global glass onion

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

Saturday, October 25, 2014

week ending Oct 25

How big should central bank balance sheets be? - In 2007, the Fed’s balance sheet was less than $1 trillion. Today, it is nearly $4.5 trillion. The U.S. experience is far from unique. Since 2007, global central bank balance sheets have nearly tripled to more than $22 trillion as of mid-2014. And, the increase is split evenly between advanced and emerging market economies (EMEs) (see chart). So what’s the right size? The answer depends on the policy goals and the nature of the financial system. In the case of the Fed, we expect that it will be able to achieve its long-term objectives with fewer than half of its current assets.  The size of central bank balance sheets varies dramatically from country to country (see the two charts below). In advanced economies, the range today is from less than 5% of GDP in Canada to more than 80% in Switzerland. Central banks in EMEs have balance sheets that are nearly twice the advanced-economy norm, ranging from 12% of GDP in Colombia to nearly 140% of GDP in Hong Kong.  In financial systems where banks dominate, central bank balance sheets will be larger. Where reserve requirements are high, central banks need bigger balance sheets to satisfy commercial bank reserve needs. Where payments technology relies heavily on currency (rather than electronic transfers), the public holds more cash and commercial banks also seek larger reserve buffers to meet payments obligations. Policymakers focused on exchange rate stability typically need big foreign currency reserves. Finally, central banks that are not politically independent may hold a large volume of assets in their role as the government’s bank, allowing them to target favored assets. In contrast, independent central banks tend to hold small portfolios of relatively short-term government securities. Such “asset neutrality” establishes a bulwark against influence over the central bank by the fiscal authority.

FRB: H.4.1 Release--Factors Affecting Reserve Balances--October 23, 2014: Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks

Fed to End Bond Buys This Month as Planned, Says Rosengren - –The Federal Reserve will likely conclude its bond-buying program this month as planned, despite recent financial market volatility and speculation to the contrary, Boston Fed President Eric Rosengren said in an interview Saturday with The Wall Street Journal. “The bond purchase program was started under the context that we needed to make substantial improvements in labor markets–5.9% [unemployment] relative to where we were when we started the program is a substantial improvement,” Mr. Rosengren said. When the Fed launched its third round of bond buying in September 2012, the latest reported jobless rate, for August of that year, was 8.1%.   (Read a Q & A with Mr. Rosengren.) Mr. Rosengren said he remains confident the U.S. economy will grow a little bit under 3% over the next year and a half, adding that he had yet to see much of a drag on domestic growth from softer activity overseas. If such weakness does begin to affect the United States, however, the central bank could merely push back on the likely timing of its first interest rate hike, rather than continuing to buy modest amounts of bonds monthly as it is now doing, Mr. Rosengren said. “There are other tools that we can use. Staying at the zero lower bound for longer is one,” he said. The Fed has kept official interest rates at effectively zero since December 2008, and bought over $3 trillion in mortgage and Treasury bonds in an effort to support the weakest economic recovery in decades. “We do want to get inflation back up to 2% and if we need tighter labor markets than we’ve historically needed in order to do that then we should allow the unemployment rate to drift further” below what some officials might otherwise consider full employment, Mr. Rosengren said.

The Chart That Explains Why Fed's Bullard Wants To Restart The QE Flow -- Remember when the Fed tried to convince the world that it was all about the 'stock' - and not the 'flow' - of Federal Reserve Assets that kept the world afloat on easy monetary policy (despite even Bullard admitting that was not the case after Goldman exposed the ugly truth). Having first explained to the world that it's all about the flow over 2 years ago, it appears that, as every equity asset manager knows deep down (but is loathed to admit for fear of losing AUM), of course "tapering is tightening" - as the following chart shows, equity markets are waking up abruptly to that reality. So no wonder Bullard is now calling for moar QE - he knows it's all there is to fill the gap between economic reality and market fiction.

Is The Fed Behind The Curve or Jumping The Gun? --Earlier this year, the commentators in the U.S. who had been warning of imminent inflation ever since the Fed began its highly accommodative policies raised the alert to code orange. And for the first time since the crisis, the inflation hawks were joined in their concern by a broader range of commentators. Although inflation remained contained, the “behind the curve” genie was definitely out of the bottle. Are we nearing the time when highly accommodative policies should be withdrawn? We all hope so—and the sooner the better. Further, even inflation doves must admit that if the Fed fails to withdraw accommodation when the proper time arrives, inflation will begin to rise. And if at that point, the Fed ignores the rising inflation, inflation will continue rising. But how can we tell when the time to tighten has arrived? BloombergLet’s look at what history tells us about episodes like this—that is, episodes in which large economies were mired for a long period with the main monetary policy interest rate at its zero lower bound. In such circumstances, traditional interest rate ease by the central bank is impossible, and the inability to lower rates brings a powerful asymmetry to the policy problem. If the economy were to boom or inflation to rise, the central bank could pursue the standard approach of raising interest rates. There is little mystery here: Sufficient rate increases reliably slow the pace of economic activity and relieve upward pressure on wages and prices. If, in contrast, the economy were to falter, the traditional response of lowering rates is foreclosed. The central bank would be forced to dig even deeper into its toolbox of nontraditional policy measures. This is a very unattractive option: we have extremely limited experience with these tools, we are unsure about their potency, and we must acknowledge that they may have unintended consequences.

 Santelli & Schiff: "A Messy Exit Is A Given... Ending QE Will Plunge US Into Severe Recession" - "Markets are slowly coming to grips with reality is not going to be as easy as everybody thought," Peter Schiff tells CNBC's Rick Santelli, noting the pick up in volatility across asset classes recently. What The Fed clearly does not understand, Schiff blasts, is that "you cannot end quantitative easing without plunging the US into a severe recession." Because of the Fed's extreme monetary policy and the mal-investment that flows from it, Schiff says, "The US economy is more screwed up now than it's ever been in history." Most prophetically, we suspect, Santelli agrees that "a messy exit is a given," and Schiff believes they know that and that is why QE4 is coming simply "because it hasn't worked and they can't admit it's been a dismal failure."

The Magic Number Is Revealed: It Costs Central Banks $200 Billion Per Quarter To Avoid A Market Crash -- "For over a year now, central banks have quietly being reducing their support. As Figure 7 shows, much of this is down to the Fed, but the contraction in the ECB’s balance sheet has also been significant. Seen from this perspective, a negative reaction in markets was long overdue: very roughly, the charts suggest that zero stimulus would be consistent with 50bp widening in investment grade, or a little over a ten percent quarterly drop in equities. Put differently, it takes around $200bn per quarter just to keep markets from selling off."

More on the Fed, QE, and the full employment unemployment rate.  -Just a quick follow up on this morning’s meanderings about the Fed, QE (quantitative easing, or the Fed’s asset purchasing program, currently winding down), inequality, and that sort of stuff. I mentioned the President of Boston Fed, Eric Rosengren, and here he is again saying very cool things in my hometown paper. For example, this is much the same point I made this AM about how you’d want to think about the net impact of QE: There’s no disputing the fact that asset prices have gone up as a result of what we’re doing,” Rosengren acknowledged, and that “disproportionately helps somebody who has enough wealth that they have, for example, stocks.” But “on balance” he “thinks the net benefits outweigh the net costs in terms of income inequality” for a simple reason: “the one thing that really contributes to income inequality is to have no income at all.” Better yet, on the unemployment rate consistent with full employment:  So it may be that when we get to 5.25 percent unemployment, if we’re not having any inflationary pressure, I’d be willing to probe further.” That’s because full employment is “not a theoretical concept, it’s really an empirical observation: at what point is there enough tightness in the labor market that we start seeing wages and prices going up consistent with a 2 percent inflation target.” And the answer is: it depends. Since there are still so many people working part-time for economic reasons, “it may be that when we hit 5.25 percent unemployment, there’s actually more slack, which would mean we’d be comfortable waiting a little longer before we should fully tighten up monetary policy.”

How Quantitative Easing Contributed to the Nation's Inequality Problem - Janet L. Yellen, the chairwoman of the Federal Reserve, is regarded as a person of the highest integrity. And that is what’s so utterly confounding about the speech she gave in Boston last week about inequality. She did a wonderful job highlighting the growing disparity between rich and poor and how it is beginning to impinge upon what it means to be an American, but she ignored the fact that, in many ways, the Fed’s policies have compounded the problem. There is no question that her remarks were a real shocker. We have been conditioned not to expect anything so honest, and in such clear and unequivocal language, from any top government official, let alone from the sitting head of the Federal Reserve.  Ms. Yellen’s speech seemed heartfelt. Yet, she has endorsed the Fed’s policies, started by her two immediate predecessors, Alan Greenspan and Ben S. Bernanke, that drove down interest rates to historically low levels – policies that have actually exacerbated the problem that she says she wants to correct. She is failing to appreciate how Mr. Bernanke’s extraordinary quantitative easing program, started in the wake of the financial crisis, has only widened the gulf between the haves and have-nots. If she does understand, she certainly made no mention of it in her speech in Boston. Indeed, there was no mention whatsoever of the Fed’s easy monetary policies at all, let alone how they have helped to cause income inequality.

Monetary policy and inequality in the US - There are several conflicting channels through which monetary policy could affect the distribution of wealth, income, and consumption. This column argues that contractionary monetary policy raised inequality in the US, while expansionary monetary policy lowered it. This evidence stresses the need for monetary policy models that take into account heterogeneity across households. Current monetary policy models may significantly understate the welfare costs of zero-bound episodes.

Is the Fed guilty of raising Inequality? -The Fed is an accomplice to the increase in inequality. An accomplice is an entity that helps another entity commit a crime. The real change that led to increased inequality is the conspicuous drop in labor share after the crisis. Record profits by firms were not being transmitted to labor. That was not the fault of the Fed. However, the Fed fed the situation by putting excessive liquidity into the capital income stream. The transmission mechanism to direct that liquidity to labor had broken down. The Fed knew that, but the Fed kept supporting the guilty ones who soaked up the excessive liquidity into capital income. In the end, capital income grew tremendously, while labor income didn’t. Inequality increased. So the Fed is an accomplice to the rise in inequality.

Debate rages on quantitative easing’s effect on inequality - FT.com: Since quantitative easing began in the US, Japan and UK, their central banks have created billions of dollars, yen and pounds to buy financial assets. Bond and equity markets have staged huge rebounds and income inequality in most advanced economies has risen sharply. These facts raise an obvious question: does QE help the rich at the expense of the poor? With the US Federal Reserve expected to end its asset purchases next week, any assessment of the effectiveness of QE must take into account its distributionary impact. The case for the prosecution is loud and diverse. In the US, some of QE’s fiercest critics on inequality grounds are on the political right. Mitt Romney, the 2012 Republican presidential candidate, blamed QE for the rise in US inequality because it “held down interest rates [and] caused the stock market to rise”. In Britain, the complaints have generally come from the other side of the political spectrum. These criticisms were fuelled by Bank of England research showing that QE boosted asset prices and household financial wealth, which is “heavily skewed with the top 5 per cent of households holding 40 per cent of these assets”. When the study was published in 2012, the leftwing website “Left Foot Forward” wrote that QE had “made the rich richer [and] widened inequalities that already existed.” Pensioner lobby groups have also argued that low interest rates and QE combined have hit the incomes of the old, who rely disproportionately on interest income.

Yes, the Federal Reserve can reduce inequality. - It was my privilege to attend a recent conference at the Boston Federal Reserve on the topic of inequality — specifically, the growing inequality of opportunity in America. The presentations, including one by Fed Chair Janet Yellen, made a solid case that our high levels of inequality are eroding opportunity for many on the wrong side of the wealth divide. But there was a big question hanging over the proceedings: Can the Federal Reserve actually do much to reduce inequality or raise opportunity? For at least three reasons, the answer is “yes.” Moreover, the Fed can also worsen inequality if it gets these wrong. First, while it’s not the case that the Fed sets the unemployment rate wherever it wants, its macro-management function plays a substantial role in both the levels and changes in the jobless rate. Second, while lower unemployment pushes against inequality, American workers’ bargaining power is so low that it takes truly full employment to force employers to bid up pay to get and keep the workers they need. Finally, while much of what the Fed does is excessively scrutinized by the media and the markets, some of what it does in the inequality space is not known at all. For example, Eric Rosengren, the president of the Boston Fed, presented some really compelling work on a Fed-initiated project called the Working Cities Challenge, where Fed research and expertise combines with stakeholders in troubled communities to build human and investment capital targeted at low-income households.

This Age of Derp - Krugman -- I gather that some readers were puzzled by my use of the term “derp” with regard to peddlers of inflation paranoia, even though I’ve used it quite a lot. So maybe it’s time to revisit the concept; among other things, once you understand the problem of derpitude, you understand why I write the way I do (and why the Asnesses of this world whine so much.). Josh Barro brought derp into economic discussion, and many of us immediately realized that this was a term we’d been needing all along. As Noah Smith explained, what it means — at least in this context — is a determined belief in some economic doctrine that is completely unmovable by evidence. And there’s a lot of that going around.The inflation controversy is a prime example. If you came into the global financial crisis believing that a large expansion of the Federal Reserve’s balance sheet must lead to terrible inflation, what you have in fact encountered is this:  I’ve indicated the date of the debasement letter for reference.So how do you respond? We all get things wrong, and if we’re not engaged in derp, we learn from the experience. But if you’re doing derp, you insist that you were right, and continue to fulminate against money-printing exactly as you did before.The same thing happens when we try to discuss the effects of tax cuts — belief in their magical efficacy is utterly insensitive to evidence and experience.

On the Proper Inflation Target - Brad DeLong -- In the 60 years since 1954, the Federal Reserve has been moved to cut the 3-Mo. T-Bill rate when a recession threatens by 2.0%-points or more 13 times–once every 4.6 years. There have been eight cuts of 4.0%-points or more–once every 7.5 years. There have been five cuts of 5.0%-points or more–once every 12 years. To me that suggests that the Greenspan-Bernanke policies–aim for 2.0%/year inflation, with a 300 basis-point “natural” short-term safe real interest rate on top of that when the economy is in the growth-along-the-potential-path phase of the business cycle–were already too restrictive. Once every 12 years is too often to run into ZLB problems, unless you are a strong believer in Coibion and Gorodnichenko arguments that price inertia is due to serious costs to businesses of altering price paths. If you hold, with Jeremy Stein, that you are asking for trouble when T-Bill rates drop below 2%/year, and if you believe that secular factors have reduced the “natural” short-term safe real interest rate when the economy is in the growth-along-the-potential-path phase of the business cycle to 2%, and if you wish to have a 600 basis-point cushion to allow for appropriate cutting in a recession, then you should aim for a 6%/year inflation target.  If you don’t mind kissing the zero lower bound when you cut interest rates by 600 basis points, you could get away with a 4%/year inflation target.

Key Measures Show Low Inflation in September --The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.1% (1.8% annualized rate) in September. The 16% trimmed-mean Consumer Price Index also rose 0.1% (1.8% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report. Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.1% (1.0% annualized rate) in September. The CPI less food and energy also rose 0.1% (1.7% annualized rate) on a seasonally adjusted basis. Note: The Cleveland Fed has the median CPI details for September here.

Eurozone Risk to U.S.: Low Inflation More Than Weak Growth -  Federal Reserve officials have said the latest round of soft eurozone economic data is not enough to worry them about the U.S. outlook – or revise their fairly optimistic forecasts in the months ahead. “It’s not really a surprise that growth in Europe has been underperforming for some time,” Boston Fed President Eric Rosengren said in an interview last weekend. “It may be a little bit softer, not dramatically softer. The inflation numbers have been coming in maybe a tenth or two [of a percentage point] lower than they were expecting.” That may be the case. But for Paul Mortier-Lee, economist at BNP Paribas, slipping inflation may be a more dangerous channel of contagion than weak growth – something that would still pose a problem for Fed officials, who have undershot their 2% inflation target for more than two years.“The impact on inflation looks to be much more serious and should worry the Fed, in our view, as inflation expectations globally seem to have been fraying at the edges,” Mr. Mortimer-Lee writes in a research note to clients. “Thus, the U.S. will probably not catch Europe’s stagnation, but it could get a bad case of unwelcome disinflation.” The reason, he says, is that import prices may be having a greater effect on underlying or core U.S. inflation than they have in the past.“The evidence does suggest a stronger relationship between import prices on the core Consumer Price Index in the last two to three years,” 

Global growth, the $, (under-priced) oil and their impact on US growth rates. --Those stalwart number crunching research economists at Goldman Sachs (i.e., not the traders) have a really interesting graph out this AM that packs in a ton of info on current growth pluses and negatives. The figure uses the Federal Reserve’s macro model (which is actually publically available now) to decompose a set of factors nudging real GDP growth this way and that, including slower global growth, the stronger dollar—they’re the larger negatives—and lower oil prices and interest rates (pro-growth).The GS analysts offer two flavors of growth impacts, one if equity and fixed income markets remain weak and one if they strengthen. A few observations:

  • –Even under the weak market scenario, the drag on growth is predicted to be a few tenths of GDP at most. This is partly due to our relative low export share—13% of GDP, half that of the Eurozone–as well as the offsetting impact of cheaper oil.
  • –If you follow this stuff, I suspect you’re well aware of the global slowdown and the cheaper oil parts of the story. But the stronger dollar has been a bit of sleeper, and it’s something I worry about a lot.
  • –On the other hand, both the dollar and the oil dynamics will put downward pressure on prices (though oil is not in the core price index most closely watched by the Fed) and this could lead a data-driven Fed to postpone the liftoff of the Fed funds rate.
  • –From what I can glean, the oil price decline is a function of both stronger supply and weaker demand, with the former dominating. In this regard, it’s worth remembering that the price of energy fails to account for environmental degradation, i.e., considering polluting externalities, it is under-priced.

Chicago Fed: Economic Growth Picked Up in September -"Index shows economic growth picked up in September": This is the headline for today's release of the Chicago Fed's National Activity Index, and here are the opening paragraphs from the report:   "Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.47 in September from -0.25 in August. Three of the four broad categories of indicators that make up the index made positive con- tributions to the index in September, and three of the four categories increased from August."The index’s three-month moving average, CFNAI-MA3, increased to +0.25 in September from +0.16 in August, marking its seventh consecutive reading above zero. September’s CFNAI-MA3 suggests that growth in national economic activity was somewhat above its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests limited inflationary pressure from economic activity over the coming year.  The CFNAI Diffusion Index, which is also a three-month moving average, increased to +0.24 in September from +0.18 in August. Fifty-eight of the 85 individual indicators made positive contributions to the CFNAI in September, while 27 made negative contributions. Fifty-six indicators improved from August to September, while 29 indicators deteriorated. Of the indicators that improved, 12 made negative contributions. [Download PDF News Release]

"The Economic Outlook Keeps Getting Better And Better" Says Fed President Who Last Week Unveiled QE4 - If one didn't know better, the clinical assessment of everyone at the Fed, from such alleged former hawks as St. Louis Fed's James Bullard, whose bullshit last week unveiled the Dow-Dependent FedTM and was sufficient to get him the honor of the Friday chart of the day, to such permadoves as San Francisco Fed's John Williams, who also last week infamously halted the market crash and launched the "Moar QE" rally when he said that "More QE may be needed if economy falters" is that they are all schizophrenics, every last one of them, one day demanding an end to QE, the next day saying the liquidity firehose is not big enough. Of course, one does know better, and what is going on here is that all the Fed's clueless presidents are simply all terrified of what will happen when the Fed finally does lose control, because that would be the end of their centrally-planned ivory tower (for more details see: USSR). As a result they will say whatever is necessary to urge the market ever higher even as the rally runs out of its 6 year long, artificial sugar-high, central bank liquidity.

The terrifying idea that the economy might stay stuck forever just got more terrifying - The U.S. economy has fallen, and it can't get up. At least that's the way it seems. That's because our slump hasn't really ended, even though the Great Recession officially did more than five years ago. Growth has been low, unemployment is still high, and it'd be even more so if the labor force hadn't shrunk so much. And all this, remember, has happened despite interest rates being zero the whole time. It's the opposite of what we would have expected: big crashes are usually followed by big comebacks. So why has this time been different? Well, it hasn't — not if you compare it to other recoveries from financial crises. These, as economists Carmen Reinhart and Ken Rogoff have shown, tend to be nasty, brutish, and long: it takes, on average, eight years just to make up lost ground. But even so, this doesn't fully explain the kind of persistent economic weakness we've seen here and most everywhere else. Look at Japan. Its own bubble burst in the 1990s, and since then even zero interest rates haven't been enough to save it from first one, and then two, lost decades. The same is happening to Europe today. Bad recoveries, it seems, have a way of turning into bad economies that never get better. It's brought back the specter of "secular stagnation." That's the idea that an economy can get stuck in a never-ending slump if slower population growth means slower investment. As Larry Summers points out, the U.S. economy has needed lower and lower interest rates just to get the investment it needs so that virtually everyone who wants a job can get one — and even then, it's taken bubbles to get us there. But interest rates can't go only lower -- they're effectively at zero. As a result, the not-so-great recovery might be followed by a future that's just as bad.

The Last Days Of The Growth Story - I am thinking about the similarities between a financial crisis and for instance a family crisis, the death of a loved one or close friend, a divorce, or a personal bankruptcy. And I wonder why in the case of our recent (aka current) financial crisis, we allow nothing to enter our communications, and our train of thought, but the idea of recovery and a return to growth. Has everyone always reacted that way after earlier financial crises – history is full of them -, or is something else going on? Why do we insist on returning to something we once had, even if we have no way of knowing whether we can ever return? Why don’t we focus – more – on what lies ahead, instead of what is behind us? Is it because we loved what we had so much? Or is something else going on? Even if we do love what once was so much, there’s a time to move on after every disaster, every death in the family, every bankruptcy. And deep down we know that very well. Life will never be the same, but it’ll still be life. It seems safe to say that in general, life is about turning, not returning. Life changes, we change, every day, every minute, every millisecond. This refusal to turn a new leaf and find out what’s on the other side of the hill has enormous consequences. We are actively digging ourselves so deep into debt that it’s preposterous to claim this debt is ours only, because it’s painfully clear, though we would never admit it (too painful perhaps?), that we can never pay it back. We leave that honor to our children, and to the generations after them.

Nominal GDP is not real (and is really tiny) -- Sometimes I argue that nominal GDP is like Coke, it's the "real thing." By that I mean it's a well-defined concept, the dollar value of all output of final goods and services. Of course I exaggerate, there are some conceptual problems in how to define NGDP. But real GDP has all those problems, and much deeper ones.   Some government statistics define real GDP as "volume" of output. But that's nonsense; it would put a country in the midst of heavy industrialization (like China) far ahead of a high tech society like ours. The next defense of real GDP is the price index, but how is that to be measured? The change in the price of a given basket of goods? But which basket, and how to we address new goods, and changes in quality? There are no good answers to these questions, which is why no one agrees as to whether US living standards have stagnated since 1970, or risen rapidly (as I claim.) On the other hand, we all pretty much agree as to what has happened to NGDP since 1970.  But there is another sense where real GDP really is very much real, and NGDP isn't. RGDP is something that can be pictured in one's mind---"the economy." You can picture all those factories churning out cars, all those homes housing people, all those barbers cutting hair. But NGDP can't really be pictured. Don't believe me? Try to picture the explosive growth in Zimbabwe's NGDP during the early 2000s in your mind's eye. My claim is that either you cannot, or you end up picturing bushels of worthless currency. And that's because NGDP is essentially a monetary concept, not real.

Is the US Current Account Deficit Problem Over? The latest World Economic Outlook, released this month by the International Monetary Fund, warns that even though global “flow imbalances” are lower than a few years ago, they are still substantial and so US liabilities to foreigners continue to rise each year. “Stock imbalances” remain a problem. The US current account went into deficit in 1982. Thirty years ago, the US Council of Economic Advisers accurately predicted record current account deficits to come and attributed the problem to budget deficits, a low national saving rate, and an overvalued dollar. Indeed, every year subsequently the Bureau of Economic Analysis reported another current account deficit. The necessary implication is that the US has been running down its net investments overseas and borrowing from the rest of the world. Knowledgeable forecasts said that if the US did not adjust, it would go from world’s largest creditor to world’s largest debtor. Many of us worried that the imbalances were unsustainable and might end in a “hard landing” for the dollar when global investors got tired of absorbing ever-greater quantities of dollars into their portfolios. The indebtedness predictions were correct. As recently as eight years ago, the current account imbalances were toward the top of topics worrying international macroeconomists. And yet, it is time to ask if the US current account deficit is no longer a problem. For one thing, a substantial amount of US adjustment did take place. I am thinking, for example, of the dollar depreciations of 1985-87 and 2002-07 and the fiscal deficit reductions of 1992-2000 and 2009-2014. The big increase in domestic output of oil and gas associated with “fracking” has also helped improve the trade balance. The recorded current account deficit is now substantially down from its 2006 peak levels. It has fallen by half in dollar terms, or from 5.8% of US GDP to 2.4%. This is a decline of 2/3 when expressed as a percent of world GDP.

Yes, the Deficit Is Smaller. But That Wasn’t the Main Problem. - Some influential people would have you believe that with the deficit shrinking our fiscal problems are behind us. Nobel Prize winner Paul Krugman recently wondered why the fiscally responsible crowd wasn’t celebrating the news that the deficit was down to $483 billion. The White House has been touting the recent two-thirds decline as a major accomplishment. The irony should not be lost on anyone: Both Mr. Krugman and the White House have long argued–correctly–that short-term deficits were not the problem and that reducing them too much too fast would harm the economy. While the massive deficits of recent years were startling, they were never the country’s key fiscal problem. Deficits, which grew more than 750% from 2007 to 2009, were a symptom of the near-calamitous economic crisis in which revenues plunged and automatic spending kicked in. Much of the growth in the federal deficit was a sign of just how bad the economy was. But deficits were also a partial cure for our economic woes in that the automatic stabilizers and the additional spending in the 2009 stimulus (for all its flaws) stopped the economic tailspin from becoming far worse. What was needed then and is still needed now is a plan–not for short-term austerity but to address our medium- and long-term debt situation. Policies need to be phased in gradually and designed to support the country’s economic recovery. Unfortunately, we got the opposite: spending reductions that focused on the short term and cuts to discretionary spending instead of tax reforms and entitlement reforms to generate permanent and growing savings. The Congressional Budget Office (CBO) estimates that last year the sequester alone shaved 0.6 percentage points–the equivalent of 750,000 jobs–from the U.S. economy.

A “Normal” Budget Isn’t Really Normal --Treasury closed the financial books on fiscal 2014 last week. As my colleague Howard Gleckman noted, the top line figures all came in close to their 40-year averages. The $483 billion deficit was about 2.8 percent of gross domestic product, for example, slightly below the 3.2 percent average of the past four decades. Tax revenues clocked in at 17.5 percent of GDP, a smidgen above their 17.3 percent 40-year average. And spending was 20.3 percent, a bit below its 20.5 percent average.Taxes, spending, and deficits thus appear to be back to “normal.” If anything, fiscal policy in 2014 was slightly tighter than the average of the past four decades.That’s all true, as a matter of arithmetic. But should we use the past 40 years as a benchmark for normal budget policy?It’s common to do so. The Congressional Budget Office often reports 40-year averages to help put budget figures in context. I’ve invoked 40-year averages as much as anyone.But what has been the result of that “normal” policy? From 1975 to today, the federal debt swelled from less than 25 percent of GDP to more than 70 percent. I don’t think many people would view that as normal. Or maybe it is normal, but not in a good way.

America’s ugly economic truth: Why austerity is generating another slowdown - You usually think about October surprises in the political context, but we’ve had something of an economic October surprise this year. A tumultuous drop in oil prices and a significant stock market pullback underlie serious challenges for the global economy. And it points to a core problem that has really been with us for over a decade, but more acutely since the Great Recession: Countries cannot generate enough demand in the economy without a financial bubble of some sort. Sadly, the primary way to change that has been, catastrophically, shut off by the blinkered stubbornness of our policymakers.Markets have unquestionably slumped: the S&P 500 is down 8 percent just since mid-September. More important, interest rates have plummeted. Geopolitical tensions, from ISIS to the Ebola outbreak in West Africa, shoulder part of the blame. But markets also fear low inflation, partly due to crashing commodity prices.  Increased supply tells part of this tale, from a bumper crop in corn and soybeans to higher U.S. shale oil production (thanks to fracking and other extraction tools). There’s even reason to believe that Saudi Arabia has refused to turn off the oil spigot to support prices because it wants to put U.S. production out of business by making it less profitable. And keep in mind that a significant amount of this worry from well-off investors has to do with the fact that ordinary people will pay less for gas and food. In fact, that aspect is likely to boost the economy, at least in the near term (although damage to the domestic energy sector could wipe this out).

Corporations used to pay almost one-third of federal taxes. Now it's one-tenth. - Vox: Everyone agrees the corporate income tax is broken, but meaningful changes to it never seem to happen. And despite a flurry of recent attention, action on inversions — reincorporating a business in a foreign country in order to take advantage of lower rates — seems to keep being punted into the future. Obama railed against inversions this week, calling for "economic patriotism." But Senate Democrats say they don't think Congress can address the issue before August recess, as Bloomberg reported this week. And even then, agreement looks tough: Republicans want broader tax-code reform, and not all Democrats are behind Obama. Corporations are shouldering far less of a tax burden than they used to. Corporate tax revenues have declined as a share of GDP over the years, but individual tax revenues have held steady, according to a 2013 GAO report.Corporations account for a much smaller share of the tax revenue pie than they used to. In 1952, corporations accounted for 32.1 percent of federal revenue. As of 2013, it was less than 10 percent. It's understandable why US corporations seek out inversions — the US has the highest nominal corporate tax rate among developed countries, with a 35 percent top federal rate and a 39.1 percent average combined rate. While other countries' rates have fallen, the U.S.'s has stayed high. But corporations are also very good at finding ways to pay less. The GAO found that all corporations who filed M-3s (a tax form for large and international corporations) paid an effective tax rate of 22.7 percent in 2013. Among profitable companies only, the rate was even lower, at 17 percent.

Plutocrats Against Democracy, by Paul Krugman -  So Mr. Leung is worried about the 50 percent of Hong Kong’s population that, he believes, would vote for bad policies because they don’t make enough money. This may sound like the 47 percent of Americans who Mitt Romney said would vote against him because they don’t pay income taxes and, therefore, don’t take responsibility for themselves,  No matter how well conservatives do in elections, no matter how thoroughly free-market ideology dominates discourse, there is always an undercurrent of fear that the great unwashed will vote in left-wingers who will tax the rich, hand out largess to the poor, and destroy the economy. In fact, the very success of the conservative agenda only intensifies this fear. Many on the right live, at least part of the time, in an alternative universe in which America has spent the past few decades marching rapidly down the road to serfdom. Never mind the new Gilded Age that tax cuts and financial deregulation have created; they’re reading books with titles like “A Nation of Takers: America’s Entitlement Epidemic,” asserting that the big problem we have is runaway redistribution. This is a fantasy. Still, is there anything to fears that economic populism will lead to economic disaster? Not really. Lower-income voters are much more supportive than the wealthy toward policies that benefit people like them, and they generally support higher taxes at the top. But if you worry that low-income voters will run wild, that they’ll greedily grab everything and tax job creators into oblivion, history says that you’re wrong. All advanced nations have had substantial welfare states since the 1940s — welfare states that, inevitably, have stronger support among their poorer citizens. But you don’t, in fact, see countries descending into tax-and-spend death spirals — and no, that’s not what ails Europe.

The result of taxpayers' financial bailout of GMAC -  Linda Beale -- GMAC, as most of you likely know, was General Motors' financial group.  GMAC had originated as a means for the auto company to support the market for autos through its wholly owned lending group.  But as with most corporate enterprises, it outgrew its origin, reaching near-collapse after becoming heavily involved in the residential mortgage securitization business and subprime loans.  It was transferred to a hedge fund in 2006, and ultimately required rescue by the government's bailout program in the 2008 financial crisis.  Why was GMAC bailed out when other mortgage lenders were not?  The government wanted to save the auto lending business, so "auto czar" Steven Rattner says, the rescue of GMAC was necessary in that "the government had to act quickly and there wasn't enough time to untangle GMAC's mortgage unit from the auto lending business." U.S. Taxpayers Earn Profit on Ally, as Treasury Cuts Stake, Wall St. J., Oct. 21, 2014 at C4. GM, of course, ultimately established a new financial arm related to its auto business, and that company has acquired some of the GMAC's successor's businesses around the globe.  See, e.g., GM Financial to Benefit from Wall Street Upgrade, Sept 24, 2014.  GMAC --renamed Ally Financial in its new incarnation--was bailed out by the federal government, with remedies including government-approved board members, sales of business lines, bankruptcy of its subprime mortgage business, and more than $17 billion in government capital through TARP.  Six years down the road, Treasury is selling off shares of Ally:  it announced last week that it had sold $245.5 million since mid-September and had now reduced federal ownership from almost 74% to barely over 11%.  The government made about "$18.3 billion from selling Ally shares--a return of $1.1 billion, or about 6.4%, on its $17.2 billion investment."  U.S. Taxpayers Earn Profit on Ally, as Treasury Cuts Stake, Wall St. J., Oct. 21, 2014 at C4.

Pro Big Corporate IRS: Agency Guts Whistleblower Program, Leaves Billions on the Table - Yves Smith - - It's widely known among tax professionals that the US does little in the way of tax enforcement, and the little that it does do is directed against individuals and small businesses. What is not so widely known is how deep the institutional bias is in the IRS in favor of letting big corporate tax cheats get away with it. Conventional wisdom is similar to the rationalization of weak enforcement at the SEC: that the agency is afraid that if they go after big companies, they'll have the penalties and fines challenged in court, and they'll often lose by virtue of being outgunned by better lawyer (yes, Virginia, even if you have a solid case, that doesn't mean you'll win at trial). And top tax litigators are among the most highly paid legal talent. This whistleblower, Jane Kim, makes it clear that in this letter, she is acting as a de facto spokesperson for an attorney that represents IRS whistleblowers. The missive, which we’ve embedded at the end of the post, presents three cases where the tax revenue lost exceeded $13 billion. Two of them looked to be particularly egregious. In one, a company set up completely sham foreign companies, with no operations whatsoever in any of these tax jurisdictions. Yet it claimed all of its profits were due to these phony companies and were kept permanently offshore (regular readers may recall that US technology companies who use Ireland and other low-tax domiciles to attribute their profits to “offshore” operations actually keep those “offshore” monies in US banks. For instance, Apple runs what amounts to a hedge fund to manage its “offshore” funds in Nevada). The effect of this scheme was that the company paid corporate taxes nowhere. That scam with that one company alone lost the IRS a purported $3 billion a year in revenues. 

Both the rich and ordinary Americans misunderstand their economic interests - Linda Beale - There is class warfare going on, right now, all across this country.  It's highlighted by the election gimmicks and gambits of those on the right who claim to be supporting ordinary Americans but whose real intentions show in the results. And it is ultimately a sad statement about Americans' understanding of what is required for a sustainable economy that supports decent lifestyles for all.Let's start by looking at the maps resulting from studies of well-being that identify the states where people are not at all well-off, such as the 2013 survey done by Gallup Healthways, available here.  Those poor states are the reddest of the red belt in Mississippi, Tennessee, Florida and elsewhere across the Deep South--places where I grew up in a decidedly Republican household that bought the GOP economic fallacies hook, line and sinker, and places where today's populations are worse off in terms of the various measures of economic well-being and happiness than the more progressive northeast and west.    Isn't it likely that the anti-government, low-tax and pro-wealthy/pro-big business policies of the GOP politicos that have run these states for several decades have something to do with these negative results, and that the more progressive policies in the northeast and northwest are reflected in the much more positive results in those areas? Yet rural, southern populations continue to proudly proclaim their allegiance, against their own economic interest,  to ill-fated Reaganomics that favors tax cuts (for the wealthy and big business) coupled with  use of  old-time, regressive consumption taxes (toll roads, sales taxes and property taxes),  privatization of public functions (e.g., charter schools managed by for-profit, nontransparent corporations), socialization of losses, militarization, and de-regulation.

Class Traitors: How Ideological Brainwashing Gets Rich and Ordinary Americans to Undermine Their Economic Interest -- Yves Smith  - Linda Beale, of ataxingmatter, has written forcefully and persuasively about some of the propagandizing-accepted-as-gospel that the well-heeled use to advocate policies that advance their economic interests. For instance, as most Naked Capitalism readers appreciate, but a remarkably large swathe of the US population does not, tax cuts for big corporations are simply a transfer to the rich. From a post last year: I've argued frequently in the past that there is no there there--i.e., that lowering corporate tax rates will do nothing to create jobs. Instead, I've said, it will simply deliver an even higher profit margin to be skimmed off by the highest paid executives and, possibly, shareholders. The higher profit margins are unlikely even to be used to increase workers' shares of the corporate revenues through higher wages, a place where they could most help the economy other than new jobs created. Thus, the drive for "revenue neutral" corporate tax reform (cut corporate taxes, cut expenditures elsewhere to make up for the decreased corporate tax revenues) is just another example of corporatism as an engine of the modern form of US class warfare Beale takes up a different theme today: how the rich and poor act against their economic interest. For many in middle and lower income strata in red states, hostility to the government is an article of faith even though those states (and many of those same govement-hating citizens) are significant beneficiaries of Federal programs. But less well recognized are the ways that the wealthy are undermining themselves. They've taken the "increase our distance from everyone else" experiment well beyond its point of maximum advantage, not just to the society around them but also in terms of the costs to the class warriors. As we've pointed out, highly unequal societies have lower lifespans, even among the rich; the shallower social networks of stratified societies and the high cost of losing one's perch, in terms of loss of friends and status, creates an ongoing level of stress that has a longevity cost. Beale points out something we've mentioned occasionally in the past, that creating an underclass with inadequate access to medical services is a great breeding ground for public health problems. The fact that many low income Americans can't afford to take sick days and health plans generally have high deductibles, which discourage individuals from getting treated until they are sure they are really sick, isn't a great program design if you want to reduce the spread of infectious diseases.

Don’t Be Late! The Importance of Timely Settlement of Tri-Party Repo Contracts -- Tri-party repo is popular among securities dealers as a way to raise short-term funding. The tri-party repo settlement process has been improved, and continues to be improved, with the implementation of a set of recent reforms. Two main goals of these reforms are to sharply reduce the amount of liquidity needed to facilitate the settlement of tri-party repo contracts, and to increase the use of more resilient sources of liquidity (for example, term financing and committed credit) to ensure that settlement can occur in good and bad times. In this post, we detail how the reforms have affected the sources of liquidity that dealers can use to facilitate settlement of tri-party repo contracts. We then explain cash investors’ role in the settlement process, and highlight how their current practice of sending principal payments late in the day disrupts the timely settlement of tri-party repo contracts.

How High Up Did the London Whale Criminality Go at JPMorgan?: Yesterday the Inspector General of the Federal Reserve System released a highly abbreviated report on the New York Fed’s supervision of JPMorgan’s Chief Investment Office (CIO) that spawned the $6.2 billion in exotic derivative losses in 2012 – using hundreds of billions of dollars in FDIC insured deposits to make those wild bets. The debacle became known as the London Whale since the outsized trades were conducted in London. The four page summary report that was sanitized for the public includes two bombshells for those who took the time to read the report carefully. First, the Inspector General specifically notes that “we selected July 2004 through April 2012 as the time period for our evaluation. July 2004 marked JPMC’s merger with Bank One Corporation (Bank One), and JPMC created the CIO in 2005.” What is the relevance of that nugget? We learn for the first time that no Chief Investment Office existed at JPMorgan until after the Bank One merger which brought Jamie Dimon on board JPMorgan for the first time. Dimon was CEO of Bank One at the time of the merger in 2004. The deal included the terms that Dimon would immediately become President and Chief Operating Officer of the combined firms and step into the role as CEO in 2006. Next we are told by the Inspector General that New York Fed staff recommended no less than three examinations of the Chief Investment Office – in 2008, 2009 and 2010. But the examinations just never came to fruition.

Jamie Dimon: U.S. Must Create a “Safe Harbor” Where JPM’s Corruption Is Not “Punished” - Bill Black - I want to give a hat tip to a recent Wall Street Journal article that brought to my attention two damning admissions by JPMorgan’s (JPM) CEO and Chairman of the Board, Jamie Dimon.  The irony is that Dimon was lulled into making these admissions because he was basking in the perfect calm created by the confluence of Sorkin’s and CNBC’s storied sycophancy at the one place on earth where elite bankers feel most loved, honored, and protected – the annual meeting of the ultra-wealthy in Davos, Switzerland.  Sorkin was the only interviewer, so Dimon faced no risk of tough questions.  It may well have been this perfect setting that caused Dimon to let slip the mask and reveal two illustrative sins of elite bankers reported in the WSJ article. Mr. Dimon said in a January 2014 interview on CNBC that it has been a ‘norm of business for years’ for banks to hire [ex government officials and the] sons and daughters of companies’ [controlling officers] and to give them ‘proper jobs’ without violating the law. ‘But we got to figure out exactly how to create a safe harbor for that so you don’t…end up getting punished,’ he told the interviewer, according to a CNBC transcript.” Yes, you read that correctly.  It has been a “norm of business for years” for multinational corporations to hire the “sons and daughters of companies’ [controlling officials]” and to hire “ex government officials” in order to secure the favor of those powerful officials for the banks.  Dimon’s concern is that it is essential that firms should be able to continue to purchase this influence with other elites in this manner with no threat of ever “getting punished” for buying influence with such powerful foreign officials.”  JPM’s priority is “to figure out exactly how to create a safe haven for that.”  The elite firms’ “norm of business for years” is not an admission from Dimon’s perspective, but rather a claim of right.  Anything that elite firms have done successfully for years to purchase influence with other elites (including hiring “ex government officials”) is obviously something that they have a right to continue to do – with total impunity from “getting punished.”  It’s not bribery, it’s buying influence with powerful officials who run firms and government agencies and ministries.

Why Is Alan Greenspan’s Lawyer, Scott Alvarez, Still Controlling the Federal Reserve? (AIG Bailout Trial)  -- Yves here. This important post explains why Scott Alvarez, the general counsel of the Federal Reserve Board of Governors, needs to be fired. His responses to the plaintiffs' questions at the AIG bailout trial weren't simply evasive; they reveal a deep, almost visceral, dedication to defending the very policies that nearly destroyed the world economy as well as a salvage operation that favored financial firms over the real economy. We have embedded the transcripts from the first three days of the AIG bailout trial, which cover Alvarez's performance on the stand, at the end of this post. Alvarez was brought to the Fed by Alan Greenspan. As a staff lawyer, he helped implement bank deregulation policies such as ending supervision of primary dealers in 1992, refusing to regulate derivatives in 1996 (I recall gasping out loud when I first read about the Fed's hands off policy), and implementing the rules that shot holes through Glass Stegall before it was formally repealed in 1999.  Alvarez also has a poor record as far as representing broad public interest in his tenure as General Counsel, which started in 2004. The Fed did an even worse job than the bank-cronyistic Office of the Comptroller of the Currency in enforcing Home Ownership and Equity Protection Act, a law that put restrictions on high-cost mortgage lenders. The Fed was also one of the two major moving forces behind the disastrous Independent Foreclosure Review, an exercise that promised borrowers who were foreclosed on in 2009 and 2010. The result instead was a fee orgy by the supposedly independent consultants, capricious and inadequate payments to former homeowners, and virtually no disclosure of what was unearthed during the reviews. Yellen has said she wants to make financial stability as important a priority of the Fed as monetary policy. That means, among other things, being willing to regulate banks. Scott Alvarez is too deeply invested in an out-of-date world view to carry that vision forward. If Yellen intends to live up to her word, Alvarez has to go.

Not with a Bang but a Whimper: DOJ Says it Cannot Prosecute “Rocket Science” Frauds --  William K. Black This is the way the Department of Justice’s (DOJ) greatest strategic prosecutorial failure ends, not with a bang but a whimper that it is too hard to prosecute “rocket science” frauds.  The context is the ritual Bloomberg exit interview with the senior DOJ official going off to make his new fortune.  The lucky fellow this week is Deputy Attorney General James Cole.  This genre of interview is designed to allow the man in the revolving door to announce his great accomplishments as a prosecutor, or in this case, non-prosecutor.  Cole gamely claims that zero prosecutions constitutes a brilliant success because DOJ’s civil cases “have resulted in banks paying huge fines and altering their behavior.” Holder is correct, DOJ produced “historic results” under the Holder/Breuer/Case team’s leadership.  Never in modern history has DOJ suffered such an abject defeat.  They didn’t simply fail to prosecute the elite bankers – they never even indicted them and rarely investigated them.The exit interview ground rules call for softball questions only, but Cole does get asked why zero prosecutions represents a “historic” triumph.  His answer, is the final whimper.  “Proving individual bankers broke the law was extremely difficult because it was hard to show criminal intent and because they may not have violated laws in effect at the time. ‘We are dealing with financial rocket science,’ he said.”There are two essential responses to Cole’s whimper.  Both responses are so important that I have to divide my comments into two columns.  In this column I assume solely for purposes of analysis that Cole is correct that DOJ could not “show criminal intent” because “we are dealing with financial rocket science.”  (My second column will eviscerate that claim and any claim that there were not laws “in effect at the time.”)

Private Equity as the Latest Example of SEC Enforcement Cowardice?Yves Smith - One of Teddy’s Roosevelt’s famed sayings was “Speak softly and carry a big stick.” The SEC seems to be hoping that speaking loudly and brandishing a water pistol will be as effective. As we’ve written, the securities regulator made an impressive initial salvo at the private equity industry. The first was Mary Jo White describing industry abuses in surprisingly specific detail in Congressional testimony. That was followed shortly by SEC official Andrew Bowden giving a simply stunning speech in May. Bowden described more than half the firms in the industry as engaging in what amounted to embezzlement or other serious compliance violations and depicting at length the sort of troubling behavior the SEC was unearthing.  Normally, when the SEC is that pointed in calling out abuses, it means the agency is about to send out Wells notices, which are official warnings that an enforcement action is imminent. But here it is, five months later, and the agency has been walking its tough talk back. What gives? The agency appears to be hoping that if it makes enough noise, the investors, as in limited partners, will do a better job of negotiating their agreements with and supervising the private equity funds, aka general partners. That is a fantasy. First, the private equity kingpins have a lock on the best law firms in the US. The limited partners are at a negotiating disadvantage even if they did want to stand up for themselves.

Gretchen Morgenson on the Damage of Private Equity Secrecy -- Yves Smith -- Gretchen Morgenson filed a must-read story on the range and some of the consequences of the private equity fetish for secrecy. The short version is that if the private equity industry had nothing to hide, they wouldn’t be hiding it. Even so, Morgenson’s story is certain to be an eye-opener to readers fresh to this topic and has important revelations for even those who’ve been on this beat for a while.  The centerpiece of her article is a private equity limited partnership agreement from Carlyle. The Times obtained a copy via FOIA, which was heavily redacted. They also obtained an unredacted copy and compared the two. The comparison was revealing, and not in a good way. The document contained numerous indefensible, overreaching redactions, such as the name of Carlyle’s attorney (Simpson Thatcher).   Morgenson does us the favor of having pulled out some substantive omissions. Not surprisingly, they are matters of interest to beneficiaries as well as typically-complicit limited partners. She hones in on one topic we’ve discussed, that of how the tax language in the clawback section undermines how the general public and many investors assume it works. For laypeople, clawback provisions are meant to assure that the private equity fund managers do not receive fees meant to reward good performance when the performance was no good. They require that the fund managers, who are general partners, settle up with the limited partners at the end of the fund’s life and return any overpayment of fees based on profits on sales of companies in the portfolio that are later washed out by losses on dogs that are sold later. She points out that defining that the amount that is subject to clawback be determined on an assumed after-tax basis reduces what the general partner might have to cough up. As we discussed long-form in a September post, in reality, both the tax provisions and industry practice assure clawback payments never take place.

Bond funds stock up on Treasuries in prep for market shock (Reuters) - U.S. corporate bond funds this year are adding Treasuries to their holdings at more than twice the rate of corporate debt amid concern that the struggling European economy and potential changes in Federal Reserve policy will drag down profits at U.S. corporations. Through September, corporate bond portfolios boosted their holdings of U.S. government debt by 15 percent, compared with a 6.5 percent increase in corporate bonds during the same period, according to Lipper Inc data. The funds now hold about $13 billion in Treasuries, 15 percent more than the $11.3 billion they held at the end of 2013. Corporate bond funds typically invest in a range of debt that includes mortgage-backed securities, U.S. Treasuries and bonds backed by student loans, credit cards and auto loans. Some corporate junk bond funds have guidelines that allow them to buy individual stocks. The move to buy Treasuries, which are more easily traded than most corporate bonds, show that managers anticipate market turmoil that could lead to redemption demands from investors.

When a Stock Market Theory Is Contagious - Robert Shiller - Since Sept. 18, the stock market has fallen more than 6 percent. An abrupt decline last week — after five years of gains — prompted fears that the market may have reached a major turning point.  Has a bear market begun? It’s a great question. The problem is that short-term market movements are extremely hard to forecast. But we live in the present and must try to understand what’s driving markets now, even if it’s much easier to predict their behavior over the long run.  Fundamentally, stock markets are driven by popular narratives, which don’t need basis in solid fact. True or not, such stories may be described as “thought viruses.” When they are pernicious, they are analogous to the Ebola virus: They spread by contagion. Theories that seem to explain the stock market’s direction often work like this: First, they cause investors to take action that propels prices even further in the same direction. These narratives can affect people’s spending behavior, too, in turn affecting corporate profit margins, and so on. Sometimes such feedback loops continue for years. The most prominent story since the September peak seems to be one of a “global slowdown” with associated “deflation.” Underlying this tale are deeper, longer-term fears. There is a name for these concerns too. It is “secular stagnation” — the idea that there is disturbing evidence that the world economy may languish for a very long time, even for generations, as the word “secular” suggests. I did a LexisNexis count of newspaper and magazine mentions, by month, of the phrase “secular stagnation,” and I found that they have exploded since November 2013. And a Google Trends search shows a similar pattern for web searches for the phrase since that time.

What is global market turbulence telling us? - The extraordinary volatility in all financial asset classes in the past week can only be described as ominous. On Wednesday, the US ten year treasury, perhaps the most liquid financial instrument in the world, traded at yields of 2.21 per cent and 1.86 per cent within a matter of hours. This type of volatility in the ultimate “risk free” asset has previously been seen only in 2008 and other extreme meltdowns, so it clearly cannot be swept under the carpet.A few weeks ago, investors had widely expected a strengthening US economy to lead to a rising dollar and a tighter Federal Reserve, with an amazing 100 per cent of economists saying they were bearish about bonds in a Bloomberg survey in April. Instead the markets have started to act as if the world is about to topple into recession, and an abrupt reversal of speculative positions has probably led to exaggerated market moves, in both directions. Now that excessively large positions have been washed out, what is the underlying message from the past month of market action? The first graph shows very clearly that the major asset classes have all moved in a classic “risk off” direction, consistent with a contractionary demand shock in the global economy – equities are down, especially outside the US, bonds are up, and commodities are down. Credit spreads have widened, including sovereign bond spreads in the euro area. Within the equity markets, cyclical stocks have under-performed, while defensives have done relatively well. There have been downward revisions to GDP forecasts in the euro area, but these have been offset by slight upward revisions in the US and recently even in China. The latest nowcasts for global activity have remained firm, and data surprises in the world as a whole have been close to flat for several months (see graph and more details here). What there has been, however, is a marked drop in inflation expectations built into the bond market right across the world. This has also been led by the euro area, where inflation expectations in the inflation swap market have started to challenge the ECB’s promise to keep inflation “below but close to 2 per cent”.

How Far Do Stocks Need to Fall to Get the Fed to Intervene? Bank of America Offers a Clue - Many market participants believe there’s a point in a dramatic market selloff when the Federal Reserve will step in and do something to staunch the bleeding. Call it the Fed “put.” While both men denied it, former Fed chairmen Alan Greenspan and Ben Bernanke were both thought by many to be willing to step in and stop stock markets from falling too far. Fed Chairwoman Janet Yellen, who took office in February, has so far managed to avoid being associated with the idea. But maybe not forever, according to a new report from Bank of America Merrill Lynch.  The firm attempts to quantify how far stocks would have to slide to cause the Fed to either extend or restart a bond-buying program that’s currently on track to end this month. The analysis was prompted by the recent financial turbulence erupting amid fears about weak overseas growth and concerns about whether central banks in advanced economies can lift inflation from persistently weak levels. “In 2010 and 2011, the Fed stepped in following equity corrections of 11% and 16%, respectively,” wrote the firm’s global rates and currency strategists. Given where the market now finds itself, they said, “it may take a further 10% decline from the recent lows” for markets to begin anticipating that the Fed will restart its bond buying to buoy markets and help prevent the lost wealth from causing broader economic problems.

Nobody Knows Nothing The first bit of investing... | The Irrelevant Investor: The first bit of investing advice Jack Bogle received when he came into the business is “nobody knows nothing.” That message rings loud and clear on a day like today. Some people are able to manage risk better than others, but at the end of the day we are always in uncharted territory as no two markets are exactly alike. To review.. Last week we experienced some extreme bearish sentiment as the S&P 500 had a peak to trough pull back of 9.8%.The “Fear & Greed” Index went to 0 and my friend Ryan Detrick told us that the NAAIM equity exposure was at the lowest levels since September 2011. The fear on the stream was palpable. Today, just one week later, we are 7% off the lows and just 3.5% away from making new all-time highs. The V-shaped recovery that we’ve grown so accustomed to certainly seemed like a low probability outcome. Consider that last week, we were 4.4% lower than the prior low made in August, something that we haven’t seen since this bull market began. Furthermore, indices sliced right through the 200-day moving average and some areas, most notably energy and semi-conductors looked like they were in straight liquidation mode.

M&A Deals Fail At Highest Rate Since 2008 - The value of deals that fail to complete has reached its highest level since 2008, in the latest sign that the best year for mergers and acquisitions since the financial crisis will also feature a number of high-profile failures. Three large deals collapsed last week, adding to the list of wrecked deals and coinciding with a sharp jump in equity market volatility that sapped confidence in stocks and put a chill on the market for initial public offerings.  The biggest blow to dealmaking prospects came as US pharmaceutical group AbbVie unexpectedly dropped its support for a $55bn takeover of UK rival Shire. The sudden U-turn has undermined the prevailing belief among bankers that a US Treasury crackdown on deals that allow US companies to lower their tax obligations by moving abroad would have little impact. So-called tax inversions have featured prominently in this year’s resurgent M&A market accounting for at least a dozen deals. But the chances of Pfizer, the US pharma company, reviving its $120bn pursuit of the UK’s AstraZeneca have been greatly diminished as a result of AbbVie’s decision, several people close to the situation recently told the Financial Times, casting doubt on the year’s biggest withdrawn deal returning.

The Profits-Investment Disconnect - Paul Krugman -- I caught a bit of CNBC in the locker room this morning, and they were talking about stock buybacks. Oddly — or maybe not that oddly, given my own experiences with the show — nobody brought up what I would have thought was the obvious question. Profits are very high, so why are companies concluding that they should return cash to stockholders rather than use it to expand their businesses?  After all, we normally think of high profits as a signal: a profitable business is one people should be trying to get into. But right now we see a combination of high profits and sluggish investment :  What’s going on? One possibility, I guess, is that business are holding back because Obama is looking at them funny. But more seriously, this kind of divergence — in which high profits don’t signal high returns to investment — is what you’d expect if a lot of those profits reflect monopoly power rather than returns on capital. More on this in a while.

Adair Turner: The Consequences of Money-Manager Capitalism -- Yves Smith -- This is a terrific interview with Lord Adair Turner, former head of the FSA. Most of it focuses on the things missed in contemporary economics, particularly macroeconomics, and how some disciplinary "back to the future" would be desirable. A major topic of discussion is how wealth is becoming as concentrated as it was in the 18th century, and the driver then and now was the disproportionately large role real estate has come to play. Then, it was income-producing agricultural land. Now it is urban property, bid up by domestic and international elites who want to live in particularly prized cities. Turner points out the irony that access to cheap finance for housing, meant to help middle and lower income buyers, has instead contributed to rising wealth inequality. He also describes how the ability of banks and financial markets to supply virtually unlimited amounts of credit, against a limited stock of particularly sought-after locations, has the potential to create tulip-mania type results. Perhaps due to time constraints, Turner didn't venture into the views of classical economists, that profiting from land, which they derided as rentier capitalism, was economically unproductive. As Michael Hudson has stressed, they urged heavy taxation of land as the remedy.

The Underworld of Finance: Welcome to Shadow Banking - We often hear about shadow banking in a Chinese context but the scary fact is that as a percentage of an economy’s GDP, shadow banking in the UK economy contributes more than twice that of any other country. For those that aren’t sure what shadow banking entails, Laura Kodres described it by drawing a comparison with a well-known saying; “If it looks like a duck, quacks like a duck, and acts like a duck, then it is a duck—or so the saying goes. But what about an institution that looks like a bank and acts like a bank? Often it is not a bank—it is a shadow bank.­” Essentially shadow banking is the process whereby nonbank financial institutions engage in maturity transformation, the utilisation of short-term loans to finance investing in assets with longer maturities. Moreover, shadow banking is growing – probably as an unintended consequence of tighter regulation on major banks and other financial establishments. Whilst shadow banking is clearly incredibly prominent in the UK, it is in the USA where this ‘underground’ banking sector poses the greatest risk. Shadow banking embodies one of the very shortcomings of the financial system which ultimately resulted in the global recession. Economist Gary Gorton even went as far as referring to aspects of the 2007-2008 crash as a “run” on the shadow banking system. The magnitude of risk associated with shadow banking in the US is due, in part, to the fact that the USA is the only country in where the value of assets in the shadow banking sector are greater than those in traditional banks. However, is shadow banking really the “underworld of finance” or does it provide an incredible opportunity to provide easy and cheap access to credit for the masses?

The Big Bank Backlash Begins - ProPublica: Last week, I visited an alternate universe. The real world sees a pandemic of bank misconduct, but to the white-collar defense lawyers of Washington, the banks are the victims as they bow beneath the weight of regulators' remarkably harsh punishments. I was attending the Securities Enforcement Forum, a gathering of top regulators and white-collar defense worthies. The marquee section was a panel that included Andrew Ceresney, the current S.E.C. enforcement director, and five of his predecessors. Four of those former S.E.C. officials represent corporations at prominent white-collar law firms:  The conference turned into a free-for-all of high-powered and influential white-collar defense lawyers hammering regulators on how unfair they have been to their clients, some of America's largest financial companies.The critics have multiple complaints about the S.E.C.

Dodd-Frank spawns software to comprehend Dodd-Frank -- “This is a maze,” says Donald Lamson. “It’s a metaphor to reflect the complexity that institutions must go through as they encounter an increasingly bewildering array of regulatory requirements they must deal with.” Banks have until July 21, 2015, to follow one of those requirements, the Volcker Rule. That is the part of Dodd-Frank Wall Street Reform and Consumer Protection Act that says banks can’t own hedge funds or invest for their own benefit; they have to stick to just helping their customers make money. “I wrote the first draft,” Lamson recalls, “which was a page and a half.” It is not, however, a page and a half anymore. “The final regulation implementing the Volcker Rule has ballooned to several hundred pages of small type in the federal register,” he says. There are hundreds of footnotes, some of them quite detailed. There are also a great many gray areas and exceptions for when activities are allowed or not allowed, says Mike Konczal, a fellow with the Roosevelt Institute. “Volcker and Dodd-Frank wanted to make sure that banks could still do what we want them to do — interact with clients, do market making, buy and sell things for their clients — and what happens is a lot of that activity kind of blurs with proprietary trading,” he says. Another reason the rules have become complicated is that, simply put, a lot of people have sued. The rules have had to become extra detailed to pass scrutiny.

Big banks giving up on their global ambitions - FT.com: Last week, Japan was one of 11 countries where Citigroup said it would pull out of its consumer banking operations entirely, including Egypt, Costa Rica and Hungary. “While these consumer franchises have real value, we didn’t see a path for meaningful return,” Mike Corbat, Citi chief executive, told analysts as part of its third-quarter results, which included the discovery of a new fraud scandal in Mexico. The move follows earlier withdrawals by Citi from consumer markets in a handful of countries including Spain, Pakistan and Uruguay. In total, Citi has cut its retail banking presence almost in half to 24 countries since 2012. HSBC, in many ways Citi’s main rival for the title of most global bank, has been pulling back too. The London-listed group has withdrawn from consumer banking in more than 20 countries, such as Colombia, South Korea and Russia, leaving it with retail and wealth management operations in about 40 markets. This has been mirrored by others, such as Barclays withdrawing from retail banking in Spain, Italy, France and Portugal, GE Capital seeking to exit much of its consumer banking operations in Europe and Royal Bank of Scotland pulling out of about a dozen markets, including most recently its public listing of Citizens in the US.

Majority of Bank Risk Managers Are Worried About the Wealth Gap - A majority of risk managers at North American financial institutions are worried that the growing wealth gap poses a risk to the financial system. The Professional Risk Managers’ International Association and FICO, the credit analytics firm, polled bank risk managers on the consequences of inequality during their quarterly survey. It showed that more than 62% believe the wealth gap could undermine the North American financial system. Just 14% said they didn’t think it posed a threat. The survey found that 41%, a plurality, of bank risk managers believe unemployment or underemployment is the greatest risk to consumers’ credit health over the coming six months. Some 22% were more worried about rising consumer indebtedness. Other concerns, including a sudden financial-system shock (16%), rising interest rates (12%) and the weakening of the housing market (8%), drew less consensus. Home loans were the only asset class where a majority of risk managers didn’t see supply meeting demand. More than one quarter of those surveyed see the supply of mortgage credit falling short of demand, the highest of any consumer borrowing category.

New York Fed taking cues from Occupy on banker pay - That was our takeaway from reading Bill Dudley’s speech at the “Workshop on Reforming Culture and Behavior in the Financial Services Industry”.  His thesis is that skewed incentives in banks and other financial firms encourage excessive risk-taking and even outright illegal behaviour. Losses from wild bets that go badly tend to be borne by shareholders and the rest of society, while the gains are often hoarded by the mid-level individuals making the trades. There is also a timing issue, where a trader can collect a bonus today for engaging in an activity that appears profitable in the short-term but has a high likelihood of catastrophic failure in the medium term.Dudley’s examples include everything from the London Whale to BNP Paribas’s violations of sanctions against Sudan, “a country engaged in genocide”. None of this is original — see Nassim Taleb, Chris Arnade, and Matt Levine, for example — but Dudley’s proposed solution, combined with the influence of his station, makes this speech worth reading. (Daniel Tarullo gave a speech at the same conference that is also worth your time.)

Federal Reserve Officials Scold Bankers, Again: More than six years after the financial crisis, top officials at the Federal Reserve have a stern message for the financial industry: fix your culture or risk further punishment, including getting broken up. At a conference Monday hosted by the Federal Reserve Bank of New York, which supervises many of the largest banks, its president William Dudley told the assembled bankers that cultural problems at large banks have persisted past the financial crisis and that he rejects “the narrative that the current state of affairs is simply the result of the actions of isolated rogue traders or a few bad actors within these firms.” He pointed to JPMorgan’s $6 billion derivative loss, criminal convictions of European banks for violating sanctions and helping Americas evade taxes, and the widespread manipulation of the reference interest rate known as LIBOR by bank traders. Dudley, who gave the usual disclaimer that he was speaking on his own behalf and not on behalf of the entire Fed, told the bank executives that if “[you] do not do your part in pushing forcefully for change across the industry,” the “inevitable conclusion” will be “your firms are too big and complex to manage effectively.”

New York Fed’s Conference Evokes Thoughts of Violence Against Wall Street - What the New York Fed attempted to pull off this past Monday with its full-day conference for the execs of wayward Wall Street banks was a public relations stunt to switch the national debate from its culture to Wall Street’s culture. Styled as a “Workshop on Reforming Culture and Behavior in the Financial Services Industry,” the event came less than a month after ProPublica and public radio’s “This American Life” released internal tape recordings made by a former New York Fed bank examiner, Carmen Segarra, revealing a regulator with no bark or bite. ProPublica’s Jake Bernstein wrote that the tapes and a confidential report by an outside consultant demonstrated the New York Fed’s “history of deference to banks.”But there is far more to this story. Wall Street banking executives, who elect two-thirds of the Board of Directors of the New York Fed and have frequently served on its Board, have structured the institution to be its sycophant. Consider the fact that Jamie Dimon, CEO of JPMorgan Chase, sat on the Board of the New York Fed from 2007 through 2012 as the regulator failed to follow through on three separate staff recommendations that JPMorgan’s Chief Investment Office undergo a thorough investigation, as reported this week by the Federal Reserve System’s Inspector General.  JPMorgan’s Chief Investment Office in 2012 finally owned up to losing $6.2 billion of bank depositors’ money in wild bets on exotic derivatives in London.

Something Is Dangerously Wrong at the New York Fed – Dayen - In a speech this week, New York Federal Reserve Board President William Dudley addressed pervasive misconduct within the financial industry, refusing to dismissively lay the blame on a few bad apples. “The problems originate from the culture of the firms, and this culture is largely shaped by the firms’ leadership,” Dudley said.  He offered some interesting suggestions on industry compensation practices, but his main message was a warning: If nothing changed, regulators would have to conclude that large financial institutions are too big to manage, and “that your firms need to be dramatically downsized and simplified so they can be managed effectively.”  These were notable words from someone in the actual position to undertake a big bank breakup. But Dudley added a little caveat, as typical for such speeches: “What I have to say today reflects my own views and not necessarily those of the Federal Reserve System.” He would have to say that, because the organization he runs hasn’t practiced what he preached. In recent weeks, multiple allegations show that the New York Fed, the largest and most important of the regional Federal Reserve banks, would rather allow financial institutions to conduct their business unencumbered than break them up. Last month, former employee Carmen Segarra released secretly recorded tapes to public radio’s This American Life, showing that the New York Fed worked diligently to avoid confrontation with Goldman Sachs over the investment bank’s admittedly “shady” practices. This week, more embarrassment arrived in a Federal Reserve Inspector General’s report.  The report concerns the disastrous “London Whale” trade, carried out in 2012 by the Chief Investment Office of JPMorgan Chase, which lost the bank over $6 billion. The Inspector General surveyed the years leading up to the trade, and while the public was only treated to a summary rather than the full report, it contains enough information to present the failure of the New York Fed’s bank supervision practices.

A Rate Cap for All Consumer Loans - NY Times Editorial Board - The Obama administration has proposed much-needed improvements in federal rules that are supposed to protect service members from predatory loans that trap them in debt and, in certain circumstances, can end their military careers. The changes would repair glaring weaknesses in the rules used to carry out the Military Lending Act of 2007. But the administration and Congress should not stop there. Millions of civilians are also exposed to ruinously priced loans. What is needed is a national consumer lending standard — and interest rate cap — to ensure fair credit in the country as a whole. The Military Lending Act sought to protect service members from debt traps by applying a 36 percent interest cap and other consumer protections to a subset of products, including certain kinds of payday loans and vehicle title loans. However, open-ended credit, long-term installment loans and some other products fell outside those rules. Even after the law was passed, a South Carolina lender gave a service member a $1,615 title loan on a 13-year-old car and charged $15,613 in interest — an annual rate of 400 percent — without violating federal law. The new proposed rules close this and other loopholes by applying the 36 percent cap to most credit products aimed at service members, with some common-sense exemptions. Poor and working-class people across the country are being driven into poverty and default by deceptively packaged, usuriously priced loans. The obvious solution is a national standard for consumer lending. Both the House and Senate have bills pending that would adopt the 36 percent standard for all consumer transactions, including those involving payday loans, mortgages, car loans, credit cards, overdraft loans and so on.

Is a 36% Cap Radical?  -- I was pleased to see today’s New York Times editorial entitled “A Rate Cap for All Consumer Loans.”  It created a very public description of an industry indiscretion involving loaning money to the military at over 36%. Those loans are illegal because a federal law makes it so, a law that passed with broad and deep bipartisan support because trapping military personnel in high-cost loans interferes with military readiness and thus threatens national security. This editorial, not in some fringe publication, but rather the New York Times, argues that we all deserve the same protections from high cost loans.  I agree (in this recent article), and think the time is right to start listening to people and not industry on this topic. Is a federal 36% cap radical? Historically, 36% would seem heinously high. Plus, if 36% is radical, why does much of the U.S.‘s eastern seaboard's state law forbid consumer loans with interest rates of over 36%? Are these radical states? The public favors a hard cap, over and over again in every study,  regardless of politics. Hearing politicians support consumer loans with 500% or even 1,000% interest, is so mysterious it makes me want to look at their list of campaign contributors.  Remember, real people over political contributions. We elect politicians and pay their salaries. In turn, they speak for us. Do you like what they are saying?

FDIC Releases Economic Scenarios for 2015 Stress Testing --From the FDIC: FDIC Releases Economic Scenarios for 2015 Stress Testing The Federal Deposit Insurance Corporation (FDIC) today released the economic scenarios that will be used by certain financial institutions with total consolidated assets of more than $10 billion for stress tests required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.The baseline, adverse, and severely adverse scenarios include key variables that reflect economic activity, including unemployment, exchange rates, prices, income, interest rates, and other salient aspects of the economy and financial markets.The baseline scenario represents expectations of private sector economic forecasters. The adverse and severely adverse scenarios are not forecasts, rather, they are hypothetical scenarios designed to assess the strength and resilience of financial institutions and their ability to continue to meet the credit needs of households and businesses under stressed economic conditions. Here is an excel spreadsheet with the scenarios.

Unofficial Problem Bank list declines to 426 Institutions --  This is an unofficial list of Problem Banks compiled only from public sources.Here is the unofficial problem bank list for Oct 17, 2014.  Unexpectedly, there was a bank failure today. Expectedly, the OCC provided us an update on their enforcement action activities through September. For the week, there were four removals and one addition that leave the Unofficial Problem Bank List at 426 institutions with assets of $135.5 billion. A year ago, the list held 677 institutions with assets of $236.8 billion. NBRS Financial, Rising Sun, MD ($191 million) became the 15th bank failure this year. At the 41st week of the year, the pace of 15 failures matches approximates the 16 failures at the 41st week of 2008. This is well under the 129 failures at the same point in 2010. Since publication of the Unofficial Problem Bank List in August 2009, 384 banks on the list have been removed because of failure. This trails actual failures of 410 over the same period. Thus, there have been 26 banks that have failed without being under a published enforcement action. We anticipate for the FDIC to provide an update on its enforcement action activities on the last Friday of the month on the 31st. So next week will likely see few changes to list. Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The list peaked at 1,002 institutions on June 10, 2011, and is now down to 426.

DataQuick: California Foreclosure Starts Lowest Since 2005 - From DataQuick: Golden State Foreclosure Starts Continue to Decline Lending institutions initiated formal foreclosure proceedings last quarter on the lowest number of California homes in more than eight years, the result of a recovering real estate market and the dwindling pool of toxic home loans made in 2006 and 2007, Irvine-based CoreLogic DataQuick reported.  A total of 16,833 Notices of Default (NoDs) were recorded at county recorders offices during the July-through-September period. That was down 3.9 percent from 17,524 for the prior quarter, and down 17.1 percent from 20,314 in third-quarter 2013, according to CoreLogic DataQuick data.  Last quarter's NoD tally was the lowest since fourth-quarter 2005, when 15,337 NoDs were recorded. NoDs peaked in first-quarter 2009 at 135,431, while the low was 12,417 NoDs in third-quarter 2004. The NoD statistics go back to 1992. ..."This home repo pipeline isn't exactly drying up, but it sure is diminishing. Its negative effect on the overall market is only a fraction of what it was several years ago, and is really only still noticeable in some pockets of the hardest-hit markets of the Inland Empire and Central Valley" To some extent the level of NoD filings in recent quarters probably reflects the rate at which servicers are able to process paperwork. The 20,314 NoDs filed in third-quarter 2013 were followed by 18,120 the following quarter and then 19,215 in 2014Q1; 17,524 in 2014Q2; and 16,833 last quarter. Most of the loans going into default are still from the 2005-2007 period. Last quarter the median origination quarter for defaulted loans was third-quarter 2006. That has been the case for more than five years, indicating that weak underwriting standards peaked then.

Black Knight: Mortgage Delinquencies decreased in September -- According to Black Knight's First Look report for September, the percent of loans delinquent decreased in September compared to August, and declined by 12% year-over-year. Also the percent of loans in the foreclosure process declined further in September and were down 33% over the last year.  Foreclosure inventory was at the lowest level since February 2008.  Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 5.67% in September, down from 5.90% in August. The normal rate for delinquencies is around 4.5% to 5%. The percent of loans in the foreclosure process declined to 1.76% in September from 1.80% in August.    The number of delinquent properties, but not in foreclosure, is down 388,000 properties year-over-year, and the number of properties in the foreclosure process is down 435,000 properties year-over-year. Black Knight will release the complete mortgage monitor for September in early November.

Letter to Regulators Regarding Ocwen | The Housing Justice Foundation:  Superintendent Lawsky, Attorney General Schneiderman, Attorney General Bondi and Senator Warren:  I am writing to you because of continued abuses by Ocwen Loan Servicing (“Ocwen”) producing mortgage documents to facilitate foreclosures nationwide. Despite all the settlements, what real changes and safeguards are in place to prevent mortgage servicers from producing shoddy and fraudulent mortgage documents? Sadly, infuriatingly, little has changed in the courtrooms and county recording offices across the country. None of the settlements required the banks and servicers to notify judges and litigants and county recorders that the loan documents they produced were fraudulent or defective. Nothing prevents servicers from continuing to produce mortgage assignments and affidavits with false information. In the foreclosure courtrooms and recording offices, it is still 2008. How accurate are the mortgage documents that are now being filed? An examination of the mortgage assignments and Affidavits filed in the first nine months of 2014 shows that for OCWEN, it is business as usual. In 2014, officers of Ocwen filed thousands of Lost Assignment Affidavits throughout the country swearing that original mortgage assignments were lost or misplaced and that “good faith efforts have been made in accordance with our procedures” for locating the lost assignments. How many thousands of mortgage documents can one servicer claim to have “lost or misplaced” without an inquiry regarding responsible document retention practices?

Mortgage Giant Accused Of Faking Documents To Justify Foreclosures -- New York state’s top financial regulator says one of the biggest mortgage servicing companies in America has continued to backdate paperwork in order to justify illegitimate foreclosures, more than two years after the widespread falsification of key foreclosure documents by financial companies was revealed and quickly resolved through a settlement with the federal government. New York Department of Financial Services Superintendent Ben Lawsky says that Atlanta-based Ocwen Financial Corporation has been sending letters to homeowners long after deadlines for renegotiating their mortgages had passed. The dates on the letters say that they were sent well ahead of the deadlines, but Lawsky’s investigators say Ocwen’s own systems indicate the documents were created after the fact with incorrect dates printed on them. Worse, Ocwen was alerted to the improperly backdated documents by an employee nearly a year ago, according to the Wall Street Journal, but “ignored them for months and still hasn’t corrected them, nearly a year after they were initially found.” By failing to provide struggling homeowners with timely information about their options, Lawsky’s investigation has found, Ocwen deprived thousands of people the opportunity to renegotiate their mortgages and improve their chances of keeping their homes. The new allegations are “the sixth time in the past two years that Mr. Lawsky’s office had raised questions about Ocwen’s business practices,” the Journal notes. The company’s stock price has fallen by more than half since the start of the year. The newest alleged violations at Ocwen, which is the fourth-largest mortgage servicing company nationwide, share DNA with the widespread document falsification scandal that was dubbed “robo-signing” when it broke into headlines in 2010.

Elizabeth Warren Demands An Investigation Of Mortgage Companies  --On Monday, Sen. Elizabeth Warren (D-Mass.) called on the Government Accountability Office to investigate non-bank companies that service Americans' mortgages, noting in a letter co-signed by Rep. Elijah Cummings (D-Md.) that an increasing number of lawsuits has been filed in recent years against these firms—which are not regulated as strictly as banks.  Mortgage servicers, whether they are owned by banks or not, handle mortgages after they've been sold to a customer. That means they take care of administrative business including collecting mortgage payments and dealing with delinquent borrowers. What Warren and Cummings are worried about is that the share of non-banks servicing mortgages has grown astronomically—300 percent between 2011 and 2013—and it appears that the increased workload has led to shoddier service.The rise of the industry, which typically services lower-income borrowers, "has been accompanied by consumer complaints, lawsuits, and other regulatory actions as the servicers' workload outstrips their processing capacity," according to a recent report by the Federal Housing Finance Agency. Last December, for instance, the Consumer Financial Protection Bureau—the agency Warren helped create—entered a $2 billion settlement with the nation's largest non-bank servicer over mortgage mismanagement. Financial industry watchdogs and consumer advocates have charged that the non-bank home loan servicing companies are often unwilling to work with troubled borrowers to modify mortgages and prevent foreclosures.

Lawler: Updated Table of Distressed and All-Cash Share for September - CR Note: Existing Home Sales for September will be released tomorrow by the National Association of Realtors (NAR). The consensus is for sales of 5.09 million on seasonally adjusted annual rate (SAAR) basis. Sales in August were at a 5.05 million SAAR. Economist Tom Lawler estimates the NAR will report sales of 5.14 million SAAR.  Housing economist Tom Lawler sent me the updated table below of short sales, foreclosures and cash buyers for several selected cities in September.  Lawler notes: "Note the jump in the foreclosure sales share in Orlando."  On distressed: Total "distressed" share is down in these markets due to a decline in short sales.  Short sales are down in all these areas. Foreclosures are up slightly in several of these areas - and up significantly in Orlando.  The All Cash Share (last two columns) is mostly declining year-over-year. As investors pull back, the share of all cash buyers will probably continue to decline.

FHFA Director Watt: Reps and Warrants to be Clarified in Coming Weeks, "sensible and responsible guidelines" for Lower Downpayments -- From FHFA Director Melvin Watt: Prepared Remarks of Melvin L. Watt, Director, FHFA, At the Mortgage Bankers Association Annual Convention. On lower downpayments: To increase access for creditworthy but lower-wealth borrowers, FHFA is also working with the Enterprises to develop sensible and responsible guidelines for mortgages with loan-to-value ratios between 95 and 97 percent. Through these revised guidelines, we believe that the Enterprises will be able to responsibly serve a targeted segment of creditworthy borrowers with lower-down payment mortgages by taking into account “compensating factors.” While this is a much more narrow effort than our work on the Representation and Warranty Framework, it is yet another much needed piece to the broader access to credit puzzle. Further details about these new guidelines will be available in the coming weeks as we continue to advance FHFA’s mission of ensuring safety, soundness and liquidity in the housing finance markets.On Reps and Warrants: We know that the Representation and Warranty Framework did not provide enough clarity to enable lenders to understand when Fannie Mae or Freddie Mac would exercise their remedy to require repurchase of a loan. And, we know that this issue has contributed to lenders imposing credit overlays that drive up the cost of lending and also restrict lending to borrowers with less than perfect credit scores or with less conventional financial situations.

The Mortgage Industry Is Strangling the Housing Market and Blaming the Government -- Dave Dayen -- At the annual conference of the Mortgage Bankers Association, Mel Watt, chairman of the Federal Housing Finance Agency (FHFA)—the conservator for Fannie Mae and Freddie Mac—delivered a speech that will matter to anyone who wants to buy a home or even hold down a steady job in the next few years.As expected, Watt signaled to mortgage bankers that they can loosen their underwriting standards, and that Fannie and Freddie will purchase the loans anyway, without much recourse if they turn sour. The lending industry welcomed the announcement as a way to ease uncertainty and boost home purchases, a key indicator for the economy. But it’s actually a surrender to the incorrect idea that expanding risky lending can create economic growth.  Watt’s remarks come amid a concerted effort by the mortgage industry to roll back regulations meant to prevent the type of housing market that nearly obliterated the economy in 2008. Bankers have complained to the media that the oppressive hand of government prevents them from lending to anyone with less-than-perfect credit. Average borrower credit scores are historically high, and lenders make even eligible borrowers jump through enough hoops to garner publicity. Why, even Ben Bernanke can’t get a refinance done! (Actually, he could, and fairly easily, but the anecdote serves the industry’s argument.)

Is Credit Too Tight, Too Loose or Just Right? -- One of the most pressing issues in housing finance today is the availability of credit. The lack of access to credit has been cited as a reason for the slower-than-hoped-for growth in home sales. The often cited Federal Reserve Loan Officer Survey tells us whether lenders are tightening or loosening credit, but tells us much less about the overall level of availability of credit.  In order to determine whether credit is too tight, too loose, or just right CoreLogic has developed the Housing Credit Index (HCI) that measures the range and variation of residential mortgage credit over time and multiple housing credit underwriting attributes. The index includes attributes that are relevant to the assessment of credit risk for a borrower applying for credit. ...  So is credit currently too loose, too tight or just right? In Figure 1, the HCI is shown from 1998 to early 2014 measured on the left axis along with the overall serious delinquency rate measured on the right axis. In the refinance boom of the early aughts, credit availability expanded significantly and then declined, but to a level moderately elevated compared to before the refinance boom. The result of increased credit availability was a modest rise from about 1 percent to 1.25 percent in the overall serious delinquency rate. The mid-aughts saw the significant expansion of credit to double the normal level and the very quick and dramatic contraction with which we are all far too familiar. Credit availability reached its tightest point in late 2010 at only one-third the normal level of the late 1990s. It is safe to say that credit was too tight. Of course, this was a natural response to the quickly rising serious delinquency rate that turned upward dramatically starting in 2006. Since 2010 credit availability has eased in fits and starts with the utilization of modification and refinance programs aimed at struggling homeowners. Most recently, the index is indicating a slight easing, but remains tight by historic standards.

MBA Sees Originations Increasing Seven Percent in 2015 -- The Mortgage Bankers Association announced today that it expects to see $1.19 trillion in mortgage originations during 2015, a seven percent increase from 2014. While MBA anticipates purchase originations will increase 15 percent, it expects refinance originations to decrease three percent. MBA’s forecast predicts purchase originations will increase to $731 billion in 2015, up from $635 billion in 2014. In contrast, refinances are expected to drop to $457 billion, from $471 billion, in 2014.  For 2016, MBA is forecasting purchase originations of $791 billion and refinance originations of $379 billion for a total of $1.17 trillion. “We are projecting that home purchase originations will increase in 2015 as the US economy continues on its current path of stronger growth, job gains and declining unemployment. The job market has shown sustained improvement this year; with robust monthly increases in both payroll jobs and job openings,” said Michael Fratantoni, MBA’s Chief Economist and Senior Vice President for Research and Industry Technology. “We are forecasting that strong job growth, coupled with still low mortgage rates, should translate to an increase in home sales and purchase originations.

MBA: Mortgage Applications Increase in Latest MBA Weekly Survey -- From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey -- Mortgage applications increased 11.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 17, 2014. This week’s results did not include an adjustment for the Columbus Day holiday. ...The Refinance Index increased 23 percent from the previous week to the highest level since November 2013. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier.....“ . “Mortgage rates have fallen close to 30 basis points over the last four weeks. Refinance application volume reached the highest level since November 2013 as a result, and the average loan balance for refinance applications increased to $306,400, the highest level in the survey’s history.”...The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.10 percent, the lowest level since May 2013, from 4.20 percent, with points increasing to 0.21 from 0.17 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.The first graph shows the refinance index. The refinance index is down 66% from the levels in May 2013. Even with the recent increase in activity - as people who purchased in the last year or so refinance - refinance activity is very low this year and 2014 will be the lowest since year 2000. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is down about 9% from a year ago. 

FHFA: House Prices increased 0.5% in August, Up 4.8% Year-over-year -- This house price index is only for houses with Fannie or Freddie mortgages.  From the FHFA: FHFA House Price Index Up 0.5 Percent in August U.S. house prices rose in August, up 0.5 percent on a seasonally adjusted basis from the previous month, according to the Federal Housing Finance Agency (FHFA) monthly House Price Index (HPI). The previously reported 0.1 percent increase in July was revised to reflect a 0.2 percent increase. The FHFA HPI is calculated using home sales price information from mortgages sold to or guaranteed by Fannie Mae and Freddie Mac. From August 2013 to August 2014, house prices were up 4.8 percent. The U.S. index is 5.8 percent below its April 2007 peak and is roughly the same as the August 2005 index level. This is the ninth consecutive monthly house price increase.For the nine census divisions, seasonally adjusted monthly price changes from July 2014 to August 2014 ranged from -0.6 percent in the New England and South Atlantic divisions to +1.2 percent in the Mountain division. The 12-month changes were all positive ranging from +1.9 percent in the Middle Atlantic division to +7.8 percent in the Pacific division.

Existing Home Sales in September: 5.17 million SAAR, Inventory up 6.0% Year-over-year  - The NAR reports: Existing-Home Sales Rebound in September - Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 2.4 percent to a seasonally adjusted annual rate of 5.17 million in September from 5.05 million in August. Sales are now at their highest pace of 2014, but still remain 1.7 percent below the 5.26 million-unit level from last September. ... Total housing inventory at the end of September fell 1.3 percent to 2.30 million existing homes available for sale, which represents a 5.3-month supply at the current sales pace. Despite fewer homes for sale in September, unsold inventory is still 6.0 percent higher than a year ago, when there were 2.17 million existing homes available for sale. This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993. Sales in September (5.17 million SAAR) were 2.4% higher than last month, and were 1.7% below the September 2013 rate. The second graph shows nationwide inventory for existing homes. According to the NAR, inventory decreased to 2.30 million in September from 2.33 million in August. Headline inventory is not seasonally adjusted, and inventory usually increases from the seasonal lows in December and January, and peaks in mid-to-late summer. The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Existing Home Sales Feed Wall Street's Surge -- The existing home sales headlines blare this is the highest increase for 2014.  That is true, yet the increase isn't much of a soar, more of a bounce back from last month's -1.75% decline. The NAR reported existing home sales increased 2.4% from last month and are down -1.7% from last year.  This represents 5.17 million homes at annualized rates.  The above graph shows why existing home sales are showing declines from a year ago.  That large bubble area for 2013 is averaged against the entire previous year, whereas we see a strong downward slide in volume, yet now 2014 is nearing that 2013 high.  This is also the 31st consecutive month for annual price gains. The national median existing home sales price, all types, is $209,700, a 5.6% increase from a year ago.  Below is a graph of the median price.  One needs to compare prices only a year ago for increases due to the monthly ups and downs in prices associated with the seasons and prices are not seasonally adjusted.  The average home price for September was $255,500, a 3.7% increase from a year ago. Of course wages are still flat. Distressed home sales have really declined in the last year, -14%. Foreclosures and short sales are now only 10% in September, but where 8% of August sales. The breakdown in distressed sales was 7% foreclosures and 3% short sales. The discount breakdown was 14% for both foreclosure and short sales. So called investors were 14% of all sales and 66% of these investors paid cash. All cash buyers were 24% of all sales. First time home buyers were 29% of the sales, which is historically low. The median time for a home to be on the market was 56 days. Short sales by themselves took 111 days. Housing inventory from a year ago unsold inventory has increased 6.0%. Current the 2.3 million homes available for sale are a 5.3 months supply.

Existing Home Sales Jump To Highest Since Sept 2013. Midwest Tumbles 5.3% -- Existing Home Sales bounced back from the worst miss in 2014 in August to print 5.17mm SAAR - the highest since September 2013. Of course the surge is driven by Condos/Co-Ops (up 5.2%) rather than single-family homes (up 2.0%) and median home prices are the highest ever for a September at $209,700. It was not all ponies and unicorns though as Midwest saw sales plunge 5.6%. NAR's Larry Yun has some crucial insight for why home sales are rising..."Economic instability overseas is leading to volatility in the stock market and is causing investors to seek safer bets [in housing]," so we assume he is disappointe dby the 1000s of Dow points we have surged off last week's lows?

A Few Comments on September Existing Home Sales  A few comments ...
• Once again housing economist Tom Lawler's forecast of 5.14 million SAAR was closer than the consensus (5.05 million) to the NAR reported sales (5.17 million). It is getting harder for Lawler to beat the "consensus" because it appears several analysts are waiting for Lawler's estimate before submitting their own!
• "The sky is falling! The sky is falling!" Maybe not ... Remember those analysts who incorrectly claimed that declining year-over-year existing home sales were a sign that the "housing recovery" was over? That was wrong, and I correctly pointed out: 1) the "housing recovery" is mostly new home sales and housing starts - not existing home sales, 2) declining overall existing home sales were a positive if the decline was related to fewer distressed sales.
• The most important number in the NAR report each month is inventory.   This morning the NAR reported that inventory was up 6.0% year-over-year in September.   It is important to note that the NAR inventory data is "noisy" and difficult to forecast based on other data.
The headline NAR inventory number is not seasonally adjusted, even though there is a clear seasonal pattern. Trulia chief economist Jed Kolko has sent me the seasonally adjusted inventory. NOTE: The NAR does provide a seasonally adjusted months-of-supply, although that is in the supplemental data.

Chart: Values of Homes Owned by African Americans Take Outsized Hit Compared to Those Owned by Whites --Between 2010 and 2013, inflation-adjusted median home values fell by 4.6 percent for white households and 18.4 percent for African American households. Though it is widely believed that home values have stabilized in most areas during the recovery, a recent report by the Federal Reserve found that between 2010 and 2013, the inflation-adjusted median home value for all homeowners declined 7 percent. Even more startling, however, is how unevenly home values have recovered by race of the homeowner. This 7 percent decline in the inflation-adjusted median home value breaks out into a 4 percent decline for both non-Hispanic whites and nonwhites (including Hispanics). But public data from the Survey of Consumer Finances—which provide more detailed race categories—show even starker differences among racial and ethnic groups. Between 2010 and 2013, inflation-adjusted median home values fell by 4.6 percent for white households and 18.4 percent for African American households, but increased by 3.7 percent for Hispanic households. Since respondents reported their highest home values in the 2007 survey, the median value reported by whites has declined 20.3 percent, compared to 37.7 percent for African Americans and 25.8 percent for Latinos.

Welcome To Arcadia – The California Suburb Where Rich Chinese Stash Cash In McMansions - The surge in foreigners buying up U.S. real estate has been well documented in recent years. Of all this buying, no nation has demonstrated a bigger increase in purchases than China. In fact, it is estimated that 24% of all foreign purchases of domestic real estate this year have come from China, up 72% from last year. In some California communities, 90% of real estate buyers are from China. Yes, 90%. Naturally, many of them are buying multi-million dollar homes in “all cash” transactions. Well it appears that one of those communities is the 57,000 person Los Angeles suburb known as Arcadia. The suburb had a relatively insignificant Asian population of 4% in 1980, but it is now 59%.

The Top 10 U.S. States Where Chinese Are Investing in Real Estate - In many American cities, the landlords are increasingly Chinese. Big institutional Chinese investors who want global real-estate portfolios typically look for trophy projects in cities like New York, Los Angeles and London. Just this month, Hilton Worldwide agreed to sell its flagship Waldorf Astoria hotel in New York City to a Chinese insurance company for $1.95 billion—the steepest price tag ever for a U.S. hotel, brokers say, although it isn’t the highest on a per-room basis. But Chinese investors with smaller war chests want to be seen as international property players too, and they have their eyes on other cities. Over the past two years, more have sought to invest in offices and hotels in inland cities such as Chicago and Houston in the U.S., and Madrid and Frankfurt in Europe, according to a recent report by property consultancy Cushman & Wakefield.  The consultancy compiled a list of the top 10 U.S. states for Chinese investment. Though the top spots are no surprise—New York, which claims the top spot with more than $6.7 billion in investment, has a lead of more than $5 billion over runner-up California—others are less obvious. Texas, which comes in at No. 4, benefits from Houston, which has become more familiar to Chinese investors in recent years. The country’s state-owned behemoth China Petrochemical Corp., known as Sinopec, has operations there, and the city gained recognition with Chinese investors with the help of former Chinese basketball star Yao Ming, who played for the Houston Rockets.

How Much Will Student Debt Drag on Housing? -- Soft entry-level housing demand has fanned fears that rising student loan burdens may be crimping home purchases. But new data suggests that student debt may lead young adults to defer homeownership rather than skip out on it entirely. Moreover, the housing market may face a greater drag in the long run from weaker homeownership among adults that don’t attend college, especially if income prospects don’t improve for those who don’t go.A series of charts help break down the findings of Federal Reserve economists. They used credit records for a nationally representative sample of adults between ages 29 and 31 between 2004 and 2010.First, the data reflects other research that has found homeownership rates declined relatively more for adults with student loans than those without student loan debt following the recession. While homeownership rates were still higher for those with student debt, the difference between the two groups declined. But what if you exclude those who didn’t go to college? The homeownership rates between those who have no college debt and those who have no college debt because they didn’t go to college are far apart, and yet the rates of both declined. In other words, looking at adults without student debt without looking at whether they have college education could tell a different story. Next, the authors look at those who attended college and took on debt versus those who attended college and didn’t take on debt. It shows that the declines in the homeownership rate aren’t all that different between the two groups—certainly not to the degree implied by the first chart.

New Home Sales increased slightly to 467,000 Annual Rate in September - The Census Bureau reports New Home Sales in September were at a seasonally adjusted annual rate (SAAR) of 467 thousand.  August sales were revised down from 504 thousand to 466 thousand, and July sales were revised down from 427 thousand to 404 thousand. "Sales of new single-family houses in September 2014 were at a seasonally adjusted annual rate of 467,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 0.2 percent above the revised August rate of 466,000 and is 17.0 percent above the September 2013 estimate of 399,000."The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate. Even with the increase in sales over the previous two years, new home sales are still close to the bottom for previous recessions. The second graph shows New Home Months of Supply. The months of supply was unchanged in September at 5.3 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 September was 207,000. This represents a supply of 5.3 months at the current sales rate."   The third graph shows the three categories of inventory starting in 1973.

New Home Sales Miss, August Drastically Revised Lower --Having exploded 18% higher in August (driven by, um, record high prices), September's new home sales printed at 467k (against expectations of 470k) and August's surge to 504k was revised lower to just 466k (busting the biggest beat since 2005 meme) revised 7.5% lower. After August's reported 50% MoM rise in The West, the region saw the rate of sales slow in September. The median new home sales price (at record highs last month) fell 4% YoY to $259,000.

Comments on September New Home Sales -  The new home sales report for September was slightly above expectations at 467 thousand on a seasonally adjusted annual rate basis (SAAR).  With the downward revision to August sales, sales for September were at the the highest sales rate since July 2008.  Sales for the previous three months (June, July and August) were revised down.   The Census Bureau reported that new home sales this year, through September, were 338,000, Not seasonally adjusted (NSA). That is up 2.4% from 330,000 during the same period of 2013 (NSA). Not much of a gain from last year.  Right now it looks like sales will barely be up this year (maybe 3% or so for the year). Sales were up 17.0% year-over-year in September - however sales declined sharply in Q3 2013 as mortgage rates increased - so this was an easy comparison.  The comparisons for Q4 will be more difficult.This graph shows new home sales for 2013 and 2014 by month (Seasonally Adjusted Annual Rate). The year-over-year gain will probably be smaller in Q4, but I expect sales to be up for the quarter and for the year. And here is another update to the "distressing gap" graph that I first started posting several years ago to show the emerging gap caused by distressed sales. Now I'm looking for the gap to close over the next few years. The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through September 2014. This graph starts in 1994, but the relationship has been fairly steady back to the '60s. Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales. I expect existing home sales to mostly move sideways (distressed sales will continue to decline and be somewhat offset by more conventional / equity sales). And I expect this gap to slowly close, mostly from an increase in new home sales.

Lawler on New Home Sales: Silly-Looking August Guess Revised Down Sharply in the West – As Expected --From housing economist Tom Lawler: Census “guesstimated” that new SF home sales ran at a seasonally adjusted annual rate of 467,000 in September, up 0.2% from August’s downwardly-revised (by 7.5% to 466,000) pace. Sales estimates for June and July were also revised downward (by 2.4% and 5.4%, respectively). Not surprisingly (see LEHC, 9/24/2014), the biggest downward revision in sales for August was in the West region, where sales were revised downward by almost 20%. Census also estimated that the inventory of new SF homes for sale at the end of September was 207,000 on a seasonally adjusted basis, up 1.5% from August’s upwardly revised (to 204,000 from 203,000) level and up 13.1% from a year ago. Census estimated that the median new SF home sales price last month was $259,000, down 4% from last September.New SF home sales so far this year have fallen well short of consensus industry expectations at the beginning of the year. A major reason appears to be weakness sales to first-time home buyers, partly because of tight credit, partly because of financial “issues” for many younger adults, but also partly because many builders have trouble meeting their high return targets for communities with smaller, lower-price homes that would normally be targeted for first-time buyers.As an example, home builder Pulte noted this morning that given its return targets “most” of its current land development was going to communities focused on the move-up and active adult markets, as in many areas there is not enough “pricing power” in the first-time buyer market for the company to meet its return targets.

New-Home Sales Rose Last Month. Or Maybe They Fell. We Don’t Really Know. - If you saw a public-opinion poll that had a 15.7% margin of error, you probably wouldn’t take it too seriously.  By that standard, Friday’s report on U.S. new-home sales isn’t worth much – at least on a month-to-month basis. The Commerce Department’s monthly estimates tend to be volatile, often are revised significantly and typically come with enormous margins of error. . Sales rose 0.2% in September from the prior month, the latest report said. But that figure came with a margin of error of 15.7 percentage points.  So it could be up 15.9%, or down 15.5% — your guess is as good as ours.  August was a good month for new-home sales. They rose a robust 15.3% from July. But the initial estimate of sales (reported a month ago) at a seasonally adjusted annual rate of 504,000 was revised down this month to 466,000. The month still saw a solid gain, because July and June numbers were revised down. But the 15.3% gain came with a margin of error of 16.3 percentage points. So sales could have been up a tremendous 31.6% — or down 1%. Take your pick. “The data are notoriously volatile and unreliable,” High Frequency Economics chief U.S. economist Jim O’Sullivan said Friday in a note to clients. Morgan Stanley economist Ted Wieseman was more blunt. “These data are pretty useless on a short-term basis because they’re so badly measured,” he said in a note to clients.

Sales of New Homes Worse Than Most Years in 1980s, 1990s - Home sales rose to their highest annual pace in September in six years, but the new-home market is still depressed by historical standards. To get a sense of just how painful the housing downturn has been, consider this: excluding the post-2008 depression, sales this year are running at their slowest pace since 1982. Back then, interest rates were above 15% as the Federal Reserve fought off inflation and unemployment rose above 10%. Of course, the recessions of the early 1980s were followed by big snapbacks in construction of the kind that haven’t been seen following the 2007-09 recession. Through the first nine months of this year, builders have signed contracts to sell some 337,000 homes. That’s up just 1.7% from 331,000 through the same period last year, and up from the low of 233,000 in 2011. Still, this year’s level is below every other year from 1983 to 2009. In 1982, builders had sold 226,000 homes in the first nine months of the year. Sales doubled to 478,000 in 1983. Friday’s figures suggest that 2014 will be a giant letdown for the new-home sales market.

The Housing Recovery Has Been Canceled Due To Data Revisions - Last month, when, with great amusement, we reported that "New Home Sales Explode Higher Thanks To... Record High Average New Home Prices?", we mocked the latest batch of bullshit data released by the US department of truth as follows: New Home Sales rose a magnificent (seasonally-adjusted annualized rate) 18% in August - the biggest monthly rise since January 1992 albeit with a 16.3 90% confidence interval, meaning the final number may well be +1.7%. But even more stunning, new home sales in The West rose a mind-numbing 50% in August (and up 84.4% YoY - nearly double).   Well, it is now a month later, and here come the revisions: first, that 50% surge in the West was revised... 30K lower. But to get a sense of just how bad the revision was, here is the old, pre-revision data, and the "data" following the latest revision.  In short: the euphoric, consensus-beating data for every single month since May has been revised lower, by on average 6% and as much as 9%. Perhaps finally people will realize that there is only one number that matters in the Census bureau's monthly new home sales report: the ±15.7 90% confidence interval. Well, people maybe, but not algos, who only care about one thing: whether the data beat or missed.

Nobody's Home - America's Vacant Housing Problem--  FRED has a lot of interesting data that is there for the taking.  As you'll see in this posting, there is one very little discussed aspect of America's housing market that has shown almost no improvement since the end of the Great Recession.  Here is a graph showing the year-round vacant housing units for the United States:  In the first quarter of 2014, there were 13,596,000 housing units in America that were vacant year-round.  This includes housing units that are for sale, for rent or those that have been sold but not yet occupied but does not include housing units that are temporarily occupied by persons whose usual residence is elsewhere.  It also includes vacant mobile homes.  These year-round units are those which are, obviously, intended for year-round use.  At its peak in the second quarter of 2010, there were 14,580,000 year-round vacant housing units, up from 13,428,000 in the fourth quarter of 2007 just as the Great Recession began.  We can see that while the current number of year-round vacant housing units is down by 6.7 percent from the post-Great Recession peak, it is actually higher than it was at the beginning of the last recession.    Here is a graph showing the percentage of total housing units in the United States that are vacant year-round:  In the first quarter of 2014, 10.2 percent of all housing units in America were year-round vacant, down from 11.0 percent in the second quarter of 2010 but only slightly lower than the pre-Great Recession level of 10.35 percent.      Here is a graph showing year-round vacant housing units by Census Regions since 2000: Here is a graph showing the number of vacant housing units that are being held off the market and vacant for other reasons:Here is how the Census Bureau defines the concept of "vacant for other reasons": "Included in this category are year-round units which were vacant for reasons other than for occasional use, and units Occupied by persons with usual residence elsewhere. For example, held for settlement of an estate, held for personal reasons, or held for repairs."  In the second quarter of 2014, a total of 3,975,000 housing units were vacant for the aforementioned reasons.  It is interesting to note that this number has steadily climbed from 3,204,000 just prior to the Great Recession, an increase of 24 percent.  A study by the Census Bureau in 2012 showed that there were several reasons why there were so many "other vacant" housing units as shown on this graphic:

AIA: Architecture Billings Index increases in September, "Robust Construction Conditions Ahead"  --Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment. From AIA: Architecture Billings Index Shows Robust Conditions Ahead for Construction Industry With all geographic regions and building project sectors showing positive conditions, there continues to be a heightened level of demand for design services signaled in the latest Architecture Billings Index (ABI). As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the September ABI score was 55.2, up from a mark of 53.0 in August. This score reflects an increase in design activity (any score above 50 indicates an increase in billings). The new projects inquiry index was 64.8, following a mark of 62.6 the previous month. This graph shows the Architecture Billings Index since 1996. The index was at 55.2 in September, up from 53.0 in August. Anything above 50 indicates expansion in demand for architects' services: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.  According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction.  So the readings over the last year suggest an increase in CRE investment this year and in 2015.

Chain Store Sales Growth Worst Since 2010 (Or Why "The Fed Turned The Market Around") - If you wondered why "The Fed turned the market around" last week, acting so sensitively aggressive to act with stocks only down modestly from record highs, one glance at the following chart might answer the question. During last week's turbulence, ICSC-Goldman Chain Store Sales growth plunged to a mere 2.1% YoY - the weakest in 5 months and worst for this time of year since 2010.   Does this seem like a nation of consumers willing to take up the animal spirits, confident-about-the-future, torch of escape velocity spending from The Fed?  Charts: Bloomberg

BLS: CPI increases 0.1% in September, Core CPI 0.1%, Cost-Of-Living Adjustment 1.7% --From the BLS: The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.7 percent before seasonal adjustment. ...The index for all items less food and energy increased 0.1 percent in September. ... The 12-month change in the index for all items less food and energy also remained at 1.7 percent.  I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI. This was close to the consensus forecast of no change for CPI, and a 0.1% increase in core CPI. Cost-Of-Living Adjustment (COLA): The BLS reported CPI-W increased to 234.170 in September, for a Q3 average of 234.242. In Q3 2013, CPI-W average 230.33. The annual Social Security Cost-Of-Living Adjustment will be 1.7%.

CPI Prints Smallest Possible Increase In September Even As Beef Prices Surge 17% In 2014 -- After last month's shocking 0.2% drop in CPI, driven almost entirely by plunging gasoline prices, September CPI once again posted a modest rebound, rising 1.7% from a year ago, or 0.1% month over month, just above the 0.0% expectation, with core prices excluding food and energy rising precisely in line with the 0.1% expected. Broad prices were pushed lower by another month of declining energy prices (Gasoline -1.0%, Fuel Oil -2.1%), however offset by rising food prices which increased by food up 0.3% and Utility bills, rising 1.6% in September - the highest price increase in Utility bills since the 7.5% surge in March. Then again, one wonders how food inflation is so subdued when the report itself notes that "the index for beef and veal rose 2.0 percent in September and has now risen 16.7 percent since January. The index for dairy and related products increased 0.5 percent, its tenth increase in the last 11 months." But hey: there is always artificial food in a box which is plunging.

Inflation Deceptive, CPI 0.1% Yet Some Items Off the Charts (graphs) - The monthly Consumer Price Index increased 0.1% for September. CPI measures inflation, or price increases. September shows relief at the pump while steak lovers are hurting. Core inflation is below the Fed's target point. Yet while the monthly inflation number seems low, the situation is actually much more of a mixed bag, in part due to the way CPI is tabulated. CPI has only increased 1.7% from a year ago as shown in the below graph. This is a low annual rate of inflation and the same as last month. Core inflation, or CPI with all food and energy items removed from the index, increased 0.1% and has increased 1.7% for the last year. Core CPI is one of the Federal Reserve inflation watch numbers and 2.0% per year is their target rate. Graphed below is the core inflation change from a year ago Core CPI's monthly percentage change is graphed below. Last month's decline stirred up the quantitative easing talk for deflation is a grave concern. Energy overall declined -0.7% for the month and energy costs are now down -0.6% from a year ago. The BLS separates out all energy costs and puts them together into one index. This index includes gasoline which dropped -1.0% for the month and has declined now -3.6% for the year. Yet contained within the energy index is some bad news for consumers. Natural gas is now up 5.8% from a year ago with a monthly jump of 1.6%. Electricity declined -0.7% for the month and is now up 2.8% for the year. Shown below is the overall CPI energy index, or all things energy. Graphed below is the CPI gasoline index only, which shows the volatility of gas prices. Gasoline was one of the better pieces of news for this report.

September Inflation -- Core minus Shelter inflation still looks pretty weak, while shelter inflation remains strong.  My position is that shelter inflation reflects a negative supply shock and core minus shelter inflation reflects a negative demand shock.  The economy might be strong enough to limp along with no help from the housing sector and with negligible core minus shelter inflation, but the downside risk is significant if it can't.  Looking at the 1 year inflation indicators in the next graph, it might be worth noting that core minus shelter inflation was this low in 2004 when short term rates began increasing and the economy continued to recover (along with inflation).  But, inflation expectations were rising then, while they are falling now, and mortgage markets were flying then and are dead now.  We now have 4 months with no cumulative core minus shelter inflation.  I think the best hope at this point is coming from FHFA.  Clearly the implicit regulatory liabilities banks now have for mortgage credit are stifling.  If this can be corrected, maybe it will pull out some pent up housing demand and we will see home prices begin to climb again.  If that happens, it's smooth sailing.  If it doesn't, it's hard to tell how things will work out in the near future.

Why Rising Rents Haven’t Pumped Up Inflation - Policy makers and economy-watchers now seem more worried about disinflation rather than accelerating inflation. . In January, economists surveyed by The Wall Street Journal expected inflation–measured by the consumer price index–would end 2014 at a 2.3% annual rate, up from the 1.5% rate of 2013. Instead, inflation through September is running at a 1.7%, according to Wednesday’s CPI report. Core inflation, which excludes food and energy, also stands at just 1.7%. The Labor Department asks homeowners to estimate how much it would cost to rent their own homes. In a period of still-rising home prices and greater demand for rental properties, it is not surprising that the estimates–called owners’ equivalent rent–are rising this year. For the 12 months ended in September, OER is up 2.7%, up from 2.2% a year ago. (Actual rent paid by tenants is up a faster 3.3%.) OER is the big gorilla in the inflation room. It accounts for 24% of the total CPI and 31% of the core. So why isn’t the accelerating OER rate pushing up the core? Because other factors are offsetting the upward push. The biggest drag is the downward pressure on goods prices coming from overseas. Excluding fuel (which has been falling on its own), the average price of imports hasn’t increased since March, according to Labor Department data. That reflects the stronger dollar, falling commodity prices, as well as foreign producers guarding U.S. market shares as their domestic demand flags. In turn, the CPI for all core goods is down 0.3% for the 12 months ended in September. n the service side, other major categories have seen a slowdown in markups. Prices of medical services are up just 1.7% year over year, versus 3.1% a year ago. Education and communication services increased 1.8%, down from 2.0% a year earlier. Recreation services are rising 1.3% versus 1.7%.Altogether, service prices less the rent of shelter increased 2.0% in September, down from 2.6% in September 2013. The disinflation among services coupled with outright price cuts in goods has overwhelmed the upward push from rents.

Gap between wages and rents continues to grow -  Here is a quick follow-up to the discussion on the looming rental crisis in the US. The gap in growth rates of rental costs vs. wages continues to widen. The gap is creating a drag on the GDP growth by suppressing household formation, consumer spending, and labor mobility. Over time this trend will also increase homelessness.

Weekly Gasoline Price Update: Down Another Nine Cents - It's time again for my weekly gasoline update based on data from the Energy Information Administration (EIA). Rounded to the penny Regular dropped another nine cents and Premium eight cents. Regular is now at its lowest price since January 2011.  According to GasBuddy.com, only one state (Hawaii) has Regular above $4.00 per gallon. The highest continental average price is in California at 3.49. Missouri has the cheapest Regular at $2.76.

Oil Prices Are Dropping. Will We Turn Into Gas-Guzzling, Energy Monsters Again? - In the 1970s, years of high oil prices forced the United States to get more strategic about how it used fossil fuel. Drivers switched from Detroit-made gas-guzzlers to Japanese econo-boxes. House builders began putting more insulation in walls. Washington and a bevy of states threw taxpayer subsidies at then-wacky ideas like wind and solar power. But by the early 1980s, oil prices cratered, and America’s energy consciousness did, too. Over the next 20 years, sport-utility vehicles eclipsed small sedans, the size of the average suburban house soared, and subsidies for renewable energy waned. Energy was cheap again—and so was talk of America having shed its profligate ways. Now, as oil prices drop again—they were at $81 a barrel on Wednesday, down 23% from $105 in June—it’s fair to suspect that history is about to repeat itself. If past is prologue, that would be bad for the environment. It could cause a host of green shoots achieved over the past decade—from more-fuel-efficient cars, to a lurch from coal to natural gas as the fuel of choice for electricity, to an unprecedented, though still nascent, rise in renewable energy—to whither. But this time, there are intriguing signs that those green shoots will survive a cheap-oil winter.

DOT: Vehicle Miles Driven increased 0.4% year-over-year in August - The Department of Transportation (DOT) reported:Travel on all roads and streets changed by 0.4% (1.0 billion vehicle miles) for August 2014 as compared with August 2013.Travel for the month is estimated to be 267.8 billion vehicle miles.Cumulative Travel for 2014 changed by 0.6% (11.1 billion vehicle miles)  The following graph shows the rolling 12 month total vehicle miles driven.  The rolling 12 month total is still mostly moving sideways. The second graph shows the year-over-year change from the same month in the previous year. In August 2014, gasoline averaged of $3.57 per gallon according to the EIA.  That was down from August 2013 when prices averaged $3.65 per gallon.

What NCR just Said about the American Retail Quagmire -- When NCR announced its preliminary and disappointing third quarter results today, it lowered its guidance for the rest of 2014.   While at it, NCR revealed to just what extent brick-and-mortar retailers were sinking into a quagmire. The maker of, among other things, point-of-sale devices for the retail industry should know: It is, as it says, “the global leader in consumer transaction technologies.” It blamed “global macroeconomic conditions” such as “foreign currency headwinds.”  And NCR blamed particularly the “challenging retail market” for its debacle. CEO Bill Nuti explained it this way: Market conditions within the retail industry worsened in the third quarter, as evidenced by weak same store sales comparisons and financial results. This resulted in our retail customers spending more cautiously than anticipated and further delaying solution rollouts. Contributing further are ongoing data security concerns, which were heightened in the third quarter. This is causing retailers to shift IT priorities, resources, and capital spending. Additionally, ongoing retail consolidation continues to be a factor impacting our performance. So, while NCR will “continue to be faced with challenging and uncertain market dynamics,” it remains, obviously, “confident in the actions we are taking to address these challenges, including strengthening our Retail Solutions team and talent….” NCR, a thermometer into the retail industry beyond the latest sales statistics, has noticed that brick-and-mortar retailers are cutting back. And they’re not just cutting back buying point-of-sale devices; they’re cutting back, period. “Ongoing retail consolidation,” Nuti called it. And some are using bankruptcy courts to do it.

Rental America: Why the poor pay $4,150 for a $1,500 sofa - At Buddy’s, a used 32-gigabyte, early model iPad costs $1,439.28, paid over 72 weeks. An Acer laptop: $1,943.28, in 72 weekly installments. A Maytag washer and dryer: $1,999 over 100 weeks. Five years into a national economic recovery that has further strained the poor working class, an entire industry has grown around handing them a lifeline to the material rewards of middle-class life. Retailers in the post-Great Recession years have become even more likely to work with customers who don’t have the money upfront, instead offering a widening spectrum of payment plans that ultimately cost far more and add to the burdens of life on the economy’s fringes. The poor today can shop online, paying in installments, or walk into traditional retailers such as Kmart that now offer in-store leasing. The most striking change in the world of low-income commerce has been the proliferation of rent-to-own stores such as Buddy’s Home Furnishings, which has been opening a new store every week, largely in the South. In some ways, the business harkens back to the subprime boom of the early 2000s, when lenders handed out loans to low-income borrowers with little credit history. But while people in those days were charged perhaps an interest rate of 5 to 10 percent, at rental centers the poor find themselves paying effective annual interest rates of more than 100 percent. With business models such as “rent-to-own,” in which transactions are categorized as leases, stores like Buddy’s can avoid state usury laws and other regulations.

LA area Port Traffic in September: Imports Highest since 2006, Exports Soft - Container traffic gives us an idea about the volume of goods being exported and imported - and possibly some hints about the trade report for September since LA area ports handle about 40% of the nation's container port traffic.The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).  To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average. On a rolling 12 month basis, inbound traffic was up 0.9% compared to the rolling 12 months ending in August. Outbound traffic was down 0.4% compared to 12 months ending in August. Inbound traffic has been increasing, and outbound traffic has been mostly moving sideways. The 2nd graph is the monthly data (with a strong seasonal pattern for imports). Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year). Imports were up 10.6% year-over-year in September, exports were down 5.6% year-over-year. This might suggest retailers are expecting a happy holiday season.

US Manufacturing PMI Tumbles, Biggest Miss In 14 Months --But the world has been printing such great PMIs? And the US is the new engine of global growth? So how did US Manufacturing PMI just print 56.2, 3 month lows, and its biggest miss since August 2013? Following China and Europe's lead, US is latest PMI print with collapsing New Orders (57.1, down from 59.8, lowest since January), Output, and New Export Orders. This is the biggest 2-month drop in US PMI since May 2013.

Weekly Initial Unemployment Claims increase to 283,000, 4-Week Average lowest since May 2000 -- The DOL reportsIn the week ending October 18, the advance figure for seasonally adjusted initial claims was 283,000, an increase of 17,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 264,000 to 266,000. The 4-week moving average was 281,000, a decrease of 3,000 from the previous week's revised average. This is the lowest level for this average since May 6, 2000 when it was 279,250. The previous week's average was revised up by 500 from 283,500 to 284,000.   There were no special factors impacting this week's initial claims.  The previous week was revised up to 266,000.  The following graph shows the 4-week moving average of weekly claims since January 1971.

Initial Jobless Claims Rise Most In 3 Months, 4-Week Average Lowest Since 2000 --Having reached multi-year lows last week, this week's 17k rise to 283k (albeit noise), missing expectations for the first time in 6 weeks, is the biggest weekly rise in initial jobless claims since early August. Of course that's irrelevant as all the time there is no hiring, there is no firing and the 4-week average (less noisy) dropped to its lowest since May 2000 - though we are sure Fed heads will not be reassured by this data as they focus attention on inflationary expectations (having 'fixed' employment). Continuing Claims dropped to cycle lows - the lowest since Dec 2000.

Unemployment Rate Below 5% in 15 States - The unemployment rate stood below the 5% line in 15 states in September, signaling a return to healthier labor-market conditions in a growing swath of the country. Colorado became the latest state to break the barrier, with its unemployment rate falling to 4.7% last month from 5.1% in August, the Labor Department said Tuesday. Many of the states with the lowest unemployment rates are in the center of the country, led by North Dakota at 2.8% and followed by South Dakota, 3.4%, and Utah, 3.5%. Georgia‘s unemployment rate was 7.9%, the highest in the country last month. Next highest was Mississippi, 7.7%, and Rhode Island, 7.6%. The national unemployment rate was 5.9% in September, down from 7.2% a year earlier. The average September unemployment rate on records back to 1948 is 5.8%.

BLS: Thirty-one States had Unemployment Rate Decreases in September - From the BLS: Regional and State Employment and Unemployment Summary Regional and state unemployment rates were generally little changed in September. Thirty-one states had unemployment rate decreases from August, 8 states had increases, and 11 states and the District of Columbia had no change, the U.S. Bureau of Labor Statistics reported today.... Georgia had the highest unemployment rate among the states in September, 7.9 percent. North Dakota again had the lowest jobless rate, 2.8 percent. This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession. The size of the blue bar indicates the amount of improvement. The states are ranked by the highest current unemployment rate. Georgia had the highest unemployment rate in September at 7.9%. The second graph shows the number of states with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 10 states with an unemployment rate at or above 11% (red). Currently no state has an unemployment rate at or above 8% (light blue); Nine states are still at or above 7% (dark blue).

State Unemployment Rates Tilt In Favor of Colorado, Florida Governors - The health of the local labor market is an important issue in several closely contested governor’s races this fall. The Labor Department data released Tuesday will likely be touted by candidates seeking to woo voters in the final weeks of the campaign. The unemployment rate in Colorado fell to 4.7% last month from 5.1% in August. Mr. Hickenlooper, a Democrat, is locked in a close race with Republican candidate Bob Beauprez. In Florida, the jobless rate fell to 6.1%, the lowest reading since Mr. Scott, a Republican, was elected in 2010. The state’s economy is a key issue in his race against former governor and current Democratic candidate Charlie Crist. The state’s unemployment rate was 11% when Mr. Crist left office. The national unemployment rate was 5.9% in September, down from 7.2% a year earlier.  The jobless rate has trended down in most states from a year ago, but there’s been little improvement in Georgia. The unemployment rate there fell to 7.9% in September from 8.1% in August, but the reading remains the highest in the country. A year ago the rate was 8%. The elevated reading is a challenge to incumbent GOP Gov. Nathan Deal. Democratic challenger Jason Carter has made the state’s unemployment rate a major campaign issue.

Philly Fed: State Coincident Indexes increased in 43 states in September --From the Philly FedThe Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for September 2014. In the past month, the indexes increased in 43 states, decreased in four, and remained stable in three, for a one-month diffusion index of 78. Over the past three months, the indexes increased in 44 states, decreased in five, and remained stable in one, for a three-month diffusion index of 78. Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:  The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Americans taking fewest vacation days in four decades - CNN.com: A new study has found that U.S. workers forfeited $52.4 billion in time-off benefits in 2013 and took less vacation time than at any point in the past four decades. American workers turned their backs on a total of 169 million days of paid time off, in effect "providing free labor for their employers, at an average of $504 per employee," according to the study. Titled "All Work and No Pay: The Impact of Forfeited Time Off," the study was conducted by Oxford Economics for the U.S. Travel Association's Travel Effect Initiative, which studies the impact of forgone vacation time. "Americans are work martyrs," says the U.S. Travel Association. "Tied to the office, they leave more and more paid time off unused each year, forfeiting their earned benefits and, in essence, work for free." According to the study, in 2013 U.S. employees took an average of 16 days of vacation, compared with an average of 20.3 days as recently as 2000. "The economic potential of returning to the pre-2000 vacation patterns is massive: annual vacation days taken by U.S. employees would jump 27% (or 768 million days), delivering a $284 billion impact across the entire U.S. economy," according to the travel association.

Work-Sharing: A Socialist Alternative to Layoffs? -- One of the major overlooked problems driving our country’s jobs crisis isn’t unemployment, it’s just not having enough work. The shadow figure that stalks behind the unemployment rate issued every few weeks by the Labor Department is underemployment: people who wish for, and need, full-time work, but are only able to get part-time hours, or have gotten “discouraged” from job seeking. Including those factors, the broad measure of underemployment hovers around 12 percent.Workers lacking full-time employment are often full-time struggling: juggling multiple part-time gigs, suffering from loss of healthcare and other social protections, and living amidst long-term joblessness across the community. . But it’s not that the underemployed just want to work more; they actually want to earn more, at a fair rate, for the work that they can get. One way to help fix this imbalance is through work-sharing. Work-sharing allows companies to distribute hours so that people work somewhat less, while ensuring that there’s still enough work to go around to prevent layoffs. Work-sharing is a simple concept: When employers try to cut costs, shrinking the payroll is a quick way to cut back not only on wages but on fringe benefits and related taxes. Employers often make the cruel calculation to replace current workers with cheaper ones, or to reduce their hours. Work-sharing tries to reconfigure the distribution of work and employment by subsidizing employment costs in exchange for reduced work time. So people work less, but get an income supplement to help offset the impact.

Apprenticeships Help Close the Skills Gap. So Why Are They in Decline? - Ask CEOs and corporate recruiters whether they're finding the workers they need, and they'll lament about a skills gap that threatens productivity and growth—not just in their companies but in the economy at large. Yet employers and state legislators have been decidedly lukewarm about a proven solution to the problem: apprenticeships. Apprenticeships can offer a precise match between the skills employers want and the training workers receive, says Robert Lerman, an economics professor at American University. "It's a great model for transferring skills from one generation to the next," says John Ladd, director of the Department of Labor's Office of Apprenticeship. Nevertheless, according to the Labor Department, formal programs that combine on-the-job learning with mentorships and classroom education fell 40% in the U.S. between 2003 and 2013. All of which leads to the question: If apprenticeships are the solution to a pressing problem, why is there so much resistance? Perhaps the biggest obstacle is that two-thirds of apprenticeship programs in the U.S. are in the construction industry, furthering a blue-collar image that stifles interest among young people and the employers who could create jobs for them. Construction unions, which dominate many of the state agencies devoted to apprenticeships, haven't done much outreach to other industries, Mr. Lerman says. At the same time, business owners and managers sometimes shy away from apprenticeships because of their association with unions. "There's an underlying fear among employers" that unions want to come in and organize workers, or that any apprenticeship program would be run by a union,

Real Hourly Wages Drop In September, Fail To Rise In 6 Of Past 7 Months -- Alongside the CPI data released earlier which showed the smallest possible broad price increase, when considering that previously the BLS reported flat nominal hourly wages in September, it implied that real wages declined  once again. Sure enough, in a separate report today, the BLS announced that real average hourly earnings (in constant 1982-1984 dollars) declined once again, this time from $10.34 to $10.32, a -0.2% drop from past month. This also means that since March, there has been just one month in which real hourly wages have increased, and that was mostly due to the outright deflationary print the BLS reported last month.

Compensation shrinks for all income groups – except the very highest -American paychecks shrank last year, just-released data show, further eroding the public’s purchasing power, which is so vital to economic growth. Average pay for 2013 was $43,041 — down $79 from the previous year when measured in 2013 dollars. Worse, average pay fell $508 below the 2007 level, my analysis of the new Social Security Administration data shows. Flat or declining average pay is a major reason so many Americans feel that the Great Recession never ended for them. A severe job shortage compounds that misery not just for workers but also for businesses trying to profit from selling goods and services. Average pay declined in 59 of the 60 levels of worker pay the government reports each October. The Social Security Administration slices wages into tight categories, starting at $1 to $5,000 and topping out at $50 million plus. Which group of lucky duckies didn’t see their pay fall? Workers making more than $50 million, who saw their average pay rise by $12.8 million, to $111.7 million.

Two-Thirds Of America's Biggest Retailers Are Worried About Flat Wages -- You really have to laugh about this one, lest you not begin to cry. It seems the same asshole American retail companies who pay their employees shit wages are now quite concerned that their bottom lines are being negatively affected by employees being paid shit wages. Here's Huffington Post with the storySixty-eight percent of the top 100 retail companies in the U.S. -- a group that includes, Walmart, Apple, McDonald's and J.C. Penney -- say the country's stagnant wages pose a major threat to their bottom lines, according to a new report by the Center For American Progress, a left-leaning think tank. Researchers analyzed the most recent SEC 10-K filings of the largest 100 retailers in the country and found that more than two-thirds of these corporations issued warnings to investors that profits could be hampered by flat wages, high unemployment and low consumer spending. The trend is hammering companies that target high-income customers, like Whole Foods and Dillard's, and those that market to low-income shoppers, like Dollar General and T.J. Maxx, according to the report. So, do you suppose this concern is enough to get these companies to actually raise their employees' salaries to a decent living wage? Of course not. Apparently, all the other companies BUT them are supposed to do it:  But even as two-thirds of the companies in the study pointed to stagnating wages as a source of their problems, many of them have opposed or stayed silent on any proposed wage increases. There are a few notable exceptions. Gap promised to institute a $10 per hour minimum wage by next year, and Costco's starting pay is already $11.50.

Businesses Agree—It’s Time To Raise the Minimum Wage  - The last barricades in the right wing’s fight to prevent increases in the minimum wage are starting to fall, as even the businesses that minimum wage opponents are supposedly protecting from having to pay a decent wage are saying, “Enough! It’s time to raise the minimum wage.”The American Sustainable Business Council and Business for a Fair Minimum Wage conducted a national phone poll of 555 small business employers and found support for raising the minimum wage to $10.10 an hour in every region of the country. Two thirds of surveyed businesses in the Northeast were in favor, and even in the South, 58 percent of small businesses approve of President Obama’s proposal to raise the minimum wage in steps and then index it to inflation.Unsurprisingly, these business owners are not simply being altruistic. Most of them understand that their businesses will benefit in two ways when millions of poorly paid employees get a raise. First, higher pay would mean lower employee turnover, increased productivity and higher customer satisfaction—all of which helps employers’ bottom line. Second, most of the owners surveyed agree that a higher minimum wage would increase consumer purchasing power and help the economy. Putting money in the pockets of millions of potential customers means more sales and higher profits.

Workers Bring $15 Hourly Wage Challenge to Walmart -- Walmart CEOs promised to “end minimum-wage pay” for its lowest-paid sales workers and touted a plan to ‘”invest in its associate base” and maybe even offer more bonus opportunities. But though these moves might help the several thousand associates earning the absolute legal minimum of $7.25 an hour, the real problem is that hundreds of thousands of Walmart workers earn just above that level and still struggle to survive (the average sales associate’s hourly wage is just under $9). In addition to poverty wages, workers have suffered cuts to benefits and exhausting, erratic schedules.  On Wednesday and Thursday, Walmart workers once again voiced their demands for decent work with demonstrations and civil disobedience in New York City; Washington, DC; and Phoenix. They delivered a petition demanding better working conditions, now signed by Walmart workers at more than 1,600 stores nationwide, to the homes of members of the Walton dynasty and the offices of their foundation. The actions were part of a string of protests that have drawn public attention to the dirty labor practices behind Walmart’s consumer-friendly veneer. The OUR Walmart campaign has tackled not just low wages but also the computerized scheduling systems that wreak havoc on workers’ lives. Working mothers suffer from rigid schedules and low pay scales that make it near impossible to support a family. The company’s recent move to slash health benefits for about 30,000 part-timers—following a growing trend among big retailers—effectively dumps more of the healthcare costs of struggling workers onto Obamacare. Many associates must supplement low wages with welfare benefits, adding up to billions of dollars a year for food stamps and other public assistance.

Janet Yellen: Average Net Worth of 62 Million U.S. Households is $11,000 -- It took 200 years of hard data in a bestselling book by Thomas Piketty, awesome graphs and charts in Robert Reich’s documentary, “Inequality for All,” and years of scolding from Wall Street on Parade, but Fed Chair Janet Yellen has finally, and correctly, arrived at the idea that the nation’s economic ills are deeply rooted in the fact that U.S. “income and wealth inequality are near their highest levels in the past hundred years.” That was the message Yellen delivered on Friday in a speech at the Federal Reserve Bank of Boston, replete with stomach-churning figures from the Fed.Make no mistake about it, coming at the end of a week that saw dramatic up and down spikes in the stock market – Yellen was sending a pivotal message to the Wall Street wealth hoarders – your billionaire standing could be as ephemeral as a day lily if we don’t fix this income and wealth gap.Yellen quieted the crowd with this opener: “The past several decades have seen the most sustained rise in inequality since the 19th century after more than 40 years of narrowing inequality following the Great Depression.” Using data from the Fed’s Survey of Consumer Finances, Yellen punctuated her message with these hair-raising figures:“The wealthiest 5 percent of American households held 54 percent of all wealth reported in the 1989 survey. Their share rose to 61 percent in 2010 and reached 63 percent in 2013; “The lower half of households by wealth, held just 3 percent of wealth in 1989 and only 1 percent in 2013. To put that in perspective…the average net worth of the lower half of the distribution, representing 62 million households, was $11,000 in 2013.”

Has Inequality Driven a Wedge Between Productivity and Compensation Growth? - Whenever those who believe inequality is the defining challenge of our time want to make a supposedly slam-dunk case that inequality has eaten into the incomes of people below the top, they trot out some version of the chart below, which Atif Mian and Amir Sufi call simply, “The Most Important Economic Chart,” one also recently deployed by Paul Krugman. The Economic Policy Institute, in particular, has been promoting the idea that inequality has driven a “wedge” between productivity growth and the income growth of the typical household. Workers’ hourly compensation, it is said, should be tied to the value of what they produce, so when productivity—the value created per hour–increases, worker compensation should increase accordingly. But the charts used to demonstrate the supposed breakdown of this relationship obscure the reality that productivity and hourly compensation continue to track each other.

Economist: Skills, Tech Gap Can’t Explain Inequality --Gaps in educational achievement and shifts in technology, often cited as key reasons for widening income and wealth inequality, do very little to explain the trend, said Lawrence Mishel, president of the Economic Policy Institute, a liberal think tank in Washington. Speaking Saturday at a conference on “Equality of Economic Opportunity” hosted by the Federal Reserve Bank of Boston, Mr. Mishel criticized the event’s narrow focus on local actions to reduce inequality when other possible approaches lie in the realm of broader economic policy. “Most of the policy discussion is limited to school interventions, go to college – totally a human capital orientation,” said Mr. Mishel. “Even some of that is a little bit outdated because, as I’m going to argue, this implicitly accepts skill-biased technological change as a driver of inequality.” That widely held point of view, he says, is largely discredited by the data. “The intellectual basis for that in my view has collapsed. It has very little to contribute to the understanding over inequality over the last 20 years, and is not the basis for thinking about the future so much,” Mr. Mishel said. “So if we want to talk about changing income inequality, a lot of it is about broadening wage growth and better jobs. And that’s a different set of policies than just human capital development,” he said, referring to efforts to boost workers’ education and skills. “And it even includes addressing the top 1% which is something we haven’t really talked about,” he said, referring to the top 1% of the population by income or wealth. Mr. Mishel said the surging wages at the very top of the income distribution had more to do with high executive pay and financial sector excesses than gaps in educational achievement. At the same time, he said wages for college graduates overall have not risen since 2000, suggesting income stagnation affected a much wider swath of the population than just poor communities.

This City Came Up With a Simple Solution to Homelessness: Housing -- Kilee lives in Salt Lake City, Utah. It’s one of hundreds of American cities that have criminalized homelessness. Sometimes the “crime” is loitering. Sometimes it’s panhandling. In 2014 alone, one hundred American cities have banned sitting or lying down in public places. Wherever it happens, the fallout is frustratingly similar. Not having a roof over your head means living in a continual crisis. The stress of not knowing where you’ll sleep at night, whether your family will be safe, and if you’ll be able to eat can suck up all your energy and your will. Regular stints in jail can only make it more difficult to find stability. Not only that, but they drain tax dollars that could be put to much better use. Salt Lake City crunched the numbers. And the prescription was clear. The city was spending $20,000 per homeless resident per year—funding for policing, arrests, jail time, shelter, and emergency services. Homelessness was not going down. Instead, for $7,800 a year through a new program called Housing First, the city could provide a person with an apartment and case management services.

The U.N. says water is a fundamental human right in Detroit - Representatives from the United Nations spent a few days in Detroit earlier this week looking into the the spate of utility shutoffs that left thousands of poor households in the city this year without water to bathe and cook by. The two special rapporteurs — one on "the human right to water and sanitation," the other on "adequate housing" — were invited to town not by the city, but by community groups that have been advocating for the poor. And their conclusion reinforces what concerned on-lookers have been saying since this summer: "When people are genuinely unable to pay the bill," the U.N. says, the state is obligated to step up with financial assistance and subsidies. "Not doing so amounts to a human rights violation." The ensuing narrative is provocative,  representing a kind of rock bottom for the Motor City (and the U.S. by implication): The U.N. just condemned an American city for violating the fundamental rights of its own residents — rights that families in much more impoverished countries should be able to expect, too. As a reminder, the rapporteurs add in their statement, the Universal Declaration of Human Rights "is fully applicable to the United States," too. "We were deeply disturbed," their statement says, "to observe the indignity people have faced and continue to live with in one of the wealthiest countries in the world and in a city that was a symbol of America’s prosperity."

States Ease Interest Rate Laws That Protected Poor Borrowers - Lenders have come under fire in Washington in recent years. Yet one corner of the financial industry — lending to people with poor credit scores — has found sympathetic audiences in many state capitals.Over the last two years, lawmakers in at least eight states have voted to increase the fees or the interest rates that lenders can charge on certain personal loans used by millions of borrowers with subpar credit.The overhaul of the state lending laws comes after a lobbying push by the consumer loan industry and a wave of campaign donations to state lawmakers. In North Carolina, for example, lenders and their lobbyists overcame unusually dogged opposition from military commanders, who two years earlier had warned that raising rates on loans could harm their troops.The lenders argued that interest rate caps had not kept pace with the increased costs of doing business, including running branches and hiring employees. Unless they can make an acceptable profit, the industry says, lenders will not be able to offer loans allowing people with damaged credit to pay for car repairs or medical bills. But a recent regulatory filing by one of the nation’s largest subprime consumer lenders, Citigroup’s OneMain Financial unit, shows that making personal loans to people on the financial margins can be a highly profitable business — even before state lending laws were changed. Last year, OneMain’s profit increased 31 percent from 2012.

State “Income Migration” Claims Are Deeply Flawed, by Michael Mazerov, CBPP: Some proponents of state income tax cuts are making highly inaccurate claims about the impact of interstate migration patterns on states with relatively high income taxes based on a misleading reading of Internal Revenue Service data.Those making these arguments claim that many of the people who leave states with relatively robust income taxes do so largely in order to pay little or no income tax in another state, and that they take their incomes with them when they move, harming the economies of the states they left.  As a consequence, these “income migration” proponents claim, states with relatively high income taxes are suffering severe damage from the loss of income as “money walks” out of their states to lower-tax states.[1]The first part of this argument — that interstate differences in tax levels are a major explanation for interstate migration patterns — is not supported by the evidence, as we documented in an earlier paper.[2]  People rarely move to lower their state income taxes.  Other factors, such as job opportunities, family considerations, climate, and housing costs, are much more decisive. The second part of the argument — that states with relatively high income taxes are suffering severe economic damage because they are losing the incomes of people who migrate to other states — is also deeply flawed.

More American Children Are Living With Their Grandparents - Roughly 10% of U.S. children were living with a grandparent in 2012, up from 7% in 1992, according to a report from the Census Bureau released Wednesday. The increase stems partly from rising life expectancy in the U.S., which means more grandparents are available to help care for children—especially in cases where both parents are busy working. However, the Census findings may also reflect pressures in the economy that are forcing more grandparents to act as substitute parents: Of America’s 65 million grandparents, 2.7 million were raising their grandchildren. And nearly 40% of those had cared for their grandchildren for five years or more. “Recent trends in increased life expectancy, single-parent families and female employment increase the potential for grandparents to play an important role in the lives of their grandchildren,” said Renee Ellis, a demographer in the Census Bureau’s Fertility and Family Statistics Branch. “Increases in grandparents living with grandchildren are one way that the grandparent role has changed.” In general, grandparents who lived with a grandchild in 2012 were younger, had lower levels of education and were more likely to be in poverty than those who did not live with a grandchild, Census said. All in all, just 3% of households had both grandchildren under 18 and their grandparents in 2012. But more than 60% of these households were maintained by a grandparent—and about 1 in 3 had no parent present.

Poor kids who do everything right don’t do better than rich kids who do everything wrong - America is the land of opportunity, just for some more than others. That's because, in large part, inequality starts in the crib. Rich parents can afford to spend more time and money on their kids, and that gap has only grown the past few decades. Indeed, economists Greg Duncan and Richard Murnane calculate that, between 1972 and 2006, high-income parents increased their spending on "enrichment activities" for their children by 151 percent in inflation-adjusted terms, compared to 57 percent for low-income parents.But, of course, it's not just a matter of dollars and cents. It's also a matter of letters and words. Affluent parents talk to their kids three more hours a week on average than poor parents, which is critical during a child's formative early years. That's why, as Stanford professor Sean Reardon explains, "rich students are increasingly entering kindergarten much better prepared to succeed in school than middle-class students," and they're staying that way. It's an educational arms race that's leaving many kids far, far behind.  Even poor kids who do everything right don't do much better than rich kids who do everything wrong. Advantages and disadvantages, in other words, tend to perpetuate themselves. You can see that in the above chart, based on a new paper from Richard Reeves and Isabel Sawhill, presented at the Federal Reserve Bank of Boston's annual conference, which is underway.

Poverty and class: the latest themes to enter the US banned-books debate -- Late last month, for the 32nd year in a row, Banned Books Week was marked across the US. Spearheaded by the American Library Association’s (ALA) Office for Intellectual Freedom, the annual salute to the freedom to read has become a fixture. It aims to counterbalance perennial challenges to the content of books and efforts to get them banned, usually from schools and libraries. The ALA collects information on which books are objected to and reports on prominent recurring themes that tend to generate moral or ideological indignation. Subjects such as religion, race, gender, sexuality and allegations of sexually explicit content or offensive language frequently top the list.  More worrying, however, is the recent rise in efforts to get books banned that cover poverty and social class. At a time when rising inequality and the demonisation of poorer people (both in the UK and the US) is commonplace, such attempts to remove books that depict the reality of life for people who are struggling should concern us all. Numerous studies have shown that reading about people, issues or circumstances unfamiliar to us can engender empathy – in times of acute social and economic divisions this becomes all the more important. It is not just wealth that separates rich and poor, but ignorance and the absence of social contact. The US has a longstanding tradition of books being challenged on sometimes spurious grounds (often, but not always from the conservative right) even while the first amendment of the constitution protects “access to ideas as well as free speech”. There are numerous organisations, including the ALA and National Coalition Against Censorship (NCAC) that contest such moves, still, there’s something unsettling about the recent manifestation of complaints on socio-economic grounds.

Public university required students to submit sexual history or face disciplinary action: Clemson University is requiring students to reveal how many times they’ve had sex in the past month and with how many partners. "They’re upset. They’re paying this astronomical tuition to come here, and they’re talking to their parents about these questions, and their parents are getting upset about having to spend this kind of money at Clemson where their students are being asked these kinds of questions." Tweet ThisIn screenshots obtained exclusively by Campus Reform, the South Carolina university is asking students invasive and personal questions about their drinking habits and sex life as part of what they’ve billed as an online Title IX training course. “How many times have you had sex (including oral) in the last 3 months?” asks one question. “With how many different people have you had sex (including oral) in the last 3 months?” asks another. In a campus-wide email, the South Carolina university announced that all students, faculty, and staff would be required to complete a mandatory, one-hour long Title IX training course by November 1.

U.N.C. Investigation Reveals Athletes Took Fake Classes - — It was November 2009, and alarm was spreading among the academic counselors charged with bolstering the grades of football players at the University of North Carolina. For years the players and others had been receiving A’s and B’s in nonexistent classes in the African studies department, but the administrator who had set up and run the fake classes had just retired, taking all those easy grades with her. The counselors convened a meeting of the university’s football coaches, using a PowerPoint presentation to drive home the notion that the classes “had played a large role in keeping underprepared and/or unmotivated players eligible to play,” according to a report released by the university on Wednesday ... they didn’t go to class ... they didn’t have to take notes, have to stay awake ... they didn’t have to meet with professors ... they didn’t have to pay attention or necessarily engage with the material,” a slide in the presentation said. “THESE NO LONGER EXIST!”

Setting Up The Students -- The high cost of college tuition and the worsening penalties for student debt raise the question “Should you go to college?”.  Various disciplines are experiencing declines in enrollment, even areas like law schools.  Where are the good jobs and is the training worth the expense?  Science, technology, engineering, and mathematics (STEM) are still portrayed an in-demand career choice despite reputable studies to the contrary (Falling Behind? Boom, Bust, and the Global Race for Scientific Talent by Michael Teitelbaum).  A virtual congressional hearing brought together a knowledgeable group concerned about this job market.  The four experts in this hearing have well respected academic credentials on this topic and had a consistent message that increasing the number of H-1B high skill guestworker visas will harm the STEM job market. Schools, professional societies, and corporations are busy recruiting more students to STEM. A corporation that manages student loans is partnering with a university to encourage more minority students to pursue STEM majors.  The American Statistical Association decided to address falling funding for statisticians by recruiting more students through social media.  They are not lobbying the National Science Foundation, nor partnering with medical researchers, nor lobbying the US Congress.  Bill Gates and friends published an OpEd in the New York Times pleading to remove all limits on legal immigration for computer programmers because their companies are not able to recruit enough US programmers, even as Microsoft is in the process of laying off 18,000 employees.

Can Student Credit Unions Solve the College Affordability Problem? --  In the past two years, Columbia University students have attempted to remedy the vexing problem of college affordability with an old but largely untried idea: a student credit union. Credit unions form a cooperatively owned alternative to traditional banks in which profits go to providing better rates and lower fees for the credit union’s clients. Recipients of capital become shareholders in the institution and participate in its decisions.  “If Columbia can have a student-run ambulance service, then it can have a student-run credit union.” Started by a group of four students, the idea, rebranded Lion Credit Union Initiation (LCUI), quickly mustered interest. In the fall of 2013 dozens of students gathered for an informational meeting, after which half of the attendees applied to join the team. The team is now constituted of twenty-two students, chosen after a “brutally long application process,” according to LCUI’s current business development analyst, Dayalan Rajaratnam. “It’s about connecting a community, while saving each other money and teaching each other things.” The credit union would be run by volunteer students. After its operational costs, which should be minor, are paid, its profits would be devoted to lowering fees and giving back to the community, by offering grants for different events and projects. For Mischa, the founder, it’s “all about knowledge-sharing and supporting innovation that comes from community members.”

What Can Universities Do About Climate Change? - Robert Stavins --There has been considerable debate about whether universities – and, for that matter, foundations – should divest fossil-fuel stocks from their investment portfolios as a way to reduce the risk of global climate change.  My own institution, Harvard University, decided that such an action was neither warranted nor wise (a position that I have supported in a post at this blog, as well as in a longer essay published by Yale University’s environment360).  Our sister institution on the West Coast of the United States, Stanford University, decided to divest coal stocks only, a position that apparently will have trivial implications for that university’s portfolio, partly because it does not affect investments in funds in which coal stocks are commingled, such as exchange-traded and mutual funds. A broader, more positive, and fundamentally more important question is what role should universities play in addressing the threat of climate change (a topic I have addressed at this blog in the past).  Recently, the Presidents of Harvard and Stanford co-authored an op-ed on precisely this topic, and so today I am pleased to reproduce it below.  The original version was published in The Huffington Post.

LePage shares ideas to reduce student debt at UMaine campaign stop -- Gov. Paul LePage shared two ideas for programs he said would reduce student debt and would encourage graduates to stay in Maine during a campaign stop at the University of Maine on Monday afternoon. Under one idea the governor spoke about, companies that employ Maine graduates would be given the option of buying their employees’ student debt in exchange for a tax break.  Although he said the plan is “in its infancy” and that the details were not fleshed out, LePage said it would be a way to get students’ loans paid off quickly and to “keep young people in Maine.”UMaine sophomore Lauren Lugdon, 19, said she was excited about the plan.“  I’ll come out, personally, with thousands (of dollars) in debt,” she said. “I think it will be a good incentive to stay in Maine.”The other plan, which LePage also did not elaborate on, would provide scholarships to Maine students who study science, technology, engineering or math.

The Moral Economy of Debt – Every economic collapse brings a demand for debt forgiveness. The incomes needed to repay loans have evaporated, and assets posted as collateral have lost value. Creditors demand their pound of flesh; debtors clamor for relief. Consider Strike Debt, an offshoot of the Occupy movement, which calls itself “a nationwide movement of debt resisters fighting for economic justice and democratic freedom.” Its Web site argues that “[w]ith stagnant wages, systemic unemployment, and public service cuts” people are being forced into debt in order to obtain the most basic necessities of life, leading them to “surrender [their] futures to the banks.” One of Strike Debt’s initiatives, “Rolling Jubilee,” crowd-sources funds to buy up and extinguish debt, a process that it calls “collective refusal.” The group’s progress has been impressive, raising more than $700,000 so far and extinguishing debt worth almost $18.6 million. It is the existence of a secondary debt market that enables Rolling Jubilee to buy debt so cheaply. Financial institutions that have come to doubt their borrowers’ ability to repay sell the debt to third parties at knock-down prices, often for as little as five cents on the dollar. Buyers then attempt to profit by recouping some or all of the debt from the borrowers. The US student-loan provider Sallie Mae admitted that it sells repackaged debt for as little as 15 cents on the dollar.

Meet Janet Dupree:72, Alcoholic, HIV-Positive, $16,000 In Student Debt: "I Won't Live Long Enough To Pay It Off" -- One would think that Janet Lee Dupree, 72, a self-professed HIV-infected alcoholic, would be slowly putting aside material worries as she prepares to set the intangibles in her life in order for one last time. One would be wrong.As she admits, "I am an alcoholic and I have HIV," she tells the BBC. "That's under control." What is the cause of most if not all consternation in the final days of Dupree's life? "I was sick and I didn't worry about paying back the debt." As a result, Dupree defaulted on her loan, and since she turned 65 she has had money withheld from her Social Security benefits. "Just recently I received a notification that they are going to garnish my wages because I am still working," says Dupree, who works 30 hours a week as a substance abuse counsellor. The debt in question: Dupree owes $16,000 in student loans she acquired in 1971 and 1972. "I will never live long enough to pay off my loan."

The epic struggle over retirement -- The retirement prospects for millions of public employees have gotten shakier in the past few months amid a growing chorus of news stories about troubled pension funds. Illinois, New Jersey, Connecticut and a dozen other states are reported to be in serious fiscal trouble, with unfunded pension liabilities exceeding annual revenues. These alarming disclosures have escalated the calls to cut benefits and eliminate traditional pensions. Judges have disputed or weakened the legal claims of Detroit and New Jersey public employees to their pensions. On Oct. 1, a judge in Sacramento, California, signaled that the city of Stockton could dismiss pension debts in bankruptcy. In cash-strapped states and municipalities, pension costs are squarely in the crosshairs of officials looking for budget cuts. Increasingly, the courts seem prepared to let them pull the trigger.  Alongside these financial pressures, mainly caused by the recession, has been a relentless campaign waged by right-wing ideologues — many of them hedge fund managers — to loot public-pension funds, which presages the real retirement battle on the horizon — Social Security. In a recent report titled “The Plot Against Pensions” (PDF), David Sirota persuasively argues that privatization cheerleaders are following a model of “pensions today, social security tomorrow.” Leading the pension battle is John Arnold, a hedge fund billionaire who is systematically courting political support to eliminate state pension plans and replace them with privatized defined contribution plans managed by Wall Street. This, despite the fact that public pension funds were among the biggest losers in the financial crash of 2008.

America's Middle Class Knows it Faces a Grim Retirement -- Per yesterday's post, I guess it isn't just the young'uns who know they're screwed. From the L.A. Times: More than a third of middle-class families aren't saving anything in a 401(k), IRA or other vehicle, the survey found. For those 50 to 59 years old, it's 41%.  "Nearly a third (31%) of all respondents say they will not have enough money to 'survive' on in retirement," the bank says. "This increases to nearly half (48%) of middle-class Americans in their 50s." Ahh...that younger segment of the Baby Boomer generation. Guess it really is better to die before you get old.There was another quote from this article that I found particularly horrifying: There's little new in these findings. They echo the findings of last year's installment in the Wells Fargo series, when more than a third of respondents said they expected to work at least until 80 to have enough to retire on.  Yikes! That's not "retiring," that's called "dying in the saddle."   I had a discussion recently with my brother-in-law. He hasn't made the best decisions in life.  BIL was reflecting on the fact that I was able to take early retirement (due in large part to the cancer) because, among other things, my wife and I lived frugally and paid off our house even before I got sick.  "I'll retire on the day I die," he stated to me rather matter-of-factly. Problem is, he works a blue collar job that takes a fair bit of physical effort, so I wonder if he won't begin to physically break down long before it is time for him to shuffle off this mortal coil.

Americans’ Social Security Benefits to Likely Increase 1.7% in 2015 - Americans who receive Social Security benefits will see a modest increase in their checks next year to cover higher consumer prices. The annual cost-of-living adjustment will amount to 1.7% for 2015, the Social Security Administration said Wednesday. The figure matches an earlier estimate from the Labor Department. The government uses the measure to adjust benefits annually. The adjustment will affect nearly 64 million Americans who receive retirement and disability benefits under Social Security. Retiree beneficiaries will see the first increase in their January payment. Those receiving Supplemental Security Income, or SSI, will see the increase starting Dec. 31. Benefits rose 1.5% this year and 1.7% in 2013.

22% of Workers Would Rather Die Early Than Run Out of Money -- Yet many of the same folks are hardly saving anything for retirement, study finds.  A large slice of middle-class Americans have all but given up on the retirement they may once have aspired to, new research shows—and their despair is both heartbreaking and frustrating. Most say saving for retirement is more difficult than they had expected and yet few are making the necessary adjustments.  Some 22% of workers say they would rather die early than run out of money, according to the Wells Fargo Middle Class Retirement survey. Yet 61% say they are not sacrificing a lot to save for their later years. Nearly three quarters acknowledge they should have started saving sooner.The survey, released during National Retirement Savings Week, looks at the retirement planning of Americans with household incomes between $25,000 and $100,000, who held investable assets of less than $100,000. One third are contributing nothing—zero—to a 401(k) plan or an IRA, and half say they have no confidence that they will have enough to retire. Middle-class Americans have a median retirement balance of just $20,000 and say they expect to need $250,000 in retirement.Still, Americans who have an employer-sponsored retirement plan, especially a 401(k), are doing much better than those without one. Those between the ages of 25 to 29 with access to a 401(k) have put away a median of $10,000, compared with no savings at all for those without access to a plan. Those ages 30 to 39 with a 401(k) plan have saved a median of $35,000, versus less than $1,000 for those without. And for those ages 40 to 49 with 401(k)s, the median is $50,000, while those with no plan have just $10,000.

Health Care Costs Expected to Rise in 2015: Are You Ready? -  While 2015 may seem like a long way off, decisions you make within the next few months could affect how much you pay for health care in the coming year. Health care costs are expected to grow 6.8 percent overall next year, according to a report from PricewaterhouseCooper’s Health Research Institute. While not all this growth will be passed on to consumers, it’s likely you’ll see some increases, particularly when it comes to your health insurance. The report points to economic improvements as part of the driving force behind the increase, as people are now seeking medical care for things they put off when times were tough. Investments in technology, specialty drugs and increased physician employment are also spurring the growth. For the consumer, this increase in medical spending could mean paying more for insurance, as employers look to cost trends like this to determine which health plans to offer. Over the past several years, this has translated into a greater number of employees being pushed into high-deductible plans, for which they must pay more out of pocket before their coverage kicks in. In fact, the HRI report says enrollment in such plans has tripled since 2009, and among employers that haven’t made the switch to such high-deductible plans, 44 percent say they're considering it. Fortunately, with open enrollment for employer-based health care plans and Obamacare plans right around the corner, now is a great time to analyze your options and prepare for the possible increases in cost.

Unable to Meet the Deductible or the Doctor - About 7.3 million Americans are enrolled in private coverage through the Affordable Care Act marketplaces, and more than 80 percent qualified for federal subsidies to help with the cost of their monthly premiums. But many are still on the hook for deductibles that can top $5,000 for individuals and $10,000 for families — the trade-off, insurers say, for keeping premiums for the marketplace plans relatively low. The result is that some people — no firm data exists on how many — say they hesitate to use their new insurance because of the high out-of-pocket costs. Insurers must cover certain preventive services, like immunizations, cholesterol checks and screening for breast and colon cancer, at no cost to the consumer if the provider is in their network. But for other services and items, like prescription drugs, marketplace customers often have to meet their deductible before insurance starts to help. While high-deductible plans cover most of the costs of severe illnesses and lengthy hospital stays, protecting against catastrophic debt, those plans may compel people to forgo routine care that could prevent bigger, longer-term health issues, according to experts and research. “They will cause some people to not get care they should get,”  “Unfortunately, the people who are attracted to the lower premiums tend to be the ones who are going to have the most trouble coming up with all the cost-sharing if in fact they want to use their health insurance.”

Inadequate Obamacare plans continue to force patients to delay care; endure crippling debt I'm just going to be blunt: if the US were to impose Obamacare -- as a universal health care solution -- on any other rich country, the citizens would surely revolt: cars would be burned, Parisian cafe tables would be thrown threw windows, Italian espresso machines would be turned into bombs. Well, you get the idea. Two recent articles from the New York Times and Yahoo News highlight two structural problems with no solution in sight: patients delaying needed care because of massive deductibles and patients being left with crippling, foreclosure-inducing debts because they can't afford to pay their bills -- particularly to out-of-network providers excluded from new narrow-network plans -- after undergoing major treatments. Deductibles for Obamacare plans are high, really high. In a nation where the majority of the population -- over 75 percent -- is living paycheck-to-paycheck, there is little left over for a $1,000 deductible, let alone the $4,000 or $5,000 deductibles common with the cheapest Obamacare plans. (And, remember, once you hit the deductible, you still have cost-sharing.) Deductibles for the most popular health plans sold through the new marketplaces are higher than those commonly found in employer-sponsored health plans, according to Margaret A. Nowak, the research director of Breakaway Policy Strategies, a health care consulting company. A survey by the Kaiser Family Foundation found that the average deductible for individual coverage in employer-sponsored plans was $1,217 this year.  In comparison, the average deductible for a bronze plan on the exchange — the least expensive coverage — was $5,081 for an individual and $10,386 for a family, according to HealthPocket, a consulting firm. Silver plans, which were the most popular option this year, had average deductibles of $2,907 for an individual and $6,078 for a family.

Why Experts Now Think You Should Eat More Fat - High-Fat Diet - For more than half a century, the conventional wisdom among nutritionists and public health officials was that fat is dietary enemy number one – the leading cause of obesity and heart disease. It appears the wisdom was off. And not just off. Almost entirely backward. According to a new study from the National Institutes of Health, a diet that reduces carbohydrates in favor of fat – including the saturated fat in meat and butter – improves nearly every health measurement, from reducing our waistlines to keeping our arteries clear, more than the low-fat diets that have been recommended for generations. "The medical establishment got it wrong," says cardiologist Dennis Goodman, director of Integrative Medicine at New York Medical Associates. "The belief system didn't pan out."

Is Your Shampoo Toxic? --Last year, in a story that attracted lots of attention on EcoWatch, the Center for Environmental Health (CEH) revealed that cancer-causing chemical cocamide diethanolamine (cocamide DEA), a chemically modified version of coconut oil used as a thickening or foaming agent, was an ingredient in 98 shampoos, soaps and other personal care products. CEH brought lawsuits against companies in California whose products included it without a warming label as required by the state’s consumer protection law. That revelation caused enough of an uproar that CEH reached an agreement with the companies to remove the chemical from their products in California, with the expectation that they would stop selling them nationwide. It’s a good idea to check to be sure—you definitely don’t want that in your shampoo. But if you ever read the list of ingredients on the label, you probably found the list was so long you didn’t notice this one. With so many chemicals with mysterious names, what else is there in your shampoo that might be a problem? Sodium lauryl sulfate and sodium laureth sulfate are common chemicals used as foaming agents in shampoos. But like many such additives, they are harsh detergents that pull the oils from your hair and dry it out. Ammonium lauryl sulfate is another variation with similar properties. All of them can leave your hair dry, dull and lifeless in the long run. Some studies have suggested that if absorbed through the skin these chemicals could be carcinogenic. That hasn’t been proven for sure but why take a chance?

 Our dizzyingly aromatic world, made so by manipulative corporate chemistry, deserves the angry retort: "Non-Scents!" - Every morning, whether it’s hot and muggy or blizzarding snow, I go jogging in the dark, while the whole world, it seems, is still sleeping. Once in awhile, as I'm running blind along a residential street, I suddenly smell the odor of men’s cologne. Immediately, my blood runs cold. Any guy who’s skulking around out there is a little bit scary, but the ones who have perfumed themselves for the occasion seem particularly sinister. That is how I have come to view the chemical-fragrance industry: It’s hidden in the shadows, plotting its next assault on our bodies. The endless onslaught of screaming scents is a sort of molestation. That guy out there in the dark has probably been fantasizing about this moment for months, imagining in exquisite detail how he will subdue you, torture and then kill you. If you were to read the trade journals of the chemical-fragrance industry -- which describe its many plots, its deliciously visualized scenarios of seduction, and its vainglorious ambitions to ravish the entire world -- you might see the parallels. Of course, the chemical guys don’t enjoy the part about torturing and killing -- unlike the dude in the dark who is licking his lips over the prospect -- but they know their science, and they know that the products that are making them rich are also making a lot of people ill and triggering conditions that can be fatal. I don't refer to people as “molesters” lightly, but this industry is in fact molesting us all over, and I do mean ALL OVER.

Obama’s moonshot probes the space inside our skulls - FT.com: Every president needs a blockbuster science project to crown his time in the White House. While John Kennedy reached for the stars, Barack Obama decided to reach for the synapses. A year on from his pledge to unravel the secrets of the human brain, researchers are beginning to spell out how they will tackle this challenge. The breathtaking implications of the research are also becoming clear; within a generation science may acquire the power to predict a person’s future capacities and possibly determine their life chances. The central idea of Mr Obama’s Brain Research through Advancing Innovative Neurotechnologies Initiative is to understand how the human brain choreographs all the astonishing feats it pulls off. It is the seat of learning and the organ of memory. It generates our character and identity, and influences our behaviour. It is our brains, more than anything else, that make us who we are today – and shape who we will become.  But that neural versatility acts as a veil. How does the squidgy, three-pound lump between your ears – filled with nerve cells (neurons) firing tiny impulses of electricity across junctions called synapses – accomplish such a wide array of functions? Research grants announced this month shed light on how Mr Obama’s vaunted cerebral exploration will proceed. One avenue will be to catalogue the differences between healthy neurons and diseased ones. This will spur research into neurodegenerative diseases, such as Alzheimer’s and Parkinson’s, which cast a shadow over ageing societies.

Machine-Learning Maestro Michael Jordan on the Delusions of Big Data and Other Huge Engineering Efforts -- The overeager adoption of big data is likely to result in catastrophes of analysis comparable to a national epidemic of collapsing bridges. Hardware designers creating chips based on the human brain are engaged in a faith-based undertaking likely to prove a fool’s errand. Despite recent claims to the contrary, we are no further along with computer vision than we were with physics when Isaac Newton sat under his apple tree. Those may sound like the Luddite ravings of a crackpot who breached security at an IEEE conference. In fact, the opinions belong to IEEE Fellow Michael I. Jordan, Pehong Chen Distinguished Professor at the University of California, Berkeley. Jordan is one of the world’s most respected authorities on machine learning and an astute observer of the field. His CV would require its own massive database, and his standing in the field is such that he was chosen to write the introduction to the 2013 National Research Council report “Frontiers in Massive Data Analysis.” San Francisco writer Lee Gomes interviewed him for IEEE Spectrum on 3 October 2014. Michael Jordan on…

  1. Why We Should Stop Using Brain Metaphors When We Talk About Computing
  2. Our Foggy Vision About Machine Vision
  3. Why Big Data Could Be a Big Fail
  4. What He’d Do With US $1 Billion
  5. How Not to Talk About the Singularity
  6. What He Cares About More Than Whether P = NP
  7. What the Turing Test Really Means

Wasteful Spending Behind Lackluster Ebola Response - Amid complaints that budget cuts have hindered the government's efforts to fight Ebola, a bipartisan effort in Congress is underway to allocate additional funding. The dollars would go to several agencies for the 2015 fiscal year to help them assist with the Obama administration's flawed response to the epidemic.The Appropriations Committee has already transferred $750 million in Defense Department funds to support the Pentagon's Ebola-related operations in Africa for about six months. The State Department and the United States Agency for International Development have issued a $10 million grant to the African Union, and USAID has promised another $75 million.National Institutes of Health Director Dr. Francis Collins told the Huffington Post that the "NIH has been working on Ebola vaccines since 2001" and that an Ebola vaccine would have been ready if not for what he called a “10-year slide in research support."  However, Ebola was not seen as a problem even as recently as last year. Additional research dollars, if they existed, might have been spent on more pressing diseases, such as Alzheimer’s, cancer, malaria, or heart disease.  In addition, major research agencies, including NIH, Centers for Disease Control, USAID, the State Department, and the Department of Defense, have spent billions on wasteful purchases or otherwise mismanaged funds. If preventing Ebola was on their radars before the outbreak, the agencies’ budgets certainly do not show it.

Life in Quarantine for Ebola Exposure: 21 Days of Fear and Loathing - So it has been in Quarantine Nation. As the Ebola scare spreads from Texas to Ohio and beyond, the number of people who have locked themselves away — some under government orders, others voluntarily — has grown well beyond those who lived with and cared for Mr. Duncan before his death on Oct. 8. The discovery last week that two nurses at Texas Health Presbyterian Hospital here had caught the virus while treating Mr. Duncan extended concentric circles of fear to new sets of hospital workers and other contacts. Officials in Texas said Thursday that nearly 100 health care workers would be asked to sign pledges not to use public transportation, go to public places or patronize shops and restaurants for 21 days, the maximum incubation period for Ebola. While not a mandate, the notices warn that violators “may be subject” to a state-ordered quarantine. When officials revealed that one of the infected nurses had flown from Dallas to Cleveland and back before being hospitalized, nearly 300 fellow passengers and crew members faced decisions about whether to quarantine themselves. The next day, a lab technician who had begun a Caribbean cruise despite possible exposure was confined to a stateroom. Medical workers, missionaries and journalists returning from West Africa — especially from Guinea, Liberia and Sierra Leone, where Ebola is rampant — are also staying home.

CDC Issues Stricter Guidelines for Treating Ebola Patients - WSJ - The Centers for Disease Control and Prevention issued stricter guidelines late Monday for treating Ebola patients, calling for health-care workers to be fully covered, undergo rigorous training, and submit to supervision when they put on and take off protective gear. “We’re increasing the margin of safety,” CDC Director Tom Frieden said on a conference call Monday night with reporters. “Even a single health-care worker infection is one too many.” It may never be known exactly how two nurses became infected with Ebola from their contact with Thomas Eric Duncan, a Liberian patient who died, , Dr. Frieden said. But he said the incident made it clear that U.S. health-care workers must cover all parts of their skin with protective gear when treating patients, because the level of care that hospitals in this country provide for Ebola patients includes “more hands-on nursing care and more high risk procedures.” The agency is also toughening its guidelines to emphasize some steps taken in Africa: rigorous training requiring health-care workers to be fully versed in putting on and taking off protective gear before they are allowed to treat Ebola patients, Dr. Frieden said. A trained monitor must supervise health-care workers as they don and doff their equipment, he said.

CDC Tightens Rules on Caring for Ebola Patients - -- U.S. health officials on Monday officially tightened guidelines for health workers treating Ebola patients, now requiring full body suits with no skin exposure and use of a respirator at all times. The U.S. Centers for Disease Control and Prevention decided to issue the tougher rules after two Dallas nurses contracted Ebola while caring for the first patient diagnosed in the United States, Liberian national Thomas Eric Duncan. Nina Pham is currently being treated for her infection at the Clinical Center at the U.S. National Institutes of Health in Bethesda, Md., while Amber Vinson is being treated at Emory University Hospital in Atlanta. Those nurses, who are employees at Texas Health Presbyterian Hospital in Dallas, had been following Ebola guidelines that the CDC first issued in 2008 and updated this August, CDC Director Tom Frieden said during a Monday evening news briefing. "The hospital caring for the first patient, Mr. Duncan, relied on these guidelines. Two health care workers became infected. This is unacceptable," Frieden said. "We may never know exactly how that happened, but the bottom line is the guidelines didn't work for that hospital." The enhanced guidelines issued Monday, which are intended to create an "increased margin of safety," call for heavy training in the use of protective equipment; suits that cover the entire body; and designated monitors to ensure gear is worn and removed properly.

U.S. To Route All Travelers From Ebola Stricken Nations To Specific Airports - A new regulation will require all persons arriving in the U.S. from the nations western Africa dealing with the Ebola crisis, either directly or indirectly, to come through one of five airports:Anyone flying to the United States from Ebola-affected countries in West Africa must enter the country through one of five airports screening for the disease, Homeland Security Secretary Jeh C. Johnson said Tuesday as the Obama administration stepped up precautions to stop the spread of the virus.  Last week, the government instituted temperature checks for West Africans arriving at Kennedy International in New York, Newark Liberty International, Washington Dulles International, O’Hare International in Chicago, and Hartsfield-Jackson International in Atlanta. The five airports already account for 94 percent of all arrivals from the affected countries, Liberia, Sierra Leone and Guinea. A fever is one symptom of the disease and an indication that the person could be infectious.

Why Airport Screening Won't Stop Ebola, The Economist Explains - Ebola has killed more than 4,000 people, nearly all of them in west Africa. But the threat to countries outside the region became clear when a Liberian man, Thomas Duncan, was diagnosed with the disease in America. He probably contracted it while helping an infected woman in Liberia. He then hopped on a plane to America. Mr Duncan died in Dallas on October 8th, the same day American officials announced that travellers from the countries hardest hit by Ebola—Guinea, Liberia and Sierra Leone—would be questioned about their health, travel and contact with the sick, and have their temperatures taken at five large airports. Quarantine is an option for those suspected of being ill. A day later Britain announced that it would screen travellers from these countries at Heathrow and Gatwick airports (and two rail terminals). African and Asian countries have been screening air passengers for months, with some using infrared cameras to detect fevers. This is in addition to the screening of all departing air travellers in the affected countries. Some governments are dusting off measures that were previously used to combat the spread of bird flu and the Severe Acute Respiratory Syndrome (SARS). But Mr Duncan, who did not have a fever when leaving Liberia, nor when landing in America. He only developed symptoms a week later. American officials admit that the new screening procedures would not have caught him. It can take up to 21 days for someone to show signs of Ebola.  During the SARS outbreak, some air passengers took painkillers to reduce their temperatures. Others may not know that they are infected, and infrared scanners are not always reliable.

U.S. plans 21-day monitoring of people who arrive from Ebola-stricken nations - Every airline passenger who arrives in the United States from one of the three West African nations hardest hit by Ebola will be monitored by state and local health authorities for 21 days, the Centers for Disease Control and Prevention said Wednesday. The travelers will be required to report their temperature daily and call a state hotline if they show any symptoms of the illness. The program will begin in six states — including Maryland and Virginia — on Monday and will expand to other states later, CDC Director Thomas Frieden said. “We’re tightening the process by establishing active monitoring of every traveler who returns to this country from one of the three infected countries,” Frieden said in a conference call with reporters. The monitoring plan was the administration’s latest step to intercept travelers who may have been exposed to the lethal virus in the three countries affected most by the outbreak — Guinea, Liberia and Sierra Leone. Fending off critics who have demanded an outright entry ban on people traveling from those countries, the White House has tried to allay domestic fears by ramping up protections in the United States.

Ebola Vaccine, Ready for Test, Sat on the Shelf - — Almost a decade ago, scientists from Canada and the United States reported that they had created a vaccine that was 100 percent effective in protecting monkeys against the Ebola virus. The results were published in a respected journal, and health officials called them exciting. The researchers said tests in people might start within two years, and a product could potentially be ready for licensing by 2010 or 2011. It never happened. The vaccine sat on a shelf. Only now is it undergoing the most basic safety tests in humans — with nearly 5,000 people dead from Ebola and an epidemic raging out of control in West Africa. Its development stalled in part because Ebola is rare, and until now, outbreaks had infected only a few hundred people at a time. But experts also acknowledge that the absence of follow-up on such a promising candidate reflects a broader failure to produce medicines and vaccines for diseases that afflict poor countries. Most drug companies have resisted spending the enormous sums needed to develop products useful mostly to countries with little ability to pay. Now, as the growing epidemic devastates West Africa and is seen as a potential threat to other regions as well, governments and aid groups have begun to open their wallets. A flurry of research to test drugs and vaccines is underway, with studies starting for several candidates, including the vaccine produced nearly a decade ago.  A federal official said in an interview on Thursday that two large studies involving thousands of patients were planned to begin soon in West Africa, and were expected to be described in detail on Friday by the World Health Organization. With no vaccines or proven drugs available, the stepped-up efforts are a desperate measure to stop a disease that has defied traditional means of containing it.

Two US states to quarantine health workers returning from Ebola zones (Reuters) - New York and New Jersey will automatically quarantine all medical workers returning from Ebola-hit West African countries, and the U.S. government is considering the same step after a doctor who treated patients in Guinea came back infected, officials said on Friday. The steps announced by the two states, which go beyond the current restrictions being imposed by the U.S. government on travelers from Liberia, Sierra Leone or Guinea, came as medical detectives tried to retrace the steps of the infected physician, Dr. Craig Spencer. "Increasing the screening process is necessary. I think it reduces the risk to New Yorkers and the residents of New Jersey," said New York Governor Andrew Cuomo. Cuomo, who appeared with the governor of neighboring New Jersey, Chris Christie, at a news conference, had earlier in the day sought to reassure New Yorkers that Ebola's threat was limited the day after Spencer tested positive for the virus. In Washington, President Barack Obama also sought to reassure a worried public with an Oval Office hug of Dallas nurse Nina Pham, who was declared Ebola-free on Friday after catching the virus from a Liberian patient who died.

NYPD Stunner: Cops Exit Ebola Victim Apartment, Dump Gloves, Masks In Sidewalk Trash Can -- If there was one theme from last night's Cuomo/De Blasio Ebola press conference it was 'how everyone has been preparing for months' for Ebola. We can all be reassured, right? Wrong! As The Daily Mail reports (and these stunning photos show), the police officers involved in securing Dr. Spencer tossed their gloves, masks and the caution tape used to block off access to his apartment in a public trash can.

US Army withheld promise from Germany that Ebola virus wouldn't be weaponized — RT News: The United States has withheld assurances from Germany that the Ebola virus - among other related diseases - would not be weaponized in the event of Germany exporting it to the US Army Medical Research Institute for Infectious Diseases. German MFA Deputy Head of Division for Export Control Markus Klinger provided a paper to the US consulate's Economics Office (Econoff), "seeking additional assurances related to a proposed export of extremely dangerous pathogens." Germany subsequently made two follow-up requests and clarifications to the Army, according to the unclassified Wikileaks cable "This matter concerns the complete genome of viruses such as the Zaire Ebola virus, the Lake Victoria Marburg virus, the Machupo virus and the Lassa virus, which are absolutely among the most dangerous pathogens in the world," the request notes. The Zaire Ebola virus was the same strain of Ebola virus which has been rampaging through West Africa in recent months.

Guinea Says Ebola Spreads to Regions Near AngloGold Mine -  The Ebola virus has spread to two new regions in Guinea, including an area where an AngloGold Ashanti Ltd. (ANG) mine is located. The village that reported the infections in Siguiri is 30 kilometers (19 miles) from the Johannesburg-based company’s facility, the Ministry of Health and AngloGold said in statements yesterday. No employees have been infected and operations continue, the mining company said. The death toll in Guinea has risen to 887 since the outbreak started in December, the ministry said in its statement. More than 4,500 people have died in Guinea, Liberia and Sierra Leone, decimating the economies of the three nations and threatening to slow growth in West Africa. Liberian President Ellen Johnson-Sirleaf said Oct. 17 that the world has finally “woken up” to the threat of Ebola and must commit the necessary resources to containment efforts. President Barack Obama is preparing to ask Congress for additional funds to combat the disease, according to one White House official and a Capitol Hill official. “This fight requires a commitment from every nation that has the capacity to help –- whether that is with emergency funds, medical supplies or clinical expertise,” Johnson-Sirleaf said. The international community can’t “pull up the drawbridge and wish the situation away.”

Doctors "Hit Breaking-Point" As Ebola Death Toll Tops 4500; Nigeria 'Clear' But Harvard Issues Travel Ban - The WHO is coming under increasing scrutiny over its response to the the deadly epidemic. As The BBC reports, after stating that the death toll has hit 4,555 worldwide, a leaked internal document shows "nearly everyone involved in the outbreak response failed to see some fairly plain writing on the wall." There are a few tidbits of good news this weekend: the Spanish patient's test returned negative, 48 "at-risk" people in Dallas have been cleared, and Nigeria has been declared "ebola-free". Sadly, the bad news keeps coming: the virus has spread to new regions of Guinea (affecting mining operations), Moodys warns the economic legacy will linger, IMF slashes growth forecasts for Africa, and most critically, MSF doctors are at their breaking point: "The epidemic is still getting worse... I don't see a light at the end of the tunnel." Lastly, Harvard has imposed a travel ban from Ebola-affected nations.

Ebola: Liberia deaths ‘far higher than reported’ as officials downplay epidemic -- The true death toll from the Ebola epidemic is being masked by chaotic data collection and people’s reluctance to admit that their loved ones had the virus, according to one of west Africa’s most celebrated film-makers. Sorious Samura, who has just returned from making a documentary on the crisis in Liberia, said it is very clear on the ground that the true number of dead is far higher than the official figures being reported by the World Health Organisation. Liberia accounts for more than half of all the official Ebola deaths, with a total of 2,458. Overall, the number of dead across Liberia, Sierra Leone and Guinea has exceeded 4,500. Samura, a television journalist originally from Sierra Leone, said the Liberian authorities appeared to be deliberately downplaying the true number of cases, for fear of increasing alarm in the west African country. “People are dying in greater numbers than we know, according to MSF [Médecins sans Frontières] and WHO officials. Certain departments are refusing to give them the figures – because the lower it is, the more peace of mind they can give people. The truth is that it is still not under control.” WHO has admitted that problems with data-gathering make it hard to track the evolution of the epidemic, with the number of cases in the capital, Monrovia, going under-reported. Efforts to count freshly dug graves had been abandoned.

The Ebola travel ban is really politically popular. Here’s why it’s not happening. - Doctors and experts have concurred and have added other reasons why such a travel ban would be unwise. Among those cited:

  1. A decrease in travel has already damaged fragile economies in West Africa.
  2. It would make it difficult for aid organizations to access these countries in a timely fashion.
  3. A ban could scare volunteers away from traveling to West Africa to fight Ebola if they know they won't be able to return to the United States or Europe after a trip.
  4. The flu will likely kill more people in the United States this year than Ebola.
  5. If the world doesn't stop the outbreak in Africa, it is more likely that the disease will spread, ban or not.
  6. There are only two airlines that service this region at the moment -- nine airlines have paused flights to the region -- and a ban could cause these remaining flights to disappear.
  7. The United States has already instituted temperature checks at U.S. airports where nearly all of the West Africa flights come through, decreasing the likelihood of a infected traveler entering the country while contagious.
  8. The State Department issued a travel advisory for West Africa this summer, saying that Americans should limit nonessential travel there.
  9. On top of all that, there are no direct flights between the countries currently dealing with an Ebola outbreak and the United States.

Doctor in New York City Is Sick With Ebola - A doctor in New York City who recently returned from treating Ebola patients in Guinea became the first person in the city to test positive for the virus Thursday, setting off a search for anyone who might have come into contact with him.The doctor, Craig Spencer, was rushed to Bellevue Hospital Center and placed in isolation at the same time as investigators sought to retrace every step he had taken over the past several days.At least three people he had contact with in recent days have been placed in isolation. The federal Centers for Disease Control and Prevention, which dispatched a team to New York, is conducting its own test to confirm the positive test on Thursday, which was performed by a city lab.  While officials have said they expected isolated cases of the disease to arrive in New York eventually, and had been preparing for this moment for months, the first case highlighted the challenges involved in containing the virus, especially in a crowded metropolis. Dr. Spencer, 33, had traveled on the A and L subway lines Wednesday night, visited a bowling alley in Williamsburg, and then took a taxi back to Manhattan.

Officials Tracing New York Ebola Patient’s Movements, While Reassuring a Wary City - As disease investigators sought to ensure on Friday that they had found and isolated everyone who came into contact with New York City’s first Ebola patient when he might have been sick and infectious, doctors treating the man were discussing using experimental treatments to help him battle the virus. Health officials said that initial reports were incorrect when they indicated that Dr. Craig Spencer, 33, had a 103-degree fever when he notified authorities of his ill health on Thursday. He actually had only a 100.3 fever. Officials attributed the mistake to a transcription error.Dr. Spencer had been working with Doctors Without Borders in Guinea, treating Ebola patients, before leaving Africa on Oct. 14 and returning to New York City on Oct. 17, according to a city official.  Since March, three international staff members and 21 locally employed staff members of the group have fallen ill while battling the Ebola outbreak in Guinea, Liberia and Sierra Leone, according to the group. Thirteen have died. Dr. Spencer is the first worker out of more than 700 expatriate staff members deployed so far to West Africa to develop symptoms after returning home.

Ebola tests pending for health care worker in New Jersey: New York and New Jersey will automatically quarantine medical workers returning from Ebola-hit West African countries and the U.S. government is considering the same step after a doctor who treated patients in Guinea came back infected, officials said on Friday. The steps announced by the two states, which go beyond the current restrictions being imposed by President Barack Obama's administration on travelers from Liberia, Sierra Leone or Guinea, came as medical detectives tried to retrace the steps in New York City of Dr. Craig Spencer, who tested positive for Ebola on Thursday. The new policy applies to medical workers returning from the region through John F. Kennedy International Airport in New York and Newark Liberty International Airport in New Jersey. In the first instance of the new move, a female health care worker who had treated patients in West Africa and arrived at the Newark, New Jersey, airport was ordered into quarantine. She had no symptoms upon arrival at the airport but developed a fever Friday evening, the New Jersey Health Department said in a statement. She is now in isolation and being evaluated at University Hospital in Newark. The agency gave no further details.

India's vulnerability to Ebola a crisis in the making | Bangkok Post: opinion: India, with its large emigrant population — the second largest in the world — high urban density, and inadequate public healthcare infrastructure, potentially has the most to lose if the Ebola virus spreads. Links to West Africa are close and go back over the last century, with almost 50,000 Indians or people of Indian origin living in the region. Indeed, scores of people fly between Accra, Lagos, Freetown, Monrovia, or Abidjan and New Delhi, Mumbai, Calcutta, or Chennai on a daily basis, transiting through the Middle East or Europe. While exit controls are in place in all of the international airports in the affected regions, the virus's incubation period — which averages eight days in the current outbreak but can be up to 21 days — means that someone with no symptoms from a recent infection could make the trip to India without triggering alarms. Recent personal experience at New Delhi airport indicated that nominal arrival checks, as the government requires, were loosely enforced, with a number of passengers exiting the terminal holding completed Ebola information cards that should have been handed to immigration officials. It seems unlikely that India's government will be able to keep tabs on all of the arrivals from West Africa. Population density in India's mega-cities is as high as 10,000 people per square kilometre, and can match that level even in second- and third-tier cities, as slums mushroom to accommodate large-scale migration from rural areas. Spending on healthcare infrastructure has been woefully inadequate, failing to keep pace with burgeoning urban populations.

What’s Ebola? Mumbai Takes Crash Course as Virus Spreads - Not until weeks after the World Health Organization declared Ebola an international emergency on Aug. 6 did doctors in Mumbai start preparing. The steep learning curve in the hospital that serves as Mumbai’s first line of defense underscores the risks in the developing world -- and especially India. Of the 10 densest megacities, five are in south Asia with a combined population that exceeds Germany’s. They face overburdened health-care facilities and thousands who have traveled to the virus’s African epicenter for work. “If it reaches India, it poses challenges unlike any other in the world,” Temmy Sunyoto, a medical coordinator for Doctors Without Borders in New Delhi, said in an interview on Oct. 14. “In Mumbai or Delhi, it just takes one patient to reach a hospital and with the state of the public-health facilities, I’m sure it would be very difficult to contain.” Doctors Without Borders, also known as MSF, “cannot speculate on a potential outbreak in another country and its preparedness,” it said in a statement today. “MSF continues to battle the outbreak on the ground and is focused on the fact that too many people in Guinea, Sierra Leone and Liberia are dying each day,” Martin Sloot, General Director of MSF India said in the statement.  While there have been no confirmed cases in India -- or anywhere in Asia -- the death of Ebola-infected Thomas Eric Duncan in Texas, as well as confirmed infections in two health workers who treated him, have accelerated preparations in the region. The worst-ever outbreak of the epidemic has killed more than 4,400, with its core in Guinea, Sierra Leone and Liberia.

Ebola Virus 'Is Becoming More Contagious', Say Experts: The Ebola virus may be becoming even more contagious as the West Africa outbreak continues, experts fear. Doctors in the U.S. and U.K. have warned that the virus appears to be becoming more contagious and more they are finding more of the virus in the bodies of infected people than in previous outbreaks of the deadly virus. The U.S. Centers for Disease Control and Prevention estimates that the latest outbreak of the Ebola virus has killed 4,500 people, mostly in West Africa. But it estimates conservatively that by January 2015 there could be as many 500,000 people infected in Liberia and Sierra Leone alone. Jeremy Farrar, director of the medical research charity the Wellcome Trust, which has funded research that could help to contain the Ebola epidemic in West Africa, said: "It does look like the amount of virus in the body is higher than in previous epidemics. That means there is more virus in the blood, in saliva, urine, vomit and diarrhea." Ebola is spread through body fluids. More virus in bodily fluids could make the virus even more contagious.

The Ebola crisis: Much worse to come | The Economist: On October 15th the WHO released its latest update. The outbreak has now seen 8,997 confirmed, probable and suspected cases of Ebola. All but 24 of those have been in Guinea (16% of the total), Sierra Leone (36%) and Liberia (47%). The current death toll is 4,493. These numbers are underestimates; many cases, in some places probably most, go unreported.  This all pales, though, compared with what is to come. The WHO fears it could see between 5,000 and 10,000 new cases reported a week by the beginning of December; that is, as many cases each week as have been seen in the entire outbreak up to this point. This is the terrifying thing about exponential growth as applied to disease: what is happening now, and what happens next, is always as bad as the sum of everything that has happened to date. Exponential growth cannot continue indefinitely; there are always barriers. In the previous 20 major outbreaks of the disease since its discovery in 1976, all of which took place in and around the Democratic Republic of the Congo, the initial rapid spread quickly subsided. In the current outbreak, though, the limits have been pushed much further back; it has already claimed more victims than all the previous outbreaks put together. There are two reasons for this. Those earlier outbreaks were often in isolated places where there are few opportunities for transmission far afield—the transfer of the virus between a wild animal and a human that sets off all such outbreaks is more likely off the beaten track. And they were mostly recognised quickly, with cases isolated and contacts traced from very early on; one was stopped this way in Congo in the past few months. The west African outbreak has broken through the barriers of isolation and into the general population, both in the countryside and the cities, and it was up and running before public-health personnel cottoned on. There is no reason to expect it to subside of its own accord, nor to expect it to come under control in the absence of a far larger effort to stop it.

Doctors Without Borders Hits Ebola Breaking Point --“Contact tracing” is the core principle of all public-health endeavors. It is the very thing that separates the men from the boys—or in this instance, the resource-plentiful from the resource-strapped countries. And though you wouldn’t know it from the trail of lamentations and mea culpas that have followed the Dallas hospital leaders and the even more beleaguered Centers for Disease Control and Prevention, we just saw a perfect execution of contact tracing right there in Metroplex, Texas (and the attendant venues on the cruise ship and the Frontier Airlines flights).  What they did—and what humanitarian aid organization Doctors Without Borders/Médecins Sans Frontières (MSF) says Liberia no longer can do—is simple: They traced people.  So when the late Thomas Eric Duncan was diagnosed, an immediate circle was drawn around his contacts—they were traced (ergo, contact tracing). And because the transmission of Ebola is pretty well understood, this group of people was watched carefully for 21 days—graduating just yesterday—until they proved themselves to be Ebola-free.  Compare this triumph and similar ones in Senegal and Nigeria to the still-deteriorating disaster of the three West African nations where Ebola still rages. There, the person who shared the house with the latest case can’t be traced; ditto the nurse or doctor who treated the patient is lost in the shuffle; so too the various people involved in a burial or, as happened in Duncan’s case, who helped a dying patient to the hospital. In other words, the systematic rational way to control the outbreak, by defining its outer borders and letting the pyre of cases inside burn to completion, cannot be used to stop Ebola 2014.

Ebola outbreak: Cases pass 10,000, WHO reports: The number of cases in the Ebola outbreak has exceeded 10,000, with 4,922 deaths, the World Health Organization says in its latest report. Only 27 of the cases have occurred outside the three worst-hit countries, Sierra Leone, Liberia and Guinea. Those three countries account for all but 10 of the fatalities. Mali became the latest nation to record a death, a two-year-old girl. More than 40 people known to have come into contact with her have been quarantined. The latest WHO situation report says that Liberia remains the worst affected country, with 2,705 deaths. Sierra Leone has had 1,281 fatalities and there have been 926 in Guinea. Nigeria has recorded eight deaths andThe WHO said the number of cases was now 10,141 but that the figure could be much higher, as many families were keeping relatives at home rather than taking them to treatment centres. It said many of the centres were overcrowded. And the latest report also shows no change in the number of cases and deaths in Liberia from the WHO's previous report, three days ago. Eight countries have registered cases in the outbreak. In West Africa, Senegal and Nigeria have now been declared virus-free by the WHO. there has been one in Mali and one in the United States.

Ebola serum for Africa patients within weeks, says WHO: Serum made from the blood of recovered Ebola patients could be available within weeks in Liberia, one of the countries worst hit by the virus, says the World Health Organization. Speaking in Geneva, Dr Marie Paule Kieny said work was also advancing quickly to get drugs and a vaccine ready for January 2015. The Ebola outbreak has already killed more than 4,500 people. Most of the deaths have been in Guinea, Liberia and Sierra Leone. Dr Marie Paule Kieny WHO assistant director general for health system and innovation Dr Kieny, WHO assistant director general for health system and innovation, said: "There are partnerships which are starting to be put in place to have capacity in the three countries to safely extract plasma and make preparation that can be used for the treatment of infective patients. "The partnership which is moving the quickest will be in Liberia where we hope that in the coming weeks there will be facilities set up to collect the blood, treat the blood and be able to process it for use." It is still unclear how much will become available and whether it could meet demand.

PR Stunt or Third World Solidarity? Cuba & Ebola - Despite Cuba's (largely US-imposed) isolation from the rest of the world for the sin of being Communist...at least in the Americas when the US has long since cottoned up to the likes of China, Vietnam, and other so-called Reds, its medical system has remained one of the world's best against all odds. The World Health Organization (WHO) lauds it as being a model for the world, while even citizens of its oppressor nation say it is "unreal" in care being free yet of high quality. So much so that it has exported doctors in exchange for petroleum. While I do believe that the US has unfairly singled it out for sanctions in an age where it no longer views being socialist as grounds for isolation, Cuba's leadership has a lot to answer for in keeping the country in a time freeze (medical care aside). That said, it does what it can to take up an international role--especially among developing countries.  Naturally, a way Cuba has built its international influence is by sending medical missions abroad. Heck, there's even an entire Wikipedia post on "Cuban medical internationalism" detailing instances of such aid being sent when crises occur abroad. Always being in touch with the times in this regard, we now have the superannuated Fidel Castro vowing to dispatch Cuban medical professionals to the Hot Zone itself during the current Ebola outbreak. With characteristic Latin brio, he writes that "the hour of duty has arrived" as the UN has called on Cuba to make a contribution to the Ebola containment effort:

Pro-GM labelling campaign hugely outspent in Colorado and Oregon ballot - Biotech and supermarket giants are spending more than $25m (£15.6m) to defeat ballot initiatives in two western states that would require labelling of foods containing genetically modified organisms. In Colorado, Dupont and Monsanto food companies are outspending supporters of mandatory labelling by 22-1 ahead of the 4 November vote, according to state campaign finance records. In Oregon, meanwhile, industry is outspending supporters of the ballot measure by about 2-1. The heavy industry spending resembles the last-minute infusions of cash for television ads, direct mail, and campaign staff that helped defeat earlier campaigns for mandatory GM labelling in California and Washington state. “It is like David vs Goliath,” Larry Cooper, director of Colorado’s Right to Know campaign said. He said the pro-labelling campaign had raised $625,000 by Thursday afternoon. Cooper’s opponents, meanwhile, amassed $14m, after Dupont this week gave an additional $3m to the campaign, and were advertising heavily on local television. “Why they put $14m in Colorado to keep us in the dark really doesn’t make sense to me,” Cooper said. “The bottom line is that we really don’t know what is in our food. We are shopping blindly.”

Is it really so bad that WTO ruled against U.S. in country-of-origin labeling dispute? - The World Trade Organization (WTO) today ruled in favor of Canada and Mexico, saying that U.S. country-of-origin labeling (COOL) rules violate our commitments in previous trade agreements. The COOL rules in dispute required new labels on fresh beef, pork, and lamb, but not on processed foods such as hot dogs. The labels would say what country the product comes from. In some cases, the labels might have to be complex ("this cow was born in Canada, fed in the United States ...").  Many people who care about food policy from a public interest perspective will say the WTO ruling is terrible. For example, Food & Water Watch Executive Director Wenonah Hauter says today: The WTO’s continued assault against commonsense food labels is just another example of how corporate-controlled trade policy undermines the basic protections that U.S. consumers deserve.But let me ask, is the WTO ruling really so bad? I have two reasons for asking this question. First, perhaps the WTO ruling has some merit. It would be one thing if the United States simply never negotiated a trade agreement in the first place. But, it is another thing altogether if the United States does negotiate a trade agreement, saying we will reduce trade barriers in return for Canada and Mexico doing the same, but then we fail to do what we promised. Second, from the perspective of Food & Water Watch and other trade-skeptical consumer groups, perhaps the consequences are not so terrible.

Mortgage scheme offered to rice farmers to delay supply to market - Thailand News - – The Rice Policy and Management Committee is launching a short-term mortgage program for rice farmers in some areas in an effort to reduce the amount of paddies entering the market and prevent the price from falling. Following a meeting of the Rice Policy and Management Committee, chaired by Prime Minister Prayut Chan-o-cha, Permanent Secretary for Commerce Chutima Boonyaprapatsorn revealed that the committee had approved the implementation of a paddy pledging program for farmers within the northern and northeastern regions. The objective is to absorb up to 2 million tons of paddies from the total supply being delivered to the market during the upcoming period. Under the program, the Bank for Agriculture and Agricultural Cooperatives (BAAC) will pay participating farmers 90 percent of their grains’ market value, or 11,700 baht a ton for sticky rice and 15,400 baht a ton for jasmine rice. Each household is allowed to receive no more than 300,000 baht and pledge no more than 20 tons of paddies. The interest, meanwhile, will be subsidized by the government. The pledging period will run for four months, from November 1 this year until February 28 next year. If any of the farmers do not redeem their pledged paddies by the deadline, the grains will be kept in the government’s stock and be put up for auction later on. The quality of the rice entered into the program will also be checked thoroughly by the BAAC before their acceptance.

Environmental Impacts of Exporting Dry Milk Powder - Kay McDonald - In the volumes of agricultural reading that I do, I have not run across a more scathing article about industrial agriculture than a recent feature story in High Country News. The article was about the environmental damage that has been done to water and waterways in Idaho due to its burgeoning dairy industry. The economic gains which are derived from this industry are, unfortunately, often outside the local Idaho communities which are negatively impacted, and sometimes even go to foreign-owned companies. This goes on largely for the purpose of exporting dry milk powder to nations such as China. If you think of Idaho as having pristine rivers, or as being immune to Big Ag, think again.   The article, “Idaho’s sewer system is the Snake River – As Big Ag flourishes, this massive waterway suffers.“, was written by Richard Manning. Please read it. You must read it. The overall issues, as I see it, are repeated across other states and also relate to other aspects of Big Ag. You name the subject. You name the state.  There is an environmental price to pay in subsidizing milk production for export abroad. Pity New Zealand, the “Saudi Arabia of Milk”! Are they experiencing problems with their waterways such as those in Idaho? And, the EU is readying to ramp up its milk exports, too, after a 30-year milk-export quota expires this coming March 31st. Here, in the U.S., the new 2014 farm bill has greatly increased its subsidized protection of our dairy industry.

Plastic Bits Found Floating Around In 24 Out Of 24 Samples Of German Beer -  How far has plastic, even plastic too small to really see, penetrated into our lives? The authors of a new study decided to find out by analyzing the contents of 24 of Germany’s most popular beers, including all of the top 10 most popular. The findings may make you think twice about partaking in a lovely bottled German pilsner: every single one of the samples was found to be contaminated, and with a variety of alien particles. Most of the concern of the study revolves around what are called “microplastics,” which the authors of the study define as bits of plastic smaller than 5mm in size. That’s not really that small — it certainly could be big enough to see — but microplastics are suddenly everywhere. Sometimes these microplastics are manufactured that way, as in abrasives, but often they’re caused by the inadequate breakdown of larger pieces of plastic: they can get smaller, but never small enough to truly disappear. Microplastics are especially common in marine environments, but nobody’s quite sure how they’re affecting life; it’s a new area of study.This particular study is especially new, but it’s not encouraging. Every single sample of beer tested was found to have contaminants, ranging from microplastics to bits of glass to skin to at least once, a basically complete dead bug. Super gross! The theory is that these contaminants could have worked their way into the beer via the water supply; a good portion of these contaminants were small enough to get through the mesh filters

Afghan opium poppy cultivation hits all-time high -- Opium poppy cultivation in Afghanistan has hit an all-time high despite years of counter-narcotics efforts that have cost the US $7.6bn (£4.7bn), according to a US government watchdog. The UN Office on Drugs and Crime reported that Afghan farmers grew an “unprecedented” 209,000 hectares (523,000 acres) of opium poppy in 2013, surpassing the previous high of 193,000 hectares in 2007, said John Sopko, the special inspector general for Afghanistan reconstruction. “In past years, surges in opium poppy cultivation have been met by a coordinated response from the US government and coalition partners, which has led to a temporary decline in levels of opium production,” Sopko said in a letter to the secretary of state, John Kerry, the defence secretary, Chuck Hagel, and other top US officials. “The recent record-high level of poppy cultivation calls into question the long-term effectiveness and sustainability of those prior efforts,” he said on Tuesday. Afghanistan produces more than 80% of the world’s illicit opium, and profits from the illegal trade help fund the Taliban insurgency. US government officials blame poppy production for fuelling corruption and instability, undermining good government and subverting the legal economy. The US has spent $7.6bn on counter-narcotics efforts in Afghanistan since the start of the 2001 war, it said.

Plants absorb more CO2 than we thought, but … -- Through burning fossil fuels, humans are rapidly driving up levels of carbon dioxide in the atmosphere, which in turn is raising global temperatures.  But not all the CO2 released from burning coal, oil and gas stays in the air. Currently, about 25% of the carbon emissions produced by human activity are absorbed by plants, and another similar amount ends up in the ocean. To know how much more fossils fuels we can burn while avoiding dangerous levels of climate change, we need to know how these “carbon sinks” might change in the future. A new study led by Dr. Sun and colleagues published in the US journal Proceedings of the National Academy of Sciences shows the land could take up slightly more carbon than we thought. But it doesn’t change in any significant way how quickly we must decrease carbon emissions to avoid dangerous climate change. The new study estimates that over the past 110 years some climate models over-predicted the amount of CO2 that remains in the atmosphere, by about 16%. Models are not designed to tell us what the atmosphere is doing: that’s what observations are for, and they tell us that CO2 concentrations in the atmosphere are currently over 396 parts per million, or about 118 parts per million over pre-industrial times. These atmospheric observations are in fact the most accurate measurements of the carbon cycle.  But models, which are used to understand the causes of change and explore the future, often don’t match perfectly the observations. In this new study, the authors may have come up with a reason that explains why some models overestimate CO2 in the atmosphere.

The Earth’s vertebrate wildlife population has halved in 40 years, says conservation group WWF - The world’s wildlife population is less than half the size it was just four decades ago, with unsustainable human consumption and damage from climate change destroying valuable habitats at a faster rate than previously thought, a new report has warned. The number of vertebrates, which make up the bulk of Earth’s visible animals, has dived by 52 per cent over the past 40 years. Biodiversity loss has now reached “critical levels”, the report warns. But some populations of mammals, birds, reptiles and amphibians have suffered much bigger losses, with fresh water species declining by 76 per cent since 1974, according to the Living Planet Report by the conservation campaign group WWF. WWF-UK’s chief executive, David Nussbaum, said: “The scale of the destruction highlighted in this report should act as a wake-up call for us all. We all – politicians, business and people – have an interest, and a responsibility, to act to ensure we protect what we all value: a healthy future for both people and nature.”Humans are cutting down trees more quickly than they can regrow, harvesting more fish than the oceans can restock, pumping water from our rivers and aquifers faster than rainfall can replenish them, and emitting more carbon than the oceans and forests can absorb, he added.

California community suffers as wells dry up in drought - - In one of the towns hardest hit by California's drought, the only way some residents can get water to flush the toilet is to drive to the fire station, hand-pump water into barrels and take it back home. The trip has become a regular ritual for East Porterville residents Macario Beltran, 41, and his daughters, who on a recent evening pumped the water into containers in the bed of his old pickup truck to be used for bathing, dish washing and flushing. As if to emphasize the arid conditions that led them there, an emergency broadcast warned of a brewing dust storm. The state's three-year drought comes into sharp focus in Tulare County, the dairy and citrus heart of the state’s vast agricultural belt, where more than 500 wells have dried up. Donna Johnson's tap went dry in June. Since then she's been trying to help neighbors connect with help from the county and the state. She began making door-to-door deliveries of water donated by charities and such supplies as hand sanitizer – often in withering 100-degree heat.  Gov. Jerry Brown, who declared a state drought emergency in January, signed an executive order last month to buy drinking water for residents with dry wells. He also signed bills to regulate groundwater. Andrew Lockman, manager at the Tulare County Office of Emergency Services, said it could be years before the groundwater management plan yields results. Meanwhile, some farmers have paid exorbitant rates for irrigation, while others have culled herds, axed fruit trees and fallowed fields, he said. Migrant farm workers have left to seek employment elsewhere.

"It's Very Extreme" - Drought & Drug Cartels Drain California's Aquifers At Record Rate -- "If there's no water for people to live, and you don’t have the basic necessities of life, your population is going to leave," warns the emergency services manager of one California town, warning that as the drought continues (and is not set to ease anytime soon), "you could see the economy of this area just decimated." But as farmers face the catastrophe with "water levels dropping at an incredibly rapid rate in some places - like 100 ft a year - 10 times expected," there is another drain on the dry state's water sources. As The FT reports, "Marijuana cultivation is the biggest drought-related crime we’re facing right now," with up to 80 million gallons of water per day stolen by heavily armed marijuana cartels.

Stunning Scenes From California's Central Valley Drought - No matter what you have read or seen so far on California’s historic Central Valley drought, you probably haven’t been touched by it as much as you will be by the following video from the New Yorker. Terribly sad.

Sao Paulo suffers worst drought in decades (slide show)

Earth Just Had Its Hottest September On Record  --Last month was the warmest September the globe has experienced since record-keeping began in 1880, according to the National Oceanic and Atmospheric Administration. Researchers from NOAA’s National Climatic Data Center found that the Earth’s average global land and ocean surface temperature temperature in September was 60.30°F, which is 1.30°F warmer than the 20th century average.  In September, NOAA states, “warmer-than-average temperatures were evident over most of the global land surface, except for central Russia, some areas in eastern and northern Canada, and a small region in Namibia. Record warmth was notable in much of northwestern Africa, coastal regions of southeastern South America, southwestern Australia, parts of the Middle East, and regions of southeastern Asia.”   NOAA also found that September’s record-breaking average temperature continues a trend set this year: average temperatures for the January through September 2014 period tied with 1998 and 2010 as the warmest January-September on record. In addition, NOAA states, almost every month in 2014 has been among its respective four warmest on record — May and June were also the warmest on record, as well as February, and this September follows a record-breaking August. It also continues a trend for warm Septembers: the last below-average September, NOAA notes, was in 1976.

Another Month, Another Global Heat Record Broken -- 2014 on track to be hottest year recorded - Earth is on pace to tie or even break the mark for the hottest year on record, federal meteorologists say. That's because global heat records have kept falling in 2014, with September the latest example. The National Oceanic and Atmospheric Administration announced Monday that last month the globe averaged 60.3 degrees Fahrenheit (15.72 degrees Celsius). That was the hottest September in 135 years of record keeping. It was the fourth monthly record set this year, along with May, June and August. NASA, which measures temperatures slightly differently, had already determined that September was record-warm. The first nine months of 2014 have a global average temperature of 58.72 degrees (14.78 degrees Celsius), tying with 1998 for the warmest first nine months on record, according to NOAA's National Climatic Data Center in Asheville, N.C. "It's pretty likely" that 2014 will break the record for hottest year, said NOAA climate scientist Jessica Blunden. The reason involves El Nino, a warming of the tropical Pacific Ocean that affects weather worldwide. In 1998, the year started off super-hot because of an El Nino. But then that El Nino disappeared and temperatures moderated slightly toward the end of the year.

Ocean Warming has been Greatly Underestimated -- Key Points:

  • The oceans are by far the largest heat reservoir on Earth, absorbing 93% of global warming. Because of this, accurate assessments of heat uptake are essential to balance the sea level budget, and for observationally-based estimates of climate sensitivity.    
  • Prior to 2005, when the Argo global array of submersible floats became operational, ocean temperature was much more sparsely sampled, especially in the southern hemisphere, leading to larger uncertainty over the evolution of ocean warming through time.
  • Durack et al (2014) analyse the period from 1970-2004 combining ocean temperature and sea surface height measurements with climate model simulations, and find that sparse sampling in the southern hemisphere oceans, and limitations of previous analytical methods, has led to a substantial underestimate of warming in the 0-700 metre layer*.
  • When corrected for this bias, Durack (2014) find that the top 700 metre layer of ocean, over the period 1970-2004, has warmed some 24-58% more than previous analyses have indicated.

Why ice sheets will keep melting for centuries to come - Ice sheets respond slowly to changes in climate, because they are so massive that they themselves dominate the climate conditions over and around them. But once they start flowing faster towards the shore and melting into the ocean the process takes centuries to reverse. Ice sheets are nature’s freight trains: tough to start moving, even harder to stop.We know this process has been going back and forth throughout history – it’s why we’ve had ice ages and warm periods. But until now we haven’t known exactly how quickly ice sheets retreated and reformed. New research published in the journal Nature Communications gives us an answer, and it isn’t great news. It turns out sea levels often rose at scary rates in response to natural climate changes, long before mankind began pumping carbon into the atmosphere. In the short-term sea level is affected by ocean warming and so-called “thermal expansion”, or melting glaciers based on land. These changes can occur quickly – within a decade – but their impact on sea level is relatively small, in the tens of centimetres. The drivers of longer-term sea level rise, over decades or centuries, are the continental ice sheets of Greenland and Antarctica. On the fringes of these ice sheets are “ice shelves” stretching far out into the ocean. Ice shelves can be hundreds of meters thick and, because 90% of ice in water floats below the surface, they remain “grounded” on the sea floor as long as the sea is less deep than 90% of the ice shelf thickness. Where the sea floor is deeper or the ice shelf gets thinner, there will be an area of floating land ice; here, warming ocean water can get underneath and melt the ice. Once sufficiently destabilised, an ice shelf can break up catastrophically.

Expanding Antarctic Sea Ice is Flooding ‘Warning Bell’ - Research suggests that the expansion of Antarctic sea ice heralds ocean changes that will hasten ice sheet melting, by trapping heat beneath a layer of cold surface water, worsening flooding around the world. The stunning outward spread of ice floes atop the seas surrounding the South Pole has been caused by cold freshwater flowing out of melting Antarctic glaciers. (Shifting winds may also be playing a role in the breaking of previous Austral sea ice records.) That melting is forming layers of unusually cold and relatively salt-free surface waters in the region, the tops of which are being frosted with layers of blue-white ice. Those layers of cold water could recast the southern stretches of the influential Atlantic Meridional Overturning Circulation, which ferries water between tropical and polar regions, all the way from the Arctic to the Antarctic — with planet-churning consequences. Recent modeling indicates that these cold-water layers also formed as Antarctica melted during the prehistoric past, when they blocked warm water, which gets carried by deepwater currents to the Southern Ocean from the tropics, from surfacing. At the surface, that warm water normally sloughs its excess heat into the atmosphere, cools down, then flows back north — typically a standard feature of the Atlantic’s circulation system. Without that Antarctic upwelling, the new study, which was published in Nature Communications, warns that the ice sheet is in danger of being melted from beneath at a hastening pace.

Recent sea level rise 'unusual' › Sea level rises seen in the past 100 years are not within the natural fluctuations seen over past millennia, a new study suggests.The findings, published this week in the Proceedings of the National Academy of Sciences show that during the past 6000 years, sea levels are unlikely to have fluctuated by more than 20 centimetres over 200 years. "Compared against this 'background' signal the recent rise of about 20 centimetres in 100 years recorded by tide gauges is anomalous," says co-author Professor Kurt Lambeck, of the Research School of Earth Sciences and the Australian National University."We see no evidence in the geological record from about 6000 years ago to 100-150 years that resembles the rise that we see in the last 100 years."Lambeck and colleagues also confirm that natural fluctuations in sea level over the past 6000 years have been smaller than what some have suggested."In the last 6000 years or so there haven't been any wild oscillations in sea level," says Lambeck."This has been a fairly contentious point because a lot of people have said that sea level has oscillated by large amounts -- a matter of metres over a few hundred years.""We don't see evidence for that."He says the findings suggest that until now Greenland and Antarctica have been relatively stable.

15 years from now, our impact on regional sea level will be clear: Human activity is driving sea levels higher. Australia’s seas are likely to rise by around 70 centimetres by 2100 if nothing is done to combat climate change. But 2100 can seem a long way off. At the moment, regional sea-level rise driven by warming oceans and melting ice is hidden by natural variability such as the El Niño, which causes year-to-year changes in sea level of several centimetres. So at any particular place, the sea level might go up in one year, and down in the next. On Australia’s northwest coast, for example, the sea level was three centimetres below normal during 1998, but four centimetres above normal the following year. At the same time, human-caused climate change is driving sea level relentlessly upwards in most regions, eventually pushing it far outside the bounds of historical variation. But when will the difference become clear? Our new analysis of sea-level projections published in Nature Climate Change today indicates that regional sea-level rise will be generally noticeable before 2030. By then the average sea-level rise globally will be about 13 centimetres higher than the average sea level calculated between 1986 and 2005.Like temperature changes, the sea-level changes are not uniform across the world. One region may experience a very different sea-level change from other regions. When averaged around the globe, sea level has been rising at a rate of about 1.7 millimetres per year between 1901 and 2010, and about 3.2 millimetres per year between 1993 and 2014.

Insurers Retreat From Weather-Related Disasters - After Hurricane Sandy roared across the Northeastern United States, many homeowners on Long Island — even those who escaped the most damage — often lost their property insurance. The same thing happened in coastal Virginia after Hurricane Katrina, which hit hundreds of miles away along the Gulf Coast.Today, from Florida to Delaware, property insurance near the water is becoming harder and harder to find.“I’m worried because insurers only stay in markets until they deem them not profitable,” said Mike Kreidler, the Washington State insurance commissioner. “We want these insurers to stay fully in the market.”This is not exclusively an American phenomenon. As the damages wrought by increasingly disruptive weather patterns have climbed around the world, the insurance industry seems to have quietly engaged in what looks a lot like a retreat. A report to be released Wednesday by Ceres, the sustainability advocacy group, makes the point forcefully. “Over the past 30 years annual losses from natural catastrophes have continued to increase while the insured portion has declined,” it concluded.  Last year, less than a third of the $116 billion in worldwide losses from weather-related disasters were covered by insurance, according to data from the reinsurer Swiss Re. In 2005, the year Katrina struck, insurance picked up 45 percent of the bill. This gradual, low-key withdrawal reveals an alarming weakness. Even as the risks of climactic upheaval increase with a warming atmosphere, the industry created to provide for civilization’s first line of defense against disasters is turning tail.

Insurance Industry Shows ‘Profound Lack Of Preparedness’ For Climate Risks -- An extensive new report found that out of 330 insurers, only nine merited top ratings when it comes to climate policies — only two of which are American companies, Prudential and The Hartford. Using insurers’ responses to a climate risk survey by the National Association of Insurance Commissioners, the report by environmental non-profit Ceres, found that barely 10 percent of the insurers’ surveyed had issued public climate risk management statements that explain the risks and implications of climate change to their businesses. The combined effects of increasing urbanization and climate change are driving higher annual losses from natural catastrophes, according to the report. Over the past three decades, annual losses from natural catastrophes have continued to increase while the insured portion has declined, leaving governments, businesses and individuals to absorb a bigger share. In 2013, insurance covered less than a third of the $116 billion in global losses from weather-related disasters, according to data from the reinsurer Swiss Re. “In the long run,” the Ceres report says, “these coverage retreats transfer growing risks to public institutions and local populations, and reduce the resiliency of communities, which are less able to finance post-disaster recoveries.”The 330 respondents to the survey represent 87 percent of the nation’s insurance market, and in 2012 they collected a combined $989 billion in premiums. One of the reasons insurers are hesitant to take on climate risks is the growing threat of litigation — a situation other industries also find themselves exposed to. According to a 2011 United Nations report, in a single year the world’s 3,000 largest public companies were causing an estimated $1.5 trillion of environmental damage directly due to GHG emissions. According to the report, this is damage for which major emitters of GHGs, along with local, state and federal governments, are already being held legally accountable.

CO2 emissions increased in 2013 -- U.S. energy-related carbon dioxide (CO2) emissions increased in 2013 by 129 million metric tons (2.5%), the largest increase since 2010 and the fourth-largest increase since 1990. Emissions trends reflect a combination of economic factors (population multiplied by per capita output [GDP/population]), energy intensity (energy use per dollar of GDP), and carbon intensity (carbon emissions per unit of energy consumed). In the decade prior to 2013, energy intensity decreased on average by 2.0% per year; given that it increased by 0.5% in 2013, this meant there was a 2.5% swing compared to trend. Energy intensity changes can reflect weather variations that directly affect energy use for heating and cooling as well as changes in the composition of economic activity. Heating degree days, a measure of heating requirements, increased about 19% between 2012 and 2013. As compared to the 2003-12 trend, the increase in energy intensity added about 134 million metric tons. Carbon intensity declined by 0.3% in 2013, but as this decline was less than the previous decade, it led to an increase of about 29 million metric tons of emissions as compared to trend. One factor driving carbon intensity lower has been the changing fuel mix in the electric power sector. The share of electricity generated from natural gas and renewables generally increased while the share from coal decreased through 2012, when natural gas prices fell to their lowest level in more than a decade following a mild winter. With higher natural gas prices in 2013, coal's generation share rose from 39% in 2012 to 40% in 2013, slowing the rate of carbon intensity reduction. Growth in per capita output in 2013 contributed 38 million metric tons over trend as it was greater than the average rate over the previous decade. Slower population growth (0.7%) put slight downward pressure on emissions growth as compared to the previous decade. Without slower population growth, 2013 emissions would have been about 8 million metric tons higher.

U.S. Carbon Emissions Rise Despite Efforts to Combat Climate Change  -- In a troubling sign, data from the U.S. Energy Information Administration (EIA) released today show that U.S. energy-related carbon dioxide emissions rose 2.5 percent in 2013, from 5,267 million metric tons in 2012 to 5,396 million metric tons in 2013. This increase comes after two years of declining emissions. Market trends on their own are clearly insufficient to achieve sustained, sharp reductions in heat-trapping emissions: we need strong policies that drive renewable energy and energy efficiency.  EIA cites two major reasons emissions rose in 2013:

  • Colder weather, which increased the demand for oil and natural gas to heat homes and drove an increase in residential sector emissions (nearly half of the total emissions increase in 2013). This also affected commercial sector emissions.
  • More coal-fired electricity generation. Higher natural gas prices in 2013 resulted in a small shift back from natural gas to coal-fired generation. The average price of natural gas for electricity generators rose from $3.54 per million Btu in 2012 to $4.49 per million Btu in 2013. Natural gas generation fell 10 percent while coal-fired generation increased 4.8 percent.

These Two World Leaders Are Laughing While the Planet Burns Up - Canada once had a shot at being the world's leader on climate change. Back in 2002, our northern neighbors had ratified the Kyoto Protocol, the world's first treaty that required nations to cut their emissions or face penalties. In 2005, the country hosted an international climate change conference in Montreal, where then-Prime Minister Paul Martin singled out America for its indifference. "To the reticent nations, including the United States, I say this: There is such a thing as a global conscience," Martin said. Australia, too, was briefly a success story. The government ratified Kyoto in 2007 and delivered on promises to pass a tax on carbon by 2011. The prime minister that year, Julia Gillard, noted her administration's priorities to set "Australia on the path to a high-skill, low-carbon future or [leave] our economy to decay into a rusting, industrial museum."Today, the two countries are outliers again—for all the wrong reasons.According to a 2014 Climate Change Performance Index from European groups Climate Action Network Europe and Germanwatch, Canada and Australia occupy the bottom two spots among all 34 countries in the Organization for Economic Co-operation and Development (OECD). Among the 20 countries with the largest economies (G20), only Saudi Arabia ranked lower than them. Canada and Australia's records on climate change have gotten so bad, they've become the go-to examples for Republicans, like Senate Minority Leader Mitch McConnell, who don't think climate change exists. How did these two nations go from leading the fight against climate change to denying that it even exists?

Global Warming Debate Over: We’re Doomed - According to Guy McPherson, Professor Emeritus of Natural Resources, Ecology, etc., at the University of Arizona, (presumably man-made) climate change is “irreversible” and, basically, we’re all doomed. As I’ve noted before, anyone who actually values human liberty and progress should welcome declarations of the “irreversible” nature of global warming. After all, if there’s nothing we can do to stop it, then we can just get on with our lives and leave humanity to dealing with environmental problems as they come, which is what homo sapiens have been doing for millennia.  So, McPherson’s pronouncement that it’s irreversible is a real load off. We can stop having the debate about whether or not to crush human economic progress with global regulatory efforts to massively reduce everyone’s standard of living via carbon emission controls (except for the super-wealthy and politically-well connected, of course).

Scientists: EPA Underestimating Renewables Potential  -- Generating electricity in the U.S. can be a lot greener and more climate-friendly than the Obama administration expects it to be through 2030, researchers at the Union of Concerned Scientists said in an analysis released Tuesday. The report says the U.S. Environmental Protection Agency set each state’s renewable energy production targets far too low in the proposed Clean Power Plan, the Obama Administration’s effort to reduce carbon dioxide emissions from existing coal-fired power plants. The plan’s goal is to reduce CO2 emissions 30 percent below 2005 levels by 2030. The Union of Concerned Scientists (UCS), a science advocacy organization, says states can reduce emissions even more, by an average of 40 percent by 2030, mainly through the expansion of renewable power production far beyond what the Obama administration may expect from each state. The Obama administration, in its effort to slash CO2 emissions, is giving each state a unique emissions reduction goal based on the efficiency of its coal-fired power plants, use of renewables, energy efficiency measures taken among the public and other factors. States can either meet the goal on their own, or work with other states to reduce emissions. The goals are likely to be met chiefly by increasing the use of natural gas and renewables to generate power.

Public Forests Sacrificed to the Biomass Industry -- If we’re to believe the biomass energy industry, the U.S. Forest Service and a chorus of politicians from both sides of the aisle, we can solve the energy crisis, cure climate change and eradicate wildfire by logging and chipping our national forests and burning them up in biomass power facilities.  The plotline of their story goes something like this: Years of taxpayer-funded logging and fire suppression in federal forests (at the behest of the timber industry) has resulted in “overgrown” forests crawling with icky bugs, ticking time bombs ready to burst into flames. And the fix, it just so happens, involves even more taxpayer-funded logging and fire suppression, with the trees forked over to the biomass industry to burn in their incinerators and then the “green” electricity sold to utilities and eventually the public—at a premium.  This “burn the forest before it burns you” propaganda is most prevalent throughout the West, but it’s present anywhere there’s public land, with a total of 45.6 million acres across 94 national forests in 35 states qualifying as “Insect and Disease Area Designations” under the 2014 Farm Bill—money on the stump for the biomass industry.

Why Solar Is Much More Costly Than Wind or Hydro --MIT Technology Review --It’s no surprise that if environmental costs are considered, renewables—particularly wind power—are a far better bargain than coal power. But it might surprise many that according to a new such analysis, solar power lags far behind wind and even hydroelectric power in its economic impact, at least in the European Union. Energy costs are rarely viewed through this lens, though it is more common in Europe than in the U.S. and other parts of the world. The study, commissioned by the E.U. and conducted by Ecofys, a renewable energy consultancy, considered the economic costs of climate change, pollution, and resource depletion as well as the current capital and operating costs of the power plants. The authors assessed the cost of generating electricity and any resulting environmental damage. They used a measure known as the “levelized cost,” the estimated cost per megawatt-hour, without subsidies, of building and operating a given plant in a given region over an assumed lifetime.  And to account for climate change, they assumed a metric ton of emitted carbon dioxide costs around €43 ($55). Surprisingly, solar power fared poorly in the analysis, costing far more than wind power and nearly the same as nuclear power. The reason, says Gardiner, is that many of world’s solar panels are manufactured in China, where electricity is very carbon-intensive. The depletion of metal resources also represents a larger cost for solar than wind, she says. Gardiner notes, however, that solar technology is still improving and may be more cost-effective today than it was in 2012, the year used for the study.

EU reaches deal on CO2 emissions cut -  European Union leaders have reached what they described as the world's most ambitious climate change targets for 2030, paving the way for a new UN-backed global treaty next year. The 28 leaders on Friday finally overcame divisions at an EU summit in Brussels to reach a deal including a commitment to cut greenhouse gas emissions by at least 40 percent compared to 1990 levels. They also agreed on 27 percent targets for renewable energy supply and efficiency gains, despite of reservations from some member states about the cost of the measures.

Europe’s Energy Supplies Are Anything But Secure - Europe has an energy problem. That has been painfully apparent as it braces for winter and potential supply disruptions of Russian gas through Ukraine loom large over the continent. Putin is now pushing for the EU to guarantee Kiev’s ability to pay for gas the winter before it turns flows back on, and in so doing is pushing on a pressure point. And, as the FT reports, Europe’s options for replacing Russian gas are quite limited:  The EU imports more than half the energy it consumes, and Russia is its biggest supplier of oil, coal and natural gas. In Europe’s capitals there is a palpable sense of déjà vu, in view of the 2006 and 2009 stand-offs between Moscow and Kiev, that held Europe to ransom. Getting away from dependence on Russian gas will likely mean an increase in emissions as gas is supplanted by much dirtier coal, a sticking point for the supposedly green-minded bloc: What other options are there, then? Nuclear energy is an attractive option, but in the wake of the 2011 Fukushima disaster many in Europe are reluctant to move forward with new plants, and indeed Germany is in the process of phasing out the zero-carbon energy source. Commercial production of domestic reserves of shale gas hasn’t yet taken off, due to a mix of geologic complexity, bureaucratic red tape, and staunch local opposition. Starry-eyed greens will point to renewables as an option for diversifying away from Russian hydrocarbons—Putin has no hold on the sun or wind, they’ll be quick to point out—but these sources can only serve as peak supplies. That is, due to the intermittency of wind and solar energy production, they can’t be relied upon to consistently provide a baseload amount of power, and until more effective storage technologies become available, renewables won’t be able to replace fossil fuels like-for-like. LNG is another oft-touted option for Europe, but with Asian buyers paying a hefty premium for the ship-carried energy source these days, Europe will have to pay out the nose for the privilege—something the continent’s struggling economies won’t be happy to do.

Texas’ Top Toxicologist: EPA’s New Smog Regulations Unnecessary, Just Stay Indoors - Texas’ chief toxicologist is arguing that the EPA shouldn’t tighten ground-level ozone, or smog, rules because there will be little to no public health benefit. Dr. Michael Honeycutt heads the toxicology division of the Texas Commission on Environmental Quality (TCEQ), the state agency tasked with protecting Texans from pollution.“Ozone is an outdoor air pollutant because systems such as air conditioning remove it from indoor air,” he argues on a blog post on the TCEQ website. “Since most people spend more than 90 percent of their time indoors, we are rarely exposed to significant levels of ozone.” He adds that those who are “near death” and thus more vulnerable to ozone spend even more time inside. The overwhelming majority of scientists believe that the EPA should tighten ozone restrictions — as the agency is widely expected to do before December. In 2008 the EPA set the current ozone standard at 75 parts per billion (ppb). In June 2014, the EPA’s Clean Air Scientific Advisory Committee (CASAC) unanimously recommended that the agency lower the limit of ozone pollution from its current standard to between 60 and 70 ppb. A federal judge ruled that the agency needs to produce a draft of new, more stringent ozone regulations by December.

What Happens When 30,000 People Run The Beijing "Airpocalypse" Marathon In "Hazardous" Smog -- Some 30,000 participants were wondering if the organizers of today's 34th Beijing International Marathon would cancel the event after "a toxic fog enveloped the Chinese capital and smog levels soared to “hazardous” levels." Adding to the confusion, and concerns, even the People’s Daily, the Communist Party’s mouthpiece newspaper, cautioned athletes against taking part in the 26.2-mile race, reporting that Beijing’s air was “not suitable for outdoor activities”.  As the Telegraph reports, "Beijing authorities admitted their city’s air was "severely polluted” on Sunday while the US embassy, which also monitors smog levels, described the situation as "hazardous". The Marathon organizers' answer, however, was that the Marathon would proceed as scheduled. The end result was a surreal photo album of the "airpocalypse" marathon, perhaps the best harbinger of the globalized future, as of thousands of people jogged across downtown Beijing in gasmasks.

Radiation levels at Fukushima rise to record highs after typhoon — RT News: The amount of radioactive water near the Fukushima Daiichi nuclear plant has risen to record levels after a typhoon passed through Japan last week, state media outlet NHK reported on Wednesday. Specifically, levels of the radioactive isotope cesium are now at 251,000 becquerels per liter, three times higher than previously-recorded levels. Cesium, which is highly soluble and can spread easily, is known to be capable of causing cancer. Meanwhile, other measurements also show remarkably high levels of tritium – another radioactive isotope of hydrogen. Samples from October 9 indicate that there are 150,000 becquerels of tritium per liter in the groundwater near Fukushima, according to Japan’s JIJI agency. Compared to levels recorded last week, that’s an increase of more than 10 times.Officials blamed these increases on the recent typhoon, which resulted in large amounts of rainfall and injured dozens of people on Okinawa and Kyushu before moving westward towards Tokyo and Fukushima. While cesium is considered to be more dangerous than tritium, both are radioactive substances that authorities would like to keep from being discharged into the Pacific Ocean in high quantities.

Fukushima film shows reality sinking in for 'nuclear refugees' (Reuters) - Before the Fukushima nuclear crisis forced them from their homes, residents of Futaba had praised the Daiichi power plant as a "godsend" that brought jobs and money to the Japanese coastal town. Now, more than three years after the disaster, they remain stuck in cramped emergency housing facing the reality they will likely never go home, with Futaba set to become a storage site for contaminated soil, a new documentary film shows. "I think this is almost a human rights violation," said Atsushi Funahashi, director of "Nuclear Nation 2", which opens in Japanese cinemas next month. true "(They) are forced to live in this temporary housing without hope for the future," he told a question and answer session after a screening at the Foreign Correspondents' Club of Japan last week. Funahashi's "Nuclear Nation" films follow the residents of Futaba, who were evacuated after the March 2011 earthquake and tsunami triggered meltdowns at the nearby Fukushima Daiichi nuclear complex, dousing their town with radiation and turning it into a "no-go zone". In the broader region, tens of thousands were forced to flee. He filmed the first installment, which premiered at the Berlin International

Fukushima radiation nearing West Coast -- Radiation from Japan’s Fukushima nuclear disaster is approaching the West Coast, the Woods Hole Oceanographic Institution is reporting. A sample taken Aug. 2 about 1,200 kilometers west of Vancouver, B.C. tested positive for Cesium 134, the Fukushima “fingerprint” of Fukushima. It also showed higher-than-background levels of Cesium 137, another Fukushima isotope that already is present in the world’s oceans from nuclear testing in the 1950s and 1960s.  The sample is the first of about 40 offshore test results that will be made public next month, said Ken Buesseler, a chemical oceanographer at Woods Hole. Further results, which Buesseler will release at a conference Nov. 13, will show offshore Fukushima radiation down the coast into California, he said, including some samples that are closer to shore.  Buesseler emphasized that the radiation is at very low levels that aren’t expected to harm human health or the environment.  “There is definitely offshore Fukushima cesium now,” Buesseler said. “It’s not on the beaches, but it’s offshore.”

Reinert Interview: Energy Environmental Sacrifice Areas | Big Picture Agriculture: I’ve flown over the tar sands area in a helicopter, and took photographs of it for Bloomberg news, and if you see the incredible destruction of the arboreal forest there you can’t imagine that it can ever be cleaned up. There is destruction elsewhere. Parts of Africa have badly leaking and poorly maintained oil fields. You saw what happened in Ecuador with Chevron, and the destruction of indigenous species. You see ecological destruction in Brazil with the ever greater quest for ethanol because as sugarcane farmers push other farmers and cattle ranches further to the edge, the rainforest gets torn down. In Georgia, they’re clearcutting forest and exporting wood to the E.U. for the purpose of using renewables to replace coal with wood. West Virginia comes as close as anywhere for being a sacrifice state. That’s where I grew up so I’ve seen how disgusting and ugly the mountain topping is for coal mining. I tubed on the Elk River when I was young, where the terrible chemical spill was earlier this year. There are some badly contaminated port areas. Then, there’s the Dead Zone in the Gulf of Mexico related to our ethanol production. I could go on and on.

Fossil fuel industry sustained by ‘toxic triangle’ that puts 400 million at risk - Political inertia, financial short-termism and vested fossil fuel interests have formed a “toxic triangle” that threatens to push up global temperatures, putting 400 million people at risk of hunger and drought by 2060, Oxfam said on Friday, a week before an EU summit to finalise a new climate and energy policy framework. In its Food, Fossil Fuels and Filthy Finance report, Oxfam warned that EU leaders must resist pressure from the fossil fuel industry, which spends at least €44m (£35m) a year on lobbying the European bloc. The report also urged leaders to commit to cuts of at least 55% in carbon dioxide emissions, energy savings of at least 40%, and an increase in the use of sustainable renewable energy to at least 45% of the energy mix. EU leaders meet in Brussels on 23-24 October to agree targets for emissions cuts by 2030, deployment of renewable energy and improving energy efficiency. The meeting comes ahead of the UN climate change conference in Paris next year. The leaders are expected to agree an emissions cut target of 40% from 1990 levels, but Oxfam said this would not be enough for Europe to make a fair contribution to tackling climate change. The EU emits about 10% of global carbon dioxide.  “The fossil fuel industry has conjured a toxic triangle that is trapping us into a warming world. Governments and investors are helping the industry to recklessly protect its own profits at the expense of us all. The world’s poorest are already being hit hardest and millions more will be made hungry by climate change,” the Oxfam chief executive, Mark Goldring, said. Oxfam says the “toxic triangle” supported spending of more than $674bn (£423bn) on fossil fuels in 2012. Investment in the industry was propped up by tax breaks, government incentives and an estimated $1.9tn of subsidies a year. More than $500,000 a day was being spent on lobbying US and EU governments, it says.

Massive coal field discovered in China's Xinjiang - (Xinhua) -- A massive coal field with 11.6 billion tonnes of coal has been discovered in northwest China's Xinjiang Uygur Autonomous Region, local authorities said Wednesday, providing a fresh supply for the country's energy strategies. Located in the southern part of the Sandaoling Mining Area, Hami Prefecture, the coal field boasts high-quality steam and civil coals, according to Xinjiang's coalfield geology bureau. Extraction work began last year within an area of 913.22 square km, the bureau said. Hami Prefecture is one of the five major coal bases in Xinjiang, with an estimated reserve exceeding 570 billion tonnes. In recent years, a dozens of state-owned energy enterprises have moved to tap the coal resources there, steering coal power and increasing Hami's strategic status in China's energy industry. Beginning in 2012, the local government stepped up development in seven coal mining areas in the prefecture, expecting its coal production capacity to top 150 million tonnes by 2015.

Mountaintop Removal Linked to Cancer -  We know what a mess mountaintop removal makes when the tops of mountains are literally blown off to access the coal inside them. Forests are stripped and debris is dumped into streams and valleys, leaving behind a ravaged landscape. It’s partly responsible for the loss of jobs in the coal industry since it requires only a handful of workers to operate the huge machines involved. Now we’re learning that the process, which has been touted by advocates as cleaner and safer than below-ground coal mining, is the direct cause of a lung cancer epidemic in the Appalachian communities—primarily in West Virginia, Kentucky and southwestern Virginia—where mountaintop removal coal mining is taking place. A new peer-reviewed study by researchers from West Virginia University’s Mary Babb Cancer Center found that the coal-dust particulates it blows into the atmosphere has fueled an epidemic of lung cancer. “Epidemiological studies suggest that living near mountaintop coal mining activities is one of the contributing factors for high lung cancer incidence,” the study states unequivocally in its introduction.

The dirty effects of mountaintop removal mining -FOR DECADES, coal companies have been removing mountain peaks to haul away coal lying just underneath.   The technique made it economical for them to extract more coal from troublesome seams in the rock, which might be too small for traditional mining or lodged in unstable formations. More recently, scientists and regulators have been developing a clearer understanding of the environmental consequences. They aren’t pretty.  Environmentalists were appalled, but the practice spread and now accounts for more than 40 percent of West Virginia coal production.  Burning coal has a host of drawbacks: It produces both planet-warming carbon dioxide and deadly conventional air pollutants. Removing layers of mountaintop in the extraction process aggravates the damage. The displaced earth must go somewhere, typically into adjoining valleys, affecting the streams that run through them. The dust that’s blown into the air on mountaintop removal sites, meanwhile, is suspected to be unhealthy for mine workers and nearby communities. Scientists have recently produced evidence backing up both concerns. Over the summer, a U.S. Geological Survey study compared streams near moutaintop removal operations to streams farther away....the researchers found decimated fish populations, with untold consequences for downstream river systems. The scientists noted changes in stream chemistry: Salts from the disturbed earth appear to have dissolved in the water, which may well have disrupted the food chain. Last week, the Charleston Gazette reported on a new study finding that dust from mountaintop removal mining appears to contribute to greater risk of lung cancer. West Virginia University researchers took dust samples from several towns near mountaintop removal sites and tested them on lung cells, which changed for the worse. The findings fit into a larger, hazardous picture: People living near these sites experience higher rates of cancer and birth defects.

Washington Post Editorial Board Damns Mountaintop Removal Coal Mining » In light of a new study finding that particulates kicked up by mountaintop removal (MTR) are connected to the lung cancer epidemic in the regions where this form of coal mining is rampant, the Washington Post‘s editorial board added up all the evidence and came out with a powerful editorial damning the practice for its health and its environmental impacts. “For decades, coal companies have been removing mountain peaks to haul away coal lying just underneath,” said the paper. “More recently, scientists and regulators have been developing a clearer understanding of the environmental consequences. They aren’t pretty.” MTR, which involves blowing the tops of mountains or using massive earth movers to remove them to extract the coal inside them, has grown in popularity in the last several decades since it allows the mining of coal seams that otherwise would not have been cost-effective to mine and it requires fewer workers than underground coal mining. It’s become a big business, particularly in West Virginia and eastern Kentucky where the process became common in the 1990s.

U.S. Utilities Facing Fuel Shortage Problems As Winter Approaches - American utility companies are facing lower-than-average fuel supplies as they begin to stockpile for the winter. Part of the reason is the country’s oil boom. Moving oil by rail has become so widespread that train backups are making it hard for utilities to receive shipments of coal, which in some cases is leaving power plants critically low on fuel supplies.   Coal stocks were inordinately depleted during the unusually long, cold snowy winter in the U.S., which saw an elevated level of electricity demand. Months later, coal-fired power plants are still struggling to replace their coal supplies. “Coal piles around the country have gotten to levels that don’t make us 100 percent comfortable,” David Crane, CEO of NRG Energy, told Bloomberg in an interview. The amount of coal on hand hit just 39 days’ worth of supply in July 2014, the month for which the latest data is available. That is down from a 57-day supply at the same time in 2013.

Methane Leaks Wipe Out Any Climate Benefit Of Fracking, Satellite Observations Confirm -- Satellite observations of huge oil and gas basins in East Texas and North Dakota confirm staggering 9 and 10 percent leakage rates of heat-trapping methane. “In conclusion,” researchers write, “at the current methane loss rates, a net climate benefit on all time frames owing to tapping unconventional resources in the analyzed tight formations is unlikely.” In short, fracking speeds up human-caused climate change, thanks to methane leaks alone. Remember, natural gas is mostly methane, (CH4), a super-potent greenhouse gas, which traps 86 times as much heat as CO2 over a 20-year period. So even small leaks in the natural gas production and delivery system can have a large climate impact — enough to gut the entire benefit of switching from coal-fired power to gas. Back in February, we reported that the climate will likely be ruined already well past most of our lifespans by the time natural gas has a net climate benefit. That was based on a study in Science called “Methane Leaks from North American Natural Gas Systems” reviewing more than 200 earlier studies. It concluded that natural gas leakage rates were about 5.4 percent. The new study used satellites to look at actual “methane emissions for two of the fastest growing production regions in the United States, the Bakken and Eagle Ford formations,” between the periods 2006–2008 and 2009–2011. They found leakages rates of 10.1 percent and 9.1 percent respectively!

Oldest Horizontally Fracked Wells in the World are the Biggest Leakers (Original audio source) This is how the industry is spinning the news about the methane hot spot in the coal bed methane fields. That it “predates’ the fracking boom. It predates shale gas, but does not predate fracking. Methane hotspot seen from space predates shale gas fracking boom. NASA and University of Michigan scientists analyzed satellite data from 2003 to 2009, and a map of their results shows a bright red spot at the Four Corners, which is most likely related to coal bed methane extraction there, as it predates the boom in shale gas fracking. Living On Earth. 19 October 2014.” Those coal bed methane wells are the granddaddies of the fracking boom, they were the first commercial horizontally fracked wells in the world. The source rock just isn’t shale. Big fracking deal. Two major corrections to the report of the methane leaks seen from space – the coal bed methane wells are by no means “conventional” wells. In fact, they are the oldest “unconventional” commercially horizontally fracked gas wells in the world.“FRANKENBERG: We only looked particularly at this Four Corners site, and we observed the enhancements already starting in 2003, and at the time there was no considerable fracking activity in this area. It’s an established technique in the Four Corners area to extract the coalbed methane, and I think it started already in the 90s.” The coal bed methane seams are “unconventional” – drilled and fracked horizontally.

Youngstown Vindicator: Arrogance is the hallmark of anti-fracking campaign: To understand the mentality of the individuals who refuse to take “no” for an answer in their campaign to ban fracking and other related gas and oil activities in the city of Youngstown, consider this comment: “There’s no one protecting our air and property rights, so the community members have to do it.” Thus said Susie Beiersdorfer, one of the mainstays of the committee that has again placed the anti-fracking Community Bill of Rights charter amendment on the Nov. 4 general election ballot in Youngstown. On three previous occasions, city residents rejected the anti-fracking charter amendment and the arguments put forth by Beiersdorfer, and her husband, Ray, a public employee. But they and other self-styled protectors of the people of Youngstown who are thought of as environmental bumpkins refuse to give the voters the respect they deserve. Let Susie Beiersdorfer’s opinion of city residents be your guide as you attempt to understand what’s driving the anti-fracking proponents. “There’s no one protecting our air and property rights …” No one. Not the mayor, not members of city council, not community leaders, not business leaders, not the clergy — and not even the U.S. and Ohio environmental protection agencies. In the view of the Community Bill of Rights committee, the city of Youngstown is a cauldron of pollution, and only a select few know what’s best for residents who are in harm’s way.

Land records show many state parks could see mining, drilling | The Columbus Dispatch: About 40 percent of Ohio’s natural treasures — its state parks, forests and wildlife and nature preserves — could be undermined in the quest to remove valuable coal, oil, natural gas and other minerals. Mineral rights owned by other parties could permit mining or drilling in parts of 18 state forests, 24 state parks and 53 natural areas, according to an analysis of state land records by The Dispatch. Even the parcel holding one of the crown jewels of Ohio’s park system — Old Man’s Cave in Hocking Hills State Park southeast of Columbus — potentially could be drilled for oil and natural gas. All told, parcels containing more than 117,000 acres, about 20 percent of the park and forest land owned by the Ohio Department of Natural Resources, could be mined and drilled. Environmentalists say the prospect of mining grew more ominous last month when the Ohio Supreme Court ruled that mineral rights underlying park lands include the right to strip mine coal unless expressly forbidden in deeds. ODNR reports it has not received “any new or renewed interest” in mining on state properties in the wake of the court ruling. And, numbers suggest a flurry of coal mining in state parks is unlikely amid an industry downturn. Many of the ODNR properties involving mineral-rights are located in Ohio’s coal country. The state has 55 surface coal mines — half the number of 14 years ago — and 10 underground mines across 17 counties in eastern and southeastern Ohio. The underground operations produce 73 percent of the coal mined in Ohio, which ranks 10th among the states in coal production. When the state bought or was given land in decades past, some sellers retained the mineral rights to extract coal, oil and natural gas underlying the land. The fact that owners held on to the mineral rights allowed the state to buy land at deep discounts, officials said. In the Ohio Supreme Court case, ODNR unsuccessfully argued that strip mining would “utterly destroy” its lands, saying only underground mining was allowed unless strip mining was specifically authorized in mineral-rights deeds.

High pollution levels found near Ohio gas wells - A study in a rural Ohio county where oil and gas drilling is booming found air pollution levels near well sites higher than those in downtown Chicago. A team from the University of Cincinnati and Oregon State University placed 25 monitors as close as one-tenth of a mile from gas wells in Carroll County, about 100 miles south of Cleveland. The monitoring occurred over a three-week period in February. The monitors detected 32 types of hydrocarbon-based compounds, some of which are found in vehicle exhaust, tobacco smoke and are produced when materials are burned. The researchers would not discuss the specifics of their findings. They plan additional monitoring to produce more precise measurements that account for drilling activity, wind and weather. They also plan to analyze wrist monitors that some residents living near wells wore for three weeks. Erin Haynes, a professor of environmental health at the University of Cincinnati, said Carroll County was chosen for the study because of residents' concerns about hydraulic fracturing, known as fracking. The researchers hope to eventually determine if fracking harms people's health.  Carroll County is located on the Utica shale, which lies beneath portions of Ohio, Pennsylvania, West Virginia and New York. The state reports there are 282 active fracking wells in Carroll County.

Fracking May Be Dangerous To Nearby Residents - Fracking sites may threaten the health of local residents, according to new research. "Those who live in close proximity to fracking sites exhibited a greater likelihood to suffer [health] problems than those who lived farther away from natural gas wells, according to a new study of Pennsylvania’s Marcellus shale region," RT reported.Titled “Proximity to Natural Gas Wells and Reported Health Status: Results of a Household Survey in Washington County, Pennsylvania,” the study was published in Environmental Health Perspectives. The study concluded: "While these results should be viewed as hypothesis generating, and the population studied was limited to households with a ground fed water supply, proximity of natural gas wells may be associated with the prevalence of health symptoms including dermal and respiratory conditions in residents living near natural gas extraction activities. Further study of these associations, including the role of specific air and water exposures, is warranted."The study by Yale University researchers "addressed 492 individuals in 180 households in southwestern Pennsylvania, where the Marcellus shale has attracted its fair share of the fracking surge seen throughout the United States," RT reported. Washington County, where the study was, is a fracking hot spot.

Fracking companies use loophole to avoid permits for dangerous chemicals, report says | The Columbus Dispatch: Federal laws meant to protect drinking water require fracking companies to get a permit before using diesel fuel in the drilling process. That permit is important: Diesel contains chemicals that can cause cancer and damage nerve tissues. The permits regulate the length and depth of concrete and steel well casings that keep those chemicals from reaching groundwater. But a loophole in the law allows oil and gas companies to separately inject the same toxic chemicals without a permit, according to a report released by the nonprofit, nonpartisan Environmental Integrity Project. Four chemicals in diesel — benzene, toluene, ethylbenzene and xylene — are the biggest worries to federal regulators and environmental and health officials. Benzene is a known carcinogen. Ethylbenzene and toluene can cause neurological problems. The Safe Water Drinking Act requires extensive oversight if diesel is used during drilling or fracking, in part because of its benzene content. Diesel can be used, for example, as a lubricant for a pipe or drill going into the ground. Yet all those chemicals are allowed to be used during fracking without a permit issued under the Safe Water Drinking Act, the Environmental Integrity Project said.

‘Fracking loophole’ allows drilling companies to use unregulated toxins – report — A number of US oil companies are taking advantage of the so-called “Halliburton Loophole” to circumvent federal legislature regulating diesel-based fluids in fracking, instead exploiting the environment with even more toxic chemicals, new report says. “Because of a gap in the Safe Drinking Water Act, companies are allowed to inject other petroleum products (beyond diesel) without a permit, and many of these non-diesel drilling fluids contain even higher concentrations of the same toxins found in diesel,” report by the Environmental Integrity Project released on Wednesday reads. Titled “Fracking’s Toxic Loophole”, the report says that the 2005 Energy Policy Act authorities the Environmental Protection Agency’s (EPA) to “regulate diesel-based fracking fluids because of the toxicity of BTEX compounds” found in diesel. However due to the so-called “Halliburton loophole” in the legislature the federal government is not applying the same protection standards to other fracking fluid other than diesel-based.

Environmental Watchdog finds oil, gas companies using cancer-causing chemicals -- Oil and gas companies are exploiting federal loopholes to frack with cancer-causing petroleum-based products, a report by the Environmental Integrity Project (EIP) said. "Despite a federal ban on the use of diesel fuel in hydraulic fracturing without a permit, several oil and gas companies are exploiting a Safe Drinking Water Act loophole, pushed through by Halliburton to frack with petroleum-based products, containing even more dangerous toxic chemicals than diesel," a statement published on the watchdog's website Wednesday said. The group found that one of the primary ingredients in fluids, used in fracking, contains a highly toxic chemical called benzene, which is more toxic than diesel fuel and harmful to drinking water supplies and public health. According to the statement, permits are required for fracking with diesel fuel; however, companies can inject other petroleum products even more toxic than diesel without using a permit. "This double standard illustrates what happens when Congress manipulates environmental statutes for the benefit of polluters, instead of allowing EPA [US Environmental Protection Agency] to make public health decisions based on the best available science," The study recommends that Congress should revise and repeal the 2005 loophole by advising the US Environmental Protection Agency to require safeguards for the Safe Drinking Water Act from using chemicals that contain large amounts of benzene and other toxic chemicals.

Fracking Companies Using Toxic Benzene in Drilling: Group - Some oil and gas drillers are using benzene, which can cause cancer, in the mix of water and chemicals they shoot underground to free trapped hydrocarbons from shale rock, an environmental watchdog group said today. Benzene isn’t banned in hydraulic fracturing, although diesel is restricted because regulators determined it may have carcinogens, including benzene. Drillers need a permit before using diesel in the fracking mixture that’s blasted into shale with oil and gas deposits; they don’t need one for benzene. The Environmental Integrity Project today said at least six fracking fluid additives contain that compound. “It’s bombs away. You can use benzene in large quantities, just as long as you don’t call it diesel,” said Eric Schaeffer, the Washington-based group’s executive director. Schaeffer said the compound could contaminate drinking water, although the group didn’t provide any evidence today showing such contamination. In 2005, Congress exempted fracking from requirements of the Safe Drinking Water Act. Health advocates called it the “Halliburton loophole,” referring to Halliburton Co. (HAL:US), the largest provider of fracking services, led by Richard Cheney before he was elected vice president in 2000.

Chesapeake has $5B deal to sell part of its Marcellus portfolio: Chesapeake Energy Corp. announced Thursday that it will shed its liquids-rich Marcellus Shale acreage in a $5.38 billion deal with Southwestern Energy Co. Oklahoma-based Chesapeake, whose leasing appetite in the Marcellus made it among the top companies holding claim to the land here, said the area being sold — mostly in West Virginia and in the western part of Pennsylvania’s Washington County — wasn't being properly valued by the market and was near the bottom of Chesapeake’s priority list. Jason Ashmun, vice president of the Appalachian North Business Unit for Chesapeake, said the company has been “on the bubble” about its southern Marcellus acreage, which includes about 14,000 acres in southwestern Pennsylvania. As is common among energy exploration companies, Chesapeake’s teams in the company’s various operation territories compete for capital allocations, which have been on the decline since CEO Doug Lawler replaced Aubrey McClendon at the helm last year. Mr. Lawler’s arrival signaled a shift in the company’s spending strategy and a greater focus on efficiency. “Chesapeake’s very aggressive historical push for growth necessitated investment that substantially outstripped operating cash flow,” said analysts from Standard & Poor’s in a note Thursday morning.

Chesapeake to Sell Gas Assets for $5.38 Billion - WSJ - Chronically cash-strapped Chesapeake Energy Corp. finally has some spending money. The Oklahoma City company on Thursday agreed to sell a big slice of its oil-and-gas holdings to rival Southwestern Energy Corp. for $5.38 billion. It was the boldest move yet by Chesapeake Chief Executive Doug Lawler to transform the driller, which for the past seven years has spent billions more than its wells generated. Analysts said proceeds could be used to pay down some of Chesapeake’s $11.5 billion in debt.  For several years before the global financial crisis, investors rewarded Chesapeake as co-founder Aubrey McClendon borrowed heavily to snap up oil and gas prospects and drill more wells than its rivals. That changed in 2012 as the company’s debt reached around $16.2 billion, and shareholders began to fret about the CEO’s appetite for risk and enthusiasm for spending. With the sale to Southwestern, Chesapeake will shed 413,000 acres with 1,500 wells in West Virginia and southwest Pennsylvania. The deal included wells in the Marcellus and Utica shales that produced the equivalent of about 336 million cubic feet of gas a day last month.

Pa. studies on shale-site air emissions incomplete, according to court documents: Three widely cited state studies of air emissions at Marcellus Shale gas development sites in Pennsylvania omit measurements of key air toxics and calculate the health risks of just two of more than two dozen pollutants. State regulators and the shale gas drilling industry over the past four years have repeatedly used the regional studies to support their positions that air emissions from drilling, fracking wastewater impoundments and compressor stations don’t pose a public health risk. The revelations about the shortcomings of the state Department of Environmental Protection’s short-term air sampling reports are contained in sworn depositions by two DEP air program employees who worked on them. Those documents were filed in a Washington County Common Pleas Court civil case in which three families allege that air and water pollution from Range Resources’ Yeager drilling and 13.5-million gallon fracking wastewater impoundment in Washington County made them sick. In a parallel case, now before the state Environmental Hearing Board, one of those individuals, Loren Kiskadden, has appealed a DEP ruling that myriad spills and leaks at the Yeager drill site and impoundment did not contaminate his well water supply a half mile away.

Fracksylvania DEP Cooks Books on Fracking Air Pollution Reports --Three widely cited state studies of air emissions at Marcellus Shale gas development sites in Pennsylvania omit measurements of key air toxics and calculate the health risks of just two of more than two dozen pollutants.State regulators and the shale gas drilling industry over the past four years have repeatedly used the regional studies to support their positions that air emissions from drilling, fracking wastewater impoundments and compressor stations don’t pose a public health risk.The revelations about the shortcomings of the state Department of Environmental Protection’s short-term air sampling reports are contained in sworn depositions by two DEP air program employees who worked on them.Those documents were filed in a Washington County Common Pleas Court civil case in which three families allege that air and water pollution from Range Resources’ Yeager drilling and 13.5-million gallon fracking wastewater impoundment in Washington County made them sick.In a parallel case, now before the state Environmental Hearing Board, one of those individuals, Loren Kiskadden, has appealed a DEP ruling that myriad spills and leaks at the Yeager drill site and impoundment did not contaminate his well water supply a half mile away.“The DEP’s willingness to allow Pennsylvania’s citizens to continue to rely upon what it knows to be an inaccurate air study is unacceptable and completely contrary to the department’s obligations to the public,”

Pennsylvania DEP = “Department of Environmental Predation” - Pennsylvania and New York are the only states that combine their minerals resource departments with their environmental departments. Then task that department, the DEP in Pennsylvania and the DEC in New York, with promoting oil and gas development. The fracking fox guarding the environmental hen house. Raw data showing high concentrations of certain pollutants at gas operations and health risks of 25 chemicals were left out of the state’s studies.  Pennsylvania regulators used flawed methodology to conclude that air pollution from natural gas development doesn’t cause health problems. The revelation has further eroded trust in an embattled state agency.  The news was first reported Monday by the Pittsburgh Post-Gazette. The paper cited court documents that show how air quality studies conducted by the Department of Environmental Protection in 2010 and 2011 failed to analyze the health risks of 25 chemicals. The studies also didn’t report some instances where high pollutant levels were detected.  The evidence came from statements of two DEP scientists who were deposed in a lawsuit. Their depositions call into question the report’s conclusion that the air sampling found no health risks from shale development.

USGS Release: Measuring Landscape Disturbance of Gas Exploration in Eight Pennsylvania Counties  Landscape change in Pennsylvania's Cameron, Clarion, Elk, Forest, Jefferson, McKean, Potter, and Warren counties resulting from construction of well pads, new roads and pipelines for natural gas and coalbed methane development is being documented to help determine the potential consequences for ecosystems and wildlife, according to a new U.S. Geological Survey report. Using geospatial data and high resolution aerial imagery from 2004-2010, USGS researchers documented spatially explicit patterns of disturbance, or land use, related to natural gas resource development, such as hydraulic fracturing, particularly disturbance patterns related to well pads, roads and pipeline construction. Spatially explicit data on the level of landscape disturbance -- which is geographic information systems data, mapped to a high degree of spatial accuracy -- is critically important to the long-term study of the potential impacts of natural gas development on human and ecological health. Through programs such as the National Land Cover Database, and Land Cover Trends, USGS has a long record of studying the consequences of land-use and land-cover changes. The current level of natural gas development in much of the country, and its effects on the landscape, is an important contemporary land-use/land-cover issue. "Landscape disturbance effects have consequences for the ecosystems, wildlife, and human populations that are collocated with natural gas extraction activities. This study examines the landscape consequences of gas extraction for eight counties in Pennsylvania; and is the final publication in the series that documents landscape disturbance in the Marcellus Shale region of the state," said Lesley Milheim, lead author of the study.

Duke professor finds fracking footprint - — A prominent Duke University researcher contributed to a recent discovery that makes it easier to say what role the controversial technology of hydraulic fracturing plays in water pollution. Duke geochemist Avner Vengosh worked with other American and French scientists in identifying what they believe is the unique, chemical “fingerprint” left behind by the relatively new process of extracting natural gas from shale. “So if there is contamination, we can tell the source,” Vengosh said. “Once you see this kind of water in the environment, you will be able to say, ‘Yes, this is fracking.’ ” The group of researchers published their findings today in the journal “Environmental Science & Technology.” The study comes at an opportune moment for North Carolina, which is poised to allow fracking for the first time in parts of the state with substantial shale reserves including Rockingham and Stokes counties. The new fingerprint could put an end to debates between the industry and environmentalists over pollution linked to hydraulic fracturing, Vengosh said.

Frackwaste Water Chemical Signature Identified by Scientists --As if there was ever any doubt where all that frackwaste water is going, (the local river) a team of scientists have developed an chemical signature for frack waste waster – so that it can be positively identified in the field. A team of U.S. and French scientists say they have developed a new tool that can specifically tell when environmental contamination comes from waste produced by hydraulic fracturing, better known as fracking. In peer-reviewed research published in the journal Environmental Science & Technology on Monday, the researchers say their new forensic tool can distinguish fracking wastewater pollution from other contamination that results from other industrial processes — such as conventional oil and gas drilling. Fracking is a controversial oil and gas well stimulation technique that uses a great deal of water, mixed with chemicals, to extract oil and gas from miles deep underground.  The disposal of this often-radioactive water mixture, known as “fracking fluid,” is widely considered to be one of the biggest environmental threats that fracking poses, along with the emissions of greenhouse gases like methane and carbon dioxide. There have been many claims of water contamination since the technique gained popularity in 2008, but it’s been difficult to determine if fracking was really the cause — mainly because fracking companies are not required to disclose what chemicals they use in the process (the mixture is often considered a trade secret). With the new tool, though, scientists no longer need to know the chemical make-up of the fracking fluid to determine whether it’s getting into the environment, Duke  . “This is one of the first times we’ve been able to demonstrate that, here, you have a spill in the environment, and yes, this is from fracking fluid and not from other source of contamination,” Vengosh said. “It’s a pretty cool way to overcome the issue of trade secrets.”

Scientists Can Now Tell If Water Contamination Comes From Fracking Waste --A team of U.S. and French scientists say they have developed a new tool that can specifically tell when environmental contamination comes from waste produced by hydraulic fracturing, better known as fracking. In peer-reviewed research published in the journal Environmental Science & Technology on Monday, the researchers say their new forensic tool can distinguish fracking wastewater pollution from other contamination that results from other industrial processes — such as conventional oil and gas drilling. Fracking is a controversial oil and gas well stimulation technique that uses a great deal of water, mixed with chemicals, to extract oil and gas from miles deep underground. Once the rock is fractured by the high pressure fluid, fossil fuels follow the fracking fluid to the surface. The disposal of this often-radioactive water mixture, known as “fracking fluid,” is widely considered to be one of the biggest environmental threats that fracking poses, along with the emissions of greenhouse gases like methane and carbon dioxide. There have been many claims of water contamination since the technique gained popularity in 2008, but it’s been difficult to determine if fracking was really the cause — mainly because fracking companies are not required to disclose what chemicals they use in the process (the mixture is often considered a trade secret). With the new tool, though, scientists no longer need to know the chemical make-up of the fracking fluid to determine whether it’s getting into the environment, Duke University geochemist Avner Vengosh told ThinkProgress on Monday.“This is one of the first times we’ve been able to demonstrate that, here, you have a spill in the environment, and yes, this is from fracking fluid and not from other source of contamination,” Vengosh said. “It’s a pretty cool way to overcome the issue of trade secrets.”

Scientists can now see fracker's “fingerprints” all over polluted water - People are getting sick all across fracking country, and many are blaming their mysterious illnesses — headaches, excruciating rashes, even liver damage — on the chemicals oil and gas companies have been pumping into the earth. But thanks to trade-secret laws, which allow companies to stay mum about the chemicals in their fracking fluid, it’s been difficult to pin the blame on the practice — until now that is. Researchers from Dartmouth College, Stanford University, and the French Geological Survey claim they’ve created a tool that detects a specific chemical fingerprint unique to fracking fluid, allowing scientists to pinpoint fracking as a culprit in water pollution.According to their research, boron and lithium — which both occur naturally in shale — mix with fracking fluid when it’s injected underground, altering the wastewater’s chemical makeup in ways different from other fossil fuel extraction methods. As Avner Vengosh, a geochemist at Duke University, told Think Progress, this new detection method, which hones in specifically on this chemical fingerprint, bypasses the whole trade-secret hiccup:“Many of the fracking operations today are happening in areas that have a legacy of 20, 30 years of conventional oil and gas development,” Vengosh said. “So when there’s contamination, [fracking companies] can say ‘Oh, it’s not us — it’s the legacy of 30 years of operations here.”“We now have the tools to say, well, sometimes you’re right and sometimes you’re wrong,” he added.

Marshall County chemical maker wary after ‘near-catastrophic’ fracking incident -- As the Tomblin administration considers a plan to allow natural gas drilling under the Ohio River, a major chemical maker in Marshall County has been fighting a proposal for hydraulic fracturing near its plant, citing a “near-catastrophic” gas-well incident last year that might be linked to geologic conditions beneath the river. Atlanta-based Axiall Corp. has been waging a legal battle to stop Gastar Exploration from fracking natural gas wells that Gastar had drilled on Axiall property under leases Gastar obtained from PPG Industries, the former owner of Axiall’s chlorine and caustic soda plant at Natrium, located along the Ohio near the Marshall-Wetzel county line. Axiall says it is concerned about a repeat of an August-September 2013 incident it blames on high-pressure fracking fluids being used by another company, Triad Hunter, to release natural gas from the Marcellus Shale at a well site on the other side of the river. In court documents, Axiall lawyers say increased underground pressure from the fracking at Triad Hunter traveled under the river and somehow made contact with brine wells Axiall uses to obtain saltwater, one of the key materials used in its manufacturing process. Axiall says those pressures led to a blowout in which one of its brine wells at its plant “began spewing flammable natural gas.” No injuries were reported, but parts of Axiall’s brine production were closed for more than six months for repairs and the company had to set up several large flares to burn off excess natural gas. Axiall was “fortunate to have been able to limit the environmental impact of the Triad Hunter incident and avoid bodily injury or loss of life due to a natural gas explosion or other disaster,” the company says in court records.

Fracking Ban Ballot Initiatives Intensify  - County ballot issues to ban fracking could have a large impact outside those counties. And the campaign money being spent on both sides—but primarily by big energy companies—shows how much is at stake. The highest profile and most contentious ban is the one on the ballot in Denton, Texas, north of Dallas, located in the heart of the Barnett shale region. Citizen groups, concerned about their families’ health and safety and frustrated by the city’s failure to enact any restrictions on fracking, gathered enough signatures to force city council to vote on the ban in July. After the council voted against it, the issue went to the November ballot. The battle has positioned the industry-backed group Denton Taxpayers for a Strong Economy against the community group Denton Drilling Awareness Group/Frack Free Denton. The Denton Chamber of Commerce and the Denton County Republican Party have come out against the ban.

Letter: Group biased toward fracking | The Sanford Herald: To the Editor: Fracking does pose health issues, but according to Katie Brown, spokeswoman for Energy in Depth, it does not. Energy in Depth, hmmmm ... looks a lot like the Energy Department. Of course I had to Google EID and found them to be a “research, education and public outreach campaign focused on getting the facts out about the promise and potential of responsibly developing America’s onshore energy resource base” especially abundant sources of oil and natural gas from shale and other ‘tight’ formations across the country.” Oh, and of course they were launched by Independent Petroleum Association of America in 2009. A little more digging, and the management team and board of directors are all oil boys! No surprise here, so do you think EID has their own biases? Sure they do! In a recent article in Scientific Magazine entitled “Fracking Sludge in Open Pits Goes Unmonitored as Health Worries Mount,” a “commercial waste facility that will receive millions of barrels of toxic sludge from oil and gas production for disposal in enormous open air pits is taking shape” less than a half mile from Nordheim School in Nordheim, Texas. Nordheim school has 180 children ranging from kindergarten through 12th grade. The proposed waste disposal pits will be as large as nine city blocks. “In the state of Texas, as in most states, air emissions from oil and gas are among the least regulated, least monitored and least understood components of the extraction and production cycle.”

Most People in NYS, Ma., Vt and NH Won’t Get Fracked. They’ll Get Gassed. - Sane Energy Project has long focused on infrastructure, and truth be told, it used to get a little lonely banging the drum about pipelines and compressor stations. But we’ve reached a turning point for the anti-fracking movement in New York State: it’s way beyond just talking about a ban now. Because really, we are already being fracked, in every way BUT the drilling. Due to the efforts of our members and allies, and with the help of our YOU ARE HERE map, people all over the region are now up in arms about shale gas infrastructure of every stripe. New coalitions are coming together, blockades are planned, forums are being held, hearings and rallies are packed! Here’s a roundup of recent and upcoming actions:

Fracking boom prompts gas pipeline development: Spurred by the nation's fracking boom, Dominion proposed in September its largest natural gas pipeline — a nearly $5 billion project to move vast supplies produced in the mid-Atlantic to the Southeast. Dominion and Duke Energy, along with two other partners, are seeking federal approval for a 550-mile pipeline — called the Atlantic Coast Pipeline — that would stretch from Harrison County, West Virginia., through Virginia and North Carolina to Robeson County, near the South Carolina border. "This will be one of the largest pipelines to take advantage of the abundant supply of natural gas in the Marcellus and Utica shale fields in West Virginia, Ohio and Pennsylvania," says Dominion spokesman Jim Norvelle. The combined use of horizontal drilling and hydraulic fracturing or fracking, which can extract oil and gas from underground rock, are a major reason why these two shale formations now generate more than a quarter of the nation's natural gas. "This new technology of getting natural gas out of the ground is a game changer," says Norvelle, noting manufacturers are using this energy to power factories. He says Duke Energy is looking to close a number of coal-fired power plants and use natural gas plants instead.

A host of chemicals emissions are seeping from oil and gas operations --A host of chemical emissions seep are seeping from oil and gas drilling pads with different ones coming from different places in the operation – from the wellhead to tanks to valves, according to a new study. “The hope is that this helps us understand what kinds of emissions are coming from which equipment on a site,” said Carsten Warneke, a University of Colorado researcher and lead author on the study. The data will may help regulators better manage oil and gas field emissions.  The study is one of several being done in Utah’s Uintah Basin, which has been the scene of winter ozone levels that exceeded readings in New York City. The eastern Utah basin is home to more than 10,000 oil and gas wells, with 1,000 wells being added every year.  The research was conducted by scientists at the Cooperative Institute for Research in Environment Sciences at the University of Colorado-Boulder and the National Oceanic and Atmospheric Administration. An earlier study by researchers at CU’s Institute of Arctic and Alpine Research identified 10 volatile organic chemicals, including toluene, which at high levels can affect the nervous system, and the carcinogen benzene. The levels of these chemicals, excluding methane, were higher than in the 28 largest U.S. cities and Mexico City. Levels of benzene exceeded a chronic-effects health threshold in 254 of 329 measurements taken in 2013, the study said. Those measurements were made from instruments on balloons about 620 feet above the oil and gas fields.

Fracking Threatens Millions of Californians » A new report shows that 5.4 million Californians—more than 14 percent of its 38.3 million population—live within a mile of an oil or gas well, and almost four million of those, or nearly 70 percent, are Hispanic, Asian or African-American, according to a new Natural Resources Defense Council (NRDC) report Drilling in California: Who’s at Risk? Non-whites make up slightly more than 40 percent of California’s total population. “California’s communities of color have long been dumping grounds for industrial pollution—and our analysis shows that fracking is poised to pile on more if the oil and gas industry has its way,” said NRDC senior scientist Miriam Rotkin-Ellman and one of the report’s authors. “From polluted skies to contaminated drinking water and hazardous waste, communities of color in California get way more than their fair share. If the oil and gas industry gets their way, drilling—and the environmental and health threats from fracking, acidizing and other technologies—will be piled onto communities already staggering under smoggy skies and unsafe water. From Los Angeles to the state’s farms and ranches, this industry must not be allowed to poison our people’s health.”

North Dakota aims to reduce natural gas flaring - (EIA) About one-third of the natural gas North Dakota has produced in recent years has been flared rather than sold to customers or consumed on-site. The rapid growth in North Dakota oil production, which rose from more than 230,000 barrels per day (bbl/d) in January 2010 to more than 1,130,000 bbl/d in August 2014, has led to increased volumes of associated gas, or natural gas that comes from oil reservoirs. These increased volumes require additional infrastructure to gather, process, and transport gas volumes instead of flaring them. These additions can take time to build, and well operators are often reluctant to delay production. In an effort to reduce the amount of natural gas flared, North Dakota's Industrial Commission (NDIC) established targets that decrease the amount of flared gas over the next several years.  The first target of 26% flared is set for fourth-quarter 2014, with continued decreases in flaring reaching 10% by 2020. North Dakota recently reported that it was close to achieving the 26% reduction target for natural gas flaring, as the percentage in August was 28% flared, or 375 million cubic feet per day (MMcf/d) out of a total production of 1,340 MMcf/d. The rest of the produced natural gas was either sold or used at the production site.

A year after N.D. oil spill, cleanup goes on — One year after a pipeline rupture flooded a wheat field in northwestern North Dakota with more than 20,000 barrels of crude, Tesoro Corp. is still working around the clock cleaning up the oil spill — one of the largest to happen onshore in U.S. history.  Cleanup costs have soared from the company’s original estimate of $4 million to a forecast of more than $20 million, and it may be at least another year before the work is completed, the company and state officials said. The oil-sopped parcel of land, about the size of seven football fields, is not usable for planting now.  “It’s a big cleanup and it’s become part of our life,” farmer Steve Jensen said Monday. “The ground is still saturated with oil. And they’re out there seven days a week, 24 hours a day.”

‘It Will Never Be The Same’: North Dakota’s 840,000-Gallon Oil Spill One Year Later  - One year ago, when more than 20,000 barrels (840,000 gallons) of crude oil spilled from a pipeline and soaked a wheat field in Tioga, North Dakota, the public almost never knew about it. After the spill was discovered by a lone farmer, it was not reported for nearly two weeks, and only after reporters from the The Associated Press asked about it specifically.  Now, a year later, environmentalists say North Dakota’s oil spill reporting process has improved, but that more needs to be done to prevent those types of spills from happening in the first place. In North Dakota’s Bakken shale, more than 1.2 million barrels of oil are produced every day, and spills from wells and pipelines happen frequently.  By all accounts, the year-old 20,000-barrel spill — one of the largest onshore spills in U.S. history — happened by chance. Tesoro Corp., the company who owns the pipeline, told the AP that the spill was caused by a lightning strike.   The freak nature of the accident is apparently why no one knew about it until wheat farmer Steve Jensen discovered it during a harvest. To this day, the farmland is still sopped with oil, and Tesoro is still working to clean it up. “It’s a big cleanup and it’s become part of our life,” Jensen told the AP on Monday. “The ground is still saturated with oil. And they’re out there seven days a week, 24 hours a day.” The AP conducted an investigation after the spill, and found that nearly 300 oil spills and 750 “oil field incidents” had occurred in North Dakota since January 2012 — none of which were reported to the public.

The drilling industry’s explosion problem - Temperatures below 20 degrees Fahrenheit froze the valve on the back of Greg Bish’s frack truck. To thaw it, he fetched a blowtorch and put the 4-inch flame to the metal. The explosion blew him 75 feet, over a 7-foot-tall barbed-wire fence, and killed him. It might seem dangerous to apply a propane torch to the back of a large metal tank holding natural gas production waste, as Bish did that morning in 2010 just outside Elderton, Pa. But in the oil and gas industry, it’s not unusual. The oil and gas industry has more deaths from fires and explosions than any other private industry, according to an EnergyWire review of federal labor statistics. It employs less than 1 percent of the U.S. workforce, but in the past five years it has had more than 10 percent of all workplace fatalities from fires and explosions. An investigation of the drilling industry’s worker safety record and what it means for those living amid the boom. The pace dipped last year but has stayed high even as oil and gas companies, using advanced hydraulic fracturing techniques, pushed into more densely populated areas and fought to keep their exemption from regulations designed to prevent explosions at industrial sites.

Environmental groups: Crude oil train laws not sufficient --Stricter federal laws regulating the shipping of crude oil by rail do not go far enough to ensure the prevention of an oil spill or explosion, area environmental groups say.The U.S. Department of Transportation is considering new regulations for trains carrying crude oil out of South Dakota’s Bakken Shale, but Ned Sullivan, of the land trust organization Scenic Hudson, said those regulations come with too many loopholes. “A crude oil spill into the Hudson River would be catastrophic to the public health and natural resources of our region,” Sullivan said in a statement. “The federal government has the responsibility to create a system of regulations, inspections and emergency response procedures to protect our communities and the Hudson River .” The country is in the midst of a surge in the crude oil industry – with the amount moving through the United States rising from 9,500 carloads in 2008 to 415,000 carloads in 2013, according to the DOT. The Hudson Valley sees between 15 and 40 trains carrying crude travel through the area each week, reports say. On average, a shipment travels 1,000 miles from mine to refinery. Paul Gallay, the president of the environmental group Riverkeeper, said the proposed changes “defer to the rail and oil industry at every turn.”

Crude oil train disclosures raise risk of attack, regulators told --Information about rail shipments of crude oil should be kept secret because of potential threats from foreign terrorists and environmental extremists, two rail industry trade groups argued to federal regulators in an August document that was made public this week.However, the comments did not appear to sway the U.S. Department of Transportation, which earlier this month said that the public release of such documents posed no meaningful security threat, nor did any federal law shield them from disclosure. The Association of American Railroads and the American Short Line and Regional Railroad Association wrote that the disclosure of the documents was “antithetical” to security concerns expressed by the FBI and the Transportation Security Administration. “The public availability of this information elevates security risks by making it easier for someone intent on causing harm to target trains transporting crude oil,” the groups wrote. However, neither FBI nor TSA could point to specific threats.

Fracking Boom Prompts Oil Industry to Push for Crude Exports --  Oil and coal producers in the U.S. are planning to use mile-long tanker trains to transport vast quantities of fossil fuels to the coast through areas that environmental groups believe should be protected. The change in world fossil fuel production, consumption and costs caused by tar sands exploitation in Canada and the fracking boom in the U.S. is causing what Bill McKibben—author, environmental activist and co-founder of the international climate campaign group 350.org—calls a “chokepoint” in the unspoiled Northwest of the country.  Coal is already being exported in even larger amounts from the U.S. because it cannot compete with cheaper gas from fracking. Now campaigners fear that the oil industry also wants to export cheap oil to Asia—although so far the companies deny it, saying it will be sent by sea to other parts of the U.S.The largest of the 11 proposals to build new or expand existing crude-by-rail terminals is that of Tesoro-Savage at the Port of Vancouver, Washington, just across the Columbia River from Portland.The company wants the capacity to transfer crude oil from the North American interior to seagoing tankers and barges. Four “unit trains,” each a mile long and comprising up to 100 tanker cars, would arrive at the terminal daily, delivering 360,000 barrels of oil. This would be the largest such terminal in the region.

Gas Pipeline Expansion Should Alarm Homeowners - Homeowners and communities are unprepared for an invasion of their cherished private yards and public spaces. The Mid-Atlantic region is facing an expansion of natural gas transport infrastructure that threatens communities’ health, safety and homes. With increased hydraulic fracturing (“fracking”) and plans to export liquefied natural gas (LNG), the gas industry needs supporting infrastructure. Beyond drilling wells, energy companies are building compressor stations and laying thousands of miles of pipelines. The Interstate Natural Gas Association of America has estimated that from 2011 to 2035 the industry must build nearly 15,000 miles of subsidiary lines — each year. It is hard to ignore the compressors and pipelines extending quickly through the Mid-Atlantic. Last month, Dominion Power gained the approval of the Federal Energy Regulatory Commission for a plan to convert a dormant LNG import facility at Cove Point on the Chesapeake Bay into a major exporting facility for fracked gas. With the FERC’s green light, Dominion will start exports from the Lusby, Md., facility in 2017. Now, residents are engaged in battles to protect their families and neighborhoods:  Dominion’s plans will turn their lives upside down, threatening quality of life, health, safety and property values. Families are distraught. Approximately 360 homes lie within 4,500 feet of the site, to which large trucks will regularly haul heavy equipment and construction will generate noise. While an increase in pollution is undisputed, Dominion has easily satisfied the FERC’s pollution-abatement requirement by buying clean-air credits from elsewhere in Maryland — which will not alleviate the toxic conditions around the facility.  Moreover, the possibility of an explosion is undeniable. Homeowners know that, unlike with oil-based fires that burn locally, an LNG fire could trigger an explosion that could race along the pipeline.

Pipeline Spills ‘Significant’ Amount Of Oil Into Louisiana Bayou -  Pipeline workers discovered a 4,000-barrel crude oil spill in Louisiana last week, and say that mopping up the spill will likely keep cleanup crews and regulatory agencies in the sparsely-populated area for months.   The oil spilled into Tete Bayou, and though it’s been contained enough to prevent it from entering Caddo Lake, which is a source of drinking water, the spill has killed 84 animals — mostly fish and reptiles — as of Sunday morning. Though no evacuations were ordered, strong fumes from the oil spill caused three families who lived nearby to voluntarily leave. Sunoco Logistics, which owns the pipeline, is paying for the families’ living expenses while they’re away from their homes.“I would call it a significant size spill,” Bill Rhotenberry, the Environmental Protection Agency’s federal on-scene coordinator told the Shreveport Times.  The Sunoco pipeline carries oil 1,000 miles from Longview, Texas to Samaria, Michigan. Sunoco says that once pipeline monitors discovered a drop in pressure in the line at around 8 a.m. last Monday, they shut the pipeline down within 20 minutes. The segment of pipeline that runs from Longview into Mayersville, Mississippi remains shut off. The cause of the spill is being investigated. Sunoco has sent about 250 contractors to the site of the spill to clean up the spilled oil, and so far, about 2,400 barrels have been recovered. According to the EPA, the spill’s cleanup will likely take months.  The EPA is also monitoring air quality near the pipeline spill to ensure it doesn’t pose a public health risk. So far, however, the agency says the levels of volatile organic contaminants (VOCs) coming from the spilled oil aren’t concerning.

Paying the Price of Tar Sands Expansion - In December 2013, after six years of community pushback, court battles, Environmental Protection Agency citations, and ongoing construction in spite of it all, BP’s $4.2 billion retrofitted facility came fully online. Part of the Whiting Refinery Modernization Project, this new coker creates a byproduct called pet coke that is burned for fuel like coal, but is much dirtier.It was now a tar sands refinery, capable of refining 350,000 barrels of the world’s dirtiest oil per day. And it was paid for, in large part, by U.S. taxpayers. A little-known tax break allows companies to write-off half of the cost of new equipment for refining tar sands and shale oil. According to a report by Oil Change International, this subsidy had a potential value to oil companies (and cost to taxpayers) of $610 million in 2013. Tar sands are petroleum deposits made up of bitumen mixed in with sand, water and clay. Their production is extremely destructive at every stage: from strip mining indigenous lands in Canada, to disastrous accidents along transportation routes, to dangerous emission levels produced by refining the heavy crude, to the hazards imposed on communities saddled with tar sands byproducts like petroleum coke (“petcoke”), and finally to the greenhouse gases pumped into the atmosphere when the end product is used for fuel. Despite all the reasons to keep tar sands in the ground, the refining equipment tax credit has helped put tar sands development in the U.S. on the rise, accelerating climate change at the expense––in every sense of the word––of American taxpayers.

Enbridge oil pipeline project delayed by spill concerns - Citing water-safety concerns, the Canada National Energy Board denied the application for an oil pipeline project proposed by Enbridge Pipelines of Calgary that would carry crude oil across the watersheds of Lake Ontario and St. Lawrence River — a move praised by Clayton environmental advocacy group Save the River, which opposed to the project. The denial of the application, made Oct. 6 by the energy board, will delay a project that would reverse the direction of oil shipped through a 639-kilometer section of Enbridge’s Line 9B pipe that runs from North Westover, Ontario, to Montreal, crossing numerous tributaries of the St. Lawrence River. Enbridge, meanwhile, will have to go back to the drawing board to address safety concerns expressed by the board. The pipeline’s oil capacity would increase from about 240,000 to 300,000 barrels per day under the plan, which would allow Enbridge to transport tar-sands oil — called diluted bitumen — from Alberta and the U.S. Bakken region to refineries in Quebec and eastern Canada. “Why anyone thinks using this pipeline to move heavy oil through these vitally important and sensitive watersheds is a good idea is beyond us,” D. Lee Willbanks, executive director of Save the River, said in a news release    "Governments on both sides of the river must hold shippers of heavy oil, whether on land or the water, to the highest standards if this toxic product is going to be shipped at all.” The energy board decided that the Enbridge proposal did not include enough shutoff valves on each side of all major waterways that Line 9B crosses to limit the damage of accidental oil spills. The proposal that was rejected included shutoff valves within 1 kilometer (1,093.6 yards) at only six of 104 waterways crossed by the pipeline.

Oil at $80 a Barrel Muffles Forecasts for U.S. Shale Boom -- The bear market in oil has analysts reassessing the U.S. shale boom after five years of historic growth. The U.S. benchmark price dropped to $79.78 a barrel on Oct. 16, the lowest since June 2012. At that level, one-third of U.S. shale oil production would be uneconomic, analysts for New York-based Sanford C. Bernstein & Co. led by Bob Brackett said in a report yesterday. Drillers would add fewer barrels to domestic output than the previous year for the first time since 2010, according to Macquarie Group Ltd., ITG Investment Research and PKVerleger LLC. Horizontal drilling through shale accounts for as much as 55 percent of U.S. production and just about all the growth, according to Bloomberg Intelligence. The Paris-based International Energy Agency predicted in November that the U.S. would pass Russia and Saudi Arabia to become the biggest producer in the world by 2015. Though some forecasts show oil rebounding or stabilizing, any slower increase in U.S. output would shake perceptions for the global market, Output, much less growth, is difficult to maintain because shale wells deplete faster than conventional production. Oil production from shale drilling, which bores horizontally through hard rock, declines more than 80 percent in four years, more than three times faster than conventional, vertical wells, according to the IEA. New wells have to generate about 1.8 million barrels a day each year to keep production steady, Dwivedi said. At $80 a barrel, output would grow by 5 percent, down from a previous forecast of 12 percent, according to New York-based ITG.

Low Oil Prices Hurting U.S. Shale Operations - Yves Smith -  Yves here. In yesterday’s Water Cooler, Lambert posted a link from Bloomberg that indicated that oil at $80 a barrel would pop the fracking bubble, an outcome we’d discussed previously. Some readers in comments expressed doubts. In fact, it was already happening as oil prices were falling from over $100 a barrel through the nineties. Seasoned energy hands had warned that shale operations could be shut down rapidly, and that has started to take place. However, the author of this article argues that the shutdowns are likely to be delayed and that most US shale operations have low break-even costs, insulating them from the impact of the oil price drop. However, he misses that another driver of the shale boom has been access to super-cheap credit and an overly-bullish mentality that has not factored in the short production lives of shale wells. The junk bond market has been much less accommodating of late, and if that skittishness continues, the prognosis isn’t quite as sanguine for the industry as Cunningham suggests.

Houston, We Have A "Fracking" Problem --Last week, I touched on the issue of oil prices and demand stating:"First, the development of the “shale oil” production over the last five years has caused oil inventories to surge at a time when demand for petroleum products is on the decline as shown below.""The obvious ramification of this is a “supply glut” which leads to a collapse in oil prices. The collapse in prices leads to production “shut ins,” loss of revenue, employee reductions, and many other negative economic consequences for a city dependent on the production of oil.Secondly, I have also discussed that the “fracking miracle” may not be all that it is believed to be due to fast production decline rates and massive amounts of leverage. Just recently Yves Smith posted an article discussing this very issue stating:"“The oil and gas sector is capital intensive. Drillers have borrowed phenomenal amounts of money, which was nearly free and grew on trees, to acquire leases and drill wells and install processing equipment and infrastructure. Even as debt was piling up, the terrific decline rates of fracked wells forced drillers to drill new wells just keep up with dropping production from old wells, and drill even more wells to show some kind of growth. One heck of a treadmill. Funded in part by junk debt.As with all things, the question of oil prices is nothing more than a supply/demand issue. As shown above, the sharp increase in production brought on by "fracking" has certainly been quite remarkable. However, this remarkable resurgence in oil production currently faces two extremely strong headwinds. The total amount of available refining capacity and the level of end demand are both declining. While the "fracking miracle" has boosted the production of raw crude in recent years, such production is only useful if you can convert the base commodity into a useful byproduct. The problem, as shown in the two charts below, is that the the number of operating refineries has continued to fall, as the regulatory environment has stifled the ability to build new plants, and operating plants are already running near full capacity.

Falling oil and gas prices are unambiguously good for the US economy, could save consumers $83 billion over next year  -  Over the last six months, retail gas prices in the US have fallen by 62 cents, from $3.71 per gallon in late April to $3.09 per gallon currently, according to GasBuddy.com (see blue line in chart above). That’s almost a 17% decline in prices at the pump, and have followed a 22% decline in oil prices over that period, from about $105 per barrel in August to about $82 per barrel currently (see brown line in chart above).   How does that fall in retail gas prices translate into savings for consumers and households? The EIA estimates that Americans consume an average of 368,510,000 gallons of gas every day, so every one cent decline in the price of gas saves consumers $3.685 million per day, and $1.345 billion per year. Therefore, the 62 cent decline in gas prices since April will save consumers more than $83 billion over the next year, compared to the amount that would have been spent if prices stayed at $3.71 per gallon. On a per household basis, that would translate to an annual savings of more than $700 on average for every one of America’s 118 million households. For every additional penny that prices at the pump continue to fall, we can think of that as an additional $1.345 billion annual “tax cut” for consumers and alternatively as a $1.345 billion “economic stimulus” for the US economy. And therefore, those lower oil and gas prices are “unambiguously good for the US economy,” as Larry Kudlow pointed out in a recent commentary,

The good, the bad and the ugly of falling energy prices - The recent correction in the price of crude oil should have an immediate positive impact on the US consumer as well as on a number of business sectors. However there also may be a significant economic downside to this adjustment. Here are some facts to consider.

  • 1. The good: The US consumer is not only about to benefit from materially lower gasoline prices (see chart), but also from cheaper heating oil.  With wages suppressed, the savings could be quite impactful, particularly for families with incomes below $50K per year. Merrill Lynch: - ... consumers will likely respond quickly to the saving in energy costs. Many families live “hand to mouth”, spending whatever income is available.  Over time, energy costs have become a much bigger part of budgets for low income families. In 2012, families with income below $50,000 spent an average of 21.4% of their income on energy. This is almost double the share in 2001, and it is almost triple the share for families with income above $50,000.
  • 2. The bad: The US has become a major energy producer, with the sector partially responsible for improving economic growth and lower unemployment in recent years. As an example here is the GDP of Texas as a percentage of the US GDP. This trend is driven in part by the recent energy boom in the state.
  • 3. The ugly: A significant number of middle market energy firms in the US - many funded via private capital (above) - are highly leveraged. The leveraged finance markets are becoming quite concerned about the situation - even for larger firms with traded debt. Here is the yield spread between the energy sector loans in the Credit Suisse Leveraged Loan Index and the index as a whole.

Despite Slumping Prices, No End in Sight for U.S. Oil Production Boom - Even after a drop of as much as 25 percent in oil prices since early summer, several government and private reports say that it would take a drop of $10 to $20 a barrel more — to as low as $60 a barrel — to slow production even modestly.On the downside, taxes and royalties on oil will decline, potentially cutting into the finances of oil-producing states like Texas, Alaska, Oklahoma and North Dakota. And it will continue to put pressure on the Organization of the Petroleum Exporting Countries to cut output to support prices, as well as cause economic pain to big producers like Russia, Venezuela and Iran. Current production levels can be sustained in the shale fields in 2015 even if the Brent global oil benchmark, which fell to just under $84 a barrel at one point this week, dropped to as low as $60 to $65, according to Rystad Energy, an international oil and gas consultancy based in Norway.Slowing American oil production is like slowing a freight train moving at high speed. The current production of 8.7 million barrels a day, the highest in nearly a quarter-century, is more than a million barrels a day higher than it was only a year ago. Most companies make their investment decisions well in advance and need months to slow exploration because of contracts with service companies. And if they do decide to cut back some drilling, they will pick the least prospective fields first as they continue developing the richest prospects.

Natural Gas: The New Gold - IMF blog - Natural gas is creating a new reality for economies around the world.  Three major developments of the past few years have thrust natural gas into the spotlight: the shale gas revolution in the United States, the reduction in nuclear power supply following the Fukushima disaster in Japan, and geopolitical tensions between Russia and Ukraine. Over the last decade, the discovery of massive quantities of unconventional gas resources around the world has transformed global energy markets, and reshaped the geography of global energy trade (see map). Consumption of natural gas now accounts for nearly 25 percent of global primary energy consumption. Meanwhile, the share of oil has declined from 50 percent in 1970 to about 30 percent today. Natural gas, however, is different from other energy sources. Being lighter than air, it is a commodity that doesn’t travel very easily and is expensive to transport. Hence, natural gas markets tend to be regional, and much less integrated than oil markets. Shipping or transporting natural gas requires either costly pipeline networks or liquefaction infrastructure and equipment, including dedicated vessels, and then re-gasification at the destination. The limited global integration of gas markets has resulted in substantial price differences across regions in recent years due to the U.S. shale gas boom and the Fukushima disaster, in spite of increasing liquefied natural gas trade. With advances in shale rock drilling, a sharp surge in U.S. gas production has made the country the world’s largest natural gas producer, and soon expected to become a net exporter of natural gas.  The shale gas boom has also had a significant impact on the patterns of global energy trade: U.S. fossil fuel imports decreased to $225 billion in 2013 from $412 billion in 2008.  Surging supply has also steeply driven down natural gas prices in the United States by about 70 percent in recent years, introducing substantial price differences across other regions (see chart). For instance, U.S. gas sells for $4 per million British thermal units, compared with $10 in Europe and close to $17 in Asia.

Drowning In Oil Again: For 4 years now the oil price (Brent) has been range bound between $90 and $130 per barrel (Figure 2). This is where it settled after the convulsions of the $148 per barrel peak in 2008 followed by the financial crash. Recently it has dipped to around the $80 mark and although we have seen a slight recovery many analysts believe it could break lower. With the world in turmoil, including OPEC producers Iraq and Libya ± Iran, and Russia cast out by the West, one might expect the oil price to be quite perky. But the opposite is true. This post takes a look at some of the key production indicators from OPEC, Europe, N America and Russia. But I believe one needs to look no further than Figure 1 to understand the weakness in the oil price. Rampant production in the USA, the world’s largest oil producer and importer, means that competition for supplies on the international markets is weakening. The world is once again drowning in oil.  So does that mean the real energy crisis is over? Well not quite. One needs to understand that shale oil, the US miracle, is expensive to produce. Over production of an expensive resource that dumps the price below the profit level is one of the effects of broken capitalism on the back side of Hubbert’s peak.

Oilprice Intelligence Report: Pressure May Remain On Oil Prices Oil prices continued to fall this week on ample supply and signals from OPEC members Saudi Arabia and Kuwait that they can deal with lower prices and are unlikely to reduce output. On Monday, Brent crude futures dropped further to $87.74 a barrel—the lowest level since December 2010--while WTI futures were down to $84.68 a barrel. Saudi Arabia, for its part, has suggested it could handle $80/barrel prices. On Tuesday, Brent crude prices slipped further, to $87.03Kuwait has also said that it will not be cutting output and predicted prices falling to as low as $76 a barrel before winter sets in and prices start to rise again. The next OPEC meeting is scheduled for 27 November, when the organization will consider targets for 2015. But it is unclear how long the party will last. Several major investment banks predict the decline in oil prices will soon come to a halt, with a likely floor price of around $80 per barrel. The rebound could already be underway, with both WTI and Brent trading in positive territory after hitting lows on Thursday. WTI briefly dropped below $80 per barrel. But oil was back up on Friday after Goldman Sachs said that oil markets are not oversupplied. “Prices have likely overshot to the downside,” the bank wrote in a research note.

How will Saudi Arabia respond to lower oil prices? -- Oil prices (along with prices of many other commodities) have fallen dramatically since last summer. Some observers are waiting to see if Saudi Arabia responds with significant cutbacks in production. I say, don’t hold your breath.  When oil demand fell in the 1981-82 recession, the Saudis cut production by 6 million barrels a day in an effort to soften the decline in oil prices. They also cut production in response to lower demand in the 2001 recession and the most recent recession. On the other hand, the kingdom boosted production quickly beginning in August 1990 and January 2003 in anticipation of lost production from Iraq in the two Gulf Wars. This historical behavior led many observers to believe that Saudi Arabia would always play the role of a swing producer to stabilize the price of oil.  But that’s hardly an accurate characterization of what happened during 2005-2007, when Saudi production declined even as prices skyrocketed. If that production decline was intentional, it was a dramatic departure from previous patterns. I remain skeptical of the claim that Saudi Arabia is ever going to produce much in excess of 10 mb/d, regardless of what’s going on in the market.Last week I discussed the three main factors in the recent fall in oil prices: (1) signs of a return of Libyan production to historical levels, (2) surging production from the U.S., and (3) growing indications of weakness in the world economy.As far as Libya is concerned, the politics on the ground remain quite unsettled. It makes sense to wait and see if anticipated production gains are really going to hold before anybody makes major adjustments. In terms of surging U.S. production, the key question is how low the price can get before significant numbers of U.S. producers decide to pull out. If world economic growth indeed slows, and if most of the frackers are willing to keep going strong even if the price falls to $80 a barrel, trying to maintain the price at $90 could be a losing bet for the Saudis.

Gail Tverberg: Eight Pieces of Our Oil Price Predicament - naked capitalism Yves here. As oil prices have come into focus as a result of a recent Saudi decision to facilitate a reset at a lower price per barrel, they've come into focus yet again as a critical nexus of economic and political power, and that's before you get to the complicating overlay of climate change considerations. This article by Gail Tverberg takes a more sophisticated, multi-persepctive approach than the overwhelming majority of articles on this topic. One of her big messages is that there is no way the world economy is getting divorced from oil any time soon. Even so, I have some minor points of contention. For instance, she correctly points out that oil producers, even the Saudis, need oil prices to be at a moderately high prices to sustain national budgets. But Riyadh has a very low production break even point, a large cash horde, and plenty of borrowing capacity. The desert kingdom could afford a price war, say to hurt geopolitical enemies or to forestall investment in and development of alternative energy sources. Low oil prices make other energy sources look unattractive, and volatile prices also deter investment, making it well-nigh impossible to forecast cost advantages (if any) and end user takeup

Update on crude oil markets -- Crude prices came under pressure again today. According to Reuters (from last week), the Saudis “will accept oil prices below $90 per barrel, and perhaps down to $80, for as long as a year or two”. Their goal is to shake out some of the high-cost competition (such as the US). The Saudis also do not want to choke off the economies of their customers by cutting production – current production levels are likely to stay unchanged. Spot crude is now holding right in the middle of the Saudis’ preferred range at around $85/bbl. Both OPEC and non-OPEC producers are not particularly happy with Saudi Arabia right now (particularly Russia, Iran and Venezuela) – these countries all want to see production cuts.  There remains a difference in demand profile between international crude markets and those in the US. While both of the futures curves shifted sharply lower, the WTI curve, unlike Brent, remains in backwardation. It means that US crude oil market participants have an incentive to take oil out of storage rather than storing it. This indicates a more robust US spot crude demand than exists globally.

Lower oil prices push Russia toward recession: — If sanctions, inflation and political risk weren't enough, falling oil prices are pushing Russia's already beleaguered economy toward recession. The price of Brent crude oil, a global benchmark, hit a four-year low last week, plunging to below $83 per barrel from $116 in June. While it was just under $85 on Wednesday, there is considerable risk it could dip well below $80, costing Russia, whose budget gets half its revenue from oil and gas exports, billions of dollars, analysts said. Geopolitics and oil prices have already reduced Russia's budget by an amount equal to 4% of its gross domestic product. A loss of "$10 per barrel costs (Russia) 500-600 billion rubles a year" — equivalent to $12.2 billion to $14.6 billion, said Natalia Orlova, chief economist at Alfa Bank, by telephone. Cheap oil has further devalued Russia's currency, with the official exchange rate falling almost 20% this year to 41.34 to the dollar Wednesday. Months of economic instability largely due to Western sanctions over Russia's incursion into Ukraine have already taken their toll, with the latest round of sanctions cutting off Russian companies from Western financing.

Russia says Ukraine should find money to pay for gas within a week |(Reuters) - Ukraine should be able to find ways of paying for Russian gas supplies within a week, Russian Energy Minister Alexander Novak said on Wednesday, suggesting a standoff would end once Moscow received financial guarantees from Kiev. The latest round of gas talks between Moscow and Kiev ended late on Tuesday in Brussels with no agreement in a dispute that prompted Russia to cut off gas supplies to its neighbor in mid-June, potentially hurting flows west to the European Union. But while Novak said he was optimistic for new talks on Oct. 29, Ukrainian Prime Minister Arseny Yatseniuk said he was skeptical about building ties with Russia, underlining how efforts to reach a deal are hampered by a wider political conflict between the two countries. true On Tuesday, Russia increased the pressure on Ukraine, which is dependent on Western aid, demanding assurances on how Kiev, would find the money to pay Moscow. Earlier Ukraine asked the European Union for a further 2 billion euros in credit.

Ukraine and Russia reach gas 'consensus': Ukraine and Russia have "found consensus" on a deal to end their gas dispute, according to the boss of Ukraine's state gas firm. Andriy Kobolev told the BBC Naftogaz was prepared to settle part of its debts, while the two parties had agreed a price for gas this winter. But he did accuse Gazprom, Russia's state energy company, of wanting to "create another crisis". Russia halted supplies to Ukraine in June over unpaid bills. Ukraine refused to pay after Russia sharply raised its gas prices. Talks between the two parties and the European Commission have been taking place this week, while further negotiations are scheduled for next week. Relations between the two countries deteriorated after the overthrow of Ukraine's pro-Russian President, Viktor Yanukovych, in February and Russia's subsequent support for separatists in Crimea and other Ukrainian regions.

These 6 Countries Will Be Screwed If Oil Prices Keep Falling - The collapse in oil prices is already a major cause of concern for countries heavily reliant on exports of the commodity. For some, it could be a matter of avoiding a severe recession. Here's why: For governments in oil-exporting countries to meet their spending commitments they need oil to remain above a certain price. With oil prices under $87 a barrel, countries that rely on high oil prices, including Venezuela, Russia, and Saudi Arabia, may have a reason to be concerned. This chart shows the price per barrel that the six most exposed countries need to meet their national budgets. Remember, the price Friday is a piffling $87.Venezuela literally needs the price of oil to double to keep its house in fiscal order. If the price remains depressed, these countries will either be forced to borrow more to cover the shortfall in oil tax revenues or backtrack on spending promises. Cutting back on spending pledges would be highly embarrassing for these countries' governments. In the cases of Russia and Venezuela, tapping bond markets for financing could be very expensive as both countries are currently regarded as highly risky by international investors.

U.S. threatens sanctions on buyers of ISIS oil : The Obama administration on Thursday threatened to slap sanctions on anyone buying oil from Islamic State militants in an effort to disrupt what it said was a $1 million a day funding source. "With the important exception of some state-sponsored terrorist organizations, ISIL is probably the best-funded terrorist organization we have confronted," Cohen said, referring to another name for Islamic State. His remarks were prepared for delivery at the Carnegie Endowment for International Peace. ISIS is generating tens of millions of dollars a month through a combination of oil sales, ransom, extortion and other criminal activities and support from wealthy donors, Cohen said in laying out the most comprehensive outline yet of the U.S. financial strategy against the group. Cohen said that each day, ISIS earns $1 million from oil sales alone. Cohen, the Obama administration's point man on sanctions, said the Syrian government, which has been fighting a long civil war against opposition forces, has also apparently agreed to buy oil from IS. "The middlemen, traders, refiners, transport companies, and anyone else that handles ISIL's oil should know that we are hard at work identifying them, and that we have tools at hand to stop them," Cohen said.

Meanwhile, This Is Who Is Quietly Buying All The Cheap Oil -- With the US Shale Oil industry up in arms, Venezuela screaming, and Russia awkwardly quiet (as the Ruble slides with the falling oil price stabilizing domestic inflows), the 'secret' Saudi-US oil deal that pressured prices for crude down to $80 (18-month lows today) has 'hurt' a lot of the world's producer nations. However, as Bloomberg reports, there is one nation that is very grateful. The number of supertankers sailing toward China’s ports surged to a nine-month high as over 80 very large crude carriers (VLCCs) - the industry’s biggest ships - sail toward the Asian country’s ports. At an average of 2 million barrels each, the 160 million barrels will help refill China's 727 million barrel SPR which it started in 2012. There are 89 tankers sailing for Chinese ports, 80 of which are VLCCs - the highest since January 3rd.

Oil rises on claims of Saudi supply cut - FT.com: Oil prices moved higher on Thursday amid claims that Saudi Arabia, Opec’s largest producer, had cut the amount of crude oil it supplied to the market last month. ICE December Brent, the international oil marker, rose 1.9 per cent to $86.32 a barrel, while Nymex December West Texas Intermediate advanced 1.4 per cent to $81.74 a barrel.   The gains followed reports that claimed the kingdom had supplied international and domestic markets with 9.36m barrels a day of crude last month, down from 9.68m in August. Oil has dropped 25 per cent since reaching $115 a barrel in June, hit hard by concerns about slowing demand growth and rising supplies. The sell-off has intensified in recent weeks because of fears that Saudi Arabia has started a price war by refusing to cut production and lowering its official selling prices. Paul Horsnell, analyst at Standard Chartered, said Thursday’s oil price rise only made sense if investors believed the theory that Saudi Arabia was trying to drive prices down to take market share. “In that context, these comments could be seen as pushing against the view that Saudi Arabia has started a price war.” Other market watchers said it was also not clear that Saudi Arabia had unilaterally cut production in an effort to rebalance the market. “We do not share this interpretation and maintain our view that Saudi Arabia has not made a deliberate decision to cut,” said Amrita Sen, analyst at Energy Aspects.

China Cuts Saudi Oil Imports Amid Colombia Shipment Boost - Share Facebook Twitter Google+ LinkedIn Email Print Save (Corrects spelling of Colombia in first paragraph.) China reduced oil imports from Saudi Arabia even as the world’s largest crude exporter cuts prices to lure Asian customers amid intensifying competition from Colombia to Oman. Oil deliveries from Saudi Arabia fell 2.7 percent to 4.74 million metric tons last month from a year earlier, according to data released today by the General Administration of Customs in Beijing. Shipments from Colombia surged 389.6 percent, while Russian deliveries increased by 56.8 percent. Asian consumers are benefiting from a wider choice of suppliers offering cheaper crude, from Venezuela to Alaska and Nigeria, as the highest U.S. production in almost 30 years cuts American demand. Saudi Arabia reduced prices for oil for Asia to the lowest in almost six years as it aims to maintain market share even as global benchmark prices have dropped about 25 percent from June. “Chinese refiners are favoring supplies from Oman and South America over Saudi Arabia as their prices relative to output are more competitive,” . “China is also increasing imports from Russia with a new contract signed last year.” Crude supplies from Colombia cost on average $94.56 a barrel last month and Brazilian imports were $95.27, while Saudi shipments were at $102.30 a barrel, Bloomberg calculations based on customs data show. PetroChina Co.’s Liaohe plant in northern China refined about 30,000 tons of Colombian crude as of Oct. 30 for the first time, its parent China National Petroleum Corp. said in a newsletter on its website yesterday.

In China, 10% Boost to Minimum Wage Cuts Jobs By 1%, Paper Says - A 10% increase in China’s minimum wage cuts employment by 1%, according to a new International Monetary Fund research paper.That fact should help guide officials in Beijing and other emerging markets as they seek to raise living standards with higher wages without damaging the economy, says Prakash Loungani, an adviser in the IMF’s research department and a former Federal Reserve economist. “On average across all firms, we find that an increase in the minimum wage leads to a small decline in employment,” Mr. Loungani said in an IMF blog post detailing his findings. Prior studies on the impact of minimum wage hikes on employment levels have largely covered high-income economies, but little work has reviewed emerging market economies where most of the world’s labor force reside. “Our study provides the first comprehensive estimates of these impacts for China, which has a large labor force and whose experience may be relevant for several other emerging markets,” he said. Mr. Loungani’s work with Yi Huang and Gewei Wang used data on minimum wage changes for more than 2,400 counties across China representing over two-thirds of the country’s manufacturing industry. The impact is the hardest at firms with the lowest average wages, where a 10% hike in minimum wages cuts employment by nearly 1.8%. That impact declines to around 0.6% in firms with the highest-paid workers.

China Economy Grows at Slowest Pace in 5 Years - ABC News: raising concerns of a spillover effect on the global economy but falling roughly in line with Chinese leaders' plans for a controlled slowdown. The third quarter figures, released Tuesday, put China on course for annual growth somewhat lower than the 7.5 percent targeted by leaders, though they have indicated there is wiggle-room in their plan. The world's No. 2 economy grew 7.5 percent from a year earlier in the previous quarter and 7.4 percent in the first quarter. Communist leaders are trying to steer China toward growth based on domestic consumption instead of over-reliance on trade and investment. But the slowdown comes with the risk of politically dangerous job losses and policymakers bolstered growth in the second quarter with mini-stimulus measures. Employment, however, remained strong through the third quarter and the service industries such as retailing that leaders want to promote have done well this year despite the downturn, which has been focused largely in the property market, said economist Julian Evans-Pritchard of Capital Economics. "There is still a lot of downward pressure on the economy," Evans-Pritchard said. Spending on infrastructure shored up growth in the second quarter but "once that fizzled out, the downward pressure has returned."

No hard-landing for China's economy for now -- China's GDP growth is gradually slowing as expected - at least according to the official reports.  Growth is now at the lowest level since 2009, but so far the Bloomberg China GDP Tracker forecast of a sharp correction this quarter has not materialized.  In fact, the nation's industrial production growth, which continues to decline, came in better than expected. Fixed asset investment growth shows a similar slowing pattern - now growing at 16% per year. Have the various hard-landing predictions  (many focused on the worrisome credit expansion in China) been too draconian? From a number of recent indicators it seems that China's economic growth is gradually grinding lower - perhaps toward something like a 4% per annum in 2020 (see report).. Unless of course China's official economic reports are completely flawed - which is always a possibility.

Anyone Expecting a Rebound in Chinese Growth Won’t Like the New GDP Figures -- Those who remain hopeful about the future of the Chinese economy got some extra evidence to bolster their case today. On Tuesday, the government announced that GDP in the third quarter rose by a slightly better-than-expected 7.3%. But don’t get too excited. That 7.3% is the slowest quarterly pace in five years — since the depths of the recession after the 2008 Wall Street financial crisis. And it was pushed higher likely by exports. In other words, external demand, not investment or consumption in the domestic economy. There is really nothing surprising about these figures. This is China’s new normal. The double-digit pace the global business community has come to expect is very likely a thing of the past. More and more economists are predicting that China’s growth rates will continue to slow over time. The International Monetary Fund, for instance, sees growth dropping from 7.4% this year to 6.8% in 2016 and 6.3% in 2019.There are too many factors at work slowing down the Chinese growth machine. First of all, no economy can grow 10% a year forever, not even China’s. The country is no longer the impoverished backwater it was in the early 1980s, when Beijing’s market reforms first sparked its growth miracle. It is now the second largest economy in the world, and the bigger China gets, the harder it becomes to post such large annual GDP increases. There are also structural forces at work. China’s population of more than 1.3 billion is aging rapidly, thanks in part to Beijing’s restrictive one-child policy, and that will act as a long-term drag on growth. The workforce is already shrinking.  The only question is: How slow will China go?

Mixed Economic Signals From China -  Markets around the world have been jolted by fears that slowing growth and deflationary pressures in Europe, Japan and other major economies could derail the United States. But the health of China, for decades an engine of growth, has emerged as one of the most significant wild cards in the global economy.It is hard to be certain just exactly how the Chinese economy is faring, given mixed signals in the data.Chinese inflation is at its weakest levels in nearly five years. Commodity prices are plunging. New home sales are declining. Foreign investment is contracting.The overall economy, though, continues to chug along at a steady, albeit more modest, pace. China’s gross domestic product increased by 7.3 percent in the third quarter, compared with 7.5 percent in the previous quarter. While that was the lowest quarterly growth since the depths of the financial crisis in 2009, the rate remains the envy of major economies. The economy also continues adding jobs at a good clip, and the currency is one of very few that are still rising against the dollar.Making sense of China’s economic health is challenging because the slowdown is partly by design. The Communist leadership has pledged to reduce China’s dependence on credit-fueled growth and investment, to instead emphasize domestic consumption. It is a risky proposal, and leaders have signaled a willingness to live with slower growth, provided employment holds up and systemic risks are contained.

China's economy suffers its worst quarter since the financial crisis -- China's economy has clocked its worst quarter in more than five years, raising concerns over Beijing's ability to meet its own annual growth target.Gross domestic product expanded by 7.3% in the third quarter versus the same period last year, according to government data, the weakest performance since the global financial crisis. While that figure is slightly ahead of the 7.2% median growth forecast by economists in a CNNMoney survey, it still falls short of last quarter's growth. With only a few months left in the year, China is running out of time to meet its own 7.5% target. The government has said it's willing to accept a slightly slower rate, but it has also adopted incremental measures to boost the economy. Today's figures "remain consistent with our view that relatively weaker data in the third quarter reflects the government's shift towards tolerating lower growth," Barclays economist Jian Chang wrote in a research note. Economists surveyed expect full-year GDP to come in at 7.3%, with growth forecast to dip further to 7% in 2015. Chang expects the government to continue rolling out targeted efforts and investment projects to support growth. China averaged economic expansion of around 10% a year over the past three decades, pushing it up the list of biggest economies and boosting household wealth. But now, the pace of economic expansion is languishing -- China recorded GDP growth of 7.7% in the last two years, versus 9.3% in 2011 and 10.5% in 2010.

Squeezing the Water Out of China’s Spongy Growth Numbers - China’s economy slowed down a fraction in the third quarter of the year. If you believe the figures,  that is. It was the usual script: an undignified scramble for handouts at the news conference, a number just a whisker above expectations and a bounce in the local stock market (which came just before the data was announced at 10 o’clock – surely no one would be unscrupulous enough to break the embargo?). But the bigger question of whether these figures represent reality—or whether they have benefited from a vigorous rubbing by the restless fingers of Communist bureaucrats—is harder to answer. The economy grew 7.3% year-on-year in the third quarter, on official figures – not a bad performance by most standards, but China’s softest since the swamps of the 2009 financial crisis. That makes the leadership all but certain to miss its 7.5% growth target for the year – though ministers have repeatedly said the target is an approximate one and missing it by a fraction of 1% is no disaster. But the target, a focus of market attention around the world, still represents a powerful incentive to sweeten the numbers. So too do the systems of promotion for officials: When superiors assess their performance, economic growth is at the top of the list.

Deutsche Bank cuts China growth forecast - -- Deutsche Bank on Tuesday cut its economic growth outlook for China, citing a slowdown in property investment. The bank now forecasts gross-domestic-product growth of 7.3% in 2014 and 7% in 2015, down from 7.8% and 8%, respectively. The analysts said that key risks to the Chinese growth story include a further sharp slowdown in property investment, higher-than-expected inflation, and weak demand from other parts of the world. The belief that Beijing may be accepting a so-called hard-landing scenario rather than launching more stimulus measures also factored into Deutsche bank cutting its outlook. The growth downgrade from Deutsche Bank comes the same day as data showed the Chinese economy grew by 7.3% in the third quarter, marking its slowest pace in five years. The growth downgrade from Deutsche Bank comes the same day as data showed the Chinese economy grew by 7.3% in the third quarter, marking its slowest pace in five years.

China Will Keep Growing. Just Ask the Soviets. - There has been plenty of discussion lately about signs that China’s economy is slowing down, focused on details of a possible housing bubble and vast sums of bad loans that the country will have to reckon with. But put aside the challenges China faces this quarter, or next year, and there is one view that is overwhelming: China is a long-term economic juggernaut that will stand astride the global economy in another generation’s time. I know this because, for years now, major magazines and editorials and books have told me about the Chinese Century, in which we are apparently now living. Leading foreign policy journals have devoted copious ink to exploring what China’s rise will mean for global economics and politics, often taking as a given that China will be the dominant power of the coming century. Official forecasts — from international agencies like the Organization for Economic Cooperation and Development and the World Bank, and from United States intelligence circles — envision China continuing to grow rapidly over the next couple of decades, its economy eventually becoming much larger than that of the United States. Robert W. Fogel, a Nobel laureate in economics, forecast in 2010 that in 2040, Chinese economic output would be $123 trillion, about seven times the current size of the American economy (and three times his forecast for the United States in 2040). But what if it’s all hogwash? Many of the most bullish forecasts of China’s economic future are based, more or less, on extrapolation.  But if you look at the long arc of economic history, such performance would be a remarkable aberration. That’s the argument that the Harvard economists Lant Pritchett and Lawrence H. Summers make in a new working paper. In short, past performance does not predict future results.

China Economy On Track For Sweeping Reform, Asia Society Report Finds - China’s leadership is making real headway in an ambitious program to liberalize its economy and if all goes to plan it will maintain a respectable 6% growth rate in 2020, according to a new detailed analysis of the reform agenda laid out at last year’s third plenum of the Chinese Communist Party. The study by the Asia Society Policy Institute in collaboration with the Rhodium Group stands in contrast to a pessimistic take by U.S. think tank the Conference Board, which on Monday predicted China’s government would fail to push through a difficult economic overhaul and cause growth rates to slow to 3.9% over the coming decade. Such a sharp decline from a current annual rate of 7.3% — according to a third-quarter GDP report released Tuesday— would likely have dire consequences. As the Asia Society report notes, there is much at stake in these competing projections. With its share of global growth having gone from 4% in 1997 to 28% now, “China is more interdependent with world markets than [other] nations going through a middle-income policy shock have been,” the report’s author, Asia Society Policy Institute fellow Daniel Rosen, wrote. “China’s current reforms will shock the world.” In coming up with a 6% forecast for what Mr. Rosen describes as “potential growth” — that is, if all reforms are fully implemented — his report focuses on nine “clusters” of economic and political reform aimed broadly at reducing centralized control over the Chinese economy and opening it up to more market influence. In all, Mr. Rosen’s analysis finds that quiet progress is being made in some politically sensitive areas of reform, a view that contrasts with critics who say that a lack of key developments such as the creation of a deposit insurance scheme are stymying vital liberalization of the financial system.

26 Arrested, 60 Injured in Weekend of Violent Clashes in Hong Kong - Hong Kong pro-democracy demonstrators have redoubled efforts to rebuild occupation barricades in the streets of the city's financial center after 26 people were arrested and more than 60 injured in violent clashes with police over the weekend. Protesters reclaimed occupation zones and established new barricades in parts of a main protest area in Mong Kok Saturday and Sunday after a clearing operation Friday evening riled up — but ultimately failed to disperse — the crowd of roughly 9,000. Activists armed with yellow hardhats, goggles, and cloth masks used umbrellas to shield themselves from police batons and pepper spray as authorities in riot gear charged protest lines. Umbrellas have become an unofficial symbol of the resistance, which some have dubbed the "umbrella revolution."

The Hong Kong Protesters Who Won't Negotiate - Pro-democracy protests took a violent turn in Hong Kong early Sunday morning, as police officers clashed with demonstrators in the territory's Mong Kok neighborhood. The scuffles, which caused at least three injuries, occurred amid news that Hong Kong's government plans to meet with student leaders on Tuesday in an effort to resolve the crisis. Mong Kok's role as a separate front in the protest movement, however, will complicate efforts at a resolution. The neighborhood, located in Hong Kong's Kowloon district, is a densely populated, working-class area where residents living cheek-by-jowl mingle with shoppers drawn to Nathan Road's famous retail area. “Mong Kok is very self-organized; it's a real people's movement.”  Previous protests, by contrast, have occurred in Admiralty, a neighborhood on Hong Kong Island. Hong Kong Island encompasses the city's most elegant commercial streets and its main government buildings. Protests there, while spirited, have been more orderly than those on Mong Kok, where a lack of sophisticated crowd-control infrastructure has exacerbated the chaos. In Admiralty, groups like Occupy Central for Peace and Love and the Hong Kong Federation of Students are representatives of the students. The protests in Mong Kok, by contrast, have been more spontaneous, and appear to ebb and flow based less on political developments than on behavior by the police.

Hong Kong Protesters See 'No Hope' In Negotiations: -- Leaders of Hong Kong's pro-democracy Occupy protests are scheduled to begin long-awaited negotiations with representatives of the city government on Tuesday. But with the talks still hours away, protesters and anti-Occupy residents alike are pretty sure they know what's going to happen. "No results," predicted Stanley Chan, an elderly demonstrator at the hotly contested Mong Kok protest site. "We know that there's no room for negotiation with the Hong Kong government, no space to go further." Discussions between the government and representatives from the Hong Kong Federation of Students are set to be broadcast live Tuesday at 6 p.m. in Hong Kong. But many of Chan's fellow protesters, as well as the fiercest critics of the demonstrators themselves, agree that the true power rests with the one party absent from talks: the Chinese central government. Without China's participation, those in Hong Kong are all but certain, Tuesday's negotiations will go nowhere. "In the end everything is decided by the Chinese government," said Eric Wong, a 44-year-old IT systems manager attending the protests. "[The Hong Kong government] just sits in the middle, and I don't think the Chinese government will compromise."

Talks fail to narrow gap between student leaders and Hong Kong government - The government and student leaders remain poles apart on how the city should elect its leader in 2017, after their televised talks yesterday failed to resolve the issues that triggered the Occupy Central mass sit-ins. Chief Secretary Carrie Lam Cheng Yuet-ngor said the government would submit a report to Beijing reflecting the latest public sentiment and would consider setting up a platform for dialogue on constitutional development. But that failed to please the five leaders from the Federation of Students. Lam and fellow officials ruled out the possibility of reversing the National People's Congress Standing Committee's August decision imposing tight limits on the 2017 election. They also rejected the students' demand for public nomination of candidates.Lam called on protesters to withdraw, but federation leaders said they would not retreat as the government had not given any concrete response. Lam said the government respected the students' passion in pursuing democracy, but added: "However respectful one's ideal is, it should be achieved by reasonable and lawful ways." Tens of thousands of people at the protest sites in Admiralty, Causeway Bay and Mong Kok watched the televised talks - the first face-to-face dialogue between top officials and activists in the city's history.

'Risk of deflation closer than thought': Korea faces a growing risk of falling into the deflationary trap that hit Japan in the 1990s, the Korea Economic Research Institute said in a report Monday. In deflationary periods, consumers delay consumption as they expect prices to fall further. This then decreases corporate sales, causes job losses and lessens consumption further in a vicious cycle. Japan’s last two decades are regarded as a typical example of how deflation can ruin an economy. The institute said the Korean economy is projected to grow 3.7 percent next year, with the government having more room to implement monetary and fiscal policies. The United States’ tapering and slowdown of growth in China are negative external factors, with household debt and uncertainties in the real estate market. The institute expects the economy to grow 3.5 percent this year. “On top of the external and internal uncertainties, the strengthening of the Korean won against the dollar is delaying the recovery of exports. Growth is estimated to be a mere 3.2 percent in the second half of this year while it picked up 3.7 percent in the first half,” said Byun Yang-gyu, director of macroeconomic policy research at the institute. However, the report warns against the growing risk of deflation. It said while the possibility of deflation is still small, it can’t be totally ignored

Japan firms want government action if yen weakens: Reuters poll (Reuters) - Nearly half of Japanese firms think the government should start defending the yen at this month's dollar high of 110, a Reuters survey shows, underscoring the threat that rising fuel and other import costs pose to a fragile economy. Over the past two years, Prime Minister Shinzo Abe has sought to boost the economy and cure deflation with bold monetary stimulus that has successfully wrought a much weaker yen. But the yen's descent against the greenback to a six-year low of 110.09 on Oct. 1 - a rapid 8 percent decline over three months - has prompted a chorus of complaints from companies that Abe's medicine could become poison. While the yen has since regained some ground to around 106 on expectations that the Federal Reserve may put off raising U.S. interest rates, the potential for further weakness is a major concern for many firms, the Reuters Corporate Survey showed. "If the yen is guided too weak, raw material costs jump and firms that can't pass on those costs become exhausted and find it hard to survive," wrote an executive at a paper company, one of the industries most affected by yen weakness.

Japan downgrades economic outlook again - — Japan downgraded its overall assessment of the economy in October for the second consecutive month, citing a slowdown in production, likely adding to concerns over whether the government will go ahead with a second sales tax increase next year. The report is the latest acknowledgment that the economy is continuing to struggle after a higher sales tax rate introduced earlier this year weakened the momentum of a recovery jump-started by Prime Minister Shinzo Abe ’s pro-growth policies. In its monthly economic report released Tuesday, the government said the overall economy was recovering moderately, though “weakness can be seen recently.” In September the government noted only “some weakness.”

S&P OK with Japan debt/GDP ratio rising to 255% --S&P hasn't lost faith in Japan's future. Japan has the highest debt to GDP ratio in the world, the Abenomics growth programme has stumbled recently and household consumption has been in retreat since the country added three percentage points to the national sales tax in April.  But the ratings agency affirmed its rating and negative outlook on Japan last month and in an supplementary analysis posted Wednesday it reminds investors of some taken for granted attributes that help Japan maintain its high AA- rating — namely its prosperous and diversified economy, political stability, and a stable financial system.  Japan's strong external position and monetary policy settings also support its sovereign credit fundamentals. The free-floating yen's status as a reserve currency is a reason for these strengths.  We believe that the status of the yen derives from the credible political and policy institutions in the country--including the Bank of Japan (BOJ), a sound financial system, freedom of capital flows, and sizable domestic capital markets. S&P said Japan risks a credit downgrade if GDP growth fails to improve, but its forecasts aren't especially bullish — the assumption is real GDP just north of 1 per cent a year in the coming three years — and it's comfortable with the debt to GDP ratio rising from 249 per cent this year to 255 per cent in 2017. Key forecasts below:

Japan’s Government Gets Paid to Borrow as Yields Fall Below Zero -  Debt buyers gave Japan’s government a $531,000 gift at today’s treasury-bill auction in Tokyo. The Finance Ministry’s sale of 5.7 trillion yen ($53.2 billion) in three-month debt had a record-low yield of minus 0.0037 percent as buyers paid 100.0010 yen on average for securities that mature at 100 yen. The Bank of Japan has bought bills that had negative yields in the market last month as it pushed ahead with its goal of increasing the monetary base at an annual pace of 60 trillion yen to 70 trillion yen. “The bill yields are likely to stay below zero for the next few months,” said Noriatsu Tanji, chief rates strategist in Tokyo at RBS Securities Japan Ltd., one of the 23 primary dealers obliged to bid at government bond auctions. “As the BOJ continues to expand its monetary base toward 270 trillion yen, the supply continues to tighten in the bill market.” Japan’s treasury-bill yields turned negative for the first in at least five years last month after the European Central Bank became the first major monetary authority to guide rates below zero. Three-month treasury bill yielded minus 0.08 percent as of 2:37 p.m. in Tokyo, while the six-month security yielded minus 0.05 percent. Investors can make money by buying three-month bills and selling them to the central bank even if yields are negative, according to Makoto Yamashita, the Japan rates strategist in Tokyo at Deutsche Securities Inc., another primary dealer.

BOJ Sees Bigger Chance of Fall in CPI Below 1% - The Bank of Japan now sees a much bigger possibility of inflation slipping below 1%, pushed down by falling crude oil prices, according to people familiar with the central bank’s thinking, a development that could rekindle market speculation for additional easing. While the BOJ recognizes that lower oil prices are ultimately good for the economy as they reduce living costs from imported food to gasoline, the central bank is concerned about their effect over the shorter term.Viewed from the perspective of the bank’s goal to achieve stable inflation of 2% in about two years, the lower crude prices will likely outweigh recent falls in the yen, slowing down the BOJ’s mission to rid Japan of deflation. A fall below 1% is now “possible,” said one of the people. Another person cited a “fifty-fifty” chance. The people also signaled that inflation could stay below 1% for more than one month, though one of them said sustained declines after October were unlikely. Only a few months ago, a drop in price growth below 1% was seen by some economists as a trigger for the BOJ to consider extra stimulus, though the falls in the yen since then largely doused out speculation of imminent easing. Still, financial markets are closely watching how the consumer price index fares over the coming months to gauge the possibility of whether the central bank will act again. The index, factoring out the effects of an increase in the sales tax in April and volatile perishable food prices, rose 1.1% in August, below its recent peak of 1.5% in April. Crude oil prices have fallen by more than $20 per barrel over the past few months. The Dubai oil price, the benchmark oil transaction in Asia, fell $3 on Thursday to $82.30 per barrel. The BOJ sees a $10 drop in crude oil prices weighing on CPI growth by at least 0.1 percentage point.

Half-year trade deficit soars to record ¥5.427 trillion : Japan posted a record deficit of ¥5.427 trillion in goods trade in the first half of fiscal 2014, against a backdrop of rising energy imports caused by the prolonged halt in nuclear power generation, the government said Wednesday. The deficit expanded 8.6 percent from a year earlier to reach the highest amount for the April-September period since data became available in 1979. The value of imports increased 2.5 percent to ¥41.324 trillion, the Finance Ministry said in a preliminary report. Imports of liquefied natural gas gained 8.7 percent while petroleum products rose 7.6 percent, the ministry said. Exports rose 1.7 percent to ¥35.897 trillion, with those of metal processing products surging 26.8 percent and automobiles climbing 2.6 percent. The results highlighted the continuing net outflow of money from the country as utilities bolster fossil-fuel based power generation as an alternative to nuclear power, now stalled in the wake of the 2011 triple-meltdown disaster at the Fukushima No. 1 nuclear plant. The depreciation of the yen also compounded the size of the deficit. During the six months through September, the value of the yen slid by 4.1 percent year-on-year against the dollar to 102.55, the ministry said.

Lower Oil Prices Seen Easing Japan’s Trade Pain - The recent sharp fall in crude prices comes as welcome news for nations that consume more oil than they produce, but it’s a particularly positive development for Japan, which is struggling with massive trade deficits. Following the 2011 Fukushima nuclear accident, Japan has been forced to rely heavily on fossil fuels for 90% of its electricity generation, with natural gas accounting for half of the total. In 2013, Japan, which racked up a Y11.5 trillion ($107.5 billion) trade deficit last year, paid an average $110 a barrel of oil, and a total of Y27 trillion for its imports of oil, natural gas and coal, or a third of total imports. To the island nation’s great relief, crude oil prices are now on the decline. Last month, crude oil futures fell 5% to $91 a barrel in New York, and by another 9% so far in October. According to economists at Mitsubishi UFJ Morgan Stanley Securities, if crude prices stay at their current levels around $82 a barrel, Japan could save Y5 trillion to Y6 trillion in import costs a year. Natural gas prices are linked to those for oil, and tend to move in tandem. The question remains as to how long before these lower prices will be reflected in the nation’s trade bill.  Data for September released Wednesday showed that an 11% jump in the volume of natural gas imports pushed the overall trade balance to a bigger-than-expected Y958 billion trade deficit. The country paid an average $106 a barrel in September, according to the data. Since most of the oil is delivered by ship from the Middle East, the prices tend to reflect those two months ago.

A Trade Storm Is Brewing - At the beginning of the year, we warned you about the upcoming trade tsunami. Well hold on to your hats everyone, because another “trade” storm is heading our way. Trans-Pacific Partnership (TPP) negotiators are meeting in Australia this month and are aiming to finish the massive 12-country “trade” agreement. Despite mounting evidence that the TPP should not be completed — including the leak of another part of the top-secret text earlier this week — President Barack Obama wants the TPP done by November 11. That is when he will be meeting with other TPP-country heads of state in China at the Asia-Pacific Economic Conference. With the TPP’s threats to food safety, Internet freedom, affordable medicine prices, financial regulations, anti-fracking policies, and more,  The Trans-Atlantic Free Trade Agreement (TAFTA) is not yet as far along as the TPP, but TAFTA negotiations recently took place in Washington, D.C., and more are set for a few weeks from now in Brussels. The largest U.S. and EU corporations have been pushing for TAFTA since the 1990s. Their goal is to use the agreement to weaken the strongest food safety and GMO labeling rules, consumer privacy protections, hazardous chemicals restrictions and more on either side of the Atlantic. They call this “harmonizing” regulations across the Atlantic. But really it would mean imposing a lowest common denominator of consumer and environmental safeguards. The Trade in Services Agreement (TISA) is a proposed deal among the United States and more than 20 other countries that would limit countries’ regulation of the service sector. At stake is a roll back of the improved financial regulations created after the global financial crisis; limits on energy, transportation other policies needed to combat the climate crisis; and privatization of public services — from water utilities and government healthcare programs to aspects of public education.

Wikileaks Exposes Trans-Pacific Partnership as Bad Trade Deal Again -- Enslaved through trade,  That seems to be the agenda with trade agreements these days.  Over and over again national law, the common good is overwritten through bad trade deals.  Wikileaks has exposed yet another horror from the Trans-Pacific Partnership (TPP) trade agreement being negotiated.  It seems freedom loving, Democratic United States is leading the charge to ensure life saving drugs are not affordable for most people. The latest leaked version of the draft text shows the United States pushing for measures that would significantly constrain affordable access to vital generic drugs, such as cancer drugs and treatments for communicable diseases such as Ebola. Just two weeks ago, 60 Minutes did an expose on how cancer drugs cost over $100,000 per year.  You might survive cancer but only if you can come up with the cash.  Already trade watchdog groups are weighing in on this latest outrage. The leak shows our government demanding rules that would lead to preventable suffering and death in Pacific Rim countries, while eliminating opportunities to ease financial hardship on American families and our health programs at home, Below is the Public Citizen synopsis on the leaked TPP intellectual property draft.  Yes, you read that right, corporations are out to patent plants.  The hits just keep on coming and many national laws, like net neutrality for example, are defeated through trade deals by circumventing sovereign states' law as a barrier to trade.  In other words, corporations and their bought and paid for government representatives negotiate, in secret, ways to get around national law and stuff those ways in trade agreements, which corrupt government officials then pass.

Treaty holds no attraction | Bangkok Post: opinion: The US-sponsored Trans-Pacific Partnership (TPP) treaty is still stalled, still contentious, still far behind every deadline set by President Barack Obama. That's the good news. In the face of failure after failure to reach agreement, this so-called "free trade" agreement still is being debated and bargained by 12 countries. They include several of our neighbours, and all are important trading partners. The government should take notice and even an active role in opposing the TPP in case, despite disagreements, it actually comes to pass. The TPP in theory is one of those deals to "level the playing field" by reducing tariffs, eliminating red tape and bringing competition to international commerce. One expects such deals to have both good and bad components for all those involved. No country can expect another to open its key economic areas without some reciprocity. The problem with the TPP is that it does just this, at least in some key areas. The negotiations on the treaty are supposed to be secret, because Washington in particular wants to keep public voices out of the issue. Once again, however, the Wikileaks whistle-blowers have obtained the core chapters of the TPP working paper, and posted it for the world to see. The chapter on intellectual property confirms the real authors of this key section are US big business. The 77-page "working document" is the opposite of a "level playing field". The US drug and entertainment industries have got 12 of the most important Pacific-area countries debating not whether to tighten patents on medicine — but by how much. The treaty negotiators are not discussing whether to monitor all internet users for pirated music and movies, but how intense the surveillance and penalties should be.

India’s Modi Exploits Oil Price Collapse to End Diesel Subsidies -- India’s government said it will stop fixing the price of diesel, in a move that will cut the bill for fuel subsidies and send a strong signal of its commitment to liberalize the economy and attract investment. The move is one of the most radical to date by the government of Prime Minister Narendra Modi, and will mollify critics who say he has been too timid since taking power in Asia’s second-largest economy. .“Henceforth—like petrol—the price of diesel will be linked to the market,” “Whatever the cost involved, that is what consumer will have to pay.”Two factors appeared to have influenced the timing of the move: firstly, the collapse in the price of crude oil to its lowest level in over three years means there will be no painful shock for the millions of consumers–most importantly, small-scale farmers–who depend on cheap fuel. Secondly, the politically bold move came as it became clear that Modi’s BJP party would win important regional elections in the states of Maharahstra and Haryana (home to the megacities of Mumbai and Delhi, respectively).The diesel subsidy, which cost over $10 billion in the last fiscal year, had been one of the defining symbols of excessive government interference in the economy, discouraging both foreign and domestic investment in India’s fuel sector. That’s important because India is dependent on imported fuel, having few resources of its own. Energy security is one of Modi’s top priorities.

Venezuela seizes warehouses packed with medical goods, food (Reuters) - President Nicolas Maduro's government said on Thursday it had taken over warehouses around Venezuela crammed with medical goods and food that "bourgeois criminals" were hoarding for speculation and contraband. The socialist government says businessmen and wealthy opponents are trying to sabotage the economy to bring Maduro down, while also seeking to make profits from hoarding, price-gouging and smuggling across the border to Colombia. Critics say 15 years of failed policies of state intervention are to blame for the OPEC nation's widespread shortages, high inflation and apparently recessionary economy. They accuse nouveau riche officials and military officers of illegal business practices. Maduro gave a live address to the nation from one of two warehouses seized in central Aragua state, where he said 14 million syringes and 2 million surgical gloves were among a massive hoard of medical equipment bound for Colombia. "There's enough medical equipment here to cover Aragua's needs for a year. This is the criminal bourgeoisie. They are going to pay with jail, I swear it," Maduro said, standing in front of piles of boxes and wheelchairs. "The bourgeois parasites are hurting the people's health." Maduro, the 51-year-old successor to the late Hugo Chavez who died of cancer last year, said the goods had been bought with dollars obtained from the state's foreign exchange board and were due to be sold across the border in Colombia.

In Mexico, Jobs Without The Recovery - Mexico’s unemployment rate fell in September to 5.1% from 5.3% a year before, and was down from August in seasonally adjusted terms, the National Statistics Institute said Friday. Urban unemployment slipped to 5.8% from 5.9% a year earlier, but remains way above pre-2009 crisis levels. “Notwithstanding a better-than-expected jobs report, the labor market continues to operate with slack,” said Goldman Sachs GS +2.51%economist Alberto Ramos in a note. Several employment indicators show improvements in the market. Manufacturers have been steadily expanding their payrolls for several years, and in August employed 2.7% more people than they did a year before. The closest indicator that Mexico has to the U.S. nonfarm payrolls is the number of workers registered for health and other benefits with the Mexican Social Security Institute, or IMSS, a measure of people employed in the private sector under formal conditions. They represent about a third of the overall workforce. IMSS reported last week that it added 156,000 workers to its roster in September to 17.2 million, a 4.1% increase from a year before. The economy has continued to lag, however, growing just 1.7% in the first half of the year

Egypt signs with six international firms to dredge new Suez Canal | Reuters: (Reuters) - Egypt signed contracts with six international firms on Saturday to carry out dredging of the new Suez Canal, the flagship project in President Abdel Fattah al-Sisi's program to revive an economy battered by years of political turmoil.Egypt hopes the new canal will more than double revenues from the waterway by 2023 to $13.5 billion from $5 billion. It also plans to develop 76,000 sq km (29,000 sq miles) in the area into an international industrial and logistics hub to attract more ships and generate income. Memish did not provide financial details of the contracts but said the companies would begin working this week. The new canal is scheduled to be completed by August 2015, an ambitious target set by Sisi. Engineers from the army began digging in the area in August when the project was unveiled. Memish said they would conduct dredging in one of the new canal's six work zones, with the international companies operating in the remaining areas. He said the total project would require up to 36 dredgers to remove about 250 million cubic meters worth of material.

Oil slump leaves Russia even weaker than decaying Soviet Union - It took two years for crumbling oil prices to bring the Soviet Union to its knees in the mid-1980s, and another two years of stagnation to break the Bolshevik empire altogether. Russian ex-premier Yegor Gaidar famously dated the moment to September 1985, when Saudi Arabia stopped trying to defend the crude market, cranking up output instead. "The Soviet Union lost $20bn per year, money without which the country simply could not survive," he wrote. The Soviet economy had run out of cash for food imports. Unwilling to impose war-time rationing, its leaders sold gold, down to the pre-1917 imperial bars in the vaults. They then had to beg for "political credits" from the West. That made it unthinkable for Moscow to hold down eastern Europe's captive nations by force, and the Poles, Czechs and Hungarians knew it. "The collapse of the USSR should serve as a lesson to those who construct policy based on the assumption that oil prices will remain perpetually high. A seemingly stable superpower disintegrated in only a few short years," he wrote. Lest we engage in false historicism, it is worth remembering just how strong the USSR still seemed. It knew how to make things. It had an industrial core, with formidable scientists and engineers.

Russians Pull $5 Billion Out of Banks as Ruble Plummets - Moscow Times -- Russians pulled 52.6 billion rubles ($1.3 billion) out of ruble deposits in September as Moscow battled to keep its currency afloat amid plummeting oil prices, high capital outflows and Western sanctions over the Ukraine crisis, business daily Vedomosti reported Tuesday, citing data from the Central Bank. While hard currency deposits grew 2.4 percent in September in ruble terms, this was thanks to the rise of the dollar and euro relative to the ruble rather than an increase in deposits. Calculating for the ruble devaluation, Russia's banking system lost a total of 200 billion rubles ($4.9 billion) in personal deposits in September, ratings agency Fitch told Vedomosti. Analysts have blamed the 0.4 percent dip in ruble deposits, the first decrease since March's drop of 2.2 percent, on the falling ruble. Russia's ruble slide began early in the year and was exacerbated by political tensions following Russia's annexation of Ukraine's Crimean Peninsula. The ruble hit 40 to the dollar early this month after oil prices, a key source of revenue for Moscow, began to fall. This storm of factors has hacked at faith in the ruble, with state estimates putting capital flight at $120 billion this year. Putting even more pressure on the downtrodden ruble, Western sanctions over the crisis in Ukraine have prevented major state-owned companies from rolling over billions of dollars in debt to foreign banks. These companies are now being forced to buy up hard currency in order to pay off the loans.

Ruble slides to record low against euro and dollar - —The Russian ruble slid to yet another all-time low against the dollar and the euro as investors wait for the latest report on the country’s creditworthiness from Standard & Poor’s Inc., expected later Friday. S&P already has Russia’s low investment-grade credit rating on negative watch. The markets fear that the rating could now lowered— a sentiment that sent the ruble dropping to the record lows. Any downgrade would make the country’s government bonds non-investment grade, otherwise known as “junk.” Finance Minister Anton Siluanov said Friday that concerns about a potential cut to Russia’s sovereign rating by S&P are “exaggerated.” The comment, however, had no calming impact on the market. The ruble, battered this month by sliding oil prices, had eased 0.7% to 42.0065 versus the dollar, taking its year-to-date loss to around 21%. Versus the euro, the ruble also hit its weakest ever level of 53.11.

The Market Says Markit Is Full Of It: Global PMIs Are Painting An Unrealistically Rosy Picture -- Why would one even look at a self-reported survey as an indicator of coincident activity: after all isn't it beyond obvious that every response will be full of confirmation bias and colored by the respondent's inherent optimism about the present and the future? Apparently it isn't, and neither is it obvious that for all business participants, hope dies last, something which always influences their responses. The problem is that in a world in which central banks have made a mockery of all other coincident signals, one has to dig very low. "We've used this measure less over the last couple of years as central banks have increasingly distorted the relationship between fundamentals and  valuation" says Deutsche Bank's Jim Reid. And as Jim Reid shows in the table below, the various regional PMIs have so consistenly overshot in their expectations of where the manufacturing and service sector of a given country is throughout 2014, that not even the market believes, well, Markit.

This Wasn't Supposed To Happen --From exuberant escape velocity 'expansion' hopes and dreams in June, to 'slowing' in September, and 'drastic downward revisions' in early October, the Goldman Sachs Global Leading Indicator has had a very troubled recent past (as QE is just 4 POMOs away from coming to an end). But nothing could prepare the avid reader for what happened to the infamous Goldman "swirlogram" this month - an epic, total collapse. As Goldman 'politely' notes, "the October Advanced reading places the global cycle deeper in the ‘Slowdown’ phase, with momentum (barely) positive and declining." And just as amazing: the world has gone from Expansion and Recovery, to Slowdown and borderlin Contraction in the span of just 3 months. Goldman explains, The October Advanced reading places the global cycle deeper in the ‘Slowdown’ phase, with momentum (barely) positive and declining. This reading agrees with the September Final GLI that the global cycle is currently in the ‘slowdown’ phase. As the Advanced GLI ‘leans’ more on the US data, we will look to the October Final GLI for confirmation of this reading.

Japanese Style Deflation Coming? Where? Fed Falling Behind the Curve? Which Way? - There's some interesting discussion points in the UK-based Absolute Return Partners October 2014 Letter, by Niels C. Jensen, most of which I agree with, others not.  It is no secret that we have been long-standing believers in deflation being a more probable outcome of the 2008-09 crisis than high inflation. What has changed over the past six months is that the world has begun to move in different directions. Whereas rising unit labour costs in the U.S. make outright deflation in that country quite unlikely, the same cannot be said of the Eurozone.Japan-style deflation across the Eurozone is no longer an outrageous thought. As you can see from chart 1, there is a close link between CPI and demographics. That has certainly been the case in Japan and I don’t see any reasons why it should be any different in Europe. The negative demographic trends are perhaps not as acute in Europe as they were in Japan in the early to mid 1990s, so one might expect a less dramatic outcome here, but the writing is on the wall. Furthermore, Japan’s problems were multiplied due to an almost complete lack of political recognition and willingness to take drastic action. At least, with Mario Draghi in charge of the ECB, there seems to be a willingness to do something. Jensen is mistaken about Japan's willingness to take action. Japan has a debt-to-GDP ratio of 250%, highest of any major developed country, as a direct consequence of fighting deflation. Japan piled on debt, built bridges to nowhere, and engaged in other wasteful spending, all of which made matters worse. Taking on debt to fight deflation is insane. Yet that is exactly what France and Italy want now! Japan's QE certainly did not help either. Both policies addicted Japan to 0% interest rates forever (until of course Japan blows up).

Why Should Europe (or Anyone Else) Fear Deflation?  -- Europe is fearful as it teeters on the brink of deflation. As the chart shows, September consumer prices in the eurozone were just 0.3 percent higher than in the same month a year earlier. That is far below the 2 percent inflation target set by the European Central Bank (ECB). Five countries were already experiencing deflation, and inflation was at zero in three others.  Still, despite all the gloomy deflation headlines, the most common question I get about deflation is, “So what?” If inflation is bad, why isn’t deflation  good?  Why should we do anything but celebrate if the prices of goods and services fall steadily year after year, and the value of our money rises accordingly? In this post, the first of two parts, I will try to explain just why a majority of economists think deflation is bad. In the second part, I will look at the views of a minority who think that deflation is actually a good thing, at least sometimes. Probably the most frequent explanation of the harm done by deflation is that it gives consumers an incentive to delay consumption. A recent article in Salon puts it this way:  When prices fall people stop spending, hoping things will get even cheaper. In response, businesses cut production and lay off workers. That means even less demand, and prices drop further. . . By then, your economy’s in a vicious downward spiral.

ECB starts buying covered bonds as part of stimulus plan - The European Central Bank said Monday it had started buying covered bonds as part of a stimulus program to boost the eurozone’s flagging economy. One person familiar with the matter said the ECB had been buying short-dated covered bonds from a number of different countries, in sizes up to €25 million ($32 million). Covered bonds are backed by a pool of loans such as residential mortgages, and are widely considered as the safest type of debt that banks sell. The ECB’s covered bond program is part of a package of stimulus measures announced in September that included interest rate cuts to fresh record lows and planned purchases of asset-backed securities. The ECB doesn’t have a target amount for the purchases. It is unclear how much in total it has bought, or sought to buy, Monday. The ECB will announce its weekly purchase amounts each Monday, starting next week.

ECB Purchases Begin and Markets Shrug - The European Central Bank launched its private sector asset purchase program on Monday. But will it work? Everyone knew it was coming, but the timing still came as a surprise when news filtered through the ECB had started to buy French covered bonds as part of its promised monetary stimulus program. Covered bonds — bank bonds backed by the interest flow from pools of safe loans like mortgages — from other member states are to follow, as are purchases of asset-backed securities due to start later in the year. Because the ECB’s purchases are focused on private sector assets, rather than sovereign debt, some are calling them private quantitative easing, or QE. In theory, they ought to work as well, maybe even better, than the more conventional type of government bond purchase-based QE that the U.S. Federal Reserve and Bank of England focused on.  Yet news of the ECB’s asset buying was met with near total indifference by investors.Instead, equities and sovereign debt fell back into the downward rut of recent weeks following a brief respite on Friday. Equities sold off. German bonds were bid higher, while those of peripheral eurozone economies fell back, leading to a widening yield differential between the core and the rest. The message from the markets was that investors are worried that the eurozone is heading towards recession, deflation and, possibly, another round of its existential crisis.

Cash-strapped France suggests €50b investment to Germany — Cash-strapped France yesterday called on Europe’s economic powerhouse Germany to invest €50 billion more by 2018 to match the amount that Paris is planning to slash from its public spending. The call from France’s Finance Minister Michel Sapin and Economy Minister Emmanuel Macron came on the eve of their visit to Berlin, where they are due to hold talks with their German counterparts on boosting investments and growth. “€50 billion euros (RM209.54 billion) savings for us and 50 billion of additional investment by you — that would be a good balance,” Macron was quoted as saying by the Frankfurter Allgemeine Zeitung. “It’s in our collective interest that Germany invests,” he added in pre-released quotes for Today’s edition. France has pledged to reduce its public spending by €50 billion in order to meet an EU budget deficit ceiling of 3 per cent by 2017.  But French President Francois Hollande is also calling on EU member states — in particular Germany — to invest in order to stimulate growth in the eurozone’s moribund economy.

Germany Slashes its Economic Forecasts - In stark contrast with the rosy forecasts made just six months ago of 1.8 per cent growth this year and 2 per cent in 2015, the government forecasts gross domestic product to expand 1.2 per cent in 2014 and 1.3 per cent next year.  The data follows last week’s release of dire German factory figures, which stoked fears among top financial officials gathered in Washington for the International Monetary Fund’s annual meeting that economic weaknesses at the heart of the eurozone could undermine the global recovery.  In spite of the growing pessimism, however, Berlin still expects Germany to avoid a recession, defined as two successive quarters of contraction. After a 0.2 per cent decline in the three months to June, Berlin forecasts some growth in the third quarter, contrary to the forecasts made by some bank economists.

German Companies Tread Unfamiliar Territory with Job Cuts -- When the flow of containers began to slow at the docks in Duisburg a few months ago, workers at the world’s largest inland port got an early indication that Germany’s export machine had begun to falter.Container volume at Duisburg, which sits at the confluence of the Rhine and Ruhr rivers, is still expected to grow strongly this year. But the outlook for the docks – as with the rest of German business – is suddenly looking less certain. German exports tumbled 5.8 per cent in August compared with July – the biggest drop since the peak of the global financial crisis in January 2009. The economy now risks slipping into recession in the third quarter, and the government has already lowered its growth forecasts for 2014 and 2015. Indeed, with Chinese demand slowing, Russian orders slumping and the eurozone still in the doldrums, some companies have been left with a surfeit of production capacity and workers.   In the meantime, German companies are tightening their belts. Siemens, the engineering conglomerate, is poised to cut jobs at its German energy division due to a slump in European demand for its large gas turbines. The company would not confirm a German radio report that 1,200 jobs are at risk, out of a total of 118,000 in Germany.Volkswagen, Europe’s biggest carmaker by sales, announced a €5bn annual cost-savings drive in July which may include a reduction in the use of temporary staff, its chief executive Martin Winterkorn, has said.

Germany May Be the Biggest Loser If It Doesn’t Start Spending -There’s growing pressure on Germany to spend more to support Europe – and for good reason. But it’s proving to be a hard sell to the country’s leaders. Germany’s budget is balanced and the government insists that its current policy stance is the best it can do – for itself, the eurozone and the world at large. The government’s mantra is that a balanced budget inspires confidence, which in turn propels growth. That’s not actually happening of course, as is plainly visible for anyone to see, yet the ongoing stagnation and sense of crisis felt across the eurozone have only encouraged the German government to repeat its flawed logic. The rest of the world is not amused, especially eurozone members that have been at the receiving end of Germany’s economic policy wisdom and have been more actively pushing against its gospel of austerity of late. For much of the time since the euro was launched in 1999, Germany has depended on foreign purchases of its exports for its own meager growth, particularly when domestic demand stagnated for much of the 2000s, just as it does today. But Europe’s biggest country has not been willing to return the favor, as public and private investment remain severely depressed. That protracted stagnation in domestic demand helped cause Germany to run up huge and persistent current account surpluses, averaging about 7% of GDP since 2006. . There is something fundamentally wrong about this prescription. It is actually no surprise that the eurozone remains stuck in crisis today, a crisis that is in some respects worse than the experience of the Great Depression of the 1930s. Unless the rest of the world starts booming soon – and there’s no sign that it will – the situation in the eurozone is more likely to deteriorate further than improve on its own. Germany would do itself a big favor by finally acknowledging that its own model is not working for the eurozone and change track.

The German ship is sinking under the weight of its own delusions - Eurostat’s recent publication (October 14, 2014) – Industrial production down by 1.8% in euro area – rightfully sends further alarm bells throughout policy makers in Europe, except I suppose Germany where denial seems to be rising as its industrial production levels fall to performance levels that the UK Guardian article (October 9, 2014) – Five charts that show Germany is heading into recession – described as being “shockingly poor”. The Eurostat data shows that industrial production fell by a 4.3 per cent – a very sharp dip in historical context for one month. Vladmimir Putin and ISIL are being blamed among other rather more oblique possible causes. But the reality is clear – the strongest economy in the Eurozone is now faltering under its own policy failures. Eurostat tell us that:  In August 2014 compared with July 2014, seasonally adjusted industrial production fell by 1.8% in the euro area (EA18) and by 1.4% in the EU28 … In August 2014 compared with August 2013, industrial production decreased by 1.9% in the euro area and by 0.8% in the EU28.  Industrial production is in the Eurozone is still 13.1 per cent below the April 2008 peak and only 3 per cent higher than when the common currency came into being in 2000. So essentially, after some growth in scale leading up to the GFC, the crisis has wiped out all those gains and the current bias is towards a further decline in industrial production. The policy makers thus should explain why the monetary system is being retained that has failed to deliver any gains in 14 years in output. The following graphs show the industrial production indexes (100 = January 2000) for Germany first and then Germany, France, Italy, Spain and Greece second. Germany’s industrial output is back at December 2006 levels – in other words, the GFC and ensuring policy mistakes (austerity) have seen the economy essentially stuck in a stagnant state for 8 years.

Europe’s Fatal Flaw Laid Bare For All To See. Again -- Germany sinks a bit, but Germany is strong. US housing is at least not falling further, but US consumer spending stalls and drops. The deep dark weakness has not yet hit the big economies. But the nerves are back. Volatility is back with a vengeance. As it should. And that will paint the picture going forward, plunge protection or not. Da markets will come again and again and dare central banks to plunge protect. Well, either that or more QE, but despite whatever Bullard says the Fed will go ahead with the taper – just listen to Yellen waxing dreamily about the US ‘expansion’ -, and the ECB won’t go full QE because the member states will never agree on anything. And Merkel feels the euroskeptics breathing down her neck as much as the ‘leaders’ of Britain, Italy, France et al. But as we’ve seen today, there’s sufficient fire power left on both sides of the pond to survive one week of mayhem. But that’s not the main lesson on this Friday. The main lesson is that Europe’s Achilles heel has been laid bare, once more, in full sight, and Europe – re: Draghi, Merkel – thinks that denial is its best defense. Big mistake. The lofty leaders at the ECB, and Berlin, Paris, Brussels, pretend they can make everything right that’s wrong inside their toy monetary union through asset purchases, sovereign bond purchases, and anything that falls in the ‘whatever it takes’ category. But it’s all just bluff. Because, what it all boils down to, they can’t keep buying Greek bonds with German taxpayer money until the end of time.

The eurozone’s German problem - There is a deal to be done to save the euro from deepening crisis. The outlines of it are generally accepted outside Germany: structural reforms in France and Italy and elsewhere combined with measures to strengthen their long-term fiscal positions; and in return, a large pan-eurozone fiscal stimulus and quantitative easing (QE) by the ECB. This offers the best way out of the current impasse in the eurozone, not just for the periphery but also for Germany. But it will take a political earthquake  for the Germans to back such a deal. Instead, the stability of the euro and the futures of the participating countries will continue to be vulnerable to the short-term exigencies of German domestic politics. This is a recipe for stagnation, deflation and political populism in France and Italy. It may culminate in a breakdown in relations between Germany and these countries and could even lead to eurozone break-up.  Why has Germany assumed such pre-eminence in the eurozone? How is it that German policy-makers from the finance minister, Wolfgang Schäuble, to the head of the Bundesbank, Jens Weidmann, can wag their fingers at everybody else for causing the eurozone crisis, while responding dismissively to any suggestion that Germany might be part of the problem? Germany’s initial pre-eminence following the crisis was understandable – it is a major creditor and in the early stages of any debt crisis, creditors tend to call the shots. However, as a debt crisis wears on, the creditors’ resolve typically weakens as the impoverishment of the debtors rebounds on the creditors politically and economically, and the debtors call the creditors’ bluff by threatening to renege on their debts.

ECB Bond Purchases Seen by Traders Exceeding $1 Billion - The European Central Bank bought at least 800 million euros ($1 billion) of covered bonds since starting an asset-purchase program on Monday, according to estimates from three traders familiar with the matter. The central bank acquired securities from Portugal to Germany this week, said the people who asked not to be identified because they’re not authorized to talk about it. It bought 1.5 billion euros in the first month of the last covered bond program in November 2011, according to ECB data. Policy makers are seeking to expand the central bank’s balance sheet by as much as 1 trillion euros to help stave off deflation in the euro area. They’re under pressure to take action after euro-area inflation slowed to 0.3 percent in September and the International Monetary Fund said the region has as much as a 40 percent chance of entering its third recession since 2008.

Ilargi: 40% of Eurozone Banks Are In Bad Shape - Yves here. While investors remain fixed on how much more the Fed and the ECB will pump into financial assets via QE, Eurozone banks lumber on in their walking wounded state. Deflationary pressures and lousy growth grind down weak and even once-good borrowers. And it's not as if the banks who lent to them in the first place were good shape themselves. As we wrote at the onset of the Eurozone bank stress tests, they were designed to be even more cosmetic than the US bank stress tests. Just a month ago, we posted an analysis that showed that many countries in Europe have banking systems weaker than those in Latin America. Even with the efforts to use the stress tests as a confidence-building exercise, the result of the current exam of Eurozone banks is expected to be less than impressive.

Leaked document shows 25 banks failed ECB safety tests - Almost one in five of the eurozone’s biggest banks have failed the European Central Bank (ECB)’s comprehensive test of their financial safety, according to leaked documents. Twenty-five of the 130 lenders being assessed by the ECB have reportedly failed the stress tests, the biggest-ever single review of the single currency’s major banks. Both the ECB and European Banking Authority (EBA) will release the results of its stress tests at 11am on Sunday. The two bodies’ assessments, which model scenarios such as downturns in the housing market, a new recession and a spike in borrowing costs, cover similar ground but have important differences. The ECB is conducting an additional review of eurozone banks’ assets ahead of it taking over as the primary regulator of banks that use the single currency; the EBA’s tests also cover European banks that are not part of the euro, including British ones. According to a draft memo of the results seen by Bloomberg, only 10 of the 25 banks to fail the tests will be told to plug capital shortfalls. The tests cover the banks’ positions at the end of last year, and the remaining 15 to fail the tests are reportedly judged to have raised the equity to meet the shortfall since then.

Europe’s economic and political future will be determined in the next few days: Europe is at a make or break moment. Two very different events on Sunday, occurring at opposite ends of Europe, will largely determine the entire continent’s direction for years ahead: the parliamentary election in Ukraine and the bank “stress tests” and Asset Quality Review conducted by the European Central Bank. Before explaining the significance of these two events, and their unexpected linkage, I need to mention a third announcement, due next Wednesday: the European Commission’s verdict on the budget for 2015 submitted last week by the French government. The Commission will next week have to come up with a Solomonic judgment that somehow reconciles the French government’s determination to stimulate its economy by cutting taxes with the German-imposed “fiscal compact” that former-President Nicolas Sarkozy rashly accepted in a moment of desperation in the 2012 euro crisis and which requires France to raise taxes or drastically cut spending in order to reduce its budget deficit to 3 percent of GDP. The fiscal compact rules, if applied literally, would make economic recovery in France a mathematical impossibility. Yet bending these rules will provoke a German public backlash, and perhaps even a constitutional court challenge, that could even force Angela Merkel to renege on her commitment to support the rest of the euro-zone. Depending on how these three events turn out, Europe will either be on the road to a moderate economic recovery next year or it will condemned to permanent stagnation, possibly leading to the break-up the euro or even the European Union as a whole.

Eurozone To Germany: Spend More! - (Reuters) - Euro zone leaders sought on Friday to bridge stark differences over how to avoid economic stagnation and deflation in the bloc, with Germany facing fresh calls to soften its budget rigor and spend more. With a U.S.-style bond-buying plan by the European Central Bank off the table for now, the bloc has few options, leaving other euro zone leaders to tread a careful line between the opposing growth and austerity camps. "It's very important to find a balance between growth and stability," Finland's Prime Minister Alex Stubb said as he arrived at the second day of an EU summit at which ECB President Mario Draghi will address leaders. After the euro zone's revival came to a halt in the second quarter, France and Italy want to shift course away from the spending cuts that marked the bloc's response to 2009-2012 crisis, but Germany says debt discipline must continue. The euro zone's poor performance is becoming a wider concern, with the United States and the International Monetary Fund worrying that the bloc that makes up a fifth of the world economy is a drag on global prosperity. The debate is complicated by EU rules that seek to keep country's public finances in order and Germany's promise to balance its books next year for the first time since 1969.

French Private Sector Output Falls at Sharpest Rate in Eight Months; Tale of Two Europes - Looking for growth in Europe? You won't find it in France, but for now you can still find it in Germany (for now).  The Markit Flash France PMI shows French private sector output falls at sharpest rate in eight months.  Key Points:

  • Flash France Composite Output Index falls to 48.0 (48.4 in September), 8-month low
  • Flash France Services Activity Index falls to 48.1 (48.4 in September ), 8-month low
  • Flash France Manufacturing Output Index falls to 47.6 (48.4 in September ), 2-month low
  • Flash France Manufacturing PMI falls to 47.3 (48.8 in September), 2-month low

Summary:  Faster declines in output were recorded in both the services and manufacturing sectors during October.  Employment in the French private sector fell further in October, extending the current period of contraction to one year.

The Markit Flash Germany PMI shows Output growth maintained as manufacturing strengthens. Key Points:

  • Flash Germany Composite Output Index at 54.3 (54.1 in September), 3-month high.
  • Flash Germany Services Activity Index at 54.8 (55.7 in September), 4-month low.
  • Flash Germany Manufacturing PMI at 51.8 (49.9 in September), 3-month high.
  • Flash Germany Manufacturing Output 53.3 (51.0 in September), 3-month high.

The seasonally adjusted Markit Flash Germany Composite Output Index rose marginally from September’s 54.1 to 54.3 in October, thereby extending the current sequence of private sector output growth to a year-and-a-half.

French unemployment hits new record high - After a slight improvement in August, the number of jobless in France once again increased in September, reaching a new record high of 3.43 million unemployed, government figures revealed Friday. Data from France’s labor ministry showed unemployment rose by 0.6 percent last month, after the modest 0.3 rise it experienced in August. “Let’s be honest, we are failing,” French Labor Minister François Rebsamen told Le Parisien newspaper on Friday in an unusually candid acknowledgement of France's massive unemployment problem. The figures were published amid declarations by Prime Minister Manuel Valls which suggested the government may seek reforms to the country’s unemployment benefits and work contracts’ system. In a recent interview in French weekly Les Obs, Valls said he thought France should consider revising existing long-term and short-term contracts in order to merge the two into a single contract system opposed by unions. Speaking from Brussels at the end of a European Council meeting on Friday, President François Hollande said unemployment could not be checked in a sustainable way unless “economic growth returns in Europe.”

 

Italy’s $2.6 Trillion Debt Giving Spanish Bonds the Edge -  Italy is paying the price for having the euro area’s third-largest debt load with the rate investors charge to lend it money at the highest in more than two years relative to Spain. While a selloff in euro-area bonds last week rekindled memories of the sovereign-debt crisis, the pain was being felt more keenly in Rome than Madrid. Traders judged that Italy’s bigger debt burden made it more vulnerable in a potential recession as the region’s economy falters. Exaggerating the difference is Spain’s outlook. Since emerging from a six-year slump, it has become one of the fastest-growing economies in the euro currency bloc. Italy is mired in a contraction; this month it cut its growth forecast while Spain’s Cabinet in September approved a budget based on higher growth estimates. Story: Banks Play It Safe by Increasing Their Government Debt Holdings “The Italian debt dynamics are poor and would get worse remarkably quickly” if the euro area slides into a recession, said Andrew Milligan, head of global strategy at Standard Life Investments Ltd., which manages about $315 billion in assets. “People are giving Spain the benefit of the doubt because the economy is starting to grow.”

Crisis: Greece; tax debts to State exceed 70 billion euros -Tax debts owed to the Greek state reached a new high in September, amounting to 70.16 billion euros. Total tax debt in August was 69.24 billion. Many Greek households are struggling to remain consistent with their payments. Statistics show that new debts are accumulated monthly. In September 2014 alone, 923 million euros were added to the debt total. According to a Kathimerini report citing figures from the General Secretariat of Public Revenue, new debts in the period January-September 2014 amounted to 9.68 billion euros. By the end of 2013, Greeks owed 60.48 billion to the state. Regarding tax collection, in the first nine months of 2014, the public revenues department received 2.69 billion euros in arrears. The target set by the troika was the collection of 2 billion euros from outstanding debts by the end of the year and 25 percent of all new debts. By those measures, the Greek government fell slightly short of projections.

Greece: Deficit would be just 1.8% without the "support" to banks!: Another official source, Eurostat this time, confirms that the banks in Greece received billions in bailout packages, leading to the unprecedented enlargement of the national deficit. Of the total 12.2% of GDP revised deficit, 10.4% is due to recapitalization of the banks! “Greece had a smaller than previously reported budget deficit last year, the European Union's statistics office said on Tuesday, as it recalculated data under a new accounting system.” “Eurostat said that Greece had an overall budget deficit of 12.2 percent of gross domestic product in 2013 rather than the 12.7 percent under the old accounting system.” “Of that number, 10.4 percent of GDP is accounted for by money set aside to recapitalise the Greek banking sector, Eurostat said, so the actual government deficit was revised down to 1.8 percent from 2.3 percent under the old accounting system.”  According a previous report by the Hellenic Statistical Authority, 10.6% of the deficit in 2013 is due to the support to banks! Which means that the deficit would be only 2.1% without this support!

Pope Francis allows Sistine Chapel to be rented out for private corporate event -  Pope Francis has for the first time allowed the Sistine Chapel to be rented out for a private corporate event, with the proceeds to go to charities working with the poor and homeless. The concert, to be performed amid the splendour of Michelangelo's frescoes on Saturday, will be attended by a select group of about 40 high-paying tourists who have signed up to an exclusive tour of Italy organised by Porsche. But as the unprecedented deal was announced, the Vatican announced that it would limit the number of visitors allowed inside the chapel to the current total of six million, amid fears that the frescoes are being damaged by the breath and sweat of so many tourists. The Vatican would not divulge how much it will earn from the event, but the five-day tour of Rome arranged by the Porsche Travel Club costs up to 5,000 euros per head, meaning an overall price of 200,000 euros. Participants are promised "a magnificent concert in the Sistine Chapel, with its ceiling frescoes painted by Michelangelo".

Ireland Considers 6.25 Percent Tax Rate on Intellectual Property - The Irish Times reports that the Irish government is considering a 6.25 percent tax rate on intellectual property: “Irish officials are examining the feasibility of a 6.25 per cent rate on a new corporate tax scheme as the Government moves to shore up inward investment after its decision to scrap the controversial 'Double Irish' mechanism.“While this is one of several options under discussion, such a rate would apply to a new ‘knowledge box’ scheme in which a preferential rate would be levied on assets such as patents which are managed from Ireland and located here.” The Irish Finance Minister Michael Noonan first made the suggestion of a “Knowledge Development Box” in his budget speech on October 14 of this year and stated, “This intellectual property offering will be a key element in attracting future foreign direct investment in Ireland.”

EU tells Britain to pay extra €2.1bn - FT.com: Britain has been told to pay an extra €2.1bn to the EU budget within weeks because of its relative prosperity, a hefty surcharge that will further add to David Cameron’s domestic woes over Europe. To compensate for its economy performing better than other EU countries since 1995, the UK will have to make a top-up payment on December 1 representing almost a fifth of the country’s net contribution last year. France, meanwhile, will receive a €1bn rebate, according to Brussels calculations seen by the Financial  The one-off bill will infuriate eurosceptic MPs at an awkward moment for the prime minister, who is wrestling with strong anti-EU currents in British politics that are buffeting his party and prompting a rethink of the UK’s place in Europe. Mr Cameron is determined to challenge the additional fee and on Thursday night met Mark Rutte, the Netherlands premier, to discuss the issue. His country is also being required to make a top-up payment, although it is smaller than the UK’s at €642m. Under the rules, Greece will be required to pay €89m, and Cyprus will owe €42m. George Osborne, chancellor, on Friday denounced the decision as having been made by “junior officials” in the “bowels” of the commission. Interviewed on Sky News, he said that once he had learned of it, Mr Cameron was “immediately” on the phone to other European prime ministers presented with demands who were “similarly surprised”. “It speaks to the wider complaint about Europe,” he said of the process. “It’s relationship with Britain is not right at the moment.”

Social mobility in a dystopia -  I have long been sceptical of the feasibility and desireability of social mobility. Today's  report though, makes me wonder: is social mobility an out-dated idea? To see my point, imagine two different societies. One is a bourgeois society, comprising a mass affluent middle class alongside some poverty. The other is a winner-take-all society in which the 1% enjoy huge incomes whilst the 99% just get by. Now, the Milburn Commission's recommendations make sense for a bourgeois society. Improving the educational opportunities of the poor and their pathways into work would increase their chances of entering the legions of mass affluent.But I'm not so sure they make so much sense for a winner-take-all society. In such a society social mobility will, by definition, be limited: only 1% of people can be in the top 1%. And whilst better education might increase one's chances of entering the 1%, it does so in the same way a lottery ticket increases your chances of becoming a millionaire: without it, you have no chance and with it only a slim one.More likely, in this society, a degree would only equip you for some type of poorly paid or poor quality job.  And it might even accelerate the degradation of previously middle-class jobs by increasing the supply of graduates faster than the demand for them.

UK GDP climbs 0.7% in Q3 as expected: The UK economy continued to outperform Continental Europe in the third quarter, according to the 'advance' report by the UK Office for National Statistics. The economy rose 0.7% q/q as expected - down from 0.9% in Q2 - which translates into year-on-year growth of 3%. Economic output is now 3.4% higher than before the global recession and up 10% from the bottom in Q2'2009. I expect the UK economy to cool somewhat in the coming quarters and consumption growth eases and house price growth moderates.

Don’t Blame Central Banks for Wealth Gap -  A senior Bank of England official Thursday pushed back against critics who claim central bank policies only benefit the wealthy. Those critics say ultralow interest rates and central-bank asset purchases have fueled a surge in asset prices without spurring durable economic growth, benefiting the rich yet doing little for the wider economy.Ben Broadbent, the U.K. central bank’s deputy governor for monetary policy, said in a speech to the Society of Business Economists in London that the actions of central banks aren’t sufficient to explain the low level of interest rates across much of the developed world and nor are they sufficient to explain the behavior of prices for assets including stocks and bonds. His remarks add to a lively debate over the wisdom of central banks’ crisis-fighting measures and also highlight a renewed focus in policy circles over widening disparities in wealth and income. “I read a lot of economic commentary that says interest rates are low because central banks have chosen to keep policy rates low and that this has pushed up the price of risky assets, benefiting only those who happen to already own them. I’m not sure either of these is true,” Mr. Broadbent said, according to a text of his remarks.