ethylene plant that “cracks” ethane, propane and butane into petrochemical products, with the star of the show being ethylene –– a critically important petchem building block.

    Gulf Coast’s first ethane shipment soon to leave for Europe --The first ethane shipment out of Enterprise Products Partners’ (EPP) new export terminal in Morgan’s Point, Texas, is preparing to set sail for Norway. As of Thursday morning, the JS INEOS Intrepid was docked at the terminal, preparing to take on its ethane cargo. The terminal, located on the Houston Ship Channel, is the second to open in the United States, and has an export capacity of up to 200,000 barrels of liquefied ethane per day, of which about 90% is contracted. The United States’ first ethane export terminal, at Marcus Hook, Pennsylvania, has been shipping ethane cargoes since March of this year. Ethane can either be extracted along with other natural gas plant liquids (NGPL) and sold separately, or left in the processed gas and sold as part of the natural gas stream. Recent rapid growth in natural gas production from resources rich in NGPL has yielded higher quantities of ethane than the U.S. market can absorb, leading to growing amounts of ethane left in the processed gas stream. Increased ethane exports could slow or reverse this trend. Natural gas produced in the Marcellus and Utica formations, located primarily in Pennsylvania and Ohio, respectively, tends to be rich in ethane. The Marcus Hook terminal sources all of its ethane from these formations. Some of this Appalachian ethane likely will be delivered to Morgan’s Point via EPP’s Appalachia-to-Texas Express (ATEX) pipeline, which moves ethane from gas fractionation plants in the Marcellus and Utica to the company’s storage complex in Mont Belvieu, Texas.

     Losses Adding Up For Exxon, Chevron — In 2014, Ohio and West Virginia saw an average of about 65 rigs running to extract natural gas and oil from the Marcellus and Utica shales, with a majority of those located in the Upper Ohio Valley. After two years of tumbling prices, there are now only 21 rigs running in the two states, with only 7 of those in West Virginia. The profits of two global energy giants, Exxon Mobil and Chevron, seem to correlate with the significant drop in drilling activity throughout the region during the last two years. From April through June 2014, Exxon and Chevron earned a combined $14.5 billion worth of profits. During the same period this year, however, that total profit fell to just $200 million, with Chevron actually posting a $1.5 billion loss during the quarter. San Ramon, Calif.-based Chevron maintains operations in Marshall County. Via its XTO Energy subsidiary, Irving, Texas-based Exxon features active wells in Belmont and Monroe counties. “The second quarter results reflected lower oil prices and our ongoing adjustment to a lower oil price world,” Chevron Chairman and CEO John Watson said. In the second quarter of 2014, Chevron earned $5.7 billion. At that time, a barrel of oil was worth about $103 on the New York Mercantile Exchange, with a 1,000 cubic-foot unit of natural gas (Mcf) then valued around $4.79. However, in 2016 second quarter, the NYMEX price for oil was about $48.46 and an Mcf of natural gas was only about $2. These lower prices contributed to Chevron actually losing $1.5 billion from April through June.  Exxon, meanwhile, did earn $1.7 billion during the three-month period this year, but this seems paltry compared to the $8.8 billion it collected from April through June 2014.

    Fracking chemicals exposure may harm fertility in female mice | EurekAlert! Science News: Prenatal exposure to chemicals used in hydraulic fracturing, or fracking, may threaten fertility in female mice, according to a new study published in the Endocrine Society's journal Endocrinology. The study was the first to find a link between chemical exposure and adverse reproductive and developmental outcomes in female mice. Scientists exposed the mice to 23 chemicals commonly used in fracking, as well as oil and gas development, to study their effects on key hormones. Researchers have previously found that these chemicals are endocrine-disrupting chemicals (EDCs) that mimic or block the body's hormones--the chemical messengers that regulate respiration, reproduction, metabolism, growth and other biological functions. More than 1,300 studies have found links between EDCs and serious health conditions such as infertility, diabetes, obesity, hormone-related cancers and neurological disorders, according to the Endocrine Society's 2015 Scientific Statement. "The evidence indicates that developmental exposure to fracking and drilling chemicals may pose a threat to fertility in animals and potentially people," said the study's senior author, Susan C. Nagel, PhD, of the University of Missouri in Columbia, MO. "Negative outcomes were observed even in mice exposed to the lowest dose of chemicals, which was lower than the concentrations found in groundwater at some locations with past oil and gas wastewater spills."

    Living Near a Fracking Site Is Tied to Migraines, Fatigue - The New York Times: Living near a natural gas hydraulic fracturing site is associated with increased rates of sinus problems, migraines and fatigue, according to new research.Scientists had 7,785 randomly selected participants in a large Pennsylvania health system fill out health questionnaires. About a quarter met criteria for one or more of three disorders: chronic rhinosinusitis, migraine headaches and severe fatigue.The study, in Environmental Health Perspectives, ranked participants according to how closely they lived to fracking sites and larger wells. Compared with those in the bottom one-quarter by this measure, those in the top one-quarter were 49 percent more likely to have sinusitis and migraines, 88 percent more likely to have sinusitis and fatigue, 95 percent more likely to have migraines and fatigue, and 84 percent more likely to have all three symptoms.The senior author, Dr. Brian S. Schwartz, environmental epidemiologist at the Johns Hopkins Bloomberg School of Public Health, acknowledged that there may be variables the researchers did not account for, and that this was an observational study that does not prove cause and effect. But, he said, “there have now been seven or eight studies with different designs and in different populations, and while none is perfect, there is now a growing body of evidence that this industry is associated with impacts on health that are biologically plausible.

    US Western Gulf of Mexico sale could focus on parcels near Mexico border: experts - Wednesday's US Western Gulf of Mexico Lease Sale will likely be a modest event in light of the industry downturn, even though it will feature more than twice the number as last year of long off-the-market blocks. But some tracts that span the maritime border with Mexico could be hotly contested, experts say, as that country prepares for its first deepwater auction in December that will include companies other than state-owned Pemex. Given lingering low oil prices and minimal E&P capital budgets, this year's annual auction is likely to roughly match the $22.7 million in high bids captured a year ago, Bureau of Ocean Energy Management's Gulf regional director Mike Celata said. "We think it could be comparable to last year's sale," Celata said in an interview. "There are a lot of opportunities available to [companies with] some remaining cash and exploration budget available to them."Last year, 33 bids were placed on the same number of blocks. Just five companies participated in last year's Western auction, the smallest such sale since area-wide leasing began in 1983. Western sales, offering blocks offshore Texas, are traditionally the smaller of two yearly offshore US Gulf auctions. Central-area sales, featuring acreage offshore Louisiana, are held in March.

     Climate activists want fossil-fuel lease auction canceled in La. — The historic flooding that has left at least 13 people dead and damaged some 40,000 homes in southwestern and central Louisiana this week was caused by record heavy rain, with as much as 31 inches falling in some places over the course of several days.While scientists are cautious about saying climate change is the cause of any single weather event, they point out that five other states — among them South Carolina, Texas and West Virginia — have experienced deadly flooding in the last 15 months. They also note that the Louisiana flood is the eighth event in that period in which rainfall in a given area of the U.S. has matched or exceeded what scientists predict will occur only once every 500 years.These unusually heavy rainfall events are exactly what scientists have predicted would happen with greater frequency in a warming climate. Last month was the Earth’s warmest on record, and this year is also expected to break temperature records. Given the connection between the Louisiana floods and climate change, environmental activists are calling on the Obama administration to cancel the fossil-fuel lease auction scheduled to take place in New Orleans next week, where it plans to put up for bid 23.8 million acres — an area nearly the size of Virginia — in the Western Gulf of Mexico. “This auction would enable the fossil fuel industry to do more of the very thing that is intensifying these floods in the first place,” Gulf Coast environmental activist Cherri Foytlin wrote in a message posted this week by the climate action group 350.org inviting supporters to sign a petition calling on the administration to call off the auction. “Allowing next week’s fossil fuel auction to move forward is rubbing salt in the wounds of a region already in a state of emergency.”

    Few bids received in protested Gulf of Mexico drilling lease sale | NOLA.com: The federal government says three companies are bidding on acreage in the Gulf of Mexico off Texas — and they've made a total of 24 bids on 24 tracts out of more than 4,000 offered. That's even fewer than last year's sale, which was the smallest ever for the western Gulf. Last year, five companies made $22.7 million in high bids — also one per tract, on 33 tracts. The statistics were released in advance of Wednesday's (Aug. 24) sale, which is the first to be broadcast live on the internet. At earlier sales, an official from the Bureau of Ocean Energy Management read bids to oil company representatives and others in a Superdome ballroom in New Orleans. A bureau spokeswoman says protests in March and April played a part in the change, but the agency also wants to broaden the audience by opening it to people anywhere. The three companies bidding are BP Exploration and Production Inc., BHP Billiton Petroleum Inc., and Exxon Mobil Corp. BP bid on 13 tracts, BHP on nine tracts and Exxon Mobil bid on two. When the bids were actually opened Tuesday at BOEM's offices in Elmwood, about a dozen protestors attempted to access the meeting. One was allowed to deliver a petition with 184,000 electronic signatures opposing the lease sale. Four others were arrested when they refused to leave the building until getting a response from President Obama. Opponents contend continued drilling in the Gulf of Mexico and elsewhere will serve to extend consumers' dependency on fossil fuel and worsen climate conditions.

    The Latest: Dismal oil tract sale results due to low prices -- The federal government’s first livestreamed oil lease sale suffered from a video glitch, as well as extremely low interest. Only three companies bid for a tiny fraction of the leases available in the Gulf of Mexico, and no bid was competitive. Bureau of Ocean Energy Management director Abigail Ross Hopper read the first two bids and was about to read another when she said “We will pause for a moment.” Several minutes then went by while the screen displayed messages such as “memory full” and “all scenes — now deleting.” The bureau got bids for just 24 of nearly 4,400 tracts offered, totaling just over $18 million. That’s even fewer than last year, when 33 tracts attracted bids. And just like last year, there was only one offer per tract. The bureau had sought to broaden its audience by livestreaming its lease sales. Officials say they don’t know how many people watched. Bids were offered by only three major corporations — BP Exploration and Production Inc., BHP Billiton Petroleum Inc., and Exxon Mobil Corp.A federal official says low oil prices are the reason few companies were interested in bidding in the latest oil lease sale for the Gulf of Mexico. The regional director for the Bureau of Ocean Energy Management, Michael Celata (sel-AH-tuh), says the $18 million sale was below last year’s record low in total money offered, number of bids and number of companies participating. Last year, the same area off the Texas coast attracted 33 bids from five companies for a total of $22.7 million. None of the bids was competitive, either this year or last.

    Update On The GOM Lease This Past Week -- As posted yesterday, the GOM western area lease in Louisiana was a bust. From Rigzone today: BHP Billiton Petroleum was the high bidder in the last federal Gulf of Mexico oil and gas lease sale of the Obama Administration, offering $9.9 million on 12 tracts in the Western Planning Area program in place between 2012 and 2017.  BP Exploration & Production Inc. followed BHP with more than $6 million in bids on 10 blocks. Exxon Mobil Corp. was the third company to participate in the August 24, 2016, sale and bid almost $2 million on two tracts.  Deepwater assets drew 40 percent more bids than other depths. In all, 24 bids were offered on 4,399 blocks for a total raise of $18,067,020.

    EPA To Texas Fracking Regulators: Your Slip Is Showing! - The Intertubes are buzzing with news that the US Environmental Protection Agency has smacked down Texas regulators for failing to publicly acknowledge that fracking and other fossil-related activities have been linked to a spate of earthquakes, particularly in northern parts of the state. According to our friends over at The Texas Tribune, the move seems calculated toward pressuring the state to take action. Speaking of The Texas Tribune, let’s hear it for Trib reporter Jim Malewitz, who unearthed a link to a 1951 U.S. Geological Survey report prepared with the Department of the Interior titled, “Earthquake Hazard Associated with Deep Well Injection — a Report to the U.S. Environmental Protection Agency.” That may be a bit puzzling for those of you familiar with EPA history, since the agency as we know it today wasn’t formed until 1970, but here’s the cover shot: If you have an explanation, drop us a note in the comment thread. Meanwhile we’re going with printer’s error, as it seems that the document posted online was re-printed as recently as 1990: Here’s the money quote from page 11:Within the United States, injection of fluid into deep wells has triggered documented earthquakes in Colorado, Texas, New York, New Mexico, Nebraska, and Ohio and possibly in Oklahoma, Louisiana, and Mississippi. Oh, snap!The 1951 report also indicates that scientists have had a pretty clear understanding about that linkage for decades: Investigations of these cases have led to some understanding of the probable physical mechanism of the triggering and of the criteria for predicting whether future earthquakes will be triggered, based on the local state of stress in the Earth’s crust, the injection pressure, and the physical and the hydrological properties of the rocks into which the fluid is being injected. Meh, scientists — what do they know, anyways.

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

    New Energy Institute Report Holds Politicians Accountable for Calls to Ban Energy Production on Federal Lands and Waters -- U.S. Chamber of Commerce - The first report in the the Energy Institute’s Energy Accountability Series finds that proposals from Hillary Clinton and other politicians to ban oil, gas, and coal production on federal lands and waters would cost America hundreds of thousands of jobs and billions in revenue. The Energy Accountability Series takes a substantive look at what would happen if energy proposals from candidates and interest groups were actually adopted. Over the past year, a growing number of politicians and interest groups—and the Democratic Party itself—have called for an end to oil, natural gas and coal extraction from federal lands and offshore waters.  That concept is the basis of the “Keep it in the Ground Act,” a House bill with over 20 cosponsors. If these policies were to be enacted, the Energy Institute’s new report found that it will cost the U.S. $11.3 billion in annual royalties lost, 380,000 jobs, and $70 billion in annual GDP. 25% of America’s oil, natural gas and coal production would be halted.“American voters deserve to understand the real-world impacts of the proposals that candidates and their allies make,” said Karen Harbert, president and CEO of the U.S. Chamber’s Institute for 21st Century Energy. “In an effort to appeal to the ‘keep it in the ground’ movement, a number of prominent politicians have proposed ending energy production on federal lands, onshore and off. Their proposals will have a direct, harmful effect on the American economy, and in particular decimate several states that rely heavily on revenues from federal land production. Given the implications, these policy proposals should not be taken lightly.”

    Oil billionaire: Trump didn't 'understand' simple fracking question - Donald Trump has promised to "unleash" America's oil industry, but he recently sounded confused about the raging debate at the heart of the matter. Harold Hamm, the billionaire oil man and one of Trump's biggest cheerleaders, even said that Trump doesn't "understand" the issue. The confusion stems from an interview by a Colorado television station last month. The GOP presidential candidate told 9NEWS he could support local attempts to ban fracking -- the controversial technology that has fueled America's oil and gas boom.  "Well, I'm in favor of fracking, but I think that voters should have a big say in it," Trump said in the interview. "If a municipality or state wants to ban fracking, I can understand it."  Even though Republicans often support the power of states to regulate themselves, those comments raised eyebrows. That's because supporting local fracking bans would undercut Trump's promise to ramp up America's already-robust oil production. Trump has previously slammed President Obama's energy policies, alleging the Democrat has "tried to destroy this renaissance" despite presiding over the biggest oil boom in U.S. history.

    Top Energy Adviser Says Donald Trump Is Solidly Behind Fracking - WSJ — Donald Trump’s top energy adviser on Tuesday sought to play down the GOP presidential candidate’s recent comments that he could support local efforts to ban hydraulic fracturing. Oil man Harold Hamm said in an interview that Mr. Trump didn't fully understand a recent question about whether he supported local bans on hydraulic fracturing, or fracking, and that the Republican nominee was a strong supporter of the industry. “Donald Trump did not understand that concept at the time in my opinion,” said Mr. Hamm, the chief executive of Continental Resources Inc., in an interview on the sidelines of the Colorado Oil and Gas Association’s annual conference.“He does now,” Mr. Hamm added.   Mr. Trump said in a July interview with a Colorado television station that he could support local efforts to ban fracking. Energy companies have used the extraction technology—which involves pumping large amounts of water and chemicals into rock formations—prolifically over the last decade to unlock vast reserves of oil and natural gas. But it has riled environmentalists, who worry it could contaminate water supplies  “Well, I’m in favor of fracking, but I think that voters should have a big say in it,” Mr. Trump said to 9NEWS in Colorado. “If a municipality or state wants to ban fracking, I can understand it.” Mr. Hamm said he hasn't spoken to Mr. Trump about the comments, but emphasized that he is confident the GOP nominee doesn’t support local bans on fracking. A request for comment to the Trump campaign wasn’t immediately returned Tuesday.

    High-Price Ethanol Credits Add to Refiners’ Woes - — The oil-refining business has always been a tough way to make money.Stiff competition, heavy regulation and high operating costs make for some of the lowest profit margins in the petroleum industry. And in the last year, profits have been even harder to come by because of the global fuel glut that has translated into bargain-basement prices for the gasoline and diesel that refiners produce.But lately, the game has been tougher still for people like Jack Lipinski, chief executive of CVR Energy, an independent operator of two refineries in Oklahoma and Kansas. The problem involves a soaring cost that is outside of his control.This year, on top of everything else, CVR Energy will have to spend as much as $235 million on credits for renewable fuels. That is nearly double what the company spent last year on the credits, and it exceeds the company’s total labor, maintenance and energy costs.Mr. Lipinski blames the federal program that requires CVR to buy the credits, but he also suspects a role by unknown market speculators who may be driving up the costs of the credits. “It’s a black pool of speculation that could cause bankruptcies in our sector.” The Environmental Protection Agency, which administers the credits, discounts charges of widespread abuse. And the issue may be only a short-term problem, as it was in 2013, when a speculative bubble drove the price of the credits to unsustainable heights before bursting.

    Two More New Crude Oil Pipelines from Hubs to Refineries - There is a story behind every new crude oil pipeline built to supply a decades-old refinery. After all, the refinery surely had a well-established crude-delivery system in place –– why change horses now, especially with refinery margins under so much pressure? Typically, the answer is that, well, times have changed. Or, more specifically, the Shale Revolution has up-ended traditional crude sourcing, forced refinery owners to rethink their crude slates, and opened up opportunities to access new, lower-cost oil. Today, we continue our look at these new pipeline connections, their rationales, and their effects on other pipelines, barge deliveries and crude-by-rail. In Part 1 of our series, we noted that new pipelines to increase crude oil takeaway capacity from major producing areas to oil storage and distribution hubs like Houston, TX and Cushing, OK seem to garner most of the media’s attention. Just outside the spotlight’s glare, though, midstream companies are building several “demand-pull” pipelines to move crude to refineries more efficiently, and to give refineries easier, cheaper access to new, desirable supplies. We noted that U.S. refineries –– and most of the crude oil delivery infrastructure that supplies them –– were built many decades before the Shale Revolution enabled vast quantities of oil (and natural gas and natural gas liquids) to be freed from the shale and/or tight sands of the Permian, the Eagle Ford, the Bakken and other big-name plays. Rapid production growth from these new plays forced a major rethinking –– and re-plumbing –– of the nation’s crude-delivery infrastructure; slashed oil imports (especially lighter crudes); and led a number of U.S. refiners to revamp their oil-processing facilities to allow the use of more domestically sourced crude.

    The Costs and Challenges of Building Crude Oil Pipelines  --  Eight years into the Shale Revolution –– and two years into a crude oil price slump that put the brakes on production growth –– midstream companies continue to develop new pipelines to move crude to market. As always, the aims of these investments in new takeaway capacity may include reducing or eliminating delivery constraints, shrinking the price differentials that hurt producers in takeaway-constrained areas, or giving producers access to new markets or refineries access to new sources of supply. Whatever the economic rationale for developing new pipeline capacity, midstreamers and potential crude oil shippers need to examine–– early on –– the likely capital cost of possible projects, if only to help them determine which projects are worth pursuing, and which aren’t. Today, we begin a series on how midstream companies and potential shippers evaluate (and continually reassess) the rationale for new crude pipeline capacity in today’s topsy-turvy markets.  As we said in our “But I Would Pipe 500 Miles” series on natural gas pipeline economics, three fundamentals drive the local price of any energy commodity: supply and demand, of course, but also transportation capacity. In the U.S. crude oil market –– as in the gas market –– that critical third factor is the extensive inter/intrastate pipeline network that connects supply basins (sellers) to demand centers (buyers). The availability (or lack) of pipeline capacity drives prices and price relationships by determining how supply connects to demand. By getting enough capacity in place, midstream companies and the customers who pay for that capacity can ensure supply reliability, increase optionality and market liquidity, relieve bottlenecks and enable both supply and demand to grow. New pipeline development is driven by either need or opportunity, and more often than not, a combination of the two. The key question that pipeline developers and their customers (the shippers) have to consider before committing to build new capacity is whether it will “pay” to flow crude on the pipeline once it’s built—not just the first year or the first three, but for years if not decades to come.

    Judge denies Iowa landowners' request to halt pipeline work (AP) — A district court judge on Monday denied a request by Iowa landowners to immediately halt construction of a $3.8 billion oil pipeline on 15 parcels of their land, saying they must first talk to state regulators. A state law written in 1998 says the Iowa Utilities Board must consider such a request before the court can weigh in, District Court Judge Jeffrey Farrell said in his order. The landowners have sued, saying the board does not have the authority to give Texas oil company Dakota Access the right to forcefully condemn private farmland under eminent domain. The landowners want to stop Dakota Access, a subsidiary of Dallas-based Energy Transfer Partners, from digging trenches on their land until the courts can determine whether the board’s application of eminent domain is legal. The planned 1,168-mile pipeline would cut through Iowa, Illinois, North Dakota and South Dakota. “It’s disappointing, but not really unexpected,” landowner Richard Lamb said of the judge’s decision. Crops have been cut down on Lamb’s land near Boone in central Iowa to make way for the pipeline. The next step is grading, which is expected to begin in week or two, and trenching after that. The company argued in court on Friday that if the board or the court grants the landowners’ motion to stop work it would be required to move construction crews and equipment around the 15 parcels at a cost of more than $500,000 for each move.

    Judge moves pipeline protest hearing, says sides should meet (AP) — A federal judge has postponed a hearing on whether a preliminary injunction should be issued to prevent protesters in North Dakota from interfering with construction of an oil pipeline. U.S. District Judge Daniel Hovland moved the hearing scheduled on Thursday to Sept. 8. The judge also extended a restraining order against the protesters until the hearing. The judge says in his order filed Monday that the two sides are “strongly encouraged to meet and confer in good faith” to try and resolve the dispute out of court. More than two dozen protesters have been arrested in the last month for interfering with the construction of the $3.8 billion Dakota Access Pipeline meant to carry North Dakota crude to Illinois. Developers have agreed to halt construction until court matters are resolved.

    Protesters settle into camp life --  An upside down flag hangs in the center of a new community larger than most small towns in North Dakota. It’s a protest camp near the Cannonball River at the border of the Standing Rock Indian Reservation. The flag is a symbol of distress, that the area had been taken over by an enemy. But the atmosphere Thursday afternoon at the Seven Councils or Overflow Camp, where hundreds are staying in Morton County, hardly feels urgent. Rather, it's joyful and cooperative. The setup is an extension of the Camp of Sacred Stones, located on the reservation at the confluence of the Cannonball and Missouri rivers, where people have been protesting an oil pipeline since April. During the past week, the once-small effort has grown to an estimated 1,500 to 2,000 people. On Wednesday, after days of protests, work at the Dakota Access Pipeline site just north of the camp was put on hold until Aug. 24, when a hearing will be held on the tribe's lawsuit against the Army Corps of Engineers over its approval of the pipeline crossing under the Missouri River. Most people at the camp, who rallied at the work site, insisted the demonstrations were peaceful, but law enforcement has said officers received information about weapons. The Morton County Sheriff's Department said in a statement Friday no weapons were seen. Many at the camp saw the previous days’ efforts as a small victory. Often repeated was a gladness that the tribes were working together. The group at the camp is predominantly native, but many white people are there, too. There are kids, adults and grandparents. Many are camped in tents and teepees set up between awkwardly parked school buses, which bring people in each day from nearby reservations. Some people show up with food, water, tents. Others bring just enough gas for the drive down.

     State pulls relief resources from swelling Dakota Access Pipeline protest camp -- North Dakota’s homeland security director ordered the removal of state-owned trailers and water tanks from the Dakota Access Pipeline protest campsite Monday, citing mounting reports of unlawful activity -- the latest involving lasers -- and the risk of damage. “Based on the scenario down there, we don’t believe that equipment is secure,” Homeland Security Division Director Greg Wilz said. As tribal members from across the nation streamed into the campsite, swelling its population to between 500 to 4,000 people depending on estimates, the loss of their main drinking water supply came as a blow and sent local officials scrambling to find an alternative water source. “I feel like I just got shot down,” said Johnelle Leingang, executive secretary to Standing Rock Sioux Tribe Chairman Dave Archambault II and the tribe’s emergency response coordinator. “It’s very hurtful.” A black heavy-duty pickup backed up to the water tanks and pulled them away just before noon as the beating sun drove temperatures into the 80s. Two air-conditioned trailers and a command center vehicle – delivered with the water tanks a week ago by the North Dakota Department of Health at the tribe’s request – also were hauled away from the campsite, which overlooks the confluence of the Missouri and Cannonball rivers just south of where the oil pipeline would cross the Missouri. “People are getting overheated now already,” Leingang said shortly before 4 p.m., as the temperature hovered around 90.

    Judge to rule on tribe's oil pipeline request by Sept. 9 (AP) — A ruling in the request by the Standing Rock Sioux Tribe to stop a four-state oil pipeline under construction near their reservation will come by Sept. 9, a federal judge said Wednesday. The tribe is challenging the Army Corps of Engineers’ decision to grant permits for Dallas-based Energy Transfer Partners’ $3.8 billion Dakota Access pipeline, which crosses through four states, including near the reservation that straddles the North Dakota-South Dakota border. U.S. District Judge James Boasberg listened to arguments and said he’d rule next month. Also Wednesday, Dakota Access was told by the Iowa Utilities Board to stay away from the properties of 15 Iowa landowners until Monday to give board time to review legal issues involving a lawsuit. The $3.8 billion pipeline, which will run 1,172 miles through Iowa, Illinois, North Dakota and South Dakota, has generated legal challenges and protests, most aggressively in North Dakota and Iowa. Growing protests and increased tension over the pipeline that will cross the Missouri River near the Standing Rock Sioux reservation has led to more than two dozen arrests, including tribal chairman Dave Archambault II. He said he would continue to call for calm at the protest site. “I’m asking that we proceed with prayer and with peace,” Archambault said. “Tribes from across the nation have united and I would hope Dakota Access does not continue with construction with the destruction of land before (the judge’s ruling).” The tribe’s lawsuit, filed last month on behalf of the tribe by environmental group Earthjustice, said the project violates several federal laws, including the National Historic Preservation Act. The tribe also argues the project will harm water supplies and disturb ancient sacred sites outside of the 2.3-million acre reservation. The pipeline’s owners agreed last week to halt construction near the reservation until Wednesday’s hearing, but it’s unclear whether that construction is still on hold.  

    FBI called over 2 laser beam cases at pipeline protest site - (AP) — Authorities in southern North Dakota say the FBI has been contacted after a laser beam was aimed twice at an aircraft doing surveillance of an ongoing oil pipeline protest. The Morton County Sheriff’s Office on Monday said a pilot reported a laser beam entering the cockpit and leaving him temporarily blind Wednesday. Then, on Sunday, the pilot was able to look away in time to avoid the laser. Morton County Sheriff’s Office spokeswoman Donnell Preskey says the North Dakota Highway Patrol was flying the state plane. Directing a laser at an airplane is a federal offense.

     Occupying the Prairie: Tensions Rise as Tribes Move to Block a Pipeline - — Horseback riders, their faces streaked in yellow and black paint, led the procession out of their tepee-dotted camp. Two hundred people followed, making their daily walk a mile up a rural highway to a patch of prairie grass and excavated dirt that has become a new kind of battlefield, between a pipeline and American Indians who say it will threaten water supplies and sacred lands.The Texas-based company building the Dakota Access pipeline, Energy Transfer Partners, calls the project a major step toward the United States’ weaning itself off foreign oil. The company says the nearly 1,170-mile buried pipeline will infuse millions of dollars into local economies and is safer than trucks and train cars that can topple and spill and crash and burn.But the people who stood at the gates of a construction site where crews had been building an access road toward the pipeline viewed the project as a wounding intrusion onto lands where generations of their ancestors hunted bison, gathered water and were born and buried, long before treaties and fences stamped a different order onto the Plains.People have been gathering since April, but as hundreds more poured in over the past two weeks, confrontations began rising among protesters, sheriff’s officers and construction workers with the pipeline company. Local officials are struggling to handle hundreds of demonstrators filling the roads to protest and camp out in once-empty grassland about an hour south of Bismarck, the state capital.More than 20 people have been arrested on charges including disorderly conduct and trespassing onto the construction site. The pipeline company says it was forced to shut down construction this month after protesters threatened its workers and threw bottles and rocks at contractors’ vehicles.

     Pipeline drama deja vu - It’s Hollywood and green groups vs. the oil industry and construction unions today in a brewing battle over the Dakota Access pipeline, a 1,172-mile conduit from North Dakota’s oil-rich shale fields to Illinois. The Standing Rock Sioux are challenging Army Corps of Engineers permits issued for the pipeline that tribe members say violate the Clean Water Act, the National Environmental Policy Act, and the National Historic Preservation Act. Ahead of an afternoon hearing in D.C. District Court, actress-activists Susan Sarandon and Shailene Woodley will appear alongside environmental groups in support of the Sioux’s cause. If you’re thinking that the battle lines sound like Keystone XL, you’d be right. Protesters aligned with the Sioux have temporarily shut down construction by camping out on reservation land in North Dakota near where the pipeline would cross the Missouri River. Meanwhile, the leaders of the Laborers International Union of North America, the Teamsters and other unions that pushed for the jobs Keystone would have created wrote to North Dakota Gov. Jack Dalrymple on Tuesday urging the Republican to “utilize the power of your office to keep our workers safe” even as the pipeline work site is “illegally occupied.”  Dakota Access' majority sponsor, Energy Transfer Partners, also filed suit in North Dakota federal court to force an end to the protest. Other companies with a stake in the $3.7 billion project are Marathon, Sunoco, Phillips 66 and Canadian pipeline giant Enbridge.

    Corps says pipeline still needs water-crossing easement - bismarcktribune.com: — While hundreds are settling in for the long haul at an encampment to protest the Dakota Access Pipeline, the U.S. Army Corps of Engineers confirmed Thursday that the pipeline developer, Energy Transfer Partners, does not yet have a written easement to build the pipeline on corps property. Corps spokesman Larry Janis said the easement is still under review, though the agency did issue Section 408 permission in late July that allows the easement to be written. “They can’t build the project by accessing corps property from west to east across Lake Oahe,” Janis said of any current construction. That could partly explain the company’s decision Aug. 18 to voluntarily stop construction at its work site just north of the Standing Rock Sioux Reservation near the Missouri River-Lake Oahe, where an active protest led to 28 arrests. The company has since received a federal court restraining order to prevent all arrestees — including tribal chairman Dave Archambault — and any “Jane and John Doe” from being at the work site and places such violations in federal, not district court. The stopped work also stopped active protest, and protesters have since held prayer circles and other gatherings in the camp area about 1 mile south. The realization that the company still does not have an actual easement surfaced Wednesday in a federal district court in Washington, D.C., where the Sioux tribe’s request for an injunction to stop the pipeline pending its suit against the corps was heard. The court judge said he wants more time to study whether the corps failed to follow the National Historic Preservation Act and other federal laws in its environmental review of the project. The judge said he will rule on the injunction Sept. 9. “Everybody thought they had it (easement),” said attorney Carolyn Raffensperger, executive director of the Science and Environmental Health Network. “This is really important information.”

    Why There's A Media Blackout On The Native American Oil Pipeline Blockade - As the Lakota Sioux continue their peaceful blockade of the $3.8 billion Dakota Access Pipeline, the story’s absence from the national media narrative is palpable. Considering the corporate media’s chronic quest for controversial stories on government versus public standoffs, you’d think this situation would garner the typical media frenzy invoked during a right-wing militia occupation of a federal building, for example, or a tense standoff between the Black Lives Matter movement and police. But it’s not. As of late, the media has faced criticism for its selective coverage of certain events — like, say, focusing on single terror attacks in Western Europe that garner thousands of headlines while basically ignoring similar or worse attacks that occur on a constant basis in Muslim-majority countries. But the confrontation unfolding in North Dakota, in particular, is strikingly similar to the recent standoff at the Malheur Wildlife Refuge in Oregon, which involved a right-wing militia advocating land rights against the federal government. The militia was led by the controversial Bundy family, which previously drew sensationalized coverage during a similar standoff in Nevada in 2014. So why were these stories covered extensively while the other — also centered around land rights — has been mostly ignored? The first point is actually very simple: Native Americans standing up for themselves is not polarizing. In an age of institutionalized media divisiveness and hyper-partisanship, the story of Native Americans in North Dakota fighting for land and water rights just doesn’t fit the script of deep, societal divides plaguing the nation’s law and order, nor does it fit in with the left-right paradigm. The second and more obvious reason why mainstream outlets have not focused on the situation in North Dakota is money — oil money, to be exact. The corporate media in the United States is deeply in bed with oil interests. From fracking advertisements on MSNBC to individuals on Big Oil’s payroll literally working for Fox News and the Wall Street Journal, the ties cannot be understated. Why would mainstream media publicize a standoff that could potentially kill an oil pipeline when their own financial interests would be negatively affected? The answer is they wouldn’t.

    Creative Bookkeeping -- DUCs -- CLR is, I think, doing something interesting. Obviously all the operators are doing this but CLR puts it right there out in front of you. Some may think it's creative financing. I think its simply "creative." I'm looking at this from the viewpoint of the shareholders (including the directors of the companies). This has to do with DUCs. Regardless of how the company is doing -- good, bad, or indifferent -- a company with DUCs has already sunk money into those wells. If those wells were drilled a few months ago, they are history. The capital required to drill those wells was factored into an earlier financial quarter. So, those DUCs are simply sitting there. What it cost to drill those wells is now history, part of a previous quarter, and perhaps part of an earlier fiscal year. So, CLR starts "from scratch." Instead of suggesting these wells cost $6.2 million, CLR simply states that these wells have an "incremental" cost of $3.6 million (or whatever it costs to frack/complete the well). It's not quite "accurate," but with creative financing, one can almost say CLR is going to "bring in" scores of Bakken wells with EURs of 900,000 boe (mostly oil) for about $3 million / well. That may be why CLR is up more than 160% in the past year, or whatever it is.

    Some Shale Drillers Return to Oil Patch - WSJ -  As the price of U.S. crude marches back toward $50-a-barrel territory, several big shale drillers are tiptoeing back into the oil patch, and that is making some energy experts nervous. Devon Energy , Pioneer Natural Resources and other prolific shale producers are telling investors that this fall they will pour more money into drilling new wells. The burst of activity shows the resilience of American energy companies that managed to survive oil’s plunge from over $100 a barrel in June 2014 to less than $30 earlier this year. But the burgeoning ramp-up threatens to cut the recent rally to $50 off at its knees. Investors are scared there is little room in the market for all the new crude that is about to be unleashed by companies restarting their operations in Texas and Oklahoma. Federal data shows companies are already pumping more from each well, getting an additional 15 percent to 30 percent from new wells in some of the biggest shale fields.  “This higher activity level may be premature, in my view, and probably keeps a cap on how high oil prices can go.” This summer the U.S. oil price has whipsawed from more than $50 a barrel in June to below $40 earlier this month. In the past two weeks it has risen more than 20%, to a recent $48.22 a barrel.   Oil storage tanks around the country are already brimming with more than 521 million barrels of crude, a 14% increase over last year, according to federal data. But as the price rises, producers can’t seem to resist pumping more despite the glut. Many have cut costs so deeply that they can turn a profit when oil trades around $50. That’s why a contingent of investors and analysts now see that price as a ceiling for the market. When oil popped above $50 a barrel for a few days in June, money managers began betting that prices would collapse. That group had just 53,377 bearish positions in the U.S. oil market on May 31, a one-year low, CFTC data show. In the following two months, the number of bearish positions ballooned to 220,000, a record high in a decade of data.

    Been Down So Long - U.S. E&P Upstream Capex Bottoms, Signs of Growth Emerge -- In their second quarter 2016 earnings announcements, North American exploration and production companies (E&Ps) announced relatively minor changes to the steep reductions in 2016 capital budgets they unveiled around the first of the year. Total 2016 “finding and development” spending for 46 leading U.S. producers was an estimated $41.0 billion, down 51% and 70% from investment in 2015 and 2014, respectively, and slightly lower than the $41.9 billion forecast for 2016 spending in year-end 2015 announcements. The second-quarter reports over the past few weeks also confirmed the initial guidance of a 4% production decline in 2016 after 7% and 6% increases in 2014 and 2015. However, as we discuss today, a look behind the headline numbers indicates that cuts in capital expenditures (capex) look to have bottomed out, and that the industry may be poised for a turnaround in drilling activity later this year into 2017.

    NYMEX September gas settle at $2.796/MMBtu, up 3.5 cents - The NYMEX September natural gas futures contract settled at $2.796/MMBtu, up 3.5 cents, further extending this week's rally as prices rose on bullish weather forecasts and expectations for another below-average weekly build to gas storage stocks. Wednesday's increase marked the third consecutive positive settlement and the eighth out of nine trading days that the contract settled higher. "Coming into this week it looked as though the weather forecast changed to put some heat back in the country for the last two weeks of August. The market has taken that as a sign we could see a correction ... . Looks as if maybe the rush to shoulder season seems to have taken a back seat to tighter fundamentals," said Tradition Energy senior analyst Gene McGillian. Since falling to $2.551/MMBtu August 11, the prompt contract has rallied 24.5 cents. The September contract is set to expire next Monday.

     Future U.S. tight oil and shale gas production depends on resources, technology, markets - Today in Energy - U.S. (EIA) --Based on projections in the U.S. Energy Information Administration's Annual Energy Outlook 2016 (AEO2016), U.S. tight oil production is expected to reach 7.08 million barrels per day (b/d), and shale gas production is expected to reach 79 billion cubic feet per day (Bcf/d) in 2040. These values reflect Reference case projections, while several side cases with different assumptions of oil prices, technological advances, and resource availability have different levels of tight oil and shale gas production.  U.S. production of tight oil and shale gas has increased significantly from 2010 to 2015, driven by technological improvements that have reduced drilling costs and improved drilling efficiency in major shale plays, such as the Bakken, Marcellus, and Eagle Ford.  Production from tight oil in 2015 was 4.89 million barrels per day, or 52% of total U.S. crude oil production. From 2015 to 2017, tight oil production is projected to decrease by 700,000 barrels per day in the Reference case, mainly attributed to low oil prices and the resulting cuts in investment. However, production declines will continue to be mitigated by reductions in cost and improvements in drilling techniques. The use of more efficient hydraulic fracturing techniques and the application of multiwell-pad drilling, as well as changes in well completion designs, will allow producers to recover greater volumes from a single well.  As oil prices recover, oil production from tight formations is expected to increase. By 2019, Bakken oil production is projected to reach 1.3 million b/d, surpassing the Eagle Ford to become the largest tight oil-producing formation in the United States. The Bakken, which spans 37,000 square miles in North Dakota and Montana, has a technically recoverable resource of 23 billion barrels of tight oil that can be produced based on current technology, industry practice, and geologic knowledge. Bakken production is projected to reach 2.3 million barrels per day by 2040, almost a third of the projected U.S. total tight oil production.

    $110b of debt from global oil companies to be due in 5 years - Already reeling under massive decline in oil prices, about $110 billion (Dh403.7 billion) of debt taken by the overseas oilfield services and drilling companies is due for payment in the next five years. The junk bonds make up 65 per cent of the total, Moody’s Investor Services said in a report.Junk bonds are securities that are not invest rated. The default rate on corporate junk bonds can early surprise 20 per cent and historically has risen as high as 69 per cent.In 2018, about $21 billion of debt will mature, which is almost three times the total maturity rate in 2017. The debt burden continues to edge higher into 2021, when nearly $29 billion of issuance and revolvers is scheduled to come due.This could mean problems for the bond issuers if financial conditions worsen. Many of the larger companies may refinance or roll-over their bonds until business conditions improve, but the smaller companies would have to pay out of their current cash on hand, said Morris Borenstein, Moody’s Assistant Vice-President in a statement. Currently as earnings continue to decline, old field services companies are not only facing challenges to service their debt (in the case of coupon payments) but may also see their refinancing options become “severely” limited or even eliminated, according to the report.And this is making fund managers edgy on these bonds. S&P Global Ratings in May said it expects corporate defaults to keep rising, dominated by energy companies. Between the start of 2015 and March 2016, the energy sector accounted for half of all corporate debt defaults in the United States.

    Debt At The Big 4 Oil Companies Hits A Record $184 Billion -- So what do you do when the commodity you harvest and sell suddenly collapses by 50-60% and slashes your operating profit?  If you said, raise a whole bunch of debt and continue spending on new capital projects to drill for even more supply in a collapsing market then you might be an oil CEO.  The Wall Street Journal this morning pointed out that raising debt to cover cash burn is exactly what the largest oil companies in the world are doing.  In fact, the 4 largest oil companies have doubled their net debt positions since 2014 when the oil selloff started.  Frankly, we're a little skeptical that raising debt to add supply to an already over-supplied market is the right idea.  That said, certain investors and CEOs, whose bonuses are tied to production in many cases, disagree. “They are just not spending enough to boost production,” said Jonathan Waghorn, co-portfolio manager in London at Guinness Atkinson Asset Management Inc. who helps oversee more than $400 million across a range of energy funds, including shares in Exxon, BP, Chevron and Shell. But as Michael Hulme of Carmignac Commodities Fund noted, “eventually something will give"..."these companies won’t be able to maintain the current dividends at $50 to $60 oil—it’s unsustainable”  Well given that, per the chart below, the largest 4 oil companies are burning nearly $80BN per year we would tend to agree with Hulme.

    Is ExxonMobil Actually Only Worth A Fraction Of What It Says? -  The investigation by a handful of attorneys general into ExxonMobil has much more to do with the oil major misleading investors than it does about covering up climate science. The legal headache stems from several news reports that ExxonMobil buried decades of internal climate science in order to protect its interests. That has environmental groups crying foul, blaming the oil company for decades of policy inaction to stop the growth of greenhouse gas emissions. That also was a key reason that New York attorney general Eric Schneiderman, along with several other AGs from different states, opened up an investigation into the company. But as The New York Times recently noted, Schneiderman emphasizes that the probe is focused on securities fraud, which hinges on recent statements that Exxon has given to shareholders and securities regulators, not on the company’s alleged cover up of climate science decades ago. Schneiderman’s argument is straightforward: forthcoming policies to address climate change will severely limit Exxon’s ability to produce all of the oil and gas in its possession. Nobody knows this better than Exxon, Schneiderman alleges, since the company has been at the forefront of climate research since at least the 1970s. If Exxon cannot produce all of its oil reserves because they become either legally off limits or so regulated and/or taxed that they are uneconomical to produce, then the company itself is actually worth a lot less than shareholders think. And if Exxon knows this, then they are committing securities fraud, Schneiderman says. “If, collectively, the fossil fuel companies are overstating their assets by trillions of dollars, that’s a big deal,” Schneiderman said, according to the NYT.

    Low oil prices, costly wildfire push Alberta's deficit to nearly $11-billion - The Globe and Mail: Alberta is facing the longest recession in its recorded history and the province’s Finance Minister is warning that the provincial government won’t be able to create enough jobs to employ the thousands of Albertans currently out of work. Facing the twin shocks of low energy prices and the costly Fort McMurray fire, Alberta’s economy is in free fall and the province’s two-year old recession is getting worse, according to the first-quarter financial update released Tuesday. Announcing that Alberta’s deficit is now expected to grow to nearly $11-billion this year, Alberta Finance Minister Joe Ceci said the once debt-free province will be $32-billion in debt by the end of the current fiscal year. “That is a place Alberta hasn’t been,” he said. With the government deep in red ink, the jobs plan put forward by Premier Rachel Notley’s NDP government will create and sustain 10,000 jobs over the next year, according to the Finance Minister. “The billions of dollars that have been taken out of the economy as a result of the reduced investment by the oil sector is a tragedy for this province, but it’s not something we can repair,” said Mr. Ceci, who was visibly frustrated. “The government is not able to shore up the job losses that have happened in private industry.”

     Mexico's Round 2.2 auction features 12 blocks, gas potential: minister - A total of 12 onshore oil and natural gas blocks will be on offer in the second auction of Round Two of Mexico's energy reform, the energy ministry announced Tuesday. The blocks include 39 fields that have already been explored. In all cases, licenses will be on offer. A total of nine of the blocks lie in the Burgos Basin, across the US border from Texas, and the nation's main source of non-associated gas. Production of gas from Burgos has fallen below 1 Bcf/d in recent months. The remaining three blocks comprise two in the Chiapas Fold Belt, and one in the southeastern basins in the states of Tabasco and Campeche. All three have potential for both oil and natural gas.Speaking at a press conference, Pedro Joaquin Coldwell, the energy secretary, said that the main objective of Round 2.2 is to "extract both wet and dry gas so as to produce more ethane, propane and butane in order to benefit the petrochemical industry." Mexican gas demand has averaged just over 8 Bcf/d over the past three months, peaking at 8.05 Bcf/d in June, according to Platts Analytics' Bentek Energy data. This represents a year-on-year build of 330 MMcf/d or 4%. A substantial proportion of that demand is now being satisfied by a growing network of pipelines linking the US to Mexico.

    Chile eyes more US LNG after expansion of Panama Canal - Since the US start commercial exports of liquefied natural gas in February, 92 Bcf of LNG, loaded on 26 vessels, have been exported to 10 different countries. Of the 26 vessels, Chile has received seven, making it the largest recipient of US LNG. Chile's first five vessels from Sabine Pass traveled around the southern tip of South America through the Strait of Magellan. These voyages lasted an average 23 days and Platts Analytics estimates that shipping costs were around 93 cents/MMBtu.Since the newly expanded Panama Canal reopened in June, Chile has taken advantage of the shorter route to save time and money. On August 11, Chile's Quintero regasification terminal received a Sabine-laden vessel, the Maran Gas Delphi, in a voyage that took just 13 days. Another Sabine-laden vessel, the Sestao Knutsen, arrived at Chile's Mejillones terminal in 12 days. Platts Analytics estimates freight route costs from the US Gulf Coast through the Panama Canal are 56 cents/MMBtu.

    U.S. LNG for China Arrives via Panama Canal - WSJ - The first shipment of liquefied natural gas from the lower 48 U.S. states to China arrived this week, thanks to the recently expanded Panama Canal’s easing access to the robust Asian market for U.S. gas exporters.  The shipment was chartered by Royal Dutch Shell PLC, the company. The cargo, from the Sabine Pass export facility in the U.S. Gulf of Mexico, was delivered to the Yantian Port on Monday in southern China and was purchased by China National Offshore Oil Corp. as part of a long-term contract.  U.S. LNG, which is usually transported on large ships that can’t fit in the older Panama Canal locks, hasn’t been able to compete in Asia. The new locks, which opened in June and can accommodate larger ships, mark a significant moment for U.S. exporters.  The new locks can reduce the travel time from the U.S. to North Asia for ships that couldn’t fit in the old locks by about one third—to 20 days—and cut transportation costs by about 30 cents to $1 per million British thermal units.

    Egypt plans to end fuel subsidies within three years: sources - Egypt plans to end fuel subsidies within three years and is aiming to increase fuel prices to 65 percent of their actual cost during the 2016/17 fiscal year, two government sources told Reuters on Tuesday. Struggling to revive its economy after an uprising in 2011 shook investor confidence and drove tourists and foreign investors away, Egypt has been trying to cut spending on subsidies because they eat into its state budget. Egypt has reached a staff level agreement with the International Monetary Fund (IMF) for a $12 billion three-year loan program which is subject to final approval by the IMF executive committee. Disbursement is linked to progress on a variety of reforms including cuts in subsidies, the introduction of value-added tax (VAT) and a shift to a more flexible exchange rate regime. "What was agreed lately with the IMF delegation in Egypt is cancelling fuel subsidies within three years," one of the officials, who declined to be named, told Reuters. A spokesman from the Petroleum Ministry said that "no decisions have been issued on that matter." Gasoline in the 92-octane category is sold at 58 percent of its cost in Egypt while the 80-octane category is sold at 57 percent of its cost and for diesel it's about 53 percent.

    The Israeli public says NO to fracking: In September 2014 an Israeli government planning committee delivered a remarkable decision: it rejected a pilot project for non-conventional oil exploration in the country's Adulam region located between Tel Aviv and Jerusalem, a pastoral rural area rich in biblical archeology with a strong eco-tourism sector.The company that had submitted the request, Israel Energy Initiatives (IEI), had planned to use an untested technology called "In Situ Thermal Recovery" to produce oil by heating shale rock to temperatures as high as 950 degrees Fahrenheit. This releases organic matter known as kerogen, a compound that eventually transforms organic matter into oil and gas. The committee's decision was a major victory for Israel's environmentalists, and a fatal blow for the IEI. IEI had argued that the since the project would operate underground, it would leave a minimal ecological footprint, and water resources would not be endangered because of an impermeable rock layer protecting them. However, the committee remained unconvinced, and its final decision determined that the technology posed a critical environmental risk. The real winners here were the local activists whose health, environment and communities had come under direct threat by the proposed IEI project. Their media-savvy campaign presence has compared the conflict to the biblical confrontation between David and Goliath; the project location was in the same area where the diminutive David emerged victorious over the giant Goliath.

    Nigerian oil militants declare ceasefire, ready to negotiate (AP) — Nigeria’s leading oil militants have declared a conditional ceasefire in attacks that are losing the West African nation a million barrels of oil a day. The Niger Delta Avengers also say they are willing to negotiate a peace deal. A statement posted on the group’s website and dated Saturday says they will continue an undeclared “cessation of hostilities” on condition that security forces stop harassing civilians, and that international mediators are involved. A military campaign in the oil-producing Niger Delta has killed unknown scores of militants, soldiers and police. The announcement follows a call Friday by community elders for all militants to join a dialogue for peace. President Muhammadu Buhari’s government already is in talks with other militants. But it is the attacks by the Niger Delta Avengers that have cut production by 40 percent this year and caused Nigeria to lose its place to Angola as Africa’s biggest oil producer. The attacks on facilities of U.S.-based ExxonMobil and Chevron, Italy’s Agip and the Dutch-British Shell resumed this year after the government stopped paying stipends to 30,000 militants under a 2009 amnesty that ended years of unrest in the Niger Delta. Some militant leaders were given multimillion-dollar contracts to protect the oil installations they once attacked. Buhari’s government earlier this month resumed the amnesty payments, though the Avengers have charged that some of the funds have been stolen over the years by militant leaders.

     Oil Rally At Risk After Niger Delta Advisors Announce Ceasefire - Three months ago, we introduced readers to the Niger Delta Avengers (the NDA): a mysterious Nigerian militant group, which appeared out of nowhere, and which as we said at the time, "held the price of oil in its their hands", as a result of its relentless - and successful - attempts to sabotage Nigerian oil production.  Back in May, the NDA was cited by Goldman as one of the key reasons for the ongoing supply disruptions that had led the bank to push up its short-term crude oil price forecast (even as it cut its long-term one).  This is what Goldman said at the time: The inflection phase of the oil market continues to deliver its share of surprises,with low prices driving disruptions in Nigeria, higher output in Iran and better demand. With each of these shifts significant in magnitude, the oil market has gone from nearing storage saturation to being in deficit much earlier than we expected and we are pulling forward our price forecast, with 2Q/2H16 WTI now $45/bbl and $50/bbl. The recent roll-over in production is the result of somewhat offsetting cross currents. And while some of the disruptions will stop such as maintenance, fires and strikes, some are likely systemic, for example in Nigeria, and we now expect production there will remain curtailed for the remainder of the year. Net, this leaves us expecting a sharp decline in 2Q output. Furthermore, the NDA's constant unwillingness to engage the government in any discussion on a compromise suggested to some that the NDA may be merely a (well-funded) front for some offshore entity, either corporate or sovereign, which was provoking unrest inside Nigeria in hopes of keeping domestic supply low thanks to disruptions and thus, the price of oil high. That, however, changed dramatically overnight, when the Niger Delta Avengers announced on their website, that it would cease “hostilities in the Niger Delta against all interest of the multinational oil corporations,” to support talks with govt to end conflicts adding that it promises "to fight more for the Niger Delta, if this opportunity fails."

     Nigeria downbeat on oil prices, adopts $42.50/b in 2017 budget - Nigeria, whose production is currently hovering close to 30-year lows, is downbeat on oil prices, with the government adopting a $42.50/b price for next year's notional budget. The government approved an oil price benchmark of $42.50/b at a production assumption of 2.2 million b/d for the purposes of revenue calculation in its 2017 budget, according to local media reports. The budget contained in the medium term expenditure framework covering the period 2017-19, was approved by the cabinet at a meeting chaired by President Muhammadu Buhari on Wednesday, state television quoted budget minister Udo Udoma saying."Government is being very conservative in terms of the reference price of crude oil, even though we are expecting it to go higher than this, but we are keeping to an extremely conservative price scenario," Udoma said. This compares with its 2016 budget, which has a price benchmark of $38/b at a 2.2 million b/d output figure. But the Nigerian government has struggled to implement the 2016 budget after oil output has slumped by more than 40% this year due to renewed militancy in the main oil producing Niger Delta region. Nigeria, which until a few months ago was Africa's largest oil producer, has seen its output fall to around 1.4-1.6 million b/d this month after climbing back up to 1.9 million b/d in end June from around 2.2 million b/d earlier in the year following a series of attacks on installations by the militants. The government is retaining this year's oil production estimate of 2.2 million b/d for 2017, according to the minister, on hopes that the security challenges that cut Nigeria's output down to around 1.5 million b/d would "soon be resolved."

    The Definitive Answer To Whether The Oil Market Has Rebalanced -  There has been much debate in this oil industry regarding this subject with a lot of poor analysis, no analysis at all, opinions, raw speculation, pure conjecture and every investment bank in the world talking their book on this subject. So we thought we would settle this question once and for all so that everybody is one the same page. We analyzed the Oil Market to determine this question definitively by checking the actual data. The only valid way of determining this matter in a rational and constructive manner. We drew down 18.9 Million of Oil Stocks during summer driving season in 2016. We drew down 28.6 Million of Oil Stocks during summer driving season in 2015. We drew down more oil in 2015 versus 2016 for the same strong season of the market, and we are sitting with an extra 65 Million more barrels of oil in storage year over year with less of a drawdown this year during the Summer Driving Season. Therefore: Oil Market Not Rebalanced. We drew down 7.9 Million of Gasoline Stocks during summer driving season in 2016. We drew down 13.9 Million of Gasoline Stocks during summer driving season in 2015. We drew down more gasoline in 2015 versus 2016 for the same strong season of the market, and we are sitting with an extra 20 Million more barrels of gasoline in storage year over year with less of a drawdown this year during the Summer Driving Season. Therefore: Gasoline Market Not Rebalanced. We drew down 2.2 Million of Distillate Stocks during summer driving season in 2016. We built 20.1 Million of Distillate Stocks during summer driving season in 2015. Conclusion: We built more Distillate Stocks in 2015 versus 2016. However, we are sitting with 5 Million more barrels of Distillates year over year. Furthermore, we were coming from such lower levels of Distillates last year there was more room to fill up storage facilities, and like Cushing this year once Oil Capacity reaches limits the Oil gets moved to the Gulf Coast. Well similarly for Distillates once inventories reach this level of overall capacity, refiners no longer want to produce extra supplies, so they have found other alternative products to process excess oil into product for available storage capacity. Therefore: Distillate Market Not Rebalanced. We built 20.6 Million of Propane Stocks for this time period in 2016. We built 25.4 Million of Propane Stocks for this time period in 2015. Conclusion: We built more Propane Stocks in 2015 versus 2016. However, we basically have the same levels of overall stocks (Which are at Record Historical Levels) as this time last year. The big takeaway is that over the last two years a lot of oil has been processed into this category for the sole purpose of doing something with the existing oil glut. Therefore: The Propane and Propylene Market Not Rebalanced. We built 24.1 Million Barrels of Oil and Petroleum Products during summer driving season in 2016. We built 35.7 Million Barrels of Oil and Petroleum Products during summer driving season in 2015. We built 11.5 Million more Total Crude Oil & Petro Stocks in 2015 versus 2016. However, we still added another 24 Million to total overall stocks this year during the Summer Drawing and Driving Season. Moreover, we are sitting at 1,393,563 versus 1,280,261 for last year, for the highest ever Recorded Reading of this Metric by a large margin. Therefore: Oil & Petroleum Products Market Not Rebalanced.

    OPEC Ignites Biggest Short Squeeze In History: Hedge Funds Cut Oil Shorts By Most On Record -- Ever since the February crash, when oil tumbled to 13 years lows, and when OPEC started releasing tactical headlines at key inflection points about an imminent oil production freeze (which not only never arrived but has since seen Saudi Arabia's output grow to record levels) which we first suggested were meant to trigger a short squeeze among headline scanning HFT algos, our suggestion was - as is often the case - dismissed as yet another conspiracy theory. Six months later, this conspiracy theory is now a widely accepted fact, and as Bloomberg reports tonight, "well-timed" OPEC talk of a potential deal to freeze output, has "forced bears" into a historic squeeze and helped push oil close to $50 a barrel, prompting West Texas Intermediate from a bull to a bear market in less than three weeks. "This is all courtesy of some very well-timed comments from the Saudi oil minister," said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. "They’ve been successful over the last year in jawboning the market, and this is the latest example." And while one can debate whether OPEC's "headline" leaks are timed to coincide with near-record short positions on WTI, one thing is certain: the past week saw the biggest crude oil short squeeze on record as money managers cut bets on falling prices by the most ever. According to Bloomberg, Hedge funds trimmed their short position in WTI by 56,907 futures and options during the week ended Aug. 16, the most in data going back to 2006. And, as one would expect following yet another record short squeeze similar to the one experienced earlier in the year, WTI futures rose 8.9% to $46.58 a barrel in the report week and closed at $48.52 a barrel on Aug. 19. WTI is up more than 20 percent from its Aug. 2 low, meeting the common definition of a bull market.

    The Shorts Have All Been Squeezed Out of the September Oil Contract (Video) - The Reason for the large move in the Oil Market over the last 7 trading days, has to do with the record level of shorts that had to cover before the September Futures contract expired. This had nothing to do with the fundamentals of the oil market. With the record level of Oil production by the Saudis in July and August a freeze at these levels is absolutely meaningless and bearish for the oil market rebalancing anytime soon.

    'Well-Timed' OPEC Talk Forces Oil Bears Into Record Reversal  |  Rigzone-- OPEC has done it again. Talk of a potential deal to freeze output helped push oil close to $50 a barrel and prompted money managers to cut bets on falling prices by the most ever. West Texas Intermediate, the U.S. benchmark, went from a bear to a bull market in less than three weeks. OPEC is on course to agree to a production freeze because its biggest members are pumping flat-out, said Chakib Khelil, the group’s former president. Saudi Energy Minister Khalid Al-Falih said that the talks may lead to action to stabilize the market. "This is all courtesy of some very well-timed comments from the Saudi oil minister," said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. "They’ve been successful over the last year in jawboning the market, and this is the latest example." Hedge funds trimmed their short position in WTI by 56,907 futures and options during the week ended Aug. 16, the most in data going back to 2006, according to the Commodity Futures Trading Commission. Futures rose 8.9 percent to $46.58 a barrel in the report week and closed at $48.52 a barrel on Aug. 19. WTI is up more than 20 percent from its Aug. 2 low, meeting the common definition of a bull market. "This was a very short market so we were bound to get some covering," said Stephen Schork, president of the Schork Group Inc., a consulting company in Villanova, Pennsylvania. "You probably won’t hear a lot from OPEC with prices up here, but if we get down to where we were a few weeks ago we can expect to hear more."

    Peak Oil Review - Aug 22 2016 - Oil prices climbed another $3 a barrel last week as traders continued to hope that not only will OPEC and Russia agree to a production freeze next month, but that it will eventually result in the elimination of global oversupply and reduce global stockpiles to a normal level. The week closes with New York futures at $48.52 and London at $50.88. Most analysts doubt that a freeze agreement can be reached as Iran and Iraq have hopes of substantially increasing their oil production in the next couple of years. Most of the other OPEC members are pumping as fast as they can and have little prospect of substantial production increases in the next few years. Libya and Nigeria currently are pumping way below capacity due to political problems and are unlikely to agree to a freeze that does not allow them to return to their previous highest production level. Last spring when OPEC could not agree on a freeze, the cartel was pumping some 33 million b/d. It is now pumping about 34 million b/d. Some analysts have noted that should the Nigerian and Libyan situations be settled, world oil production could increase by another million b/d in the near future. While oil prices back in the vicinity of $50 a barrel have been enough to entice many rigs back into production in the US, it is still well below the levels need to attract the major oil companies back into expensive projects, most of which would be deepwater these days. A few companies still in reasonable financial shape have increased drilling, but most of the surge in the US rig count has been based on hopes of much higher prices, using other people’s money. Most still believe that overproduction will fade in the second half of this year and that prices will gradually climb to average in the mid-$50s next year and the mid-$60s in 2018. There are several factors that could upset this calculation such as a revival of US shale oil production, an increase in US interest rates, or weaker-than-expected Chinese demand.

    Saudi Arabia isn't flooding oil market ahead of freeze talks: Kemp | Reuters: Saudi Arabia's oil production hit a record in July, according to published statistics, and is likely to hit another in August, according to industry sources. Some analysts have interpreted the increases as an aggressive demonstration of the kingdom's ability to ramp up output ahead of an informal meeting of oil ministers in Algeria next month. In this view, Saudi Arabia is increasing output as a warning to rivals that if there is no agreement on a production freeze it has the means to continue raising its output and intensify the pain for all oil exporters ("Saudi signals it may hit new output record ahead of freeze talks", Reuters, Aug. 17). Saudi Arabia may have resorted to volume warfare in the past to encourage agreement on output and punish non-compliance ("OPEC and other commodity cartels", Alhajji and Huettner, 2000). But a closer look at the kingdom's recent production, consumption and export statistics paints a more nuanced picture. At least this time around, there is no evidence that Saudi Arabia is raising production to intensify the pressure on its rivals to reach a production freezing agreement.Saudi oil production typically increases during the summer months to meet extra direct consumption of crude in the kingdom's power plants. In the past decade, Saudi oil production has been on average almost 400,000 barrels per day higher in July than January (tmsnrt.rs/2bz0A6P). The production swing from January to July has been very variable, ranging from a reduction of 325,000 bpd to an increase of more than 1 million bpd. But production has tended to increase seasonally by between 150,000 bpd and 650,000 bpd, according to the Joint Organisations Data Initiative (JODI).

    Goldman Calls It For Oil: "OPEC Freeze Insufficient To Support Prices; The Price Rally Should Stall" -- Exactly 24 hours ago, we explained why - in our view - the oil rally was over, and gave four key reasons: i) after the biggest documented short squeeze in history, all the "weak hands" had been blown out and any incremental covering from here on out would be far more difficult; ii) an oil OPEC freeze will have no impact coming at a time when production by many cartel members is at all time highs, iii) the Niger Delta Avengers have agreed to a ceasefire meaning up to 300kbpd in Nigerian oil production would hit market shortly, and iv) the fundamentals suggest far more supply in the future, notably out of the US shale sector much of which has reorganized with cleaner balance sheets, which in the absence of rising demand (in fact demand out of China is falling) means lower price. Moments ago, Goldman energy analyst Damien Courvalin released a note titled "More worried about a thaw than a freeze", in which he effectively confirmed everything we said yesterday, when the sellside strategist said that the "three remaining large sources of oil supply disruptions – Nigeria, Iraq and Libya – have all shown signs of increasing output since last Wednesday", warning that "each country has the potential to move the global oil market back into surplus given our modest 230 kb/d expected deficit in 2H16" and "as a result, we reiterate our view that the oil price and fundamental recovery remains fragile." But worst of all, if only for the headline scanning algos, and Venezuela's increasingly more desperate oil minister Eulogio Del Pino, Goldman now thinks that "while discussions of an OPEC freeze and a weakening dollar have been catalysts for the sharp reversal in oil prices this month, we believe neither will be sufficient to support prices much further. In our view, thawing relationships between parties in conflict in areas of disrupted production would be more relevant to the oil rebalancing than an OPEC freeze which would leave production at record highs and could prove counter productive if it supported prices further and incentivized activity elsewhere." As for fundamentals, "supply continues to feature the cross currents of rising low-cost supply, declining high-cost production, and new project ramp up. In fact, marginally more bearish data recently than we had assumed suggests in our view that the recent price rally should stall."

    Oil futures snaps 7-session win streak -  Oil futures settled with a drop of 3% on Monday as investors cashed in on a seven-session streak of gains, pressured by expectations of higher global crude production. Bets that major oil producers will agree to stabilize oil output at a meeting late next month fed a rally last week, but expectations for an agreement have faded and the market is eyeing the potential for higher production from Iraq and Nigeria. September West Texas Intermediate crude CLU6 slid $1.47, or 3%, to settle at $47.05 a barrel on the New York Mercantile Exchange. That was the largest one-day dollar and percentage decline since Aug. 1. The contract expired at Monday’s settlement, with October CLV6, which ended at $47.41 a barrel, down $1.70, or 3.5%, now the front-month contract. “The slowed covering of short positions relative to the torrid pace in recent weeks as the prospect of a Saudi-Iran agreement to freeze production grows increasingly unlikely, in conjunction with the potential of increased exports from Iraq and Nigeria are certainly weighing on prices,”

    Oil down 3 percent as rally snaps on rising crude, China fuel exports | Reuters: Oil settled down more than 3 percent on Monday, retreating from last week's two-month highs, on worries about burgeoning Chinese fuel exports, more Iraqi and Nigerian crude shipments and a rising U.S. oil rig count. China's July diesel and gasoline exports soared 181.8 percent and 145.2 percent, respectively, from the same month last year, putting pressure on refined product margins. In the United States, BP's 413,500 barrel per day refinery in Whiting, Indiana, returned to normal production for the first time since late July, adding to refined products supply. On the crude oil front, U.S. drillers added 10 oil rigs in the week to Aug. 19, the eighth straight week of rig additions, as crude rebounded toward the $50-a-barrel mark that makes drilling viable. Elsewhere, Iraq plans this week to increase exports of Kirkuk crude by 150,000 bpd from its northern fields while Nigerian rebels who regularly attacked oil facilities in the country earlier this year said they were ready for a ceasefire. Brent crude settled down $1.72, or 3.4 percent, at $49.16 a barrel. It hit a two-month high of $51.22 on Friday. U.S. West Texas Intermediate (WTI) crude's front-month contract, September CLU6, closed down $1.47, or 3 percent, at $47.05 before expiring. It hit a six-week high of $48.75 on Friday. WTI's more active second month position, October CLV6, closed down $1.70, or 3.6 percent, at $47.41 a barrel.

    Iran signals more willingness for OPEC action to boost oil price: (Reuters) - Iran is sending positive signals that it may support joint action to prop up the oil market, sources in OPEC and the oil industry said, potentially aiding efforts to revive a global deal on freezing production levels at talks next month. OPEC's third-largest producer has been boosting output after the lifting of Western sanctions in January. Tehran refused to join a previous attempt this year by OPEC plus non-members such as Russia to stabilise production, and talks collapsed in April. Though Iran has not yet decided whether to join a new effort, Tehran appears to be more willing to reach an understanding with other oil producers, the sources said. Venezuelan Oil Minister Eulogio Del Pino last week toured oil-producing countries including Saudi Arabia and Iran to rally support for a deal. Despite rising this year, oil at around $49 a barrel is less than half its level of mid-2014. "Iran is reaching its pre-sanctions production level soon and after that it can cooperate with the others," said a source familiar with Iranian thinking after del Pino's visit to Tehran. "In general, Iran prefers more actions from the OPEC side rather than just freezing at the maximum production level of all members. If this freezing issue helps prices to improve, Iran by positive words of support, will help."

    Oil up on Iran talk; stockpile build cited by API surprises | Reuters: Oil prices rose on Tuesday after Reuters reported Iran was sending positive signals that it may support joint OPEC action to prop up the market, before the market pared gains on trade data showing a surprise build in U.S. crude stocks. Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries, refused to join a previous attempt this year by the group and non-OPEC members led by Russia to stabilize production. But sources in OPEC and the oil industry told Reuters that Tehran appeared more willing to support such talks scheduled next month in Algeria. "Iran is reaching its pre-sanctions production level soon and after that it can cooperate with the others," said a source familiar with Iranian thinking after a visit by Venezuelan Oil Minister Eulogio Del Pino to Tehran as part of a tour to convince OPEC of a production freeze. Brent crude settled up 80 cents, or 1.6 percent, at $49.96 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 69 cents, or 1.5 percent, to close at $48.10. Tehran has been boosting its oil output since the lifting of Western sanctions in January. News of its potential support for a production freeze helped halt an abrupt slump in crude prices that began on Monday, after a 20-percent rally in the past two weeks. Still, Brent and WTIpared gains in post-settlement trade after the American Petroleum Institute (API) reported that U.S. crude inventories rose by 4.5 million barrels last week, a surprising build versus analyst expectations' for a draw of 500,000 barrels. The U.S. government will issue official inventory data on Wednesday.

    WTI Slides After Biggest Inventory Build In 4 Months - Amid the volatility of crude prices, inventory levels, and headline hockey; API printed a surprisingly large 4.464mm crude build (against expectations of a 850k draw). Having spiked early in the day on Iran rumors (and failed to fall on denials), WTI knee jerked lower after the API data showed the biggest crude build in over 4 months (and a bigger than expected build at Cushing). API

    • Crude +4.464mm (-850k exp)
    • Cushing +417k (+200k exp)
    • Gasoline -2.2mm (-1.7mm exp)
    • Distillates -834k

    Biggest build in crude in over 4 months... (4th weekly draw in gasoline)

    No End in Sight for East Coast Gasoline Glut - Higher gasoline imports to the U.S. East Coast and weaker demand in the region have combined to bloat gasoline inventories, raising the question, what would it take to bring the market into balance? East Coast refinery output is down from this time last summer in response to somewhat lower crack spreads, but not enough to make a dent. Part of the problem is that while gasoline demand turned anemic in the Maine-to-Florida region, it is even weaker in many overseas markets. Also, the skill of East Coast blenders in dealing with a wide variety of supplies has always made the region an attractive destination for international product flows. Today, we continue our look at petroleum product cargo flows, and what they are telling us about the health of the market. In Part 1 of this series, we discussed the fact that while global demand for crude oil has been growing 3% to 4% annually, growth in oil refining –– turning crude into products –– has been on a steeper climb. It comes down to this: Refiners, tempted by cheap crude and healthy processing margins, have been turning out more product, and refiners, traders, marketers and others have been squirreling away those barrels. The long run of high refinery output now is coming back to haunt the industry, both in the U.S. and overseas. Our focus last time was on middle distillates (heating oil/diesel and jet fuel). We found that a combination of favorable refining margins, a relatively mild 2015-16 winter and other factors have left U.S. inventories of middle distillates at or near record highs so far in 2016. This time, we focus on gasoline. U.S. inventories are at historically high levels for this time of year, the high-demand season for gasoline is about to end on Labor Day, and refiners have to consider how long to idle their plants during maintenance season. The U.S. East Coast is the main connection to the world gasoline market, and a bellwether for the health of refining in its own right. We will therefore dedicate a large part of this post to the outlook for that part of the country.

    Crude Slammed After Inventory Builds Across Entire Oil/Product Complex --Following API's reported biggest crude build in 4 months overnight, which weighed on oil prices, DOE exasperated the pain by signaling builds across the entire complex. Crude's build of 2.5m barrels (biggest in 3 months) was less than API but more than the expected 850k draw but Cushing saw a big build and gasoline and distillates both saw builds despite expectations of big draws. As a reminder, US Crude production surged by the most since May 2015 the prior week but fell modestly in the last week. Crude tumbled back to $47 on the print.  DOE:

    • Crude  +2.5mm (-850k exp)
    • Cushing  +375k (+200k exp)
    • Gasoline +36k  (-1.7mm exp)
    • Distillates +122k

    DOE reports biggest build in 3 months and builds cross the entire complex... This is the first time since Feb 2016 that all 4 major segments have seen a build in the same week.

    Crude futures weaken after EIA data shows inventories growing - Crude futures fell Wednesday after US Energy Information Administration data showed a larger-than-expected build in crude stocks, and refined products inventories saw slight increases. NYMEX October crude settled $1.33 lower at $46.77/b. ICE October Brent settled 91 cents lower at $49.05/b. NYMEX September ULSD settled 55 points lower at $1.4963/gal. NYMEX September RBOB settled 1.08 cents higher at $1.5096/gal. Crude stocks increased 2.501 million barrels to 523.594 million barrels in the week that ended August 19, EIA said.It was the fourth crude build over the last five reporting periods, and was far greater than the 200,000-barrel increase analysts were looking for. The main factor driving stocks higher was imports, which jumped 449,000 b/d to 8.642 million b/d. That was 9.39% above the year-to-date average of 7.9 million b/d. Gulf Coast crude runs dropped 244,000 b/d to 8.712 million b/d, leading inventories higher. Severe flooding in the region, which knocked out refineries in Texas and Louisiana, was likely responsible for the downturn. The same outages were expected to deliver a draw in gasoline stocks of 1.6 million barrels, but instead EIA reported that inventories increased 36,000 barrels to 232.695 million barrels.

    U.S. Oil-Rig Count Unchanged in the Latest Week - WSJ: The number of rigs drilling for oil in the U.S. were unchanged in the past week at 406, ending a recent trend of increases, according to oil-field services company Baker Hughes Inc. BHI -1.53 % The U.S. oil-rig count is typically viewed as a proxy for activity in the sector. After peaking at 1,609 in October 2014, low oil prices put downward pressure on production and the rig count fell sharply. The oil-rig count had risen for eight weeks in a row before the past week, and the count is up roughly 28% in the past three months. The nation’s gas-rig count fell by two in the past week, to 81. The U.S. offshore-rig count fell by one rig from last week to 17, which is 13 fewer than a year ago. The rig count comes as Brent crude traded near flat on Friday. Federal Reserve Chairwoman Janet Yellen’s remarks, which left the door open for a sooner-than-later interest-rate increase, erased earlier gains.

    U.S. oil rig count unchanged at 406; Baker Hughes: Oil prices were modestly higher on Friday in a volatile session, as traders reacted to comments from Fed Chair Janet Yellen and reports of missile activity in Saudi Arabia. The market was taking its cues from the movement in the dollar, which has been choppy following Yellen's remarks. At one point, crude benchmarks were up as much as 2 percent before drifting lower. Brent futures for October were up 0.44 percent at $49.89 a barrel. U.S. crude was at $47.60 per barrel, up 27 cents, or 0.55 percent. The U.S. crude oil rig count was at 406, Baker Hughes said on Friday. That compares to 675 a year ago. The market was primed to react to Yellen's speech in Jackson Hole, Wyoming, as her remarks initially caused a big rally in the dollar, which caused oil to slip. Later, the dollar pared those gains, with the dollar index at one point down as much as 0.5 percent. It was lately up 0.3 percent. Oil prices touched the day's highs after reports of Yemeni missiles hitting Saudi Arabia's oil facilities, traders said. Saudi state TV reported that a projectile fired from Yemen hit a power relay facility in Najran, in the southern part of Saudi Arabia.

    BHI: Another Permian rise not enough to prevent US rig count decline - Oil & Gas Journal: The US drilling rig count decreased during the week ended Aug. 26 for just the second time in 13 weeks, data from Baker Hughes Inc. indicate. However, the tally of oil-directed units was flat and the Permian basin continued its hot streak with a 3-unit increase. Down 2 units to 489, the overall US count is still 85 units above its total on May 27, just before the recent drilling rebound began. The Permian has added 62 units during that time (OGJ Online, Aug. 19, 2016). After jumping 152,000 b/d last week, US crude oil production during the week ended Aug. 19 decreased 49,000 b/d to 8.548 million b/d, down 789,000 b/d year-over-year, the US Energy Information Administration reported this week. The Lower 48 declined 55,000 b/d while Alaska added 6,000 b/d. EIA foresees more declines from US tight oil into next year. In the reference case of its Annual Energy Outlook 2016 published this month, US tight oil output is projected to drop 700,000 b/d between 2015-17 primarily due to low oil prices and resulting investment cuts. “However, production declines will continue to be mitigated by reductions in cost and improvements in drilling techniques,” EIA said. “The use of more efficient hydraulic fracturing techniques and the application of multiwell-pad drilling, as well as changes in well completion designs, will allow producers to recover greater volumes from a single well.” Continuing the trend of firms flocking to West Texas’s resilient production hub, meanwhile, PDC Energy Inc. bought its way into the Delaware basin this week, agreeing to take 57,000 net acres for $1.5 billion (OGJ Online, Aug. 24, 2016). The Denver-based firm plans to add 2 rigs to the basin and spud 9 horizontal wells by yearend. Also reported on Aug. 26, Blackstone Energy Partners LP, an affiliate of multinational private equity firm Blackstone Group LP, said it’s investing in two units respectively focused on the Midland and Delaware basins (OGJ Online, Aug. 26, 2016).

    OilPrice Intelligence Report: Oil Under Pressure As Saudi Arabia Downplays OPEC Deal: Oil prices faced some downward pressure at the end of this week as Saudi Arabia seemed to downplay the chances of an OPEC deal in Algeria (see below). But oil prices moved back up during midday trading on Friday as reports surfaced that Yemeni missiles hit Saudi oil facilities. Meanwhile, Fed Chair Janet Yellen said that the U.S. Federal Reserve’s case to raise interest rates “has strengthened in recent months,” a sign that rate hikes could resume in the relatively near future. Ultimately the markets do not expect an increase in September, but the chances of a December hike are more likely. The dollar fell slightly following the news, providing a small boost for oil.  In an interview with Reuters, Saudi Arabia’s oil minister Khalid al-Falih said that he did not think that intervention in the oil market was necessary, raising questions about the viability of a deal in Algeria next month between OPEC and Russia. He also said that no “discussions of substance” have been conducted yet. The comments throw cold water on the chances of a freeze deal, but they come just after Iran said that it would attend. Oil analysts are now at odds over the chances of a successful outcome. The WSJ reports that China’s oil production likely peaked last year at 4.3 million barrels per day and is already in decline, perhaps permanently. China gets most of its oil from aging and depleting oilfields. The collapse of oil prices has made many of them unprofitable, and several of China’s state-owned companies have abandoned the least attractive fields.  The result will be a higher dependence on imports in the years to come.  The Only Chart Needed To Understand The Global Oil Market - Sure, there's tanker-carry-trades, positioning extremes, jawboning, marginal supply interruptions (and increases), and slowing (or rising) growth expectations... But taking a step back for a moment, what do you think this means for 'price'... US oil inventories (crude plus refined product) soars above 1.4 Billion barrels for the first time ever... 40% above the 25-year 'norm' average

    Saudi government to sell $5 billion worth of bonds - Khaleej Times: The Saudi Arabian government is raising up to 20 billion riyals ($5.3 billion) from banks in this month's sale of domestic bonds, financial website Maaal reported on Tuesday. The government began the regular monthly sales in mid-2015 to help cover a budget deficit caused by low oil prices. Since then, it has sold 156.6 billion riyals of bonds, of which 70.5 billion has come in the first half of this year, Maaal said. The government has informed banks of August's allocations, Maaal quoted unnamed sources as saying, without specifying how large they were. There are signs that Saudi banks are becoming less willing or able to buy government bonds as persistently low oil prices reduce the amount of spare cash they have available for such purchases. Saudi banks' holdings of government bonds increased by just 3.1 billion riyals month on month in June, a slower rise than in previous months, central bank figures show. Bankers say that because the bond offers are shrouded in secrecy, it is impossible to be sure how much debt the government is selling. Total issue Maaal quoted sources as predicting issues in 2016 would total 100 billion riyals. In this month's sale, the government offered five-year bonds at 64 basis points over US Treasuries, seven-year bonds at 77 bps over and 10-year bonds at 91 bps over, Maaal said. That is within the pricing ranges offered in last month's sale.

    Investors Panic-Buy Saudi Default Protection Ahead Of Big Debt Deal -- Amid expectations that The Kingdom will sell bonds as early as next month, investors are panic-buying protection against default on Saudi Arabia. The last few weeks have seen a surge in CDS notional outstanding to its highest on record even as Saudi risk has stabilized after quadrupling in the last year.  Saudi CDS notionals are soaring as potential buyers of Saudi's future debt issuance load up on protection to 'free' up balance sheet room to cover the issue.  Rather notably, bets of Riyal devaluation in the FX forward market have slid notably recently... at exactly the time as investors are loading up on credit protection... a proxy for devaluation fears...  It would appear every effort is being made to put some lipstick on this pig before the debt issuance (and don't forget that it was a Saudi statement that spraked the biggest short-squeeze in history in crude), but under the covers, the big boys are scrambling for hedges.

     Japan to look at possibility of raising Saudi Arabia's Okinawa crude storage capacity - Japan will examine the potential for increasing Saudi Arabia's crude oil storage capacity in Okinawa, when it starts detailed discussions with officials from the kingdom in September, Japanese government sources told S&P Global Platts Wednesday. In the event Saudi Arabia's leased storage capacity of 1 million kiloliters, or 6.29 million barrels, at Okinawa, in Japan's southwest, is actually increased, it could further help cement its already strong crude marketing outlet in Asia. The possible development over a crude storage deal came as Saudi Arabian Deputy Crown Prince Mohammed bin Salman is scheduled to visit Japan over August 31 to September 3, when memorandums of understanding of bilateral cooperation are expected to be signed. The Japanese government sources said that Tokyo is now working to finalize details on possible MOUs, which include cooperation in areas such as energy, and confirmed that the crude storage framework, known as the joint crude storage by producing countries, is among potential items to be included. The Saudi Gazette reported Wednesday that the kingdom's discussions with Japan for an MOU on cooperating in the energy sector were approved by the Cabinet. The deputy crown prince is visiting Tokyo en route to China to attend the G20 meeting, and it comes after a Cabinet session this week delegated several ministers to discuss with the Chinese side an MOU to cooperate in the energy sector and an initial cooperation memorandum on crude storage, according to the Saudi Gazette.

    Fuel Subsidy Regime Falls Like Dominoes Across Middle East - Two weeks ago, news broke that the International Monetary Fund had reached a “tentative” agreement with Egyptian officials regarding a $12 billion loan that the Washington-based pool would pay out over the next three years. The IMF’s Egypt mission chief, Chris Jarvis, said, “Egypt is a strong country with great potential but it has some problems that need to be fixed urgently.” One of those problems, it turns out, is the country’s fuel subsidies. Reuters reported on Tuesday that Egyptians will pay 65 percent of the actual cost of fuel at pumps during the 2016-17 fiscal year, and by the time the IMF distributes the last portions of its massive loan in 2020, the fuel subsidies will be completely dismantled. To be clear, the fuel subsidy cuts do not represent a new political position in Egypt. In October 2014, Acting President Adly Mansour released a five-year economic development plan that would be valid through the 2018-2019 fiscal year. The strategy – or Strat-EGY, as the government put it – scheduled fuel and electricity price reforms for the 2015-2016 fiscal year, but current President Abdel Fattah el-Sisi did not follow through on the proposed measures. Now, as cash flows from neighboring Gulf States – which had kept Egypt’s ailing economy afloat– start to run dry, the republic has reached out to the IMF for financial buoyancy.

    Dubai crude structure flips back to contango as Asian demand dissipates -The benchmark Dubai crude market structure has flipped back to contango this week as Asian demand dissipated after most refineries were heard to have covered their requirements for October. Platts Tuesday assessed the spread between first and second month Dubai crude swaps at a contango of 14 cents/b and between the second and third month Dubai crude swaps at a contango of 1 cent/b. Both spreads flipped to backwardation on Tuesday last week, for the first time since May 31, 2016 and July 10, 2015 respectively, amid an expected uptick in demand as refineries in China and elsewhere in Asia returned from seasonal maintenance. But the anticipated strength of this demand did not fully materialise, leaving sellers of October-loading cargoes to lower their selling ideas this week. During Tuesday's Platts Market on Close assessment process, seven October-loading cargoes, comprising three Upper Zakum, two Das Blend, a Qatar Marine and a Murban cargo, were seen offered by oil major BP, South Korea's SK Energy, France's Total and Western trading house Vitol.

    Iran Oil Production Stalls Ahead of OPEC Talks–Energy Journal -- The Wall Street Journal’s Benoit Faucon reports that Iran’s revival as a crude-oil exporter appears to have stalled, seven months after Western sanctions over its nuclear program were lifted, casting uncertainty over the country’s willingness to cooperate with other producers on limiting output.  Iran’s production has taken on heightened significance in recent weeks as the Organization of the Petroleum Exporting Countries gets ready for talks next month on oil output. Iran has previously refused to consider joining fellow OPEC members in action to lift crude prices by curbing output until its exports and production reach pre-sanctions levels.  But the country’s ability to reach pre-sanctions levels above four million barrels a day are now in question. Iran has been pumping 3.85 million barrels a day this month, the country’s oil minister Bijan Zanganeh said Saturday, little changed from above 3.8 million barrels a day he cited in June. That is up from less than three million barrels a day from before sanctions were lifted in January but short of the country’s stated goals.

     Report: Iran detains Greek national for smuggled oil  (AP) — An Iranian state-run daily is reporting that authorities in Tehran have detained a Greek national they accuse of embezzling money from smuggled oil and selling three oil tankers for $100 million. The report on Thursday in the IRAN newspaper suggests the Greek national was involved in smuggling Iranian crude oil while economic sanctions were imposed over the country’s contested nuclear program. Those sanctions under then-President Mahmoud Ahmadinejad greatly restricted where Iranian oil could be sold in the global market. The newspaper said the unnamed Greek national was detained three weeks after arriving at Tehran’s Imam Khomeini International Airport due to a “special trick” by investigators. It did not elaborate, though it said the Greek had controlled eight Iranian oil tankers and five have since been brought back to Iran.

    US Destroyer Fired Warning Shots At Iranian Fast-Attack Ship -- Yesterday, we reported that four Iranian ships carried out a "high speed intercept" of a US destroyer, the USS Nitze, in the Strait of Hormuz, an incident that the official dubbed "unsafe and unprofessional", cited by Reuters. The four vessels belonging to the Islamic Revolutionary Guard Corps "harassed" a U.S. destroyer on Tuesday by carrying out a "high speed intercept" in the vicinity of the Strait of Hormuz, a U.S. Defense official said on Wednesday. Moments ago, CNN reported that in a separate incident, A US Navy ship fired three warning shots after an Iranian fast-attack craft approached and circled two U.S. Navy ships and a Kuwaiti vessel in the northern Gulf on Wednesday.  It said the U.S. ship fired the shots into the water after the Iranian ship did not leave after a brief radio conversation, according to U.S. officials. The United States on Wednesday had reported another incident in which it said Iranian vessels harassed a U.S. warship near the Strait of Hormuz on Tuesday. CNN also provided more details on yesterday's incident, report that according to a US official two of the Iranian vessels slowed and turned away only after coming within 300 yards of the US guided-missile destroyer "as it transited international waters near the Strait of Hormuz, and only after the destroyer had sent multiple visual and audio warnings."

    U.S. paid $1.3 billion to Iran two days after cash delivery: The Obama administration said Wednesday it paid $1.3 billion in interest to Iran in January to resolve a decades-old dispute over an undelivered military sale, two days after allowing $400 million in cash to fly to Tehran. State Department spokeswoman Elizabeth Trudeau says the U.S. couldn’t say more about the Jan. 19 payments because of diplomatic sensitivities. They involved 13 separate payments of $99,999,999.99 and final payment of about $10 million. There was no explanation for the Treasury Department keeping the individual transactions under $100 million. The money settles a dispute over a $400 million payment made in the 1970s by the U.S.-backed shah’s government for military equipment. The equipment was never delivered because of the 1979 Islamic Revolution that overthrew the shah and ended diplomatic relations between the U.S. and Iran. On Jan. 17, the administration paid Iran the account’s $400 million principal in pallets of euros, Swiss francs and other foreign currency, raising questions about the unusual payment. The $1.3 billion covers what Iran and the U.S. agreed would be the interest on the $400 million over the decades.

    Iran Sets Condition Under Which It Would Join OPEC Oil Production Freeze -- In the past two weeks, Iran has rejoined the OPEC production freeze headline and jawboning fray, by making bold statements that it would be willing to work with OPEC on the recurring plan other members, mostly Venezuela, have proposed to push prices higher, namely freeze oil production (at a level which is an all time high output for OPEC's largest member, Saudi Arabia, beyond which it can't produce even if it wanted). So earlier today, Iran's oil minister Bijan Zanganeh made the most explicit statement on the topic, when he laid out the conditions under which Iran would be willing to "help other oil producers stabilize the world market."  It was a simple condition: Iran will cooperate as long as it is excluded from the freeze, or as Reuters put it, Iran will cooperate "so long as fellow OPEC members recognize its right to regain lost market share, the country' oil minister said on Friday." In other words, Iran will endorse an OPEC supply freeze as long as it can keep pumping more. Iran, OPEC's third-largest producer, boosted output after Western sanctions were lifted in January, and had refused to join OPEC and some non-members in an accord earlier this year to freeze production levels. "Iran will cooperate with OPEC to help the oil market recover, but expects others to respect its rights to regain its lost share of the market," Bijan Namdar Zanganeh was quoted as saying by the oil ministry's news agency SHANA.

    Oil Spikes On Iran Report Saudi Aramco Facilities Hit By Yemen Missiles -- While oil is spiking thanks to the dollar's kneejerk reaction lower following Yellen's (not really) hawkish speech, another reason for the move higher appears to be an unconfirmed report by Iran's PressTV that Yemeni forces have fired ballistic missiles at the facilities belonging to the Saudi state oil giant Aramco in the kingdom’s southwest. From the report: Yemeni forces have fired ballistic missiles at the facilities belonging to the Saudi state oil giant Aramco in the kingdom’s southwest. The retaliatory attack took place on Friday, hitting targets in Saudi Arabia’s Jizan region and causing considerable damage to the Aramco facilities there, Yemen’s al-Masirah television reported. Saudi military has been pounding Yemen since March last year to undermine Yemen’s Houthi Ansarullah movement and to restore power to the former president, Abd Rabbuh Mansur Hadi, a staunch ally of Riyadh. Nearly 10,000 people, most of them civilians, have been killed in Riyadh’s military aggression which lacks any international mandate. HIstorically, the accuracy of PressTV reports has been spotty at best, so waiting for confirmation may be prudent, although as of this moment algos are buying first and not even bothering to ask questions.

    No ISIS There – Are U.S. Troops In Hasakah “Advising” Kurds To Attack The Syrian Army? - Yesterday a fight broke out between Syrian Arab Army troops and local Kurdish forces in the predominately Kurdish city of Hasakah in north-eastern Syria. Hasakah, with some 200,000 inhabitants, has held a SAA garrison for years. There is some enmity between the Kurds and the soldiers but the situation is generally peaceful.  There have been earlier fights but these were local rivalries between Syrian auxiliary National Defense Forces from local Arab (Christian) minorities and some gangs who form a Kurdish internal security force under the label Asayish. Such fights usually ended after a day or two when grown-ups on both sides resolved the conflict over this or that checkpoint or access route. The Islamic State (grey on the map) once threatened Hasakah but that danger is now far away. Yesterday another fight broke out, but got serious. The Syrian air force was called in to defend against direct attacks on the SAA garrison and minority quarters Syrian government warplanes bombed Kurdish-held areas of the northeastern city of Hasaka on Thursday for the first time in the five-year-old civil war, the Syrian Kurdish YPG militia and a monitoring group said.  The cause of this week's flare-up was unclear. The reason that fighting started might have to do with U.S. troops who, for whatever reason, seem to be in Hasakah. The U.S. military now laments that these troops came under Syrian air force fire:

    Kurds versus Syrian army battle intensifies, complicating multi-fronted war | Reuters: Fighting between the Syrian army and Kurdish forces intensified late on Friday and into Saturday, creating the risk of yet another front opening in the multi-sided civil war. The two sides have mostly avoided confrontation during the five-year conflict, with the government focusing its efforts against Sunni Arab rebels in the west, and the Kurds mainly fighting Islamic State in northern Syria. In an indication of their reluctance to escalate further, pro-government media said on Saturday they had held preliminary peace talks. After the fighting broke out this week, government warplanes bombed Kurdish-held areas of Hasaka, one of two cities in the largely Kurdish-held northeast where the government has maintained enclaves. Fighting there could complicate the battle against Islamic State because of the Kurds' pivotal role in the U.S.-backed Syrian Democratic Forces' (SDF) fight against the group. On Friday, warplanes from the U.S.-led coalition flew what the Pentagon called protective patrols around Hasaka to prevent Syrian jets from targeting U.S. special forces, who are operating on the ground with the SDF, the first sorties of their kind in the war. Ground fighting intensified late on Friday when Kurdish YPG fighters battled Syrian forces, whose air force flew sorties over the city, Kurds and monitors said. "The clashes continue in areas inside the city today. There were military operations,"

    Kurds to launch an assault to kick the Syrian army out of its last stronghold in Northeastern Syria- (Reuters) - The Kurdish YPG militia launched a major assault on Monday to seize the last government-controlled parts of the northeastern Syrian city of Hasaka after calling on pro-government militias to surrender, Kurdish forces and residents said. They said Kurdish forces began the offensive after midnight to take the southeastern district of Nashwa, close to where a security compound is located near the governor's office close to the heart of the city. The powerful YPG militia had earlier captured Ghwairan, the only major Arab neighborhood still in government hands. The fighting this week in Hasaka, which is divided into zones of Kurdish and Syrian government control, marks the most violent confrontation between the Kurdish YPG militia and Damascus in more than five years of civil war. The Syrian army deployed warplanes against the main armed Kurdish group for the first time during the war last week, prompting a U.S.-led coalition to scramble aircraft to protect American special operations ground forces.

    Turkey makes first major foray into Syria with assault on IS (AP) — Turkey on Wednesday launched its first major ground assault into Syria since the country's civil war began, sending in tanks and special forces backed by U.S. airstrikes to help Syrian rebels retake a border town from Islamic State militants. The surprise incursion to capture the town of Jarablus was a dramatic escalation of Turkey's role in Syria's war. But its objective went beyond fighting extremists. Turkey is also aiming to contain expansion by Syria's Kurds, who are also backed by the United States and have used the fight against IS and the chaos of the civil war to seize nearly the entire stretch of the border with Turkey in northern Syria. That raises the potential for explosive frictions between two American allies. U.S. Vice President Joe Biden flew into Ankara hours after the offensive, and he backed Turkey with a stern warning to the Kurds to stay east of the Euphrates River, which crosses from Turkey into Syria at Jarablus. Kurdish forces "must move back across the Euphrates River. They cannot, will not, under any circumstance get American support if they do not keep that commitment," he said. The Turkish assault, launched in retaliation after a string of militant bombings in Turkey, adds yet another powerhouse force on the ground in an already complicated war.

    Syria regime, Kurds blast Turkish incursion - Syria condemned Wednesday's Turkish incursion into an Islamic State group-held border area as a "flagrant violation" of its sovereignty as Kurdish authorities said the action amounted to a "declaration of war". The foreign ministry in Damascus said it "condemns the crossing of the Turkey-Syria border by Turkish tanks and armoured vehicles towards the Jarabulus area with air cover from the US-led coalition and considers it a flagrant violation of Syrian sovereignty". The Syrian opposition in exile, however, welcomed the intervention. The operation -- named "Euphrates Shield" -- began around 4:00 am (0100 GMT) with Turkish artillery pounding dozens of targets of the Islamic State (IS) jihadist group around Jarabulus, the Turkish prime minister's office said. Turkish tanks and special forces accompanied by pro-Ankara Syrian rebels then rolled across the border in an unprecedented operation to drive IS out of Jarabulus, from which it has fired rockets into Turkey. "Syria demands the end of this aggression," the foreign ministry said. "Any party conducting a battle against terrorism on Syrian soil must do so in coordination with the Syrian government and the Syrian army who have been fighting this war for five years. "Chasing out IS and replacing them with terrorist groups backed by Turkey is not fighting terrorism."

     Russia warned that US will fight back after attack near American forces in Syria | Daily Mail Online: A top US commander has warned Russia that the United States 'will defend itself if threatened' after warplanes attacked near American forces operating in Syria.Lt. Gen. Stephen Townsend, based in Baghdad, vowed to defend US special operations forces in northern Syria if they come under another attack.'We've informed the Russians where we're at,' he told CNN. '(They) tell us they've informed the Syrians, and I'd just say that we will defend ourselves if we feel threatened.' The warning follows what defense officials described as an 'unusual' incident Thursday when President Bashar al-Assad's regime deployed warplanes to attack an area near where US special operations forces were operating.US forces are currently in the area to support Kurdish forces in the fight against terrorist group ISIS.

    The Islamic State and Body Parts -- While the fight against ISIS/ISIL rarely appears on the front pages or headline stories of the mainstream except in cases where there appears to be a link between ISIS/ISIL and a terrorist attack, an interesting fatwa or legal Islamic declaration has been released by the ISIL Committee of Research and Fatwas.   Fatwa Number 68, dated January 31, 2015 and found during a December 2015 raid in eastern Syria answers the age-old question: "Is it permissible to take the captured apostate's body organs and give them to Muslims who are in need of them?" The Islamic scholars that answered this question did so stating that Muslim hospitals are overwhelmed with diseases that are both "incurable by doctors and harsh on patients" and stated that Allah Almighty knows best what is right and what is wrong.  The scholars go on to point out that verse 5:32 of the Quran states the following: "Because of that, We decreed upon the Children of Israel that whoever kills a soul unless for a soul or for corruption [done] in the land – it is as if he had slain mankind entirely. And whoever saves one – it is as if he had saved mankind entirely.  And our messengers had certainly come to them with clear proofs. Then indeed many of them, [even] after that, throughout the land, were transgressors." (my bold) From this verse, ISIS' Islamic scholars claim that "saving a Muslim from death or deterioration is an Islamic legal duty that should be performed with every legitimate way or financial means.".  As well, they claim that jurists of two Islamic schools allowed Muslim warriors to actually consume the flesh of infidels and apostate Muslims when it is necessary to save their own lives. In addition, ISIS' scholars claim that it is even more appropriate to transplant organs from the apostate to the Muslim to save the life of the Muslim since it has been ruled that the apostate's life and organs are not protected by Islamic law.

    After 10 Years, US B-52H Resumes Operations in Afghanistan - The United States has resumed operations of its B-52H Stratofortress strategic bomber in Afghanistan for the first time in ten years.  The strategic bomber recently flew several operations, dropping 27 munitions in various counterterrorism operations in Afghanistan. The reintroduction of the bomber may highlight the United States’ expanding role in Afghanistan and the increasing instability in the country.   “We got the B-52 back in the fight in Afghanistan and Iraq,” Staff General David L. Goldfein announced.”We have the B-52 contributing to a significant ground effort and employing weapons in close proximity of friendly troops who are under attack [and] who are preparing the battlefield in new ways.”   Goldfein indicated that the U.S. Air Force’s B-52H detachment at the Al Udeid Air Base has conducted roughly 325 strikes, dropping nearly 1,300 bombs in Operation Inherent Resolve in Iraq and Syria.  The B-52H brings valuable capabilities to the fight in Afghanistan and its reintroduction on the battlefield may highlight the rising instability in Afghanistan. Capable of carrying 70,000 pounds (roughly 32,000 kilograms) worth of munitions, the aircraft can hold an array of bombs, to include 20 long-range JASSM-ERs, 80 Small Diameter Bombs, 24 MALD-Js, AGM-142 Raptor missiles, 51 500 lb bombs, 30 1,000 lb bombs, 12 joint stand-off weapons (JSOW), 12 joint direct-attack munitions (JDAM), and 16 wind-corrected munitions dispenser (WCMD).  On top of its impressive payload capability, which offers much flexibility to ground commanders, the B-52H provides another added bonus especially specific to the mountainous terrain in Afghanistan. Equipped with modern and secure radios that include beyond-line-of-sight data nodes, the B-52H is capable of acting as a network node such as the Battlefield Airborne Communications Node (BACN), which would act as a relay station feeding information to ground and air assets over the country.

    Pentagon Admits "Lapses In Accountability" Led To Loss Of Hundreds Of Thousands Of US Guns In Afghanistan And Iraq -- Back in April 2016, the New York Times published an article highlighting a number of Facebook pages in the Middle East being used to sell U.S. military equipment. A terrorist hoping to buy an antiaircraft weapon in recent years needed to look no further than Facebook, which has been hosting sprawling online arms bazaars, offering weapons ranging from handguns and grenades to heavy machine guns and guided missiles. The Facebook posts suggest evidence of large-scale efforts to sell military weapons coveted by terrorists and militants. The weapons include many distributed by the United States to security forces and their proxies in the Middle East. These online bazaars, which violate Facebook’s recent ban on the private sales of weapons, have been appearing in regions where the Islamic State has its strongest presence. Many of the Facebook pages have subsequently been shut down, as selling stolen U.S. military equipment to terrorist organizations technically violates Facebook's user policies.  But the remnants remain...like the Facebook post below showing a row of kids shooting increasingly lower caliber weapons culminating with a young man shooting a sling-shot...adorable!   

    In Response to Indiscriminate Saudi Bombing, MSF Evacuates Northern Yemen - Things are getting even worse for the civilian population of Yemen as Doctors Without Borders (MSF) announces that it is pulling its staff and medical personnel out of northern Yemen following the latest bombing of one of their hospitals there earlier this week: Doctors Without Borders announced on Thursday that it’s withdrawing from northern Yemen due to what the international aid group called “indiscriminate bombings and unreliable reassurances” from the Saudi-led coalition that’s fighting Shiite rebels in the country. The group, known by its French acronym MSF, said an attack on a hospital it supported in the area on Monday had killed 19 people and wounded 24 — a higher death toll after some of the wounded had died. Earlier, 11 were reported killed.  “The airstrike on Abs Hospital was the fourth and the deadliest attack on an MSF-supported medical facility during this war, while there have been numerous attacks on other health facilities all over Yemen,” the Geneva-based group said in a statement. This is another devastating blow to the people living in northern Yemen. Not only have the Saudis and their allies grossly and repeatedly violated international law with their bombing of civilian targets for well over a year, but they have struck so many hospitals that they are now forcing a major aid group out of the area. That deprives injured and sick Yemenis of essential medical care that is made all the more necessary by the frequent indiscriminate bombing of civilian areas by the coalition, and it further cuts off this part of Yemen from an outside world that was already mostly ignoring its plight.

    Saudis bomb Sanaa during “Million-Person march”  - The Houthi Ansarullah Movement that controls most of north and west Yemen staged what was by all accounts an enormous demonstration in the capital of Sanaa on Saturday. It may have been the single largest demonstration in the country’s history. While it was unlikely actually to have involved a million people, it did probably tens of thousands, and it showed how strong grassroots support for the Houthis is in the north. The massive demonstration in Sab`in Park in downtown Sanaa was intended to send a signal to Saudi Arabia and its coalition that the Houthis are enormously popular in the north and that the General People’s Congress, the parliament of Yemen in its present form, shares in that popularity. If so, Saudi Arabia did not get that message. Its fighter-bombers targeted downtown Sanaa in the midst of the demonstration, which arguably was a war crime (you aren’t allowed to endanger large numbers of civilians in war if you don’t have to). The Saudis are at war with rebel supporters of the Houthis, whom Saudi Arabian inaccurately depicts as a cat’s paw of Iran.  The Houthis are a fundamentalist movement growing out of the moderate Zaidi branch of Shiite Islam in north Yemen. They were one of the groups that supported the Yemeni revolution of 2011-2012, which deposed ‘president for life’ Ali Abdullah Saleh. But during the transition to elected governments, the Houthis derailed the country’s move to democracy by making a coup and gradually dismissing civilian high governing officials.

    Acceptable Losses - Andrew Cockburn -  Harper's - Just a few short years ago, Yemen was judged to be among the poorest countries in the world, ranking 154th out of the 187 nations on the U.N.’s Human Development Index. One in every five Yemenis went hungry. Almost one in three was unemployed. Every year, 40,000 children died before their fifth birthday, and experts predicted the country would soon run out of water. Such was the dire condition of the country before Saudi Arabia unleashed a bombing campaign in March 2015, which has destroyed warehouses, factories, power plants, ports, hospitals, water tanks, gas stations, and bridges, along with miscellaneous targets ranging from donkey carts to wedding parties to archaeological monuments. Thousands of civilians — no one knows how many — have been killed or wounded. Along with the bombing, the Saudis have enforced a blockade, cutting off supplies of food, fuel, and medicine. A year and a half into the war, the health system has largely broken down, and much of the country is on the brink of starvation. This rain of destruction was made possible by the material and moral support of the United States, which supplied most of the bombers, bombs, and missiles required for the aerial onslaught. (Admittedly, the United Kingdom, France, and other NATO arms exporters eagerly did their bit.) U.S. Navy ships aided the blockade. But no one that I talked to in Washington suggested that the war was in any way necessary to our national security. The best answer I got came from Ted Lieu, a Democratic congressman from California who has been one of the few public officials to speak out about the devastation we were enabling far away. “Honestly,” he told me, “I think it’s because Saudi Arabia asked.”

    Ex-president Saleh offers 'all Yemen's facilities' to Russia | al-bab.com: In a TV interview today, Yemen's ex-president, Ali Abdullah Saleh, appeared to invite Russian military intervention in the country's conflict. He talked of reactivating old Yemeni agreements with the Soviet Union and offfered "all the facilities" of Yemen's bases, ports and airports to Russia. Saleh seemed to be advocating something similar to what happened in Syria, where Russia and Iran joined the conflict on the Assad regime's side under the guise of fighting terrorism. A video of the interview is here, with a transcript in Arabic here.. Saleh, who was ousted from the presidency in 2012, is allied to the Houthis who currently control the Yemeni capital and large parts of the country, especially in the north. For more than a year Saudi-led forces, who back Saleh's exiled successor, Abd-Rabbu Mansour Hadi, have been bombing Houthi-controlled areas of Yemen. Meanwhile the Houthis, who have some Iranian backing, have attacked Saudi territory in the border area. Talks in Kuwait aimed at ending the war recently collapsed. Separately from the Houthi-Saleh-Hadi conflict there are frequent attacks in Yemen by Islamist militants. In the Russian TV interview, Saleh described Russia as "the closest kin to us", adding that it has "a positive attitude" in the UN Security Council.

    Yemen Offers Russia Use Of Its Airports And Ports In "Fight Against Terrorism" - While Obama was golfing in the midst of another Louisiana natural disaster, and is set to end his vacation so he can do what is truly important, support Hillary Clinton in the presidential race, Putin has been busy making new friends: first he did the seemingly impossible, having rekindled relations with Turkey to the point where Ankara itself is warning it may quit NATO to seek "military cooperation" with Russia, followed quickly by strengthening relations with Iran to the point where Russia is now using an Iranian airbase to strike ISIS, much to the angry dismay of the US and the United Nations, the latest stunning pivot toward Russia comes from yet another civil war-torn nation, Yemen, whose former president, Abdullah Saleh, said its newly-formed governing council could work with Russia to "fight terrorism" by allowing Moscow use of the war-torn country's military bases. What makes the announcement even more striking is that Ali Abdullah Saleh, Yemen's ex-president who was toppled by mass protests in 2011 as part of the Arab Spring launched by none other than the US when it "intervened" in Libya and Egypt, was a former staunch counter-terrorism ally of the US; it is this former US ally who told state-owned channel Russia 24 that Yemen was ready to grant Moscow access to air and naval bases. "In the fight against terrorism we reach out and offer all facilities. Our airports, our ports... We are ready to provide this to the Russian Federation," Saleh said in an interview in Sanaa.

    Erdogan: Suicide bomber in Turkish wedding attack that killed 51 was 12-14 years old - The suicide bomber who attacked a wedding party in the southeastern Turkish city of Gaziantep on Saturday killing 51 people was a child between the ages of 12 and 14, President Tayyip Erdogan said. In comments shown live by broadcaster NTV, Erdogan also confirmed that 51 people had died in the blast, and 69 were wounded. Seventeen of the injured were "heavily" wounded, Erdogan said. Erdogan said it was likely that Islamic State militants carried out the late-night attack, the deadliest bombing this year in Turkey , which faces threats from militants at home and from Syria. Saturday's wedding party was for a member of the pro-Kurdish Peoples' Democratic Party, it said, and the groom was among those injured. The bride was not hurt, one local official said. Celebrations were ending at the traditional henna night party, when guests have decorative paint applied to their hands and feet. Some families had already left when the bomb went off but women and children were among the dead, witnesses said.Blood and burns marked the walls of the narrow lane where the blast hit. Women in white and checkered scarves cried, sitting crosslegged outside the morgue waiting for word on missing relatives. "The celebrations were coming to an end and there was a big explosion among people dancing," said 25-year-old Veli Can. "There was blood and body parts everywhere."

    China's Decline in Oil Production Echoes Globally —China’s struggling oil sector has entered a challenging new phase: long-term decline of its domestic production. Oil production in China likely peaked last year at around 4.3 million barrels a day, according to new data and interviews with industry executives. The development has significant implications globally, including the potential for higher crude prices over time as China steps up imports to meet rising demand at home. “The turning point that we’ve been searching for, for years, is happening now,” said Kang Wu, vice chairman for Asia at energy consultancy FGE. As an oil producer, he said, “China is entering long-term stagnation and decline.”   For years, the world’s second-largest economy eked out gains from its aging oil fields as demand surged. But new discoveries haven't been enough to keep production growing, and the crash in commodities prices led the state-owned oil giants to sideline less-productive wells. All this puts pressure on China’s oil giants to step out on the global stage. Today, more than ever, state-controlled PetroChina, China Petroleum & Chemical Corp , and Cnooc compete with international companies such as Exxon Mobil Corp. for resources and customers. At the same time, China will be forced to boost imports. As domestic production falls, additional barrels of oil that China needs to fuel the new cars hitting its streets will come from overseas. That marks a fundamental shift for a country that not long ago saw energy independence as a key part of national security. It also deepens China’s exposure to global hot spots. Among its biggest suppliers today: Saudi Arabia, Russia, Angola and Iraq.

     PetroChina's H1 oil, gas output up 1.7% on year to 748 mil barrels - State-owned PetroChina said late Wednesday it produced 748 million barrels of oil equivalent in the first six month of the year, up 1.7% year on year. The company said oil and gas equivalent output in the first six months has exceeded half of the 2016 annual target of 1.45 billion boe, despite growth being slower than the 2.9% seen in the H1 of last year and 2.5% in the same period of 2014. PetroChina, the listed subsidiary of China National Petroleum Corp., early this year actually targeted cutting its oil and gas output by 2.7% on the year in 2016 amid low oil prices. The company's crude oil output in the period stood at 470.6 million barrels, down 1.4% year on year, while natural gas output rose healthily at 7.4% on the year to 1.665 Tcf, it said while announcing its H1 financial results. The company's oil and gas production from domestic operations edged down 0.5% year on year to 640.1 million boe, while production from its overseas assets was jumped by 16.5% to 108.1 million boe. PetroChina processed 483.4 million barrels of crude oil, down 2.5% from the 493.7 million barrels in H1 2015 and around 500 million barrels in the same period of 2014. It produced 43.44 million mt of refined oil products, representing a decrease of 6.5% compared with the same period of 2015 as a result of a 0.2 percentage point decline in the integrated oil products yield to 93.7% as well as 20% year on year increase in the output of downstream petrochemical products.

    $3.2 Trillion (Actually a Bit More) Isn’t Enough? The Fund on China’s Reserves: China is running a persistent current account surplus, one that could be larger than officially reported (the huge tourism deficit looks a bit suspicious). If China paid off all its external debt, it would still have around $2 trillion in reserves.* If it paid off all its short-term debt, it would have $2.5 trillion in reserves. And China has a very low level of domestic liability dollarization (3 percent of total deposits are in foreign currency) True, $3.2 trillion ($3.3 trillion if you include the PBOC’s other foreign assets, as you should, and as much as $3.5 trillion if you include the China Investment Corporation’s foreign portfolio, which is more debatable) isn’t $4 trillion.** But much of the fall in reserves over the last 18 months has stemmed from the use of reserves to repay China’s short-term external debt. The IMF projects that China’s short-term external debt will have fallen from $1.3 trillion in 2014 to just over $700 billion by the end of this year. Reserves are down, but—from an external standpoint—China’s need for reserves is also down. The two year fall in short-term debt is actually about equal to projected drop in reserves. The Fund though sees things a bit differently. Buffers, according to the Fund’s staff report, are now low, and need to be rebuilt. Some in the market agree.  And that gets at a critical issue for China, and a critical issue for assessing reserve adequacy more generally. Just how many reserves do countries like China, need?

    China's Best Bank Called 'Mirage' of Shadow Lending - Bloomberg: The best-performing bank in China is in a struggling city in the northeast where weeds sprout alongside the concrete skeletons of high rises in an industrial zone that mostly looks like a ghost town. Steel plants have laid off tens of thousands of workers. Cranes stand idle on construction sites. Wipe away a spiderweb on a dirty glass door at an empty complex with smashed windows and there’s a notice from the local government demanding rent unpaid since November 2014. Yet the Bank of Tangshan’s financial statements hardly reflect these realities. Instead, this small lender reports the fastest growth of 156 Chinese financial institutions and the lowest level of bad loans, a mere 0.06 percent. Its profit jumped 436 percent in two years and assets soared almost 400 percent since the start of 2014 to 177.9 billion yuan ($26.7 billion). It’s largely driven by shadow lending. The bank is the most prominent example of the off-loan-book wizardry that’s turbo-charging some of China’s small and mid-sized banks, creating opaque risks that could lead to failures, bailouts or liquidity shocks that jolt the nation and global markets in the years ahead. “It’s a mirage built upon risks,” said He Xuanlai, of Commerzbank AG. The Singapore-based analyst cited smaller banks’ use of so-called “investment receivables” — including asset management plans and wealth management products — to boost lending without facing requirements to bolster capital and loan-loss provisions. “It’s hard to assess the banks’ true asset quality.”

      China’s Ever More Mysterious Tourism Numbers: China’s deficit in tourism is over 40 percent of China’s goods surplus (the other parts of services trade are in rough balance; China’s services deficit is for now all tourism); the tourism deficit is one of the main reasons why the rise in China’s goods surplus hasn’t led to a corresponding rise in China’s current account deficit. And the tourism deficit has materialized quickly. In 2013, China’s imports of tourism (travel services, in BoP speak) were about $100 billion. In the last four quarters of data, tourism imports were around $320 billion. The corresponding deficit rose from $75 billion in 2013 to over $200 billion in the last four quarters of data. It is one hell of a boom. China’s increased spending on tourism is getting close to equaling its decreased spending on commodities, and we all know that that has had a big global impact. And the IMF projects that China’s tourism boom will continue. The IMF’s long-term current account forecast assumes that continued explosive growth in tourism will pull China’s current account surplus back to around 1 percent of GDP even as China’s goods surplus remains elevated. A roughly $200 billion services deficit in 2015 will become a $500 billion deficit in 2020 (3 percent of $16 trillion is a big number; see table 2 on p. 40). There is only one problem with China’s current tourism boom: It isn’t confirmed in the data reported by China’s counterparties in the tourism trade. No one should doubt that Chinese tourism to Japan has increased enormously. It shows up in the Japanese arrivals data. It fits with a broader policy decision to liberalize visas. And it fits with economic theory too; the weaker yen has made Japan affordable to a broader group of Chinese residents. But spending by Chinese tourists in Japan is also too small relative to the total to drive the data.

     China takes aggressive steps to fend off banking, financial risks | Reuters: China took aggressive steps on Wednesday to head off signs of growing risks in its financial and banking system, unveiling detailed rules to curb an unruly peer-to-peer (P2P) lending sector and intervening in its money markets. In the past year, Chinese policymakers have been moving levers to try to keep credit growing at a reasonable pace to underpin the economy, while addressing vulnerable aspects of the financial and banking system. But sharply increasing debt levels have raised alarm bells, most lately from the International Monetary Fund, about the health of the financial system. The country's stock market crash last year is still fresh in investors' minds. This year, officials have expressed concern about the unravelling of Chinese peer-to-peer (P2P) online lending platforms that they had once hoped would provide a new channel of funding to spur the economy's growth. On Wednesday, the banking regulator and other government entities issued measures to curb a sector that has produced a raft of scandals. Almost half of the 4,000-odd lending platforms are "problematic", the China Banking Regulatory Commission warned.

    Household debt risks growing out of control - The government said Thursday it will control the supply of new homes to curb surging household debt, retracting its earlier policy of using residential construction to boost the economy. However, the latest in a series of measures to cut household debt is drawing skeptical responses from the market. The debt has kept growing and hit a record 1,257 trillion won ($1,120 billion) at the end of June, which amounts to 88 percent of the nation's gross domestic product. Analysts say that the effects will not be much different this time as the new package lacks substance to pull down the debt. The government can ill-afford to take aggressive measures on fears that a cool-down in the real estate market will further weaken the economy. Finance Minister Yoo Il-ho said the government will tighten its control on the housing supply at every stage, including restricting land supply and enhancing screening on the provision of debt guarantees by financial firms to construction companies. According to the package, the state-run Korea Land and Housing Corp. will limit the development of additional residential areas in the metropolitan region next year. Also, it will lower the number of construction approvals to curb the supply of new apartments and restrict issuances of debt guarantees. In Korea, construction companies sell new apartments before they are completed. The buyers make installment payments for the new homes while they are being built. Guarantees for completion and distribution are required for the builder in case it goes bankrupt before completing the apartment blocks.

    Japan consumer prices fall for 5th month, raising pressure on central bank - Consumer prices in Japan fell for a fifth straight month, underscoring the central bank's struggle to spur inflation to its 2 per cent target. The figures released Friday (Aug 26) are the last reading on this key measure before Bank Of Japan governor Haruhiko Kuroda and his board consider a possible policy revamp at their next meeting on Sept 20-21. Consumer prices excluding fresh food, the Bank of Japan's core gauge, dropped 0.5 per cent in July from a year earlier Consumer prices overall slipped 0.4 pe rcent.Consumer prices excluding food and energy rose 0.3 per cent. After more than three years of unprecedented monetary stimulus, the BOJ is no closer to its price target and investors are asking whether the central bank is running up against the limits of its effectiveness. Mr Kuroda has ordered a comprehensive assessment of policy that may result in further monetary easing, according to economists surveyed by Bloomberg. The yen's gains this year, weak exports and fragile consumer spending at home are adding to the BOJ's woes. "Given Kuroda has said he will act if the price target is in danger, today's data confirms he has to take action again," said Nobuyasu Atago, chief economist at Okasan Securities, previously head of the BOJ's price statistics division. "The strong yen is a big factor dragging on price growth and that is expected to continue." "The problem for the BOJ is, the Bank of Japan has pretty much exhausted all of its monetary policy tools to reflate the economy," said Takuji Okubo, chief economist at Japan Macro Advisors. The yen has gained about 20 per cent in 2016 against the US dollar, reducing inflationary pressures from imports while hurting export-dependent companies.

    World's biggest pension fund loses US$52 billion in stock rout - The world's biggest pension fund posted a US$52 billion (S$70.3 billion) loss last quarter as stocks tumbled and the yen surged, wiping out all investment gains since it overhauled its strategy by boosting shares and cutting bonds. Japan's Government Pension Investment Fund lost 3.9 per cent, or 5.2 trillion yen (S$70.3 billion), in the three months ended June 30, reducing assets to 129.7 trillion yen, it said in Tokyo on Friday. That erases a 4.1 trillion yen investing return for the previous six quarters starting October 2014, the month it decided to put half its assets into equities. The quarterly decline follows a 5.3 trillion yen loss in the fiscal year through March, the worst annual performance since the global financial crisis. After benefiting from a surge in Japanese equities and a weaker yen earlier in Prime Minister Shinzo Abe's term, GPIF has posted losses as domestic stocks tumble and gains in the currency reduce the value of overseas assets. Still, for Sumitomo Mitsui Trust Bank Ltd, that's no reason to veer from the current approach. "Since its investments are tied to market moves, it's natural that this would happen and there's no point looking at it with a short-term view,"

    Japan's fiscal 2017 budget requests look to top ¥101 trillion | The Japan Times: Budget requests by Japan’s central government offices for a new fiscal year from next April are expected to exceed ¥101 trillion ($1 trillion), government sources said Thursday. The requests for the general-account budget for fiscal 2017 will top ¥100 trillion for the third straight year, reflecting increasing social security costs amid a rapidly aging society and expenses to fund key policies of Prime Minister Shinzo Abe. The requests are likely to be some ¥5 trillion higher than the fiscal 2016 initial budget but fall around ¥1 trillion short of the record ¥102.4 trillion requested for the fiscal 2016 budget, as low interest rates will reduce debt servicing costs. The Finance Ministry will accept budget requests from other government agencies until next Wednesday, with an eye to slashing several trillion yen in a run-up to drafting a fiscal 2017 budget later this year as an economic slowdown may hurt tax revenues. Requests for social security costs such as pension and medical expenses are likely to exceed ¥31 trillion, up around ¥640 billion from the fiscal 2016 initial budget, while those for grants to local governments are expected to grow 4.8 percent to ¥16.01 trillion in general-account outlays. Requests for policy spending, which also include public works and educational expenditures and personnel costs for ministries, are expected to total around ¥77 trillion, the sources said.

     'Sufficient chance' of more BOJ easing in September, Kuroda says | The Japan Times: There is a “sufficient chance” the Bank of Japan will add to its unprecedented easing at next month’s policy meeting, Gov. Haruhiko Kuroda said in a recent interview published in the Sankei newspaper. The BOJ won’t hesitate to act based on discussions on the results of a comprehensive review at its Sept. 20 and 21 board meeting, Kuroda said in the article published Saturday. The bank will publish the results of the review, the first of its kind since Kuroda took over as governor in March 2013, when it releases its policy statement at the meeting, he said. Board members will discuss the economy and financial situation based on the comprehensive review, and if needed will take further easing steps without hesitation, Kuroda said in the interview. The governor regularly says the central bank won’t hesitate to add stimulus when needed, but he appears to be moving beyond his usual phrasing by saying there is “sufficient chance” of more easing. “The market thinks the BOJ is running out of ways” to achieve its 2 percent inflation target in the fiscal year starting in April, said Ryutaro Kono, chief Japan economist at BNP Paribas SA in Tokyo. “It’s important for the BOJ to dispel such concerns that it’s running out of ammunition.” The policy review comes as prices continue to fall, moving away from the bank’s target. Interest from global investors is high as the BOJ is the biggest single holder of Japanese government bonds and also one of the biggest stockholders in Japan. Deputy Gov. Kikuo Iwata said earlier this month that the central bank won’t taper its record easing program at the September meeting.

     Adviser to PM Abe: Japan needs 10 trillion yen stimulus in each of next two years | Reuters: Japan should spend 10 trillion yen ($99.83 billion) on fiscal stimulus both in fiscal 2017 and in fiscal 2018 to offset a lack of demand in the economy and eliminate the risk of deflation, an adviser to Prime Minister Shinzo Abe said on Tuesday. Abe has already compiled a stimulus package for the current fiscal year with 7.5 trillion yen in spending, but the government needs to spend more and do so quickly to boost demand, Satoshi Fujii, an adviser to Abe, told Reuters in an interview. "We need to spend 10 trillion yen next fiscal year and another 10 trillion yen the following fiscal year to eliminate the deflationary gap," he said. The Bank of Japan should stick with its existing quantitative easing but should examine its negative interest rate policy and decide how to proceed in the future, Fujii said. "The important point is the velocity of spending. The problem with fiscal stimulus up until now is the velocity of spending was not high enough," said Fujii, who is also a professor at Kyoto University. "There are a lot of opinions about negative rates, but I would like the BOJ to review this and decide what to do from here on." Fujii's comments suggest the government could rely more on fiscal stimulus and less on additional monetary easing to revive Japan's fortunes after the economy ground to a halt in the second quarter due to weak consumption and exports.

    Mobius Says Helicopter Money Will Be Japan’s Next Big Experiment - Bloomberg: Helicopter money is coming, says Mark Mobius, even as soon as next month. The 80-year-old investment veteran is outlining how he expects central banks to respond to sluggish economic growth. For Mobius, executive chairman of Templeton Emerging Markets Group, traditional easing measures have just made people save instead of spend or borrow. Combined with a stronger yen, he says that’s going to force the Bank of Japan governor to contemplate a policy he’s repeatedly ruled out. “They’re really beginning to think what ammunition they have,” he said in an interview on a visit to a typhoon-struck Tokyo this week. “The first reaction is to say, OK, let’s go for helicopter money, let’s get money directly into the hands of consumers,” he said. “I think that would probably be the next step.” Stimulus Flood Central bankers have flooded their economies with monetary stimulus in the eight years since the global financial crisis, driving up asset prices -- including the stock markets that Mobius invests in -- while struggling to kickstart global growth. A foray into negative interest rates in Japan has been met with the yen surging to about 100 per dollar, falling stocks and dwindling bank profits. Helicopter money, a kind of last resort in unconventional monetary policy, comes in several forms. The most simple is printing money and giving it to the public, hoping -- and even creating incentives that -- they’ll spend it. Others include financing state spending directly, or in other words putting money into the hands of companies.“I think they will engage in helicopter money with great care and great reluctance, and of course if they do it carefully it won’t have the desired effect,” he said.

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

    IMF Cannot Quit Fiscal Consolidation (in Asian Surplus Countries) - In theory, the IMF now wants current account surplus countries to rely more heavily on fiscal stimulus and less on monetary stimulus.This shift makes sense in a world marked by low interest rates, the risk that surplus countries will export liquidity traps to deficit economies, and concerns about contagious secular stagnation. Fiscal expansion tends to lower the surplus of surplus countries and regions, while monetary expansion tends to increase external surpluses. And large external surpluses should be a concern in a world where imbalances in goods trade are once again quite large—though the goods surpluses now being chalked up in many Asian countries are partially offset by hard-to-track deficits in “intangibles” (to use an old term), notably China’s ongoing deficit in investment income and its ever-rising and ever-harder-to-track deficit in tourism. In practice, though, the Fund seems to be having trouble actually advocating fiscal expansion in any major economy with a current account surplus. Best I can tell, the Fund is encouraging fiscal consolidation in China, Japan, and the eurozone. These economies have a combined GDP of close to $30 trillion. The Fund, by contrast, is, perhaps, willing to encourage a tiny bit of fiscal expansion in Sweden (though that isn’t obvious from the 2015 staff report) and in Korea—countries with a combined GDP of $2 trillion.*I previously have noted that the Fund is advocating a 2017 fiscal consolidation for the eurozone, as the consolidation the Fund advocates in France, Italy, and Spain would overwhelm the modest fiscal expansion the Fund proposed in the Netherlands (The IMF is recommending that Germany say on the fiscal sidelines in 2017).

    Philippine police anti-drugs operations have killed 712 since July, Senate hears -- The Philippines’ national police chief has said 712 people have been killed in police operations since 1 July in President Rodrigo Duterte’s hardline war on drugs. Speaking at a Senate hearing on extrajudicial killings, Ronald Dela Rosa said 1,067 killings by vigilante groups had been documented over the same period. The official tally for the past seven weeks is far higher than most unofficial counts of killings since Duterte was elected in late May. Duterte ran on a no-nonsense, anti-establishment platform and promised to wipe out crime in his first three to six months in office. He has publicly stated that he will not pursue law enforcement officers who shoot dead drug dealers.The 71-year-old leader, known locally as “the Punisher”, also urged citizens with guns to shoot and kill drug dealers who resist arrest and fight back. He has sworn to continue his war on crime despite what he labelled “stupid” criticism  criticism from the United Nations, including from the secretary general, Ban Ki-moon, who said the apparent support for extrajudicial killings was “illegal and a breach of fundamental rights and freedoms”. Rights groups and Filipino politicians have accused Duterte of creating a wave of killings – both extrajudicial attacks carried out by police and vigilante hits. Dela Rosa told the hearing that the country had 3.7 million drug users and that although much had been done to eradicate illegal drugs, the problem persisted. He said that from 1 July to 21 August, police arrested 10,153 “drug pushers and users” as part of the “double-barrel” policy, a two-pronged campaign that aims to target both high-level criminals and street-level drug users. More than 600,000 individuals had surrendered to police, Dela Rosa said.

    "I Don't Give A Shit About Them" - Philippines President Threatens To Quit "Son Of A Bitch" United Nations -- While the US media is obsessing over what could happen to the US if the diplomatic debacle that is Donald Trump becomes president (as opposed perhaps to the pathological liar and State Department-for-hire that is HIillary Clinton), the Philippines has a living, breathing example of the worst that a person who has zero regard for the status quo or the establishment, can unleash. Or perhaps the best. We are talking about the country's new president, Rodrigo Duterte, who most recently made headlines for calling the US ambassador to his country an "annoying, homosexual, son of a bitch", yet whose policies, unorthodox as they may be, are working when after some 400 drug dealers were killed in the Philippine government's "war on narco-politics", reportedly another 500,000 turned themselves in. In Duterte's latest outburst, the Philippine president has threatened that the country could leave the UN, after the organization urged the Philippines to stop executing and killing people linked to drug business and threatened that “state actors” could be punished. "Maybe we'll just have to decide to separate from the United Nations. If you're that rude, son of a bitch, we'll just leave you," Duterte told reporters in Davao, quoted by Bloomberg. “I don't give a shit about them,” he added. “They are the ones interfering. You do not just go out and give a shitting statement against a country.”

    India "Plays It Safe", Names Urjit Patel To Replace Rajan As Central Bank Governor -- Two months ago, the head of the Reserve Bank of India, Raghuram Rajan who some had called India's version of Paul Volcker, unexpectedly quit. As we briefly summarized at the time, the central bank succeeding in not only stabilizing the rupee and the local stock market, but making India the world's fastest growing major economy, overtaking China. However, his success had also planted the seeds of his own destruction: many Indian businessmen were are frustrated that interest rates have not fallen faster. Some tycoons were unhappy with growing pressure to repay their overleveraged companies’ debts to ailing state banks, despite tough economic times. And so, as a result of rising political and business pressure (although he would never admit to it), Rajan stepped down, prompting the question who would replace him, especially since Rajan was popular with most international investors and many say they will be watching closely to see if his successor continues to resist pressures from New Delhi. We got the answer earlier today, when India appointed Urjit Patel as the country’s next central bank chief. Patel is currently a deputy governor at the RBI, and a former consultant for the Boston Consulting Group. He has been appointed for three years and will begin his term once Mr. Rajan steps down on Sept. 4. A quick look at Patel's background: After obtaining his PhD, Dr. Patel joined the International Monetary Fund in 1990 worked on the USA, India, Bahamas and Myanmar desks at IMF till 1995. Thereafter he went on deputation the IMF to the Reserve Bank of India, where he played an advisory role in the development of the debt market, banking sector reforms, pension fund reforms, targeting of real exchange rate. After the two-year deputation with RBI, Patel became a Consultant to the Government of India in the Ministry of Finance, Department of Economic Affairs - a position he held from 1998 to 2001. On 11 January 2013, Urjit Patel was appointed as Deputy Governor of RBI for a period of three years. He took over charge of the vital Monetary Policy Department, succeeding Subir Gokarn to the post.

    Everyone Wants Emerging-Market Bonds, But There Aren’t Enough to Go Around - WSJ: As the hunt for yield stretches into emerging-market bonds, investors are finding there isn’t a lot of game to shoot. Such crowded terrain spells danger. The gusher of money into emerging-market bonds has hit extraordinary levels of late. In July, over $18 billion flooded in, and as of last week, $5 billion had entered emerging-market bond funds this month, according to data provider EPFR. As a comparison, July’s inflows are almost the same amount that were sucked out of emerging markets during the so-called taper tantrum three years ago. If anything, the balance of flows are looking a lot like the 2009 post-financial crisis world. And like 2009, bond supply is scarce. So even as some investors are driven by negative rates into higher yielding emerging-market bonds, they are meeting a dearth of product. Issuance is above last year’s very low levels, but not by enough to meet a wall of demand, according to Dealogic data. Led by central bank bond-buying globally and long-term investors including pension funds and insurers, world-wide demand for bonds is expected to rebound 46% by the end of this year, according to J.P. Morgan. This supply-demand mismatch has had an obvious effect on yields. It is with high-quality emerging-market bonds where the spreads seem to have become the most extreme. Emerging-market debt tends to trade alongside U.S. junk bonds, given the level of currency and political risk.

     Australia's national debt could hit $1 trillion as Scott Morrison warns of recession -- Federal Treasurer Scott Morrison will warn for the first time today that the national debt will blow out to $1 trillion in ten years if budget savings measures do not pass. In the first of a series of speeches in coming weeks, which will attempt to appeal to the Senate cross-bench, Morrison is set to warn of a recession if the government's plans are not put into action. Morrison has six billion dollars of savings measure he wishes to pass and will switch to alarmist language of the $1 trillion debt and possible recession to get them through the senate and parliament. “Whether the measures that are necessary to return to budget balance are supported is yet to be seen,” he will say in his first speech today.“Failure to do so, in the worst-case scenario, will see our gross debt rise to more than $1 trillion — one thousand billion dollars — in the next 10 years.” Morrison will caution that the country has between five and seven years to deal with the debt problem and will claim Labor’s plan to raise taxes is not the answer.

    Boko Haram is leaving a major healthcare crisis in its wake -- Nigeria's military has been busy chasing Boko Haram militants out of large swaths of the country's northeast over the last year, pushing fighters out from their camps and strongholds. But as the troops clear out militants, we're starting to see the true scope of what they left behind — a health crisis, and almost a million more people facing dire conditions than previously thought. For the first time, humanitarian organizations are entering areas across Nigeria's Borno State that were held by Boko Haram for years and then caught in the crossfire between the militants and the army. What they are finding is mass malnutrition, worrying epidemics, and a logistical nightmare. Recent visits, made possible by military escorts because the security situation remains unstable, found more than half of all medical facilities non-functional. Even healthcare centers still up and running are understaffed and short on supplies. There are least 800,000 people in the newly reached areas with urgent health problems, adding to the 7 million in the northeast region already in need of emergency assistance, according to the World Health Organization. Fifteen percent of the people in areas newly liberated from Boko Haram also display severe acute malnutrition, the health agency said. Just last week experts confirmed new cases of polio in the area, the first new outbreak in Africa in two years. Measles cases have also been identified. The WHO is already conducting a vaccination campaign against both.

    Mugabe Orders Arrest Of "Rats We Call Athletes" After Zimbabwe Wins No Olympic Medals -- It appears Zimbabwe President Robert Mugabe was banking on a precious metal inflow from Rio to fix his nation's ailing economy as he has ordered the arrest of all 31 Zimbabwean Olympic athletes arrested and detained for daring to return home with no medals. Zimbabwe which is one of the countries in the Olympics without a medal presented a team of 31 athletes. The closest any of the athletes came to win a contest was at the 8th position. As NaijaLoaded.com reports, Mr. Mugabe who is incensed with the team’s performance told the Police Chief to arrest all the team members and detain them. “We have wasted the country’s money on these rats we call athletes. If you are not ready to sacrifice and win even copper or brass medals (referring the 4th and 5th positions) as our neighbors Botswana did, then why do you go to waste our money” he said. ”If we needed people to just go to Brazil to sing our national anthem and hoist our flag, we would have sent some of the beautiful girls and handsome guys from University of Zimbabwe to represent us.” He added that, the money invested in the team to represent the country could have been used to provide amenities and build schools. “This situation is like an impotent man who is married to five women, what is the essence? I will make sure we share the cost across board for all of them to pay back to government chest even if it takes 10 years to recoup, now it turns out to be a soft loan we have given them to go and visit Brazil as tourist, they are useless” he concluded.

    Bolivian Minister Kidnapped, "Savagely Beaten To Death" By Striking Mineworkers - In a shocking development in Bolivia, striking workers - who were demanding more mining concessions with less stringent environmental rules - kidnapped and "savagely beat to death" 56-year-old Deputy Interior Minister Rodolfo Illanes. Bolivian President Evo Morales is calling Friday a day of "deep pain" for the country following the violent murder of Deputy Interior Minister Rodolfo Illanes on his way to negotiate with striiking mine-workers. Illanes "was kidnapped, tortured and murdered," Morales said. As Reuters reports, officials said he died of blows to the head. Striking Bolivian miners kidnapped and beat to death the country's deputy interior minister in a shocking spasm of violence following weeks of tension over dwindling paychecks in a region hit hard by falling metal prices. The miners were demanding they be allowed to work for private companies, who promise to put more cash in their pockets. The issue has bedeviled President Evo Morales, who began as a champion of the working class and privatized the nation's mining industry, only to see his support crater amid the downturn. Miners say Morales has become a shill of the rich, and done little to help them make ends meet as the economy slows. Deputy Minister Rodolfo Illanes, whose formal title is vice minister of the interior regime, had traveled Thursday to the scene of the violent protests in an effort to negotiate with the strikers who armed themselves with dynamite and seized several highways. As AP reports, the fatal beating came after the killings of two protesters in clashes with police Wednesday, deaths that likely fueled the tensions.

    Venezuela's Latest Response To Food Shortages: Ban Lines Outside Bakeries --- The tragedy of Venezuela continues unabated, but that doesn't mean the government of President Nicolás Maduro has stopped trying to fix problems like the devastating scarcity of food which has led to malnutrition, riots, food truck hijackings, vigilante lynchings of petty thieves, and the starvation of zoo animals. No, Maduro hasn't admitted the failure of Chavismo — the brand of Bolivarian socialism imposed on the oil-rich country by his late predecessor Hugo Chavez — instead, Venezuela's embattled leader has launched a war on "anxiety." The National Superintendency of Fair Prices has reportedly instituted a policy of fining bakeries that allow lines to stretch out their front doors, according to PanAmPost. The head of this particular bureaucracy, William Contreras, claims the lines aren't a true indicator of a severe shortage of bread, but rather, a political "strategy of generating anxiety."Contreras was also quoted by El Tiempo as saying the long lines represented "fairly clear political intentions and purposes" such as "destabilizing the economy and break[ing] the morale of the people." This is in keeping with Maduro's deflection of the blame he deserves for destroying Venezuela's economy, which he puts at the feet of U.S.-backed agitators engaging in "economic war" by keeping things like toilet paper off supermarket shelves.

      Venezuelan hospitals lack 80% of medicines, supplies - News - JamaicaObserver.com: – Hospitals in crisis-hit Venezuela are facing shortages of about eight in 10 medications and medical supplies needed to treat patients, according to a study published Tuesday. The 2016 National Hospital Survey found that 76 per cent of the medicines and 81 per cent of the medical and surgical supplies that doctors need had run out or were hit by severe shortages in the country's public hospitals. That was up from 67 per cent of medicines and 61 percent of supplies a year ago. The study, which analysed more than 240 health centers nationwide, was carried out by a non-profit medical organisation and academics at Central University of Venezuela.   It found that 90 per cent of hospital emergency services were hit by "periodic failures" and that 70 per cent of hospital nutrition programs reported shortages, in a country where food has also grown scarce. The shortages "explain why there are waiting lists at all the hospitals," said opposition lawmaker Jose Manuel Olivares, who presented the study in congress. The opposition-held legislature passed a law in April requiring President Nicolas Maduro's leftist government to accept humanitarian aid for the food and medicine shortages. But the Supreme Court, which the opposition says Maduro controls, ruled the measure unconstitutional.

    Deloitte and Touche sued in Dubai over Lebanese Canadian bank collapse - A Dubai-based investment group is suing the Middle Eastern arm of Deloitte and Touche after the accounting firm failed to flag up money laundering at a now-defunct Lebanese bank. Lebanese Canadian Bank paid over $100 million, or £76 million, in 2011 to settle claims brought by US authorities that it was involved in laundering drug money and funnelling funds to Hezbollah and other militant organisations. Deloitte and Touche has been the bank's main auditor from 1995 and remains its auditor in liquidation. LCB was shut down after an investigation by the US Federal Bureau of Investigations and Drug Enforcement Administration, and most of its assets were sold to Societe Generale. Nest Investments Holdings, along with 10 other minority shareholders, is preparing to bring a negligence lawsuit against the accounting firm and Middle East managing partner Joseph El Fadl at the Dubai International Financial Centre.

    Provoking Nuclear War by Media: Putin is Demon Number One. It was Putin who shot down a Malaysian airliner over Ukraine. Headline: “As far as I’m concerned, Putin killed my son.” No evidence required. It was Putin who was responsible for Washington’s documented (and paid for) overthrow of the elected government in Kiev in 2014. The subsequent terror campaign by fascist militias against the Russian-speaking population of Ukraine was the result of Putin’s “aggression”. Preventing Crimea from becoming a Nato missile base and protecting the mostly Russian population who had voted in a referendum to rejoin Russia – from which Crimea had been annexed – were more examples of Putin’s “aggression”. Smear by media inevitably becomes war by media. If war with Russia breaks out, by design or by accident, journalists will bear much of the responsibility. In the US, the anti-Russia campaign has been elevated to virtual reality. The New York Times columnist Paul Krugman, an economist with a Nobel Prize, has called Donald Trump the “Siberian Candidate” because Trump is Putin’s man, he says. Trump had dared to suggest, in a rare lucid moment, that war with Russia might be a bad idea. In fact, he has gone further and removed American arms shipments to Ukraine from the Republican platform. “Wouldn’t it be great if we got along with Russia,” he said. This is why America’s warmongering liberal establishment hates him. Trump’s racism and ranting demagoguery have nothing to do with it. Bill and Hillary Clinton’s record of racism and extremism can out-trump Trump’s any day. (This week is the 20th anniversary of the Clinton welfare “reform” that launched a war on African-Americans). As for Obama: while American police gun down his fellow African-Americans the great hope in the White House has done nothing to protect them, nothing to relieve their impoverishment, while running four rapacious wars and an assassination campaign without precedent. The CIA has demanded Trump is not elected. Pentagon generals have demanded he is not elected. The pro-war New York Times — taking a breather from its relentless low-rent Putin smears — demands that he is not elected. Something is up. These tribunes of “perpetual war” are terrified that the multi-billion-dollar business of war by which the United States maintains its dominance will be undermined if Trump does a deal with Putin, then with China’s Xi Jinping. Their panic at the possibility of the world’s great power talking peace – however unlikely – would be the blackest farce were the issues not so dire.

    Germans may soon be required to keep 10-day stockpile of food in case of attack --An upcoming report from the German government will recommend that all citizens stockpile five days of drinking water and 10 days of food supplies in case of "a development that could threaten our existence and cannot be categorically ruled out in the future," according to the Frankfurter Allgemeine Sonntagszeitung newspaper, which accessed the report. The newspaper also quoted the report, "Concept for Civil Defense," as saying that Germany's "population will be obliged" to follow the recommendation, although it remained unclear whether it would be legally binding. This would be the first time Germans would be subject to such a recommendation since the Cold War. A recent spate of terrorist attacks have left the country on edge. More than a million refugees arrived in Germany in 2015 alone, mostly fleeing Syria's civil war, and their presence has deepened a wide divide on immigration policy. Earlier in August, the German government announced a significant spending increase on police and security forces. The report was compiled by Germany's Interior Ministry, whose spokesman told Reuters that it would be presented to the cabinet Wednesday. The Interior Ministry is careful in the report to note that an attack on Germany's territory is unlikely to require a conventional deployment of ground troops. But the recommendation that Germans keep supplies on hand indicates that the government is thinking about what measures need to be taken should the government not be able to secure an area for a prolonged period of time after an attack.

     Armed police make Muslim woman remove her burkini on French beach - - Images have emerged of French police officers making a woman remove her burkini on a beach on Tuesday. One photograph shows four police officers standing over the middle-aged woman, who was lying down on the Promenade Des Anglais beach in Nice, just a few yards away from the Bastille Day lorry attack scene. In another, the police seem to watch as she removes a blue garment and one of the officers appears to take notes or give out an on-the-spot fine.   Officials in several French towns have implemented a ban on the burkini, which covers the body and head, saying they have concerns about religious clothing in the wake of multiple terrorist attacks in the country. On Tuesday, in another similar incident, a mother of two in Cannes said she had been fined on the beach for wearing a tunic, leggings, and a headscarf. In that case, the woman's ticket seen by the AFP news agency said she was not wearing "an outfit respecting good morals and secularism." The woman, a former air hostess from Toulouse, identified by only her first name, Siam, said: "I was sitting on a beach with my family. I was wearing a classic headscarf. I had no intention of swimming." She said her family had been citizens of France for three generations, adding: "Today we are not allowed on the beach. Tomorrow, the street? Tomorrow, we'll be forbidden from practicing our religion at all?

    RBS Pays Negative Interest on Large Deposits Starting Monday; Negative Interest Roundup - Mish - In response to the Bank of England setting interest rates at a record low 0.25% at its last meeting, the Royal Bank of Scotland sent out letters informing some large depositors that negative interest start on Monday. Postbank, a subsidiary of Deutsche Bank, will charge depositors €3.9 per month starting November, in response to the ECB’s negative interest rate policy. This is more money out the window for depositors. At the end of this article I have a roundup of banks offering negative interest rates on deposits. El Economista reports RBS and Postbank Begin to Charge Customers for Deposits. Royal Bank of Scotland (RBS), an entity in which the British Government controls a 72.6% stake, will begin charging its institutional customers for their deposits in the bank in order to cope with the last rate reduction interest held by the Bank of England (BoE) on August 4. In addition, two other German companies will do the same to cushion the negative rates implemented by the ECB. According to the newspaper Financial Times, RBS has sent a letter to certain corporate customers of its investment banking division in which indicates that negative interest rates will apply from next Monday. The negative interest rates affect customers operating in futures and options and therefore maintain deposits as collateral, said the British head a knowledgeable banker plans of the entity. In the letter, RBS argues that so far have remained at 0% deposit rate, but the time has come where they can not “hold” this level, so begin applying negative interest rates. Also, the German bank Postbank, a subsidiary of Deutsche Bank, will charge €3.9 per month to customers to keep their current accounts in order to offset the negative interest rates of the European Central Bank (ECB), reports Reuters.

    The head of Germany’s largest bank says negative rates are ‘fatal’ - Add John Cryan to the ensemble of Wall Street heavyweights decrying the emergence of negative-yielding debt. Cryan, the chief executive of Deutsche Bank—Germany’s largest and most prominent bank, with some €­­1.7 trillion ($1.9 trillion) in assets—cautioned that the negative interest-rate policy could have “fatal consequences.” He made is remarks as part of a guest commentary published in the German newspaper Handelsblatt on Aug. 23. “Monetary policy is now running counter to the aims of strengthening the economy and making the European banking system safer,” Cryan said, ahead of a bank summit starting Aug. 31. Cryan also said negative rates punish savers and could have disastrous implications for pensions, which attempt to match their liabilities with safe, interest-bearing assets like bonds. The remarks come as the U.S. stock market is hovering near records, with the S&P 500 index Dow Jones Industrial Average and Nasdaq Composite all less than a percent from all-time highs, as of Wednesday’s close. Government bond yields are hanging near historic lows, with the U.S. benchmark 10-year Treasury note bearing a yield of 1.56% and Germany’s benchmark 10-year bund yielding negative 0.008%, according to FactSet. The Deutsche Bank boss’s comments also come amid a concatenation of warnings from high-profile investors and pundits, including Janus Capital’s Bill Gross, DoubleLine Capital’s Jeff Gundlach, and recently the author of Grant’s Interest Rate Observer, Jim Grant. For Deutsche Bank’s part, the institution has been among the large European banks that have more acutely felt the pinch of negative interest rates in Europe, which has crimped the profitability of lenders.

    There’s no yield, and Citi isn’t going to take it anymore -- Citi’s Matt King has some harsh words for central bankers ahead of this week’s gathering in Jackson Hole, Wyoming: he says they’ve broken the market. King echoes a group of fund managers who say central banks’ stimulus efforts are distorting the way global markets function. The problem is this: with negative yields on $13 trillion of safe assets, investment managers are crowding into the shrinking group of investments with yield — or into securities they may be able to sell to central banks. This has been frustrating for those fund managers, to say the least. (This journalist remembers getting laughed at when she asked an expert how to determine the value of a Treasury security, because the Federal Reserve still owns more than $2 trillion of them.) Instead of gauging market fundamentals in their decisions, investors are primarily concerned with the outlook for central bank policy. So they crowd into trades that could profit off of the actions of central bankers in Europe, Japan or the UK. That’s why Bill Gross and Paul Singer have both bemoaned the effect central banks have had on the global markets and the economy recently. Gross says it’s causing growth to stagnate, and Singer is warning of a sharp reversal. King agrees. Here are some of the reasons he thinks markets are broken:

    1. A greater share of global equity-market variance is explained by macro factors, according to the bank’s quant team. From his note: “When there’s only one factor dominating markets, it inevitably forces investors the same way round.”
    2. Credit spreads aren’t responding to climbing leverage and defaults. If defaults and leverage are higher, you’d expect investors to demand more yield to own a security — unless, of course, they think they’ll be able to sell it to a central bank soon:

    Derivatives Users Hit as Negative Rates Raise Collateral Costs - Bloomberg: Derivatives users are the latest group to be hurt by negative interest rates as they get penalized for the cash they park at Europe’s biggest clearinghouses. Traders can thank European Central Bank President Mario Draghi. Futures and swaps are used to hedge or speculate on everything from German interest rates to oil prices. To avoid taking a loss if a counterparty to a trade defaults, they post collateral, such as government bonds or cash, at a clearinghouse. In Europe, the biggest ones are in Frankfurt and London. But with German and U.K. debt yields so low, or even negative, clearinghouse customers are sometimes losing money on those assets. Europe’s big clearing firms are operated by the likes of Deutsche Boerse AG, Intercontinental Exchange Inc. and LCH, which is majority owned by London Stock Exchange Group Plc. To varying degrees, they have customers who lose money on euro collateral, whereas they used to receive a return. Two-year German debt yields minus 0.64 percent. An important benchmark known as Eonia, the euro overnight index average, is at minus 0.34 percent. While the costs don’t so far seem to be impeding trading or collateral holdings, they’re a sign that monetary policy may be reaching its limits, as central bankers such as Draghi have reduced interest rates and bought up vast amount of assets to try to boost weak economic growth. The unusual costs to hold cash at clearinghouses suggest the measures are starting to have unintended consequences. “It’s gotten to the extent that you’re seeing negative reactions,” said Gregor Macintosh, chief investment officer macro and fixed income at Lombard Odier Investment Managers in Geneva. “The expansion of these easing programs risks enhancing the negative feedback loop. As returns from investment are further suppressed, in turn it’s further reducing the incentive to invest.”

    Revealed: ECB Secretly Hands Cash to Select Corporations -- In June, the ECB began buying the bonds of some of the most powerful companies in Europe as well as the European subsidiaries of foreign multinationals. This pushed the average yield on euro investment-grade corporate debt to 0.65%. Large quantities of highly rated corporate debt with shorter maturities are trading at negative yields, where brainwashed investors engage in the absurdity of paying for the privilege of lending money to corporations. By August 12, the ECB had handed out over €16 billion in freshly printed money in exchange for corporate bonds.  Throughout, the public was given to understand that the ECB was buying already-issued bonds trading in secondary markets. But the public has been fooled. Now it has been revealed by The Wall Street Journal that the ECB has also secretly been buying bonds directly from companies, thus handing them directly its freshly printed money. It has been doing so via “private placements.” These debt sales are not open to the broader market. There’s no need for a prospectus. Only a small number of institutional investors participate. It allows companies to raise cash quickly, without jumping through the normal hoops. Private placements are not unusual. What’s new is that the ECB used them to buy bonds. There have been two of these secretive private placements. And Morgan Stanley arranged them. The Wall Street Journal determined this by analyzing data from Dealogic and national central banks. The two companies involved were the Spanish energy giants Repsol and Iberdrola. The Bank of Spain, now no more than a local branch of the ECB, was among the select buyers of a €500 million bond issued by Repsol. It is also the owner of part of a €200 million bond issued by Iberdrola. .. because there is no prospectus or the other formalities required in a normal bond offering, “there won’t be any transparency, there won’t be a press release. It’s all done discreetly.” The central bank is able to operate this way for two reasons: first, the general lack of public awareness and interest in what it does; and second, the blanket immunity it and its employees enjoy from virtually all forms of legal redress. As we recently reported, the ECB and all of its affiliated national central banks are, by law, above the law of national jurisdictions and answerable only to the European Court of Justice, provided they are fulfilling the functions and responsibilities assigned to them by EU law.

    Private Placement: European Companies Issue Debt Simply Because the ECB will Buy That Debt - Mish - Things are so absurd in the Eurozone that the ECB is buying private placement debt with little regard for safety. In turn, private equity companies issue debt simply because they know in advance the ECB will buy it. It’s a startling example of how the market is adapting to extremes of monetary policy, and it’s a safe conclusion the experiment will not end well. For now, it’s a Seller’s Paradise as Companies Build Bonds for European Central Bank to Buy. The European Central Bank’s corporate-bond-buying program has stirred so much action in credit markets that some investment banks and companies are creating new debt especially for the central bank to buy. In two instances, the ECB has bought bonds directly from European companies through so-called private placements, in which debt is sold to a tight circle of buyers without the formality of a wider auction. Now, they are all but inviting private actors to concoct specific things for them to buy so they can continue pumping money into the financial system. The furious central-bank buying has been a relief to companies and governments that can now borrow at rock-bottom interest rates. But it has also spurred criticism that the extreme policies are killing the returns available to other investors, such as pension funds, and loading up the economy and financial system with potentially overpriced debt. Private placements are private debt sales not open to the broader market, typically relying on a handful of investors that want to buy a company’s bonds. “Typically there won’t be a prospectus, there won’t be any transparency, there won’t be a press release. It’s all done discreetly,”

    ECB faces bulked-up govt bond buying if QE extended beyond March | Reuters: The European Central Bank will have to bump up its monthly purchases of government bonds if it decides to continue buying beyond March 2017, just to ensure maturing paper does not reduce the pace of its money printing. J.P. Morgan estimates 320 billion euros ($363 billion) worth of bonds will mature between 2017 and 2019, and will need to be invested again to honour an ECB pledge to redeploy the money it receives when bonds are repaid. This additional buying could compound liquidity problems that have created unpredictable price swings in the bond market, and the ECB might find it hard to source enough paper and keep within its purchase criteria in some countries - notably Ireland and Portugal where it has already scaled back transactions. Most of the maturing paper is government debt that the ECB started buying in March 2015 in a bid to kick-start inflation and growth in the euro zone by lowering the cost of borrowing. With inflation hovering around zero, expectations are growing that the ECB will announce an extension of its quantitative easing (QE) programme, possibly as soon as its next meeting on Sept. 8. This has led analysts to start questioning how the ECB would approach the reinvestment of maturing government bonds if the money-printing scheme continues. An ECB spokeswoman said any redemption is added to the 80 billion euros of assets the Bank buys every month.

    How Long Will It Take for the ECB to Own All Sovereign Debt of Spain, Germany, France? - Mish -- Huky Guru on Guru’s Blog posted a chart that answers the question: How Long Will it Take For the ECB to Own All Sovereign Debt of Eurozone Countries? At the current rate of purchase of sovereign bonds the ECB will have have purchased all sovereign debt issued by Spain in 9 years and Germany in 8.8 years. Distortion in the corporate bond market has picked up since the ECB has started buying corporate bonds. The above chart shows a comparison between the yields of bonds eligible to be purchased by the ECB and bonds with the same rating in the same sector that are not eligible for the ECB.  Corporate bond yields have collapsed across the board since the ECB’s announcement, but even more so for eligible bonds.

    Coeure: ECB may need to bolster its monetary stimulus programs if governments fail to act to boost their economies - Speaking at an economics conference yesterday in Geneva, Mr. B. Coeure (ECB’s Executive Board Member) reportedly said that the ECB may be forced to bolster its monetary stimulus programs if governments fail to act to boost their economies, while also noting that “If there is not much taking place on the structural reform front, if there is not much taking place on the fiscal policy front, then the ECB will do more”. According to MNI, Mr. Coeure said also that "Growth is picking up," albeit "certainly not up to the levels we΄d like to see. Potential growth is clearly much below what it used to be". Moreover, ECB executive criticised the current European structures as "not fit for the purpose of sustaining the single currency," which he attributed to a "bleak performance in structural terms."

    Fiscal spend in richer euro countries would help periphery: ECB paper | Reuters: Fiscal spending in "core" euro zone countries, such as Germany, would help weaker economies in the region's periphery at a time when European Central Bank rates are stuck at zero, an ECB research paper showed on Thursday. The authors argue for fiscal stimulus in the euro zone's core to counter the effects of "structural reforms", which temporarily reduce prices and wages, in peripheral countries, such as Greece, Portugal and Spain. The paper provides further ammunition to ECB President Mario Draghi, who has long been calling for countries to use the "fiscal space" they have under European rules and raise the pace of reform. His plea has fallen on deaf ears so far, with Germany, which is sitting on its biggest budget surplus since records began with reunification in 1990, reluctant to loosen the purse strings. The study found that spending in core countries, which include Germany, France and the Netherlands, would boost euro zone inflation, thereby lowering the cost of borrowing for firms and households in real terms. If ECB interest rates remained at zero despite the inflation rise, this would then stimulate domestic demand in peripheral economies as well as their exports to core countries, according to the three authors.

    Eurozone PMI Data Point to Quicker Recovery - WSJ: The eurozone’s economic recovery gained a little speed in August, according to surveys of purchasing managers that provide fresh evidence of the currency area’s resilience in the wake of the U.K.’s decision to leave the European Union. In advance of the British referendum in late June, economists had feared that a vote to depart the EU could weaken spending by businesses and consumers across the bloc, while reducing eurozone exports to the U.K. But surveys of businesses and households undertaken during the eight weeks since the vote have registered little negative impact on the eurozone economy, including data firm IHS Markit INFO 0.40 % ’s monthly questioning of 5,000 businesses operating in the manufacturing and services sectors. IHS Markit on Tuesday said its measure of private-sector activity based on that questioning and known as the composite Purchasing Managers Index rose to 53.3 from in 53.2 in July. A reading below 50.0 signals a decline in activity, and a reading above that level indicates an expansion. Economists surveyed by The Wall Street Journal last week had estimated that the PMI fell to 53.0. “The August flash PMI indicates that the eurozone remains on a steady growth path in the third quarter, with no signs of the recovery being derailed by Brexit uncertainty,” said Chris Williamson, IHS Markit’s chief business economist. The surveys of purchasing managers suggest the recovery is likely to continue over coming months, with service providers reporting the strongest flow of new orders in four months, although manufacturers saw new orders slow. However, consumer confidence weakened for the third straight month, a warning sign for an economy that has been heavily reliant on an increase in household spending for much of its recent, modest expansion.

     Why Portugal could be Europe’s next economic disaster -  First it was Brexit, then it was the Italian banking sector, and now it’s Portugal’s surprisingly slow growth that’s threatening the stability of Europe’s financial system this summer. Over the past few weeks, fears have mounted that the country’s weak economy will prompt a credit ratings downgrade, making Portuguese bonds ineligible for the European Central Bank’s quantitative easing program. Those jitters have pushed up the yields on Portuguese government paper, with the yield on 10-year debt, jumping above 3% this week. That’s up from around 2.3% less than a year ago. “The sharp rise in Portugal’s bond yields [this month] reflected justified concerns about the government’s credit rating,” said Jack Allen, European economist at Capital Economics, in a note. “While the government intends to stick to the EU’s fiscal rules, slow economic growth will leave its credit rating in doubt for some time. As a result, investors’ fears that Portugal might eventually be excluded from the ECB’s asset purchase program are unlikely to subside,” he said. Concerns over Portugal’s lackluster economy took off earlier in August when ratings agency DBRS hinted the country could lose its investment grade credit rating at the next review in October. In an interview with Reuters, head of sovereign ratings at DBRS Fergus McCormick said “pressures appear to be mounting” in Portugal after second-quarter gross domestic product printed at a disappointing 0.2%.

     Danish MP: EU a bigger threat than Russia -  Danish People’s Party MP Marie Krarup is under fire for saying that the EU is “without a doubt” a bigger threat to Denmark than Russia, In an interview with Mandag Morgen, Krarup said that the EU is an existential threat to Denmark and is a much bigger problem than Russia. "For Denmark? Yes, without a doubt. Just Schengen alone is a catastrophe. It’s something that will make Denmark disappear from the world map if we don’t pull ourselves together. That national borders have been disbanded is a threat against Denmark’s existence,” she told the magazine. She went on to that although she views Russian President Vladimir Putin as “an exponent of an despotic, non-democratic system that we don’t want in Denmark”, she would welcome his help in dismantling the EU in its current form. “I don’t want an EU like the one we have time. I want the EU buried and replaced by a forum for free trade. That’s our policy. If Putin or Marine Le Pen [France’s most powerful Eurosceptic, ed.] can help with that, that’ just fine,” she told Mandag Morgen, adding she'd also except help from "Satan himself".

    Scotland's deficit almost £15bn as North Sea oil revenues fall 97% in one year (From Herald Scotland): Scotland's share of North Sea oil revenues have fallen 97 per cent in the past financial year, according to new figures. The Government and Expenditure Revenue Scotland (GERS) figures, unveiled at a launch in Glasgow, show that oil revenues fell from £1.8bn to £60m between 2015 and 2016. Scotland's deficit has also grown from 9.1 per cent to 9.5 per cent, including its share of North Sea revenues, more than double the four per cent figure for the UK as a whole.The new statistics show that while the country's spending deficit has remained at around £15bn for the 2015-16 financial year, it spent £14.8bn more than it raised in taxes. Scotland's onshore revenues grew by £1.9 billion. The figures also show that Scottish public sector revenue, including an illustrative geographic share of North Sea revenues, was estimated as £53.7 billion - the equivalent of £10,000 per person and about £400 per person lower than the UK average. Meanwhile, public spending in Scotland totalled £68.6 billion. This is equivalent to 9.1% of total UK public sector expenditure, and £12,800 per person, which is £1,200 per person greater than the UK average.

    Brexit: Article 50 must be triggered within months to avoid a 'neverendum', warns Iain Duncan Smith - Iain Duncan Smith has called for talks about Britain leaving the EU to take place “as soon as possible”, warning the referendum risks becoming a “neverendum” as negotiations are delayed. The former Work and Pensions Secretary and prominent Leave campaigner appealed to Theresa May to take swift action to ensure Brexit is enacted imminently. Writing in a column for The Sun newspaper, Mr Duncan Smith said: “It is clear that the referendum was NOT a suggestion… We need to get on with triggering Article 50, as the Government has said, in early 2017.  “We shouldn’t wait to see the outcome of the two elections in Germany and France – that suggestion is yet another attempt to turn this referendum result into a ‘neverendum’… My time in industry before I came into politics taught me that every negotiation begins with belief in the strength of your own position. Let us leave as soon as possible, so that we can get on and make the most of our new- found independence.” Following the vote to leave the European Union, the UK can decide when to trigger Article 50 and formally begin the process of leaving. Once it is triggerd, a two year period will begin in which formal negotiations will be undertaken. However, there is fierce debate over when the mechanism should be engaged. It recently emerged Remain supporters have crowd-funded £32,000 in legal fees to mount a High Court challenge in a bid to delay Article 50 by requiring Parliament to approve any negotiations before they begin.  In Northern Ireland, where a majority backed Remain, a legal challenge has been launched arguing that Brexit could threaten the peace process and calling for Theresa May to gain consent of the Stormont parliament in negotiations.

    Prevailing Gray Swans: The Clear and Present Danger List --Prevailing Gray Swans provides a list of known catalysts or flashpoints in the world today that have the highest likelihood of causing great harm to quality of life to North Americans or on a global scale. These flashpoints are called gray swans in lieu of black swans because instead of being absolutely unknown there is a limited visibility to estimate their consequence and nature — they are clear and present dangers that command vigilance. The list is unranked (and unrankable) and is updated weekly.

    1. European banking collapse with immediate global contagion (ground zero: Deutsche Bank). [Analysis…]
    2. European banking collapse (ground zero: Italian banking sector).[Analysis…]
    3. Economic collapse of Japan. [Analysis…]
    4. Cyberterrorism/cyberwarfare/sabotage affecting US infrastructure (e.g. financial markets, power grid, internet). [Analysis…]
    5. The collapse of the European Union due to a successful Brexit-like referendum in France or Italy. [Analysis…]
    6. Escalation of a war between the US/NATO and Russia originating from the Syrian conflict or from the eastern European border countries (Balkans/Poland). [Analysis…]
    7. Bursting of the global sovereign bond bubble.
    8. Escalation of a war between the US and China originating from the South China Sea territorial water disputes.
    9. A large and rapid Chinese currency devaluation.
    10. A failure to physically deliver (force majeure) on the New York Comex precious metals market exchange (monetary metals: gold and/or silver).
    11. Organized civil unrest that escalates to prolonged violence in multiple US cities which triggers martial law and a permanent re-calibration of the social consciousness vis-à-vis a collective, national awakening to a starkly different definition of America on all levels