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

Saturday, October 31, 2015

week ending Oct 31

Betting Against a Fed Rate Rise - WSJ: The global economy’s troubles are casting a long shadow over this week’s Federal Reserve meeting. In the past week, China posted its softest gross-domestic-product growth since the financial crisis, Japan reported a sharp decline in export growth and European forecasters cut their projections for eurozone inflation. The developments, together with mixed U.S. economic data in recent months, increase the likelihood the Fed will keep interest rates near zero for the rest of 2015, according to analysts and traders. The slowdown and expansive central-bank policy overseas are likely to keep U.S. long-term interest rates down while at least initially fueling purchases of riskier assets such as stocks, corporate bonds and commodities, they said. While Fed officials have repeatedly said an increase in the federal-funds rate this year isn’t off the table, many analysts believe U.S. policy makers are loath to raise rates too soon. By acting too aggressively, they warn, the central bank risks thwarting an already sluggish economic recovery or rekindling an emerging-markets selloff that rattled investor sentiment this past summer.Even if investors are wrong, their positioning means the Fed runs the risk of a bad reaction if it moves ahead, say money managers and traders. Fed-funds futures, used by investors and traders to place bets on U.S. central-bank policy, on Friday showed an 8% likelihood of a rate increase at the Federal Open Market Committee policy meeting ending Wednesday, according to data from CME Group. The odds Friday were measured at 37% for an increase at the Dec. 15-16 policy meeting, compared with 44% last month. The odds of that were seen above 50% earlier this year.

No Rate Hike --  No rate hike, but door still open for later this year, appears a bit less worried about international conditions, a bit more worried about conditions in the US: Press Release, Release Date: October 28, 2015, For immediate release: To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

FOMC Statement: No Rate Hike  -- Less global concern. Slightly more positive. December still on table. FOMC Statement: Household spending and business fixed investment have been increasing at solid rates in recent months, and the housing sector has improved further; however, net exports have been soft. The pace of job gains slowed and the unemployment rate held steady. Nonetheless, labor market indicators, on balance, show that underutilization of labor resources has diminished since early this year. Inflation has continued to run below the Committee's longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation moved slightly lower; survey-based measures of longer-term inflation expectations have remained stable. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced but is monitoring global economic and financial developments. Inflation is anticipated to remain near its recent low level in the near term but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate. To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate.

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

Fed's zero interest-rate policy stretches into seventh year : The Federal Reserve announced Wednesday afternoon that it would not raise its target for interest rates, pushing its zero rate policy into a seventh year. The central bank also raised expectations for its next meeting in December, saying that it would determine whether it was "appropriate" to raise rates then. December is the earliest investors had expected such a move. Following Wednesday's decision, odds for the Fed to raise rates rose to 50-50, as implied by bond market prices. There have been conflicting sighs about the possibility of a rate hike at the December meeting.Inflation has remained low in recent months, defying Fed members' stated determination to see it rise to their 2 percent target. There are also enough threats facing the economy, especially from slowing growth overseas, to cause doubt about whether the economy will heat up enough to send inflation upward if the Fed tightens the money supply. Earlier this month, two of Chairwoman Janet Yellen's colleagues on the Fed's Board of Governors warned that they don't see the economy as strong enough to raise rates this year, especially given the risks to the U.S. posed by slowing growth in China and elsewhere overseas. Wednesday's announcement, however, downplayed the possibility of global pressures slowing U.S. growth. The announcement excised a reference to overseas threats included in September's announcement, although it did say that members would be watching growth abroad.

The possibility of a 2015 rate hike in the US should not be ignored -- Futures-implied probability of a 2015 rate hike in the United States remains below 40%. Some market participants have all but dismissed this possibility as they look at weak global growth as well as soft inflation and inflation expectations in the US. Some have even suggested that the next policy move by the Fed should be a rate cut into negative territory. However global growth and US inflation expectations may not necessarily the main focus at the Fed. For example, numerous economists continue viewing the energy market crash as having only a transient impact in inflation. The logic here is that if we freeze crude oil prices at current levels (below $45/bbl), by early 2016 the year-on-year change will be around zero.  And a number of analysts expect crude oil prices to begin gradually rising going forward. To many forecasters this would imply that crude oil price weakness will no longer have such a severe impact on the rate of inflation. Of course some would say that low fuel prices have not yet fully made their way through the economy - suggesting that the disinflationary pressures will persist for some time. Similarly some argue that the full effects of the dollar rally in the first half of 2015 are yet to be fully felt.  Nevertheless many economists view the headline inflation approaching the core measures by early 2016, with the core CPI turning higher as well. Moreover, a slew of recent US economic reports suggests that while the US economy probably slowed in the second half due to dollar strength and weakness abroad, the effect may be transient. The housing market for example continues to recover and consumer sentiment and spending does not seem to be impacted by the recent market volatility.

Fed Watch: December Still Very Much A Live Meeting -  One of two things is going to happen. Either the US economy is or will soon be slowing on the back of already tighter financial conditions. Or the US economy will soon be slowing on the back of future tighter financial conditions as directed by the Federal Reserve.  In a worst case scenario, both of these things will happen.  And the odds of both of these things happening seems higher after this week's FOMC meeting. Rather than being a nonevent as expected, it was actually quite exciting. We learned that the majority of the FOMC remains wedded to the idea of a December rate hike. That was made very clear with this sentence: In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. That was a fairly clear warning that December is really, really in play. No, really this time. They mean it. After all, a number of them are on record repeatedly saying that they expect to hike interest rates this year. It also seems as if Federal Reserve Governors Lael Brainard and Daniel Tarullo were schooled hard this week. They argued publicly that they did not see reason to raise rates this year. I doubt they changed their opinions - at least not privately. But they very clearly did not change any opinions on the FOMC. Indeed, one wonders if they only hardened their colleagues positions on a rate hike this year. Regardless, note what key line was removed from the September statement: Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term. Downplaying these concerns appears to be an effort to cut the knees out from under Brainard. To be sure, US markets rebounded, but have we seen much in the last six weeks to so quickly remove global concerns? I am wary to believe so with data like these: CRB spot raw industrial price index set new 6 year low this week.

Fed puts December rate hike firmly on the agenda | Reuters: The U.S. Federal Reserve kept interest rates unchanged on Wednesday and in a direct reference to its next policy meeting put a December rate hike firmly in play. Investors had expected the Fed to remain pat on rates, but the overt reference to December came as a surprise. The central bank also downplayed recent global financial market turmoil and said the U.S. labor market was still healing despite a slower pace of job growth. "In determining whether it will be appropriate to raise the target range at its next meeting, the committee will assess progress - both realized and expected - toward its objectives of maximum employment and 2 percent inflation," the Fed said in a statement after its latest two-day policy meeting. Investors quickly placed bets reflecting a higher chance the U.S. central bank will raise rates in December, with futures contracts implying a 43 percent possibility compared to 34 percent prior to the statement. "The Fed is seriously considering a December rate hike," said Harm Bandholz, an economist at UniCredit in New York. Going into the Fed meeting this week, the market had viewed March as the most likely time for the central bank to begin its rates "liftoff," but it now sees a greater chance of that happening in late January.

The 57-Year-Old Chart That Is Dividing the Fed - That would be the Phillips curve, one of the most important concepts in macroeconomics. It shows how inflation changes when unemployment changes and vice versa. The intuition is simple: When joblessness is low, employers have to pay ever higher wages to attract workers, which feeds through into higher prices more broadly. And inflation is particularly prone to rise when the unemployment rate falls below the “natural rate” at which pretty much everybody who wants a job either has one or can find one quickly. As the Fed’s chairwoman, Janet L. Yellen, put it in a 2007 speech, the Phillips curve “is a core component of every realistic macroeconomic model.”   Except it hasn’t worked very well in the last few decades in the United States. And it has proved particularly problematic to try to use that historical relationship to predict where inflation is going.  Ms. Yellen and many of her Fed colleagues have indicated that they think they should raise interest rates this year, in part because the Phillips curve suggests there will be excessive inflation if they don’t. The unemployment rate was 5.1 percent in September, just a smidgen above the 4.9 percent that Fed leaders believe is the appropriate jobless rate in the longer run.In other words, if you believe in the traditional Phillips curve, inflation should be taking off any day now.But this month, two Fed governors, Lael Brainard and Daniel K. Tarullo, argued against a rate move. Ms. Brainard said that the Phillips curve relationship was “at best, very weak at the moment.” Mr. Tarullo said that it was “probably wise not to be counting so much on past correlations, things like the Phillips curve, which haven’t been working effectively for 10 years now.”

Market Forces Challenge the Fed’s Power Over Rates - Surging levels of cash in U.S. money markets threaten to undermine the Federal Reserve’s control over short-term interest rates, some market participants said, citing forces in an obscure corner of the markets that could complicate a move to tighten monetary policy. The Fed’s benchmark federal-funds effective rate, the daily average rate charged on overnight loans between banks, has fallen sharply at the ends of recent months. It has fallen around recent month-ends to just above the 0.05% rate or “floor” the central bank has tried to set as it prepares to raise short-term interest rates for the first time since 2006. The declines have been caused by financial institutions boosting their holdings of cash ahead of financial-reporting deadlines, reducing demand for loans in the fed-funds market. The fed-funds rate fell to 0.07% on Sept. 30 and to 0.08% on Aug. 31, below its 0.13% average for the year, Fed data show. At least one transaction on Sept. 30 took place as low as 0.02%. The declines underscore the challenges the Fed could face when it eventually raises rates in markets that have experienced dramatic changes since the financial crisis. If the central bank can’t manage interest rates effectively, it would lose control of a key lever that shapes economic and financial activity.

Quantitative Easing & the Nightmare It Has Created | Armstrong Economics: While so many people claimed that Quantitative Easing (QE) would produce inflation since it was the creation of money, the truth is very far from this simplistic idea. The theory used by the central banks is seriously flawed and a throwback to ancient times before 1971. There used to be a difference between debt and cash where you could not use debt as cash to borrow on. Then it was less inflationary to borrow than to print, but that changed post-1971. If you want to trade today, you post T-bills as cash. The REPO market has emerged where AAA securities can be borrowed against for the night. Therefore, buying in bonds to inject cash into the system under the old way of running the monetary system pre-1971 made sense. Today, it is proving to be a fool’s game. Why? This is merely swapping debt for cash; the REAL money supply has not increased when the true definition of the base in money supply is debt + cash. Then you add the leverage from banking.  So what does this new reality mean? Under QE, the central banks are the bidders supporting the market in the same stupid manner as attempting to peg a currency. The ECB under Draghai has lost its mind. They keep increasing the percentage of bonds they buy in hopes of creating inflation, but nothing is working. The bonds will not crash without a free market, but instead, they could become extinct. In order for a crash to materialize, there has to be a free market where the private sector bids. But what happens when the private sector has no interest? Oops! Extinction.

OECD Chief Economist: It's Time To "Temper The Frothiness" In Markets -- Excerpted from MarketWatch's Greg Robb's interview with Catherine Mann, a former Fed staffer and current chief economist at The Organisation for Economic Co-operation and Development, who is concerned the Fed is "crying wolf," always threatening a rate hike but not moving. Simply put, The Fed’s inaction is fueling unproductive moves in asset markets, Mann said. ...we argued that September would have been a good idea because it would have put behind us and behind the emerging markets and behind the markets, the timing of the first move. ...Now going forward, we continue to have uncertainty about global trade,about the magnitude of global trade — it is quite low compared to global GDP— but this is something that the U.S. economy has been dealing with for a while. That is not new. Commodity prices? Again this is not new. We’ve been dealing with this for a while.... What is a new dimension between September and October is, that unfortunately, there is a lot of speculative capital that had been repositioning itself all summer for the expectation of a September hike.Now, since that didn’t happen, all that capital starts running back to where it was before, creating some problems in emerging markets with basically the most speculative money going for six weeks more of higher yields. So that is the unfortunate new aspect, I think, of where the global economy is. And that, again, would suggest that the best thing to do is to take the first move off the table by doing it, and then being very clear about the shallow slope of the trajectory of interest rates going forward.

IIF Warns Household Wealth Gains Will Disappear Unless Fed Normalizes Rates Soon  -  "Easy policy has passed the point of diminishing return and keeping it longer would only increase moral hazard and distort financial markets," exclaims the Institute of International Finance, warning that the gap between the value of Americans' holdings of stocks, bonds and other financial assets and the trend growth rate of the economy is still large and not far off the level that prevailed in 2007 before the financial crisis. "The Fed should start to normalize policy as soon as possible," removing the excess as the 'gap' "typically ends up being narrowed by a correction in the stock market." As Bloomberg details, household financial assets have ballooned, far outstripping the growth of the economy since 2013, as the Federal Reserve's ultra-easy monetary policy fuels excesses in the markets... That's the message from a measure compiled by the Institute of International Finance (which represents close to 500 banks and financial services companies worldwide) which compares the rise in the value of Americans' holdings of stocks, bonds and other financial assets to the trend growth rate of the economy. While the gap between the two has narrowed in recent months as the bull market in equities has stalled, it is still large and not far off the level that prevailed in 2007 before the financial crisis. Hung Tran, an executive managing director at the institute, said the inflated level of asset prices is one reason the Fed needs to begin raising interest rates from the near-zero levels that have prevailed since 2008."The Fed should start to normalize policy as soon as possible—meaning liftoff this year," he said. "Easy policy has passed the point of diminishing return and keeping it longer would only increase moral hazard and distort financial markets."

Something Happened -- Kunstler - Ben Bernanke’s memoir is out and the chatter about it inevitably turns to the sickening moments in September 2008 when “the world economy came very close to collapse.” Easy to say, but how many people know what that means? It’s every bit as opaque as the operations of the Federal Reserve itself. There were many ugly facets to the problem but they all boiled down to global insolvency — too many promises to pay that could not be met. The promises, of course, were quite hollow. They accumulated over the decades-long process, largely self-organized and emergent, of the so-called global economy arranging itself. All the financial arrangements depended on trust and good faith, especially of the authorities who managed the world’s “reserve currency,” the US dollar. By the fall of 2008, it was clear that these authorities, in particular the US Federal Reserve, had failed spectacularly in regulating the operations of capital markets. With events such as the collapse of Lehman and the rescue of Fannie Mae and Freddie Mac, it also became clear that much of the collateral ostensibly backing up the US banking system was worthless, especially instruments based on mortgages. Hence, the trust and good faith vested in the issuer of the world’s reserve currency was revealed as worthless. The great triumph of Ben Bernanke was to engineer a fix that rendered trust and good faith irrelevant. That was largely accomplished, in concert with the executive branch of the government, by failing to prosecute banking crime, in particular the issuance of fraudulent securities built out of worthless mortgages. In effect, Mr. Bernanke (and Barack Obama’s Department of Justice), decided that the rule of law was no longer needed for the system to operate. In fact, the rule of law only hampered it.

QE, The Anti-Veg-O-Matic - Paul Krugman - In his interview with Martin Wolf, Ben Bernanke expresses exasperation with claims that quantitative easing is a giveaway to the rich (at the same time that it hurts savers — go figure): This is the fourth or fifth argument against quantitative easing after all the other ones have been proven to be wrong.   It is, indeed, kind of amazing. In the eyes of critics, QE is the anti-Veg-O-Matic: it does everything bad, slicing and dicing and pureeing all good things. It’s inflationary; well, maybe not, but it undermines credibility; well, maybe not but it it causes excessive risk-taking; well, maybe not but it discourages business investment, which I think is a new one.  Brad DeLong spends what may be too much time on the latest; it’s an argument that doesn’t make any sense, deployed to explain something that isn’t happening (business investment isn’t any lower than you’d expect given the relatively slow recovery). I’m not surprised to see Kevin Warsh going down this road: he’s both a permahawk, who used to warn about inflation but simply changed arguments when the inflation failed to materialize. When Brad complains that there is no coherent argument offered in the article — not a bad argument, but no argument at all — it’s pretty much what one might have expected from Warsh. 

The PCE Price Index Down from August -- The Personal Income and Outlays report for September was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index year-over-year (YoY) rate is 0.16%, down from the previous month's 0.32%. The latest Core PCE index (less Food and Energy) at 1.31% is unchanged from the previous month. The general disinflationary trend in core PCE (the blue line in the charts below) must be perplexing to the Fed. After years of ZIRP and waves of QE, this closely watched indicator consistently moved in the wrong direction. Since Early 2013, Core PCE Price Index has hovered in a narrow YoY range around 1.5%. For six months beginning in April 2014 it rose to a plateau slightly above the range has since dropped to a lower range around the 1.3% level. The adjacent thumbnail gives us a close-up of the trend in YoY Core PCE since January 2012. The first string of red data points highlights the 12 consecutive months when Core PCE hovered in a narrow range around its interim low. The second string highlights the lower range of the past eleven months. The first chart below shows the monthly year-over-year change in the personal consumption expenditures (PCE) price index since 2000. Also included is an overlay of the Core PCE (less Food and Energy) price index, which is Fed's preferred indicator for gauging inflation. The two percent benchmark is the Fed's conventional target for core inflation. However, the December 2012 FOMC meeting raised the inflation ceiling to 2.5% for the next year or two while their accommodative measures (low FFR and quantitative easing) are in place. The most recent FOMC statement now refers only to the two percent target.

3Q15 GDP Forecast Drops Again! Down To 0.8 Percent --  -- The GDPNow model (a dynamic link) nowcast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 is 0.8 percent on October 27, down from 0.9 percent on October 20.  The model's nowcast for the contribution of inventory investment to third-quarter real GDP growth declined from -1.9 percentage points to -2.0 percentage points after this morning's report on durable goods manufacturing from the U.S. Census Bureau. The final nowcast for third-quarter GDP will be released tomorrow after the Census Bureau releases its advance report on U.S. international trade in goods.  This only adds to the story with this headline: Rate hikers at the Fed are running out of ammoThe conditions add up to a headache for the Fed during a year in which Chair Janet Yellen and her top lieutenants repeatedly have expressed a desire to begin the rate normalization process. The first hike was supposed to happen in March, which would have been five months after the Fed ended its quantitative easing program, a series of monthly bond purchases that exploded the central bank's balance sheet past $4.5 trillion.  Now, the target again appears to be March, but in 2016. Traders at the CME assign just a 1 in 20 chance that the FOMC will announce a hike on Wednesday. The outlook has dimmed so much that traders say there's a 16 percent probability the Fed will still hold steady next September.

Atlanta Fed: The Crowd’s Q3 GDP Expectations Are Too High -- Expectations are in need of a haircut for tomorrow’s preliminary release of the government’s third-quarter US GDP report, according to yesterday’s update of the Atlanta Fed’s unofficial estimate. In contrast with’s consensus forecast for a 1.7% rise in Q3 output, yesterday’s update of the unofficial GDPNow model forecast sees Q3 growth at a tepid 0.8%, down a tick from the bank’s Oct. 20 nowcast of 0.9% and far below Q2’s strong 3.9% rise. The Atlanta Fed advises: “The model’s nowcast for the contribution of inventory investment to third-quarter real GDP growth declined from -1.9 percentage points to -2.0 percentage points after [yesterday’s disappointing] report on durable goods manufacturing from the U.S. Census Bureau.

US economy slowed to 1.5 pct. growth rate in third quarter - US News: (AP) — The U.S. economy slowed sharply in the summer, reflecting a cutback in businesses' stockpiling of goods, which offset solid consumer spending. But most economists think growth has been strengthening since the July-September quarter ended. The Commerce Department said Thursday that the economy, as measured by the gross domestic product, grew at a tepid annual rate of 1.5 percent in the July-September quarter, far below the 3.9 percent rate of the previous quarter. The biggest reason was a push by businesses to shrink unwanted stockpiles, which slashed 1.4 percentage points from quarterly growth but is expected to be only temporary. Encouragingly for the economy, consumer spending remained solid over the summer: It rose at a 3.2 percent annual rate, down only slightly from the previous quarter. And most analysts have said they think businesses are stepping up their stockpiling this quarter in response to the continued gains in consumer spending. Many predict that growth in the October-December quarter will rebound to around a 2.5 percent annual rate. Ian Shepherdson, chief economist at Pantheon Macroeconomics, said that excluding the drag from scaled-back inventory rebuilding, Thursday's report was "solid." Noting the consistent strength in consumer spending, Shepherdson said he thinks the current quarter's annual growth rate could reach 3 percent.

Q3 GDP Advance Estimate at 1.5%, A Big Decline from Q2's 3.9% -- The Advance Estimate for Q3 GDP, to one decimal, came in at 1.5 percent, a sharp decline from 3.9 percent in Q2. Today's number was a bit below most mainstream estimates, with and both forecasting 1.6 percent. However, the Atlanta Fed's latest GDPNow forecast, as of yesterday, was for a lower 1.1 percent. Here is an excerpt from the Bureau of Economic Analysis news release: Real gross domestic product -- the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes -- increased at an annual rate of 1.5 percent in the third quarter of 2015, according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 3.9 percent.  The Bureau emphasized that the third-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 2 and "Comparisons of Revisions to GDP" on page 4). The "second" estimate for the third quarter, based on more complete data, will be released on November 24, 2015.  The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), state and local government spending, nonresidential fixed investment, exports, and residential fixed investment that were partly offset by negative contributions from private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased. Real GDP increased 1.5 percent in the third quarter, after increasing 3.9 percent in the second. The deceleration in real GDP in the third quarter primarily reflected a downturn in private inventory investment and decelerations in exports, in nonresidential fixed investment, in PCE, in state and local government spending, and in residential fixed investment that were partly offset by a deceleration in imports. [Full Release]

Q3 GDP A Not So Hot 1.5% - The initial Q3 GDP estimate is a not very enticing 1.5%.  Consumer spending was still relatively healthy but the contraction in inventories eradicated 1.44 points of economic growth.  Imports and exports somewhat negated each other.  Government contributed a small amount of growth to GDP.  As a reminder, GDP is made up of: Y = C + I + G + (X-M) where Y=GDP, C=Consumption, I=Investment, G=Government Spending, (X-M)=Net Exports, X=Exports, M=Imports*.  GDP in this overview, unless explicitly stated otherwise, refers to real GDP.  Real GDP is in chained 2009 dollars. The below table shows the GDP component comparison in percentage point spread from Q3 to Q2.   Consumer spending, C was fairly healthy with a 2.12 percentage point increase, although not as strong as Q2. Below is a percentage change graph in real consumer spending going back to 2000.Goods contributed 0.99 percentage points to GDP and within goods, durables was 0.48 percentage points. Services was a 1.20 percentage point contribution. Graphed below is PCE with the quarterly annualized percentage change breakdown of durable goods (red or bright red), nondurable goods (blue) versus services (maroon). Imports and Exports, M & X were nil, a -0.3 percent point contribution. Trade activity looks halved but this is the advance GDP estimate. Actual trade data hasn't come in yet and imports are almost always revised upward.Government spending, G contributed 0.30 percentage points to Q3 GDP with almost all of it, 0.29 percentage points, contributed by state and local governments spending and investment. Investment, I is made up of fixed investment and changes to private inventories. The change in private inventories alone was a horrific -1.44 percentage point contribution. Below are the change in real private inventories and the next graph is the change in that value from the previous quarter.

Advance Estimate 3Q2015 GDP Growth at 1.5%. A Significant Slowing of Economic Growth.: The advance estimate of third quarter 2015 Real Gross Domestic Product (GDP) is a positive 1.5 %. This is a significant decline from the previous quarter's 3.9 % if one looks at quarter-over-quarter headline growth. However, year-over-year growth declined so one could say economic growth was mixed. There are significant "buts" relative to this advance GDP estimate (see below). The major reasons for the decline in GDP growth were personal consumption for goods, fixed investment, and inventories. One must consider:

  • This advance estimate released today is based on source data that are incomplete or subject to further revision. (See caveats below.) Please note that historically advance estimates have turned out to be little more than wild guesses.
  • Headline GDP is calculated by annualizing one quarter's data against the previous quarters data (and the previous quarter was relatively strong in this instance). A better method would be to look at growth compared to the same quarter one year ago. For 3Q2015, the year-over-year growth is 2.0 % - significantly down from 2Q2015's 2.7 % year-over-year growth. So one might say that GDP decelerated 0.7% from the previous quarter.
  • Change in inventories significantly affected GDP this quarter.

The table below compares the 2Q2015 third estimate of GDP (Table 1.1.2) with the advance estimate of 3Q2015 GDP which shows:

  • consumption for goods and services declined.
  • trade balance degraded
  • there was significant inventory change removing 1.4% from GDP
  • there was slower fixed investment growth
  • there was little change in government spending

Growth Falls Off Sharply in Third Quarter - Dean Baker - The economy grew at a 1.5 percent annual rate in the third quarter, a sharp slowing from the 3.9 percent rate reported for the second quarter. The falloff was largely due to slower inventory growth. Inventories subtracted 1.44 percentage points from the growth rate in the quarter after adding 0.02 percentage points in the second quarter. Final demand for the quarter grew a 3.0 percent annual rate. For the first three quarters of the year GDP has risen at a 2.0 percent annual rate. There were few surprises in the report. Consumption grew at a 3.2 percent rate, driven by a 6.5 percent growth rate in durable good consumption. Non-residential investment grew at a weak 2.1 percent rate. All components of investment were weak, but structures declined at a 4.0 percent rate after rising 6.2 percent in the second quarter. Housing grew at a modest 6.1 percent rate, down from an average of 9.8 percent in the prior three quarters. Exports and imports grew at almost the same rate, having little net effect on growth. Government expenditures grew at a 1.7 percent annual rate, adding 0.3 percentage points to growth. There continues to be no evidence of inflationary pressures in any sector. The core PCE grew at just a 1.2 percent rate in the quarter. The basic story continues to be one of modest growth with very little inflation.

Economic Growth Over The Summer Was Quite Sluggish -- The first estimate of Gross Domestic Product growth for the quarter that ended September 30th shows that the economy grew at a relatively anemic rate, which in part explains why the Federal Reserve Board has held back on raising interest rates: Despite still-healthy spending by consumers, the American economy slowed significantly last quarter, the government said Thursday.  At an annualized rate of 1.5 percent, which was in line with analysts’ expectations, the tempo of growth in July, August and September represents a marked drop from the 3.9 percent pace of expansion in the spring. But the downshift last quarter was mostly caused by slower inventory accumulation, as businesses let stockpiles of goods in warehouses and on store shelves unwind rather than making big additions, as they had done in the first half of 2015. Nonfarm inventories increased at half the rate they did in the second quarter, a reduction that shaved 1.44 percentage points off the overall figure for growth in the third quarter. While the headline rate was lackluster, major components of the economy, including consumer demand and business spending on equipment, held up well in recent months. Consumption rose 3.2 percent last quarter, compared with a 3.6 percent advance in the spring. Residential investment also remained healthy last quarter, a sign that the housing market, after a long period of suffering, is now providing the overall economy with a fresh tailwind. “Outside of the inventory correction, this was a solid report,” said Scott Anderson, chief economist at Bank of the West in San Francisco. “It bolsters the case that we will see a bounce-back in growth,” he added, noting that his firm is looking a growth rate in the current quarter of about 2.5 percent.

Q3 GDP Per Capita at 0.8% for Advance Estimate -- Earlier today we learned that the Advance Estimate for Q3 real GDP came in at 1.5 percent (rounded from 1.49 percent), down significantly from the 3.9 percent of last month's the Third Estimate.  Here is a chart of real GDP per capita growth since 1960. For this analysis we've chained in today's dollar for the inflation adjustment. The per-capita calculation is based on quarterly aggregates of mid-month population estimates by the Bureau of Economic Analysis, which date from 1959 (hence our 1960 starting date for this chart, even though quarterly GDP has is available since 1947). The population data is available in the FRED series POPTHM. The logarithmic vertical axis ensures that the highlighted contractions have the same relative scale. The chart includes an exponential regression through the data using the Excel GROWTH function to give us a sense of the historical trend. The regression illustrates the fact that the trend since the Great Recession has a visibly lower slope than long-term trend. In fact, the current GDP per-capita is 9.9% below the pre-recession trend but fractionally above the -10.1% below trend in Q1 2014.  The real per-capita series gives us a better understanding of the depth and duration of GDP contractions. As we can see, since our 1960 starting point, the recession that began in December 2007 is associated with a deeper trough than previous contractions, which perhaps justifies its nickname as the Great Recession. The standard measure of GDP in the US is expressed as the compounded annual rate of change from one quarter to the next. The current real GDP is 1.5 percent. But with a per-capita adjustment, the data series is currently at 0.8 percent (0.81 percent to two decimal places). The 10-year moving average illustrates that US economic growth has slowed dramatically since the last recession.

Q3 GDP Misses Expectations, Tumbles To 1.5% On Sliding Inventories - The long awaited inventory correction is finally arriving. Moments ago the BEA reported preliminary Q3 GDP, which at 1.49%, missed both sellside consensus expectations of 1.6%, and tumbled from the 3.9% reported in the second quarter as the quarterly volatility continues at an unprecedented pace. This was the second lowest quarterly GDP print since Q1 2014 excluding the "double seasonal adjustment" meant to cover up the collapse in Q1 2015 GDP. The component breakdown reveals that virtually every component of GDP was weaker, starting with Personal Consumption expenditures which dropped from 3.6% to 3.2%, missing expectations of 3.3% as a result PCE contributed 2.19% to the bottom line GDP number, down from 2.42% last quarter. Once again the biggest contributor to spending growth was healthcare expenses. Fixed investment - something the Fed was bullishly touting in its statement yesterday, also tumbled and added just 0.47% to GDP down from 0.83%. Net trade also detracted modestly from growth after a small contribution in Q2, and even government spending dropped, adding 0.3% to GDP, down from 0.46%.But the biggest factor for the drop in GDP was what we had been warning for a while, namely inventories, which tumbled from a boost of 0.02% in Q2 to a negative 1.44% in Q3 - the biggest drop since Q4 2012, as the nominal contribution from inventories slid from $127.5 billion to just $62.2 billion. While this may seem like an inventory normalization, it was still an addition to GDP - recall that during the financial crisis, Inventories subtracted a whopping $718 billion from GDP over 8 consecutive quarters. At some point, that same liquidation cycle which can only be delayed so long, will take place once again.

3rd Quarter Advance GDP Estimate +1.5%; December Hike Odds Up to 46.5% --  The third quarter advance (initial) GDP estimate came in at 1.5% a bit under the Econoday Consensus of 1.7%, a bit over the Atlanta Fed GDPNow Forecast of 1.%, and well below the Blue Chip consensus of 2.1%.  Steady domestic spending helped to prop up GDP growth in the third-quarter which came in at an annualized 1.5 percent, just shy of expectations. Final sales rose a very respectable 3.0 percent in the quarter in a gain that points to underlying momentum for the fourth quarter. Both residential and nonresidential investment slowed in the third quarter with both net exports and especially inventories also pulling down GDP. The price index came in a little lower than expected at plus 1.2 percent. Personal consumption expenditures slowed 4 tenths but are still a major highlight at a plus 3.2 percent rate. Service spending, an area insulated from global factors, continues to show solid resilience. But it was spending on durables, including vehicles, that was the strongest consumer category in the quarter. Government purchases, another area of domestic-centered spending, also contributed to the quarter's growth. The quarter's 1.5 percent rate is only 2 tenths lower than the average growth of the prior four quarters and comes against a difficult 3.9 percent comparison in the second quarter. Not a great result but not bad either.

U.S. economy keeps growing - The Bureau of Economic Analysis announced yesterday that U.S. real GDP grew at a 1.5% annual rate in the third quarter. Although the headline number sounds disappointing, the underlying fundamentals look solid. It was encouraging that housing, nonresidential investment, and the government sector all made positive contributions. The one negative was a drawdown in inventories (goods sold but not produced during the quarter). Leaving inventories out, real final sales grew at a healthy 3% annual rate. With the BEA now estimating that real GDP grew in the second quarter at a 3.9% annual rate, the latest reading for the Econbrowser Recession Indicator Index eased down to 5.6%, unambiguously signaling an ongoing economic expansion. The index uses yesterday’s data release to form a picture of where the economy stood as of the end of 2015:Q2.

Q3 GDP: Investment  - The graph below shows the contribution to GDP from residential investment, equipment and software, and nonresidential structures (3 quarter trailing average). This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.  In the graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. So the usual pattern - both into and out of recessions is - red, green, blue. The dashed gray line is the contribution from the change in private inventories. .Residential investment (RI) increased at a 6.1% annual rate in Q3.  Equipment investment increased at a 5.3% annual rate, and investment in non-residential structures decreased at a 4.0% annual rate.   On a 3 quarter trailing average basis, RI (red) and equipment (green) are both positive, and nonresidential structures (blue) is slightly negative.  Nonresidential investment in structures typically lags the recovery, however investment in energy and power provided a boost early in this recovery - and is now causing a slight decline.  Other areas of nonresidential are now increasing significantly. 

And The Biggest "Contributor" To Q3 GDP Was...If you said "the Supreme Court-approved tax that is Obamacare", then give yourself a pat on the back. As we broke down earlier, Q1 GDP rose at a disappointing 1.5% CAGR, rising to $16.394 trillion in chained dollars, an increase of $61 billion, and a modest annual increase of just 2% compared to Q3 2014, the lowest Y/Y increase since the 1.7% recorded in Q1 2014. Yet with most components disappointing, growth had to come from somewhere. So where did it come from? The answer: of the $60.6 billion annualized increase, the biggest contributor came from one specific spending category which accounted for $18.2 billion of this, or 30% of the total. That "category" is highlighted in the chart below. And so, for the 5th consecutive quarter, Obamacare once again comes to the "rescue" of the US economy. Now if only all other taxes could be added as GDP growth line items, then the US economy would be well and truly flying.

Q3 2015 GDP Details on Residential and Commercial Real Estate  The BEA released the underlying details for the Q3 advance GDP report today.  Yesterday, the BEA reported that investment in non-residential structures decreased slightly in Q3.  The decline was due to less investment in petroleum exploration. Investment in petroleum and natural gas exploration declined from a $88.6 billion annual rate in Q2 to a $75.0 billion annual rate in Q3.  "Mining exploration, shafts, and wells" investment is down 49% year-over-year. Excluding petroleum, non-residential investment in structures increased solidly in Q3. The first graph shows investment in offices, malls and lodging as a percent of GDP. Office, mall and lodging investment has increased a little recently, but from a very low level. Investment in offices increased in Q3, and is up 24% year-over-year -increasing from a very low level - and is still near the lows for previous recessions (as percent of GDP). . Investment in multimerchandise shopping structures (malls) peaked in 2007 and is up slightly year-over-year. The vacancy rate for malls is still very high, so investment will probably stay low for some time. Lodging investment increased further in Q3, and with the hotel occupancy rate near record levels, it is likely that hotel investment will increase further in the near future. Lodging investment is up 39% year-over-year. The second graph is for Residential investment components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, Brokers’ commissions and other ownership transfer costs, and a few minor categories (dormitories, manufactured homes).

Industrial Production as a share of real GDP: I regularly see people comment about the decline in the importance of industrial production but I never see any data on how much it has declined. Finally, I saw a libertarian blogger talk about as a point in his argument but he also revealed that he had not idea what had happened to industrial production relative to the economy. The Federal Reserve actually publishes the value of industrial production as part of its monthly industrial production report, so it is quite easy to get the raw data to construct a series of industrial production as a share of GDP. It has fallen from 33% of real GDP in 1972 — as far back as the data goes — to 23% currently. The trend is for the share to fall 2.4% annually.

What U.S. Growth Looks Like Without the Government Spending Slowdown -- If the government hadn’t pulled back on spending since 2010, the economy would have grown at near a 3% pace. In that case, economists may have a more rosy assessment of the mostly sluggish expansion. From 2010 through the first half of 2015, year-over-year economic growth was 0.9 percentage point lower, on average, than it would have otherwise been without the government pullback, according to an analysis of Commerce Department data. That negative for the economy’s near-term growth prospects could be easing significantly thanks to a budget deal in Congress that would lift federal spending levels and rising home values that should allow local governments to collect more in property taxes. The drag was most pronounced in 2010 and 2013. It came after federal stimulus spending expired and was replaced by spending cuts. At the same time, state and local governments were feeling the full effect of lower postrecession revenues. The drag lessened somewhat over the past year to about a 0.5 percentage point. That coincides with a federal budget agreement that blunted the impact of automatic spending cuts known as the sequester. The level of government spending has begun to rise again, but it’s still growing at slower pace than the rest of the economy.

Chance of recession highest in two years: Survey: The chance of recession in the next 12 months jumped to a two-year high in the latest CNBC Fed Survey as Wall Street continues to downgrade the outlook for U.S. growth and push out the date for the first Fed rate hike. Respondents to the survey, including economists, fund managers and analysts, see a 22 percent chance of a recession in the next year, up from 19 percent last month and the highest level since the fiscal cliff debate seized Washington and the nation in January 2013. The chance of recession, however, remains well below its all-time high of 36 percent in 2011, but higher than the 13 percent all-time low at the beginning of this year. "The economy is losing momentum in a way that in the past has been consistent with the Fed cutting interest rates, certainly not raising them," Mark Vitner, a senior economist at Wells Fargo, wrote in response to the survey. The median of the 41 respondents sees the first rate in December, compared with September in the prior survey. While about half of the respondents forecast the first rate hike this year, the other half sees it into 2016 and even, for some, as late as 2017. As recently as the September survey, 80 percent were certain of a 2015 hike.

Bernanke: Governments 'too focused on budget cuts' - As the chairman of the US Federal Reserve during the crash and Great Recession, Ben Bernanke is the most influential central banker of our age. So it matters that he says western politicians expected too much of central bankers over the past few years, and that governments were too obsessed with making budget cuts. In an interview with me, he says that the administrations of the US, UK and eurozone over-did austerity, with the consequence that the Fed, Bank of England and European Central Bank were forced to engage in extreme monetary stimulus - cuts in interest rates to almost zero and massive money creation through quantitative easing - that many regard as dangerous. In remarks that will fuel the intense debate between the Labour and Tories in Britain on austerity, he said: "I think politicians have been too focussed on near-term budget cuts in all of these major countries [the US, UK and Europe]". He added: "Way too much of the burden [of engineering recovery] has been placed on central banks… The central banks are trying to use the tools they have to accomplish their objectives. "If you had a more balanced monetary/fiscal mix - and I am talking here about the US, as well as Europe and the UK - the central banks could do less."

Republican leaders struggle to find votes to up debt limit - (AP) — Congressional Republicans say they are short of the necessary votes for raising the debt limit and avoiding a first-ever government default. With barely a week before deadline, there's no plan on what to do.It's a huge problem for House Speaker John Boehner and a potential nightmare for his successor-in-waiting, Rep. Paul Ryan, R-Wis. GOP leaders promised Friday that the House will act next week — just days from a Nov. 3 deadline. Increasing the government's $18.1 trillion borrowing cap so that it can continue to pay its bills in full and on time would prevent a potential meltdown in the financial markets and save the Republican Party from presiding over a default on U.S. obligations. Treasury Secretary Jacob Lew has warned lawmakers that the government's ability to use accounting steps to pay its bills for veterans, Social Security recipients, federal employees and others will run out early next month. "The debt limit will have to be raised, but we've got to do something to deal with it for the future," said Majority Leader Kevin McCarthy, R-Calif. "We've got a lot of ideas cooking." But in the same breath, House GOP leaders warn that they can't summon even minimal support for the kind of debt limit increase demanded by President Barack Obama — one that's free of any concessions to hardline conservatives. They are still holding out hope for some kind of add-on to make the politically toxic vote more palatable. Too bad, say Democrats, who point out that Congress passed a debt-limit increase just last year without add-ons. And all but two of 188 House Democrats have promised to vote for the measure, which means it would only take just 32 out of 247 Republicans to produce a winning vote of the full House.

Moody's Says Failure To Raise Debt Limit Does Not Mean Default As Jack Lew Pleads To "Honor Our Obligations" -- In an op-ed released today in the USA Today, the US Treasury Secretary takes his appeal to raise the U.S. debt target once again, this time to the $19.6 trillion number disclosed here previously, by pointing fingers at "some in Congress" who "are endangering this progress by once again manufacturing a crisis for our country. By waiting to the last minute to act on the debt limit, Congress could cause a terrible accident. This is not an abstraction; failure to raise the debt limit would mean devastating impacts for taxpayers, consumers and businesses." In a report released earlier today, rating agency Moody's (the one that did not downgrade the US in August 2011 and saved itself a lawsuit by Tim Geithner unlike the less lucky S&P), reported that "failure to raise the US government's (Aaa stable) statutory debt limit before the Treasury has exhausted the "extraordinary measures" that it is using to fund the government's spending, does not mean that the US is about to default on its debt, Moody's Investors Service says." As Bloomberg reported, Moody's - like Jack Lew - expects that an agreement to raise the debt limit will be in place before the measures are exhausted, and if not by then, certainly before November 15, when the Treasury is scheduled to make interests payments of $35 billion. "If an agreement is still not in place by this time, the government could delay other expenditures to ensure it has enough cash to pay bondholders." "Even if the debt limit is not raised, we believe the government will order its payment priorities to allow the Treasury to continue servicing its debt obligations," says Moody's Senior Vice President Steven Hess. This is called prioritization, and is something that Jack forgot to mention in his op-ed. Of course, it means that while funding existing U.S. debt obligations, the US government would have to drastically shrink its unlimited spending budget.

Congress, White House make progress on 2-year budget deal - House and Senate Republicans will meet in closed sessions Monday evening, as congressional negotiators and the White House near a two-year budget deal that would boost defense and domestic spending by tens of billions of dollars, and lift the debt ceiling until March 2017. The ambitious accord, which is being negotiated by top House, Senate and White House officials, would boost defense and non-defense spending by $50 billion next year, and $30 billion the year after, split evenly between defense and non-defense programs. Negotiations are fluid, however, and details might change before legislation is filed. Story Continued Below A cap on premium hikes for Medicare Part B beneficiaries — sought by House Minority Leader Nancy Pelosi (D-Calif.) but initially rejected by the White House — would also be part of the deal. Medicare Part B covers doctors’ services, outpatient hospital services, and some home health care. The deal under discussion is also expected to address Social Security disability insurance, according to multiple sources. The new spending in the plan would be offset by extending existing measures to contain Medicare and hospital outlays, the sources said. House and Senate Republicans are expected to discuss the proposal at separate meetings in each chamber Monday evening. Senate Majority Leader Mitch McConnell "is going to talk to members of our conference and sort of test the waters and see where we go from here," Sen. John Cornyn (R-Texas), the majority whip, said.

White House, Congressional Leaders Reach Tentative Budget Deal - NBC News: Congressional leaders have reached a tentative budget deal with the White House in a breakthrough that would set government funding levels for the next two years and extend the nation's debt limit through 2017, avoiding routine talks of a government shutdown. The 144-page bipartisan funding bill, labeled a "discussion draft," was posted online just before midnight Monday setting up a potential vote in the House as early as Wednesday. If approved, the agreement would be a milestone after years of gridlock and annual threats of government shutdowns. advertisement "It's a solid agreement and I told my colleagues there isn't any reason that any member should vote against this," Speaker John Boehner told reporters following a closed door meeting Tuesday of the House Republican conference. The outgoing speaker — who is set to resign from Congress at the end of the week — knew he would see "bricks flying from those who don't like the fact there is a bipartisan agreement" but wanted to be sure to help set up a more conducive situation for his replacement. "I didn't want (Rep. Paul Ryan) to walk into a dirty barn full of you know what," Boehner said Tuesday morning. "So I have done my best to try and clean it up."

White House, GOP strike budget deal - Senior White House officials and congressional leaders have struck a deal to raise the debt limit and set the federal budget for the next two years, say sources familiar with the talks. The deal would extend the debt ceiling to March 2017 and bust budget limits set by a 2011 agreement that imposed a decade of reduced spending known as sequestration on the government.It would raise those caps by a total of $112 billion in fiscal 2016 and 2017, according to a person briefed on the agreement. Those funds would be divided equally between defense and nondefense spending, charting a compromise between Republican defense hawks pushing for more Pentagon spending and Democrats who wanted more spending on domestic programs as well. The deal would also restructure benefits for Social Security Disability Insurance, a move that Republicans have pitched as the program’s first major change in decades. The House could vote on the deal as early as Wednesday, and the legislation is expected to be unveiled late Monday night. If approved, it would provide a fresh start for Rep. Paul Ryan (R-Wis.), who is expected to be elected Speaker later this week and has not taken part in these budget negotiations, aides said. Outgoing Speaker John Boehner (R-Ohio) has said he wants to “clean the barn up a little bit” to make life easier for his successor. It would also ensure Congress would not have to deal with the threat of a government shutdown or default before the 2016 elections, a goal of Senate Majority Leader Mitch McConnell (R-Ky.). Yet getting a deal through the House and Senate could be an enormous challenge. Raising the debt ceiling by itself is political poison for many Republicans, who have argued for deep spending cuts to be linked to any hike in the nation’s borrowing limit.

Treasury Bill Rates Slide Below Zero After Debt-Ceiling Deal - Rates on the Treasury’s shortest-maturity obligations slid below zero as a deal to extend the government’s borrowing authority stemmed investors’ concern that a political quagmire could trigger a default or delayed payments on the debt. Rates on Treasury bills maturing Nov. 12, viewed by many as being at most risk of payment issues if political gridlock prevented a deal, traded as low as negative 0.01 percent Tuesday, down from as high as 0.13 percent Monday and from a seven-month high of 0.17 percent on Oct. 19. The rate on the bill due Nov. 5 fell to negative 0.01 percent. The White House and top lawmakers from both parties reached a deal to avoid a default after Nov. 3, the date Treasury Secretary Jacob J. Lew had expected the U.S. would reach its debt limit. The accord will give the government new borrowing capacity until March 2017 and includes a two-year agreement on spending, aides from both parties said. House and Senate Republican leaders presented the plan to members Monday night and a draft of the bill was later posted on the White House website. “With optimism about a deal being reached, there is less headline risk associated with owning some of these November bills,”

Budget deal divides Hill Republicans : Congressional leaders and the White House reached a major deal Monday to avoid a potential fiscal calamity, but not before many Republicans were left fuming that their party leadership had given too much away to their Democratic adversaries. The two-year agreement, which would raise domestic and defense spending by $80 billion and lift the national borrowing limit until March 2017, could be voted on by the House as soon as Wednesday -- the same day the GOP is expected to nominate Rep. Paul Ryan, R-Wisconsin, to replace retiring Rep. John Boehner, R-Ohio, as House speaker. The deal prompted a tense session among House Republicans Monday night in the basement of the Capitol. The final details were ironed out late into the night Monday, including cuts to the Social Security disability program and to Medicare. But the deal was the product of weeks of negotiations led by Boehner, who is furiously trying to take the divisive fiscal issues off the plate for Ryan before his successor takes office. If the deal passes, Ryan could have a clear path to do his job without the fiscal brinksmanship that damaged Boehner's speakership. Still, the private talks and the frantic effort to push the measure into law only prompted sharp criticism from many House and Senate Republicans, who contended that Boehner gave away too much in the name of getting a deal

Budget deal: Paul Ryan will support budget agreement - After sharply criticizing how it came together, Wisconsin Rep. Paul Ryan announced he would support the budget deal Wednesday. "What I’ve heard from members over the last two weeks is a desire to wipe the slate clean, put in place a process that builds trust, and start focusing on big ideas," Ryan said in a statement. "What has been produced will go a long way toward relieving the uncertainty hanging over us, and that’s why I intend to support it. It’s time for us to turn the page on the last few years and get to work on a bold agenda that we can take to the American people." Story Continued Below Ryan will stand before his House Republican colleagues Wednesday morning in a closed election to be the next speaker of the House. He has assured his GOP colleagues that he would not cut deals in this manner, even going as far as saying the process "stinks." In his statement Wednesday morning, he reiterated that if he's elected speaker, "we will begin a conversation about how to approach these big issues – as a team – long before we reach these kinds of deadlines. We simply can’t keep doing business this way."

Paul Ryan Used to Think Blowing Past the Debt Limit Was No Big Deal -- After wavering for two weeks, and negotiating backward from the criteria he’d set for his candidacy, Representative Paul Ryan has agreed to run for House Speaker—which is to say he’s overwhelmingly likely to be elected House Speaker later this month."He appears to be one of the people over there that could be reasonable. I mean, look at some of the other people," Harry Reid, the Senate Minority Leader, told reporters. "I don't agree with him on much of what he does. I think what he's done with Medicare and Medicaid, what he wants to do with it, I disagree with. But generally speaking, I think we've been able to work with him." Ryan’s reputation for reasonableness stems largely from the bipartisan agreement he struck with Senator Patty Murray to fund the government, and increase annual spending levels, after Republicans shut down the government in 2013. That deal marked a departure for him, and an admirable one, but it has helped conceal a nonchalance about the risk of defaulting on the debt—both before and since the shutdown—that bordered on recklessness. This isn’t simply historical trivia. The Republican party’s opposition strategy to the Obama presidency entailed shattering a wide array of norms that governed both the House and Senate. As that era draws to a close, and creates an opening for a new era of unified GOP control, Republicans are finding it difficult to reimpose those norms without creating a level of dissent that makes their caucuses ungovernable.

Budget Deal Stirs Anger on the Right - WSJ: —Congressional leaders worked Tuesday to marshal support for a sweeping budget and debt deal that offered an end to fiscal fights with President Barack Obama but opened up top Republicans to criticism from conservatives, including GOP presidential hopefuls. The House is expected to pass the legislation as soon as Wednesday, eliminating the risk that the government might default on its debt until after the next presidential election and increasing government spending for the next two years. The bill is likely to then pass the Senate only days before Nov. 3, after which the Treasury Department has said it wouldn’t be able to pay all its bills unless Congress acted to raise or extend the federal debt limit. The agreement, which boosts federal spending above limits established in a 2011 deal and in effect since 2013, would deliver a policy victory to the administration and congressional Democrats because it increases domestic spending on par with that for the Pentagon. It also revealed the GOP split over spending levels, infuriating conservatives, who accused congressional leaders of caving to the administration and its allies on Capitol Hill during House Speaker John Boehner’s final days in office. Both deals came together carrying an unusual political price. The first was negotiated two years ago after a 16-day partial government shutdown. The second was struck only after Mr. Boehner announced his resignation last month. In a twist of political irony, Mr. Boehner’s retirement liberated him to cut his final deal, infuriating the same lawmakers who helped bring his quarter-century congressional career to an end by Friday.

This new budget deal looks good. How did that happen?! -- Somehow, the White House and congressional partisans just crafted a budget deal that actually looks pretty damn good. A deal that provides significant relief from the boneheaded sequestration caps to the tune of $80 billion over the next two years, with parity on the defense and non-defense sides of the budget. A deal that staves off governing by crisis with fiscal cliffs and debt ceilings and shutdowns for a couple of years — that’s “years,” not “weeks” (e.g., the debt limit is raised until early 2017) — and that does so without dinging Medicare or Social Security beneficiaries. A deal that ensures the ability of Social Security Disability Insurance (SSDI) to not only stave off a 20 percent cut that would have hit next year but to pay full benefits through 2022; that prevents a huge increase in Medicare deductibles and premiums faced by almost a third of Medicare recipients. I don’t mean to oversell it. Really, this sort of budget deal should be the rule, not the exception. It’s just that one’s expectations in this area have understandably been laid extremely low by years of truly terrible budget processes. What about “payfors?” Congress taps a time-shifting technique they’ve used before, replacing some sequestration cuts now and claiming them back in a later year. A touch squirrelly, perhaps, but since those cuts are ill-conceived in the first place, pushing them into the future at least raises the possibility that we can figure out how to get rid of them before they come due. There’s also a tax measure, described by House Democrats as “$11 billion in revenues from tax compliance, mostly from significant reforms to improve tax compliance among investors in hedge funds, private equity funds, and other large partnerships.”

New Budget Deal Cuts Social Security, But How? -- So far, limited information provided to the public seems to indicate that, rather than expand Social Security (as Senators Bernie Sanders, Elizabeth Warren and many others have advocated), the new budget deal is a "bipartisan compromise" to cut benefits for the disabled and lower the "cap" for high income earners (that, according to other media sources). And just like the TPP trade agreement, the new budget is also being negotiated behind closed doors (while we're being distracted by other sensational news). According to a source familiar with the talks, House Speaker John Boehner (R-Ohio) and Senate Majority Leader Mitch McConnell (R-Ky.) are making “structural entitlement reforms” to Social Security disability a key piece of budget talks with the White House. Here's what the Washington Post had to report: "The agreement includes about $80 billion in additional spending over two years, divided equally between defense and domestic programs. Those spending increases would be offset by savings from changes to the Social Security disability insurance fund and Medicare payments to doctors and other health care providers ... New rules for the Social Security disability Insurance fund, which is expected to run out of funds by the end of 2016 are expected to deliver savings along with changes to Medicare provider payments and Medicaid generic drug costs."   The Huffington Post reports: "The new agreement would prevent a 20 percent cut in benefits next year to the 11 million Americans enrolled in the Social Security Disability Insurance program. The cut would be avoided by diverting some of the incoming payroll tax money from Social Security's much bigger retirement insurance program for six years, something Republicans previously said they wouldn't do without cuts to benefits.

Does the budget deal include benefit cuts? -- Many of us reacted to the tentative budget deal with surprised relief. Assuming the agreement holds, the White House was able to lift the debt ceiling and end the sequester without losing limbs in the process, as my colleague Ross Eisenbrey aptly put it. This time the administration resisted the urge to throw red meat to the other side’s lions. Inevitably, the deal will intensify dissent on the right. But there is also a surprisingly heated debate about the seemingly benign Social Security provisions among advocates, some of whom view any cost savings as benefit cuts and say an off-budget program with a dedicated funding stream should not be discussed in budget negotiations (though they don’t object to including transfers to the disability program in this budget deal). In particular, a vocal minority opposes a provision that would no longer allow people to take advantage of the “file and suspend” strategy, whereby someone eligible for both retirement and spousal benefits delays take-up of the former to receive a larger benefit at age 70, while receiving the latter in the interim.  Eliminating “aggressive Social Security-claiming strategies, which allow upper-income beneficiaries to manipulate the timing of collection of Social Security benefits in order to maximize delayed retirement credits” was something the president included in his fiscal-year 2015 budget, not something the administration reluctantly agreed to. And most advocates, including the Social Security Works coalition, to which EPI belongs, think it’s a loophole that needs to be closed, since the purpose of the delayed retirement credit is to equalize lifetime benefits, not to give savvier beneficiaries who can afford to delay take-up a little something extra. The dissidents counter that a benefit cut by any other name is still a benefit cut, and say it’s a strategy that can help divorced women, who can be particularly vulnerable in retirement.

VSPs Get Their Way With Budget Deal: Social Security Benefits Are Cut -- All the Very Serious People are jumping up and down and cheering.  We have a budget deal in the House and the debt ceiling is being raised and there will be no more artificial budget crises until after the new president is in office, hurray hurray hurray!  Not only that, all the Dems in the House voted for it, with everybody gushing gratitude to John Boehner for making it possible by resigning as Speaker to turn it over to reasonable Paul Ryan once Boehner could get this deal through the House, thwarting the evil Tea Party/Freedom Caucus bomb throwers who want to have a big crisis with the government shut down and indeed bankrupt outright. We are saved! Well, indeed there certainly are these benefits.  But without much publicity, Paul Ryan is reported to be behind slipping into the deal something that he has long supported, entitlement benefit cuts, which have been heavily featured in past budgets he has proposed.  The particular cut is the ending in Social Security of the ability of couples to “file and suspend” with this being replaced by “deemed filing.”  File and suspend allowed someone to get Social Security benefits prior to retiring, while not having to accept the lower benefits one gets if one retires at 62 or 66.  One can get the higher benefits later.  This will now not be allowed, so one must accept the lower benefits if one starts getting benefits early.  This has only been possible for  married couples with this involving one getting spousal benefits and then their own through some semi-complicated maneuvers that have been allowed since 2001. So, while most commentators have simply ignored this item, or focused on some other changes that have involved propping up the disability part of Social Security (which has needed some propping), this is indeed a benefit cut and one that will affect people who are on the verge of  retiring (those already doing it I think are grandparented in), not non-voting Gen-Xers or millennials down the road, as would be the case for most of the proposals being made by the GOP presidential candidates.

As China 'Buys Low' To Build SPR, Washington Forced To Sell Strategic Crude To Meet Budget -- The signs of regime change are everywhere. From embarrassment by Russia's success in Syria to China's creation of its own 'World Bank' and SWIFT alternative, the trend of de-empirization are growing, but tonight's news that Washington will sell oil from its strategic reserve in order to meet budget constraints and avoid default (as China takes advantage of low prices to build its own reserves) is simply stunning in its analogy of the shifting world order. As CNN reports, Bipartisan congressional leaders and the White House struck a major fiscal deal in principle Monday that would raise the debt ceiling and lift budget caps on both defense and domestic programs, according to congressional sources familiar with the deal....This deal would avoid a potential debt default on November 3, and it would reduce the chances of a government shutdown on December 11. ... The deal includes $80 billion in increased defense and domestic spending over two years‎, a senior House source told CNN. ... That new spending would be offset by sales from the strategic petroleum oil reserve, use of public airwaves for telecommunications companies and changes to the crop insurance program — among other measures. Moreover, the deal would spread out increases in Medicare premiums over time so beneficiaries don't feel them acutely. It would also aim to preserve the Social Security disability trust fund, sources said.

Boehner's Budget Deal Caps Extraordinary Execution Of An Exit Strategy --  When John Boehner announced his resignation last month, he said he wanted to "clean the barn" before he left. What he is accomplishing this week should put him in the Barn Cleaning Hall of Fame.If the votes go as planned — always a question mark in the current House — Boehner will end his week and his career having engineered the choice of his successor, stabilized the nation's fiscal trajectory for the next two years and wrapped up most of the other major legislation pending in the chamber.The new agreement will suspend the debt ceiling until March 2017 — after the next election — and set spending figures through September of that year.It was not the "Grand Bargain" he had once envisioned in his first months as speaker. The dream was that he and President Obama might tackle tax reform, spending limits and even the sacred entitlement programs such as Medicare and Social Security. In this imagined deal, the nation's long-term indebtedness would be paid down — or at least returned to a manageable level.But that bid for an overarching agreement broke down in the summer of 2011, the victim of misunderstandings between the parties and resistance in the ranks of Boehner's House majority. But Boehner remained interested in making a deal on a smaller scale, something that would at least safeguard the essential operations of the Treasury and the Pentagon and attract enough votes in both parties in both chambers to become law.

Senate passes two-year budget deal - (CNN)The Senate early Friday morning gave final approval to a large fiscal package that would prevent a U.S. default next week and lower the risk of a government shutdown in December. The bill, already cleared by the House, now goes to President Barack Obama, who is expected to sign it. The vote was 64 to 35. The measure, which suspends the nation's debt limit through March 2017 and increases federal spending for domestic and defense programs by more than $80 billion over the next two years, had broad support from Democrats but limited support from Republicans, many of whom complained the deal, brokered by bipartisan congressional leaders, contained too much spending. GOP presidential candidate Sen. Rand Paul of Kentucky forced a rare overnight Senate session when he filibustered the bill. "The right's going to get more military money, the left's going to get more welfare money. The secret handshake goes on, and the American public gets stuck with the bill," he said in a speech on the floor Thursday afternoon. "This deal will do nothing but explode the debt."  Sen. Pat Toomey, a conservative Republican facing a tough re-election campaign in Pennsylvania, said the bill "fails to address our overspending problem." Texas Sen. Ted Cruz, who helped force the last government shutdown in 2013, said the deal gives Obama a "diamond-encrusted, glow-in-the-dark AmEx card."

US Senate passes budget, debt limit bill, sends to President Obama - The US Senate passed a bill on Friday that will extend government borrowing authority until March 15, 2017. This also includes a two-year budget plan, which will increase military and domestic spending to the tune of $80 billion. US President Barack Obama said on Friday that he intends to sign the deal overnight, as soon as it reaches his desk. The agreement was set to expire on November 3. He praised the lawmakers for a "responsible, long-term budget agreement that reflects our values, grows our economy and creates jobs." "After that, Congress should build on this by getting to work on spending bills that invest in America's priorities without getting sidetracked by ideological provisions that have no place in America's budget process," Obama said in a statement released by the White House In March, the Treasury reported that the US’ federal debt had passed $18 trillion, which was over its debt limit. However, Treasury Secretary Jack Lew told Congress the debt ceiling needed to be raised.

House GOP nominates Ryan for speaker - House Republicans selected Wisconsin Rep. Paul Ryan on Wednesday as their nominee for speaker of the House, the first step in ending a month-long saga over the party's leadership after John Boehner's surprise resignation. Ryan defeated Florida Rep. Daniel Webster in a closed-door election of the House Republican Conference. Ryan received 200 votes, easily earning the support of the majority of the conference. Webster received 43 votes and Rep. Marsha Blackburn of Tennessee got one, as did Majority Leader Kevin McCarthy (R-Calif.). Story Continued Below The full House is expected to ratify Ryan as speaker on Thursday. Boehner (R-Ohio) plans to leave Congress this week. Ryan, a 16-year veteran of Congress who was reluctantly lured into the race for speaker, has promised as speaker to empower committee chairmen and rank-and-file members, and to reform House rules. He vowed to “turn the page” and said the House can start with a “clean slate.” "We're going to move forward. We're going to unify," Ryan said in some brief remarks to reporters after the Republican Conference vote. "We think the country is headed in the wrong direction. We have an obligation here, in the people's House, to give this country a better way forward."

Republicans pick Ryan for speaker; House passes budget deal --  Republicans made Paul Ryan their choice to be the next speaker of the U.S. House of Representatives on Wednesday as the chamber passed a major budget and debt limit deal that would launch his tenure with far less risk of a major fiscal standoff. The nomination puts the Wisconsin congressman and 2012 Republican vice presidential candidate on track to replace retiring Speaker John Boehner on Thursday, marking a transition to a potentially more conservative House leadership stance. "Our party has lost its vision and we're going to replace it with a vision," Ryan told reporters after the vote. The House later voted 266-167 to pass a two-year budget deal negotiated by Boehner, the White House and other congressional leaders that clears the decks for the new speaker and relieves market worries over a possible default next week. The plan extends the federal debt limit through March 2017 and eases automatic spending caps to add $80 billion in new discretionary spending over two years. A provision to cut crop insurance subsidies by $3 billion to help pay for the deal was removed from the bill at the last minute, according to House Agriculture Committee Chairman Michael Conaway. Farm-state lawmakers had objected to the cut. Supported by Ryan, the deal won only 79 Republican votes, and was carried by votes from 187 Democrats. Ryan has pledged that he will not bring future legislation to the floor unless it can win the support of a majority of the 247 House Republicans.

House uses rare procedure to revive Export-Import bank: — The House launched a rare effort Monday to circumvent Republican leadership in hopes of reviving the Export-Import Bank, which conservatives managed to choke off earlier this year. The procedure, known as a "discharge petition," basically allows a simple majority of the House to force the House to vote to extend the bank's charter. In the Monday vote, 62 Republicans joined 184 Democrats to exceed the 218 votes needed to force the bill to the House floor over the objections of 177 GOP lawmakers. A final vote to extend the bank's charter through 2019 will likely come Tuesday. It is not clear what the future of the bill will be in the Senate. Majority Leader Mitch McConnell, R-Ky., has said he does not intend to bring it to the floor. The Senate previously approved extending the bank as part of a highway bill the House did not take up. The bill had languished in the Financial Services Committee, because Republican Chairman Jeb Hensarling of Texas was part of a group of House conservatives who believed the bank provided federally backed favors for well-connected corporations. Hensarling vigorously opposed the discharge petition, saying it undermines the normal legislative process and gives Democrats control of the House agenda. In a letter to colleagues last week, Hensarling and Rules Chairman Pete Sessions, R-Texas, said Monday's vote is about "whether a minority of our (Republican) Conference will find common cause with Democrats whenever we have an internal disagreement, use this uncommon, extreme Discharge Petition process, and force a vote when a majority of the majority does not want a vote." The last time the House approved a discharge petition was 2002, for a campaign finance bill.

House Votes to Reauthorize U.S. Export-Import Bank - WSJ: The House Tuesday approved the reauthorization of the U.S. Export-Import Bank, with a majority of Republicans joining almost all Democrats to demonstrate a broad bipartisan coalition to revive the export-finance agency. The measure passed 313-118. More than half of the House’s 247 Republicans—127 in all—voted to renew the bank’s charter. Three years ago, 147 out of 242 backed it. Passage had already been assured after Republicans had joined most Democrats on Monday in calling up a so-called discharge petition, a rarely effective procedural tool that allows a majority of lawmakers to dislodge legislation that has been held back by party leaders. But Tuesday’s vote showed that an aggressive campaign by conservative critics to close the bank had done little over the last three years to turn GOP lawmakers away from supporting the bank. The vote marked a big victory for business groups that had fought to secure its revival. The bank was unable to process new business this summer after its charter expired. GOP leaders bottled up legislation that would have reauthorized the agency’s charter with some changes.

75+ U.S. Groups: USTR Must End TTIP/TAFTA Secrecy  -- Yesterday, more than 75 labor, environmental, consumer, transparency, agriculture, and other U.S. groups and academics sent a letter to U.S. Trade Representative Michael Froman calling on USTR to increase transparency in the Trans-Atlantic Free Trade Agreement (TAFTA) negotiations (also called the Transatlantic Trade and Investment Partnership, or TTIP). The letter notes that while the European Commission has published the "actual language and binding commitments" it has proposed for TTIP, the U.S. government has thus far failed to make any textual proposals or negotiating texts public. “If the EU is willing to publish its textual proposals, there is no reason why the U.S. cannot immediately release its own textual proposals as well,” the letter said. “This significant change from present practice would be a major step toward the release of composite draft texts after each round. It would also help produce trade negotiations guided by the principles of democracy, transparency, and political accountability.” USTR has been repeatedly criticized for excessive secrecy in its negotiations of TTIP and the Trans-Pacific Partnership (TPP), a controversial "free trade" agreement with 11 other countries in the Pacific Rim. Experts and civil society have pointed out that while the public and the press are not allowed to see the negotiating text for either of these agreements (and Members of Congress were only granted very limited access after years of demands), more than 500 so-called "trade advisors," nearly 9 out of 10 representing corporate and industry interests, have special access.

An Analysis of the Final Intellectual Property TPP Chapter Leak -- There’s been a development in the ongoing TPP debate. The Intellectual Property Chapter of the trade agreement has leaked. What’s significant about this leak is that it’s the final consolidated text. We offer in-depth analysis of the chapter. Earlier, Wikileaks published one of the controversial chapters of the Trans-Pacific Partnership agreement (TPP). We here at Freezenet have been following the TPP debate carefully and offered very detailed coverage of the text of this agreement. Earlier, we analyzed the August 2015 draft. Before that, we offered an in-depth analysis of the 2011 leaked draft. Today, we are continuing our coverage by examining the final draft leak of this chapter. For clarity, when we mention what page we are on, we’ll be using the paginated page number instead of the PDF reader number (as the PDF reader adds a page because of the cover page). We begin our analysis on page 3

Global Corporatocracy’s Unborn Baby Just Got A Lot Bigger - The Trans-Pacific Partnership is not yet fully alive: the agreement has been signed but still needs to be ratified by the governments of its signatory nations. Nonetheless, the corporatocracy’s unborn baby is growing at a startling rate. Last week, the agreement boasted a grand total of 12 signatories (the United States, Japan, Canada, Mexico, Peru, Chile, Australia, New Zealand, the Philippines, Brunei, Malaysia and Singapore) with a combined population of 800 million people. This week that number rose to 13 after Indonesia’s President Joko Widodo told U.S. President Barack Obama that the country he represents also wants a piece of the action. “Indonesia is an open economy and with a population of 250 million, we are the largest economy in Southeast Asia. Indonesia intends to join the TPP,” Widodo said on Monday after meeting Obama in the White House. If Indonesia does sign the agreement, it will bring the combined population of the TPP-bloc to over one billion people, not far off the population of the country the trade agreement was originally devised to encircle and corral — i.e., China (pop: 1.357 billion). The TPP bloc will also represent over 40% of the global economy. The basic proposition behind TPP is disarmingly simple: either China joins or it will be isolated. This isolation would progress: first from its own back yard through the TPP and the Pentagon’s “Asian Pivot,” then from the West (through the TTIP and TISA), and ultimately from the rest of the global economy. Such isolation could be ruinous, not only for China but the U.S, too. China and the U.S., when it comes to trade, are joined at the hip. China is the US’s most important trading partner. It has an enormous trade surplus with the US. If anything came in between Chinese exports to the US, China’s economy would collapse (and the US economy would grind to a halt).

G.O.P. Candidates Seek Pot of Gold at End of Tax Cut Rainbow -   In March, Senator Marco Rubio announced a tax plan that I called the “Puppies and Rainbows” plan because it’s full of things almost every Republican likes. Mr. Rubio, as laid out in a proposal he developed with Senator Mike Lee of Utah, wants big tax cuts on capital income that are supposed to encourage investment, including a tax rate of zero on capital gains. He also seeks big tax cuts for middle-income families, most notably an increase in the child tax credit to $2,500 from $1,000.  Seven months later, almost every candidate who made the cut for the main CNBC debate on Wednesday has announced a plan for tax cuts. And in a crucial way, they have followed Mr. Rubio’s lead: They have proposed plans that would cost trillions of dollars over a decade, with no clear plan of how they would compensate for the revenue loss.But in structure, Mr. Rubio’s opponents have diverged from his proposal. All the candidates want to hand out tax cuts, but you might say the others are less puppy-oriented in their tax policy than Mr. Rubio, with a more pure focus on chasing rainbows.  That is, you can think of “puppies” and “rainbows” as shorthand for two of the policy aims of tax cutting. One aim is to return money to ordinary families to raise their standards of living — for example, by making it possible to afford to have nice things, like a puppy.The other aim is economic growth, which Republicans hope to create when lower tax rates encourage people to work harder or invest more money. Unfortunately, tax cuts have not necessarily led to growth when we’ve tried them before. But negative past experience will not always stop people from chasing pots of gold at the end of rainbows.

Can taxing the rich reduce inequality? You bet it can!-- Brookings -- Two recently posted papers by Brookings colleagues purport to show that “even a large increase in the top marginal rate would barely reduce inequality.”[1] This conclusion, based on one commonly used measure of inequality, is an incomplete and misleading answer to the question posed: would a stand-alone increase in the top income tax bracket materially reduce inequality? More importantly, it is the wrong question to pose, as a stand-alone increase in the top bracket rate would be bad tax policy that would exacerbate tax avoidance incentives. Sensible tax policy would package that change with at least one other tax modification, and such a package would have an even more striking effect on income inequality. In brief:

  • A stand-alone increase in the top tax bracket would be bad tax policy, but it would meaningfully increase the degree to which the tax system reduces economic inequality. It would have this effect even though it would fall on just ½ of 1 percent of all taxpayers and barely half of their income.
  • Tax policy significantly reduces inequality. But transfer payments and other spending reduce it far more. In combination, taxes and public spending materially offset the inequality generated by market income.
  • The revenue from a well-crafted increase in taxes on upper-income Americans, dedicated to a prudent expansions of public spending, would go far to counter the powerful forces that have made income inequality more extreme in the United States than in any other major developed economy.

The Plutonomy Is Doing Fine –  The new issue of the Credit Suisse Global Wealth Report (2015) has been published. Below is the distribution of global wealth. Nothing has changed much since we posted the previous version here. As I commented regarding the previous version, the poor are fundamentally in Africa, India, and Asia-Pacific (mainly Bangladesh, Indonesia, Pakistan, and Vietnam), while the wealthy are in the United States, Europe and Asia-Pacific (i.e. Japan). China has more people in the middle section of the wealth distribution than at the extremes. Below is the Global Wealth Pyramid.  Not much difference from the previous one, but a bit worse. Now 71% of the population holds 3% of the wealth (before it was the 67% at the bottom who held 3.3% approximately). And the top 0.7% of the population holds slightly more than 45% of total wealth.  By the way, the U.S. has added more people at the top, while Japan and Europe have lost a few. If you are interested on how many really wealthy people there are (not the 34 million people at the top of the figure above, who are the ones worth more than 1 million), here is what the report says: We estimate that there are 123,800 UHNW individuals worldwide, defined as those whose net worth exceeds USD 50 million. Of these, 44,900 are worth at least USD 100 million and 4,500 have assets above USD 500 million. UHNW means Ultra-High Net Worth (or what a decade ago Citigroup analysts called the plutonomy). So about 4,500 with a net worth above $500 million. Read the full report here.

When the Superrich Die, Here’s What’s in Their Wallets - The superrich are different from the very, very rich. For one thing, they own more art.  Estate tax data recently released by the Internal Revenue Service show what the wealthiest Americans possess when they die—and where the money goes. First, a few basics. The returns in the data sample were all filed in 2014, which means they came largely from the estates of people who died in 2013. That year, the tax applied to estates of individuals exceeding $5.25 million, with a top rate of 40 percent, up from 35 percent the year before. Estates can deduct charitable contributions and bequests to surviving spouses, who then pay up when they die. The most important thing to remember about the estate tax is that almost no one pays it anymore. Congress has bumped up the exemption and indexed it to inflation, ensuring that almost all of the 2.6 million people a year who die in the U.S. never have to worry about the estate tax. That leaves the very wealthiest sliver of the country. Fewer than 12,000 estate tax returns were filed in 2014, and more than half of those returns didn’t yield any tax for the federal government. The data break down what assets people hold at death, offering a glimpse into the holdings of the ultrawealthy. They don’t provide much information about all of the ways that wealthy individuals shift assets out of their ownership or all of the convoluted planning maneuvers that can reduce the size of estates before death. People who died with more than $50 million–the top category–were heavily invested in stock and closely held businesses.

Top 100 CEO Retirement Savings Equals 41% of U.S. Families - The retirement savings accumulated by just 100 chief executives are equal to the entire retirement accounts of 41 percent of U.S. families -- or more than 116 million people, a new study finds. In a report scheduled for release today, the Center for Effective Government and Institute for Policy Studies found that the 100 largest chief executive retirement funds are worth an average of about $49.3 million per executive, or a combined $4.9 billion. David C. Novak, the recently departed chief executive officer of Yum! Brands Inc., is at the top of the list, with total retirement savings of $234.2 million. In recent years, pay and income inequality across different income groups have received increasing attention in the U.S. Significantly less attention has been focused on the growing gulf in retirement savings, a lack of focus that the study’s authors say they are attempting to address. “This CEO-to-worker retirement gap is a lot bigger than the pay gap and one more indicator of the extreme level of inequality that is really tearing the country apart,” said Sarah Anderson, the report’s co-author and the global economy project director at theInstitute for Policy Studies. Some of the chief executives with the biggest retirement stashes are at companies that have cut retirement benefits for new employees.

Inside the Secretive World of Tax-Avoidance Experts -- Wealth management is a profession on the defensive. Although many people have never heard of it, it is well known to both state revenue authorities and international agencies seeking to impose the rule of law on high-net-worth individuals. Those individuals—including the 103,000 people classified as “ultra-high-net-worth” based on having $30 million or more in investable assets—pay wealth-management professionals hefty fees to help them avoid taxes, debts, legal judgments, and other obligations the rest of the world considers part of everyday life. The general public doesn’t hear much about these professionals, since there are only a few of them worldwide (just under 20,000 belong to the main professional society) and they strive to keep a low profile, both for themselves and their clients.  But they are very much on the radar of regulatory agencies, due to the central role wealth management plays in tax avoidance. Media coverage of the 2012 presidential campaign of Mitt Romney noted that his $250 million personal fortune was spread out through a network of offshore trusts and bank accounts, lowering his effective income-tax rate to just under 15 percent. Few outlets, however, noted the professional interventions that made that happen: Mitt Romney employs at least one wealth manager to create and maintain those offshore shelters.

Tax expenditures distort our understanding of the tax code - There are certainly good reasons to subsidize the adoption of electric cars. . But using a tax break originally designed to encourage farmers to invest in large equipment to now encourage people to buy a Tesla Model X probably isn’t one of them. The benefit from this tax break will almost certainly go to the wealthy individuals who were already going to buy these cars in the first place. This story is just an exaggerated example of some of the many problems with the number of loopholes and deductions in the U.S. tax code. A recent piece by Politico tax reporter Katy O’Donnell details one of the issues with tax deductions: They are a shadow budget because the spending doesn’t show up on the official U.S. budget. Deductions are often called “tax expenditures” because specific tax breaks act very much like government spending. Consider the mortgage interest tax deduction: In practice, the tax break acts like giving money to a taxpayer with a mortgage, with the amount of the payment depending on the mortgage’s size. Despite acting like spending, tax expenditures aren’t registered on the U.S. federal budget like the rest of spending. So while the rest of the spending in the budget gets voted on every year, most tax expenditures roll on unaccounted for. If you want to see how much the federal government has spent since 1789, for example, that data is easily available and downloadable on the Office of Management and Budget website. Finding the amount of spending through the tax code for just the last two years, however, requires finding a PDF squirreled away on a separate page.

Avoiding the Financial Resource Curse - Noah Smith - For a long time, and especially since the financial crisis, many people have suspected that financialization is bad for an economy. There is something unsettling about watching the financial sector become a bigger and bigger part of what people do for a living.  We can’t all get rich trading houses and bonds back and forth.   Critics will probably dismiss these concerns as a relic of the past. We transitioned from agriculture to manufacturing, so why shouldn’t we now transition from manufacturing to services? If the market is willing to pay finance 7 percent of our total national output, then finance must be earning its keep.   This debate goes back and forth. There are a few studies that claim to find a link between financialization and slow growth, but the connection is very hard to prove. For example, a 2008 paper by Turkish economist Ozgur Orhangazi found that finance tended to grow when investment in the rest of the economy slowed. But that doesn’t really prove causation -- what if finance and other industries are simply a little out of step? The same difficulty plagues similar studies. A Bank for International Settlements paper by Stephen Cecchetti and Enisse Kharroubi claimed to find a nonlinear relationship between finance and growth -- once finance grows past a certain point, economic growth seems to slow down. But this analysis shows only correlation, not causation -- perhaps as growth slows, countries simply need to put more resources into finance in order to ferret out the investment opportunities that remain.

Michael Hudson: How the U.S. Avoided Chronic Deflation by Relinquishing Monetary Control to Wall Street - naked capitalism - Yves here. This post is likely to frustrate readers who like simple Manichean readings of politics and history. Hudson, a long-standing critic of the financialization of the economy, describes the relationship between banks and the Treasury in the US in the 19th century versus in the post-crisis era. He points out that even though banks have normally favor deflationary policies, financiers in the US have a tension among various objectives that in recent years have produced a bias against deflation (although the Fed’s current interest rate conundrum and the fact that policymakers are discussing negative interest rates reflects the fact that the US may still fall prey to the exporting of deflation by its trade partners). First, the Fed was formed to stem the recurrence of the sort of deflation that plagued the 19th century, and thus was designed to have an inflationary bias (in the older term of art, provide for elasticity of the currency). Second, the US has moved since the 1980s of having asset bubbles serve as a means for creating short-term growth (until the bubbles deflate or implode) and transferring more wealth to top income groups (by making government policy more focused on asset markets than growth in wages, as witness the preoccupation with home prices and the stock market). This perverse economic model has had one positive side effect (despite the other costs that Hudson has long inveighed against): that of putting Wall Street on the side of opposing deflationary policies, unlike financial players in Europe, who exert similar influence over monetary and fiscal policy.

Inside the Secretive Circle That Rules a $14 Trillion Market (BBG) Fifteen of the biggest players in the $14 trillion market for credit insurance are also the referees. Firms such as JPMorgan Chase & Co. and Goldman Sachs Group Inc. wrote the rules, are the dominant buyers and sellers and, ultimately, help decide winners and losers. When a question comes up, the 15 firms meet on a conference call to decide whether a default has triggered a payout of the bond insurance, called a credit-default swap. Investors use CDS to protect themselves from missed debt payments or profit from them. Once the 15 firms decide that a default has taken place, they effectively determine how much money will change hands. And now, seven years after the financial crisis first brought CDS to widespread attention, pressure is growing inside and outside what’s called the determinations committee to tackle conflicts of interest, according to interviews with three dozen people with direct knowledge of the panel’s functioning who asked that their names not be used. Scandals that exposed how bank traders rigged key interest rates and fixed currency values have given ammunition to those who say CDS may also be susceptible to collusion or, worse, outright manipulation. The trade group that oversees the process, the International Swaps & Derivatives Association, is now proposing rule changes that it says will reform the determinations committee. The proposals include limiting the people who can be involved in decision-making and prohibiting panel members from discussing decisions outside meetings, according to a document obtained by Bloomberg News. For skeptics, the question is whether the changes would go far enough. Because only the biggest CDS traders are seated on the panel, conflicts are not only tolerated but unavoidable. “You’ve got a self-regulatory body that has handed the authority over an entire market to those folks who have the greatest self-interest and have no prohibition for putting their interests ahead of the broader market,”

New way to bet on oil wipes out billions in investor savings: Two years later, Karen Robinson's partnerships have plunged in value and she has lost more than half of the $202,000 she invested, according to a complaint filed with regulators against Parks and his firm, Ameriprise Financial Services.   For years, brokers have been luring savers like Robinson into drilling partnerships with the promise of fat payouts. With yields on safer investments like government bonds so puny, it wasn't a hard sell. But now this once hot business, a big source of fees for brokers and banks, is coming to a messy end. In the past year, investors have lost $20 billion in publicly traded drilling partnerships, or $8 of every $10 they had invested, according to a report prepared by FactSet for The Associated Press. That figure does not include losses from $37 billion of bonds sold by the partnerships in the five years since 2010, many down by half in last 12 months, or losses from bets on private partnerships that don't trade publicly and are difficult to track. A plunge in the price of oil that few anticipated explains much of the loss. But many partnerships had borrowed heavily and were running big risks even when oil was twice as high a year ago, suggesting that either investors were too sloppy in their hunt for steady income or brokers too reckless in their hunt for fat fees — or some ugly combination of both. "If you were trying to preserve your capital, oil and gas producers were not for you,"

Why is Helane Morrison, General Counsel for Hall Capital, Fund Manager for the Super-Rich, Attacking SEC Investor Protection? --  Yves Smith - Earlier this month, we excerpted a section of a panel discussion from an SEC securities enforcement conference. It showed the degree to which former senior SEC officials who’ve gone into private practice openly ridicule the idea that the SEC should do its job, for instance, by deriding enforcement as “gotcha”.  Today, we’ll look at the panelist who was most aggressive in attacking the SEC, Helane Morrison, the general counsel of a fund manager targeting the super-rich, Hall Capital. You’ll see Morrison repeatedly take positions that are hostile not just to the SEC, but to the interest of her firm’s clients. And this was not just my reaction. From a senior member of the investment industry who has had extensive dealings with Hall Capital and has met Ms. Morrison*: Ms. Morrison’s comments constitute a betrayal of the people whose interests she holds in trust, which are the clients of Hall Capital. These individuals entrust their life savings to Morrison’s firm in the belief that Hall Capital will act as a careful steward of the funds and, implicitly, that Ms. Morrison, as the firm’s general counsel, will act as a vigorous advocate for their financial interests. Instead, we see that she embraces a highly ideological anti-government, anti-enforcement agenda that leaves investors naked and powerless at the hands of those who would cheat them. This attitude is fundamentally incompatible with the role that Ms. Morrison is charged with as the chief counsel at a fiduciary investment adviser, and she should seek work elsewhere that is better aligned with her world-view.

Are share buybacks jeopardizing future growth? | McKinsey -- Returning cash to shareholders is on the rise for large US-based companies. By McKinsey’s calculations, share buybacks alone have increased to about 47 percent of the market’s income since 2011, from about 23 percent in the early 1990s and less than 10 percent in the early 1980s. . Income is before extraordinary items, goodwill write-downs, and amortization of intangibles associated with acquisitions. Some investors and legislators have wondered whether that increase is tantamount to underinvestment in assets and projects that represent future growth. It isn’t. Distributions to shareholders overall, including both buybacks and dividends, are currently around 85 percent of income, about the same as in the early 1990s. Instead, the trend in shareholder distributions reflects a decades-long evolution in the way companies think strategically about dividends and buybacks—and, more broadly, mirrors the growing dominance of sectors that generate high returns with relatively little capital investment. In fact, ever since the US Securities and Exchange Commission loosened its regulations on buybacks in 1982,2 companies have been changing the way they distribute excess cash to shareholders. So while dividends accounted for more than 90 percent of aggregated distributions to shareholders3 3The shift makes good sense. Empirically, the value to shareholders is the same,4

Wall Street Shocked As Feds Bring Criminal Case Against Goldman Banker Over Fed Leaks -- Perhaps it was the public shaming of Iceland's diametrically opposite approach to 'dealing' with its bankers, or perhaps Janet Yellen needs a distraction from her own 'Fed Leak' problems, or finally perhaps Carmen Segarra's 2013 whistleblowing over the cozy relationship between Goldman and The New York Fed was just too conspicuous to brush under the carpet. Despite Bill Dudley's insistence that The New York Fed is not a subsidiary of Goldman, The NY Times reports, federal prosecutors are preparing to announce a criminal case this week against a former Goldman banker suspected of taking confidential documents from a source inside the government. As we previously detailed, this is what happened in July 2014: From his desk in Lower Manhattan, a banker at Goldman Sachs thumbed through confidential documents — courtesy of a source inside the United States government. The banker came to Goldman through the so-called revolving door, the symbolic portal that connects financial regulators to Wall Street. He joined in July after spending seven years as a regulator at the Federal Reserve Bank of New York, the government’s front line in overseeing the financial industry. He received the confidential information, lawyers briefed on the matter suspect, from a former colleague who was still working at the New York Fed. As a reminder, the NY Fed is also the world's biggest hegde fund, as it is the place where, at Liberty 33, the Fed's market moving operations are executed. It is also where the legendary PPT is located.

Goldman fined over theft of NY Fed data FT - New York’s state banking regulator has slapped a $50m fine on Goldman Sachs and ordered it to suspend consulting activities for three years after an employee stole secret supervisory information from the Federal Reserve Bank of New York. On Wednesday, Goldman admitted that it had failed properly to supervise Rohit Bansal, a 30-year old associate who joined the firm last July after seven years at the New York Fed. Shortly after arriving, Mr Bansal began to receive dozens of documents from a former colleague about a Goldman client he had been charged with supervising at the New York Fed. Mr Bansal then passed that intelligence to colleagues at Goldman, breaking rules banning leaks of confidential supervisory information. In its announcement, the New York Department of Financial Services said that Goldman had agreed to pay $50m — the steepest fine yet for a violation of this sort — and accept a three-year “voluntary abstention” from new consulting engagements. The case is an embarrassment for the Wall Street bank, which has been in the spotlight in the past over its close ties to public bodies.

British trainee bankers at JP Morgan sacked after cheating at 'basic' maths test -- British trainee analysts at a leading investment bank's New York office have been sacked after they were caught cheating in a "basic" maths test, the Telegraph understands.  The disgraced junior bankers are said to have been told to pay for their own flights home after instructors discovered the foul play.  It is understood that nearly a dozen of the trainee analysts at JP Morgan, some of whom are British graduates, were caught sneaking notes into the exam room or copying fellow trainees' answers. The firm's prestigious trainee scheme is among the most competitive in the world, with most successful candidates coming from elite private schools and universities such as Harvard, Oxford and Cambridge. JP Morgan staff told the Telegraph that the accounting tests were unlikely to have been very difficult, but claimed cheating was commonplace.

Deutsche Bank to rip out IT systems blamed for problems --- John Cryan will promise to rip out and replace much of Deutsche Bank’s messy and outdated technology as one of his top priorities when the German bank’s new boss presents his strategy to investors on Thursday. As well as cutting tens of thousands of jobs, shrinking the bonus pool and shedding billions of dollars of unwanted assets, he is determined to overhaul the creaking computer systems that he blames for many of its problems, according to people familiar with his plans. Deutsche declined to comment. In discussions with colleagues, he has expressed alarm about the “Horlicks”, or total mess, the bank has made of its technology by allowing individual teams and traders to operate on their own incompatible platforms. By operating a deliberate strategy of pitting teams against each other, in an attempt to spur them on, the bank has found itself riddled with different systems — all of which must be reconciled, often by hand, before trades can be processed and recorded. His emphasis reflects the challenge confronting many big banks as they scramble to modernise IT systems, in the face of mounting pressure from regulators, digital challengers and cyber criminals. Kim Hammonds, who Deutsche hired from Boeing two years ago as its chief information officer, has told colleagues that its IT systems operate by trial and error — an approach akin to her former employer sending aircraft into the sky, watching them crash, and then trying to learn from the mistakes. Deutsche now has, for example, more than 100 different booking systems for trades in London alone, and has no common client identifiers. It has even been unable to retrieve some of the data requested by regulators — which contributed to its failure in this year’s US bank stress tests.

Just When You Thought Wall Street's Heist Couldn't Get Any Crazier... Just when you thought Wall Street’s heist of the U.S. financial system couldn’t get any crazier, along comes a regulator’s report on FDIC-insured banks exposure to derivatives. According to the Office of the Comptroller of the Currency (OCC), one of the regulators of national banks, as of June 30 of this year, Goldman Sachs Bank USA had $78 billion in deposits, and – wait for it – $45.7 trillion in notional amount of derivatives. (Notional means face amount of derivatives.) According to the OCC report, Goldman Sachs Bank USA’s notional derivatives are an eye-popping 563 percent of its risk-based capital. You and every other little guy in America is backstopping this bank because it’s, amazingly, FDIC insured. Compared to its Wall Street peers, Goldman Sachs Bank USA is a midget. JPMorgan Chase Bank NA has just shy of $2 trillion in assets; Citibank NA (part of Citigroup) has $1.3 trillion; Bank of America NA $1.6 trillion. That compares with Goldman Sachs Bank USA, which just became an FDIC insured bank at the height of the financial crisis on November 28, 2008, which has a puny $122.68 billion in assets. But it wants to play with the big boys anyway when it comes to derivatives, as the chart above shows. Based on the data, it looks like the average taxpayer is backstopping a ton of risk at this FDIC insured bank and getting very little in return. According to financial data from the FFIEC for the second quarter, the bank had $25.1 billion in trading assets and according to the company’s web site, it’s those high net worth clients of its Private Bank that it’s working with “to manage their cash flow needs, finance private asset purchases, and facilitate strategic investments.”

Resurrecting Glass-Steagall - Simon Johnson - All three of the remaining mainstream Democratic presidential candidates now agree that the existing state of the financial sector is not satisfactory and that more change is needed. The three leading Democratic candidates disagree, however, on whether there should be legislation to re-erect a wall between the rather dull business of ordinary commercial banking and other kinds of finance (such as issuing and trading securities, commonly known as investment banking).  This issue is sometimes referred to as “reinstating Glass-Steagall,” a reference to the Depression-era legislation – the Banking Act of 1933 – that separated commercial and investment banking. This is a slight misnomer: the most credible bipartisan proposal on the table takes a much-modernized approach to distinguishing and making more transparent different kinds of finance activities. Sanders and O’Malley are in favor of this general idea; Clinton is not (yet).  There are three main arguments against a modern version of Glass-Steagall. None is convincing.   First, some prominent former officials argue that not all of the financial firms that got into trouble in 2008 were integrated commercial-investment banking operations. For example, Lehman Brothers was a standalone investment bank, and AIG was an insurance company.  This argument is, at best, irrelevant. What happened “last time” is rarely a good guide to fighting wars or anticipating future financial crises. The world moves on, in terms of technology and risks. We must adjust our thinking accordingly.   Second, leading representatives of big banks argue that much has changed since 2008 – and that big banks have become significantly safer. Unfortunately, this is a great exaggeration.  In the run-up to the 2008 crisis, the largest US banks had around 4% equity relative to their assets. This was not enough to withstand the storm. Now, under the most generous possible calculation, the surviving megabanks have on average about 5% equity relative to total assets – that is, they are 95% financed with debt. Finally, some observers – although relatively few at this point – argue that the biggest banks have greatly improved their control and compliance systems, and that the mismanagement of risk on a systemically significant scale is no longer possible.  This view is simply implausible. Consider all the instances of money laundering and sanctions busting (with evidence against Credit Agricole last week, Deutsche Bank this week, and almost every major international bank in the past few years).

How Repo Works - naked capitalism - Yves here. Repo is a critically important mechanism by which major dealer banks finance themselves, and repo is therefore often a major topic in bank reform discussions. We thus thought it would be useful to post this overview.

Making Insider Trading Legal - Do you run a hedge fund? If so, I have exciting news. The prominent campaign by Preet Bharara, the United States Attorney in Manhattan, to crack down on insider trading in the three-trillion-dollar hedge-fund industry has just ground to an inglorious halt. Late last week, it was quietly announced that prosecutors would drop all charges against one of Bharara’s highest-profile targets, Michael Steinberg, who worked at the fourteen-billion-dollar hedge fund S.A.C. Capital Advisors. Steinberg, a trusted deputy of Steven A. Cohen, the founder of S.A.C., was convicted of insider trading, in 2013. (I wrote about the investigation of S.A.C. for the magazine last year.) But Steinberg appealed. Last December, in a separate case, a New York appeals court overturned the convictions of two other hedge-fund traders and issued an opinion that dramatically narrowed the definition of insider trading, by requiring that prosecutors prove both that the tipper received some sort of compensation for sharing the information and that the individual who traded on that information knew it was an illegal tip. Bharara’s office challenged the ruling, but, earlier this month, the Supreme Court declined to hear the case.  Under this new interpretation of insider trading, Steinberg appeared likely to win his appeal—so Bharara dropped the charges against him, and also dismissed the guilty pleas of six coöperating witnesses who had acknowledged trading on material nonpublic information. The United States Attorney’s office maintains that the majority of its insider-trading convictions will remain unchallenged by this change in the legal landscape. But the truth is that if you operate a hedge fund and care to structure your business around the gaping loopholes that the Supreme Court has implicitly endorsed, insider trading is now effectively legal in the United States.

U.S. Court Rules Whistleblowers Can Sue Board Members - Whistleblowers are allowed to seek compensation from directors of a company, a federal judge ruled in California, broadening legal protections for whistleblowers by expanding those who can be held liable in such cases. U.S. District Court Judge Joesph Spero in the Northern District of California ruled that although it was a “close call” and few courts had taken up the issue before, the financial regulation laws Sarbanes Oxley and Dodd-Frank didn’t intend to shield directors who retaliate against an employee. Ruling the other way and protecting board members would have tilted the scales unfairly against whistleblowers, he said. “Such an interpretation of Sarbanes-Oxley would permit a corporation‘s board members to fire high-level employees (like the whistleblower in the Enron case) for whistleblowing even though the exact same conduct on the part of a corporation‘s managers would give rise to individual liability,” Mr. Spero wrote, pointing out the critical role whistleblowing played in the writing of each law. “The Court concludes that Congress intended that Dodd-Frank provide for individual liability that is at least as extensive as that of Sarbanes-Oxley, and therefore, that directors may be held individually liable for retaliating against whistleblowers under Dodd-Frank,” he wrote.

Debt-buying industry and lax court review are burying defendants in defaults: After more than four decades as a commercial litigator, Ward Benshoof was shocked at what he learned two years ago while handling a post-judgment debt-collection case. What had been accepted as evidence seemed to have no more substance than the shadow of smoke. And as he later learned, it also was not evidence at all. His pro bono client’s life had been seized up in such fear that she pawned her wedding ring to feed the maw of a default judgment against her in Los Angeles County Superior Court, obtained by one of the nation’s biggest debt buyers. California’s courts were relying on an antiquated law reaching back to the 1800s, when merchants kept so-called books of account—handwritten ledgers with amounts owed—and those spare records sufficed in a smaller world. Now with about 80,000 such cases each year in Los Angeles alone, that law helped move things along. Critics put it more harshly: “Most courts nationwide have some version of that limited-evidence requirement and have allowed themselves to become co-opted and thus part of the problem,”  . Studies have shown that many people sued by debt buyers lose through default judgments, typically from simply not responding. When they do challenge the complaint, those without lawyers almost always lose, often because of a lack of sophistication in answering or asking questions on paper or in a face-off with a debt-collection lawyer. The debt-buying industry has understandably taken advantage of this and put an unprecedented burden on the nation’s courts—state venues, usually small claims or others of nonrecord jurisdiction.

The Myth of the Disappearing Free Checking Account -- A regular trope sounded by opponents of consumer financial regulations is that the regulations have resulted in the disappearance of free checking. Whether it's the Durbin Interchange Amendment, the CFPB, or the Dodd-Frank Act in general, all are variously blamed for the supposed demise of free checking.  As it turns out, free checking is a little like Mark Twain--reports of its death have been greatly exaggerated.  Most Americans with bank accounts report paying nothing for their services.  The prevalance of such respondents has actually increased since 2010, from 53% to 61% of respondents.  As an initial matter, what is called "free" checking isn't really "free."  Free usually means "free" assuming certain conditions are met, such as direct deposit, maximum number of transfers, minimum balance, etc.  This is because checking accounts are part of bundle of consumer financial services that can be priced in lots of ways. There can be an upfront fee and no additional fees or there can be no upfront fee and lots of additional, behaviorally contingent fees, and every variation in between. In this regard, the pricing of checking accounts is a lot like that of credit cards, where there can be an annual fee or not as well as various behaviorally contingent fees.  What the credit card industry learned a long time ago (thanks to Andrew Kahr) is that different types of fees have different salience to consumers.  Consumers are generally more adverse to inflexible upfront fees, like annual or monthly fees, and more receptive to behaviorally contingent fees...even if the total cost of using the product with behaviorally contingent fees is higher. Once we understand that there's no such thing as "free" checking, then we recognize that changes in checking account pricing are really about how banks are shifting around pricing, but not necessarily about the total cost of financial services to consumers.  Instead, it is about changes in which behaviors are triggers for fees and the amount of those fees.

Fed’s New Rule Would Ease Strain From Dying Banks -  But regulations introduced since the financial crisis of 2008 have, in theory, already made it much safer to let a bank die. And on Friday, the Federal Reserve proposed a new rule that aims to make the process of winding down a faltering financial giant smoother still.It would require banks to have a bigger financial buffer that could absorb potential losses on loans and trading positions.The new regulation seeks to inflict the costs of a failure on investors who have lent to an ailing bank and on its shareholders, rather than on taxpayers. The hope is that the rule would work without greatly disrupting the wider market and economy. “The proposal is another important step in addressing the ‘too big to fail’ problem,” said Janet L. Yellen, the Federal Reserve chairwoman, referring to the notion that the government has to bail out big banks because letting them fail would cause severe collateral damage in the economy.Of course, there can be no guarantee that the authorities would let a large financial firm topple in a future crisis, especially if several big banks are teetering at once. In 2008, soon after Lehman Brothers collapsed and the global financial system seized up, government officials dropped their opposition to bailouts.At the very least, though, the new rule and related regulations could force investors to think harder about the risks of backing financial giants. And if large banks have to consistently pay more for their financing, they may decide to shrink to make their businesses more profitable.

Banks face $120bn shortfall on Fed plan - Six of the biggest US banks would have to make up a $120bn shortfall in their long-term debt to boost the financial system’s resilience under a Federal Reserve proposal aimed at preventing another systemic meltdown. The proposal unveiled on Friday is part of a global regime and one of the final post-crisis steps designed to end the problem of lenders whose size and influence renders them “too big to fail”. Debate continues to rage on whether policymakers have done enough to prevent the taxpayer-funded bailouts from which the largest banks benefited during the financial crisis in 2008. The Fed’s proposed rules on banks’ “total loss absorbing capacity”, or TLAC, say banks must carry a minimum amount of capital and liabilities — equal to 18 per cent of risk-weighted assets — that can be written off when a bank gets into serious trouble. Janet Yellen, Fed chair, told an open meeting: “The proposal, combined with our other work to improve the resolvability of systemic banking firms, would substantially reduce the risk to taxpayers and the threat to financial stability stemming from the failure of these firms.” The proposal affects eight US institutions designated as globally systemically important banks, or GSIBs, but the Fed would not say which six had the combined $120bn shortfall. The eight banks are JPMorgan Chase, Citigroup, Bank of America, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, State Street and Wells Fargo.

Killing Off Community Banks — Intended Consequence of Dodd-Frank? -- Ellen Brown -- At over 2,300 pages, the Dodd Frank Act is the longest and most complicated bill ever passed by the US legislature. It was supposed to end “too big to fail” and “bailouts,” and to “promote financial stability.” But Dodd-Frank’s “orderly liquidation authority” has replaced bailouts with bail-ins, meaning that in the event of insolvency, big banks are to recapitalize themselves with the savings of their creditors and depositors.  The six largest US financial institutions now have assets of some $10 trillion, amounting to almost 60% of GDP; and they control nearly 50% of all bank deposits. Meanwhile, their smaller competitors are struggling to survive. Community banks and credit unions are disappearing at the rate of one a day. Access to local banking services is disappearing along with them. Small and medium-size businesses – the ones that hire two-thirds of new employees – are having trouble getting loans; students are struggling with sky-high interest rates; homeowners have been replaced by hedge funds acting as absentee landlords; and bank fees are up, increasing the rolls of the unbanked and underbanked, and driving them into the predatory arms of payday lenders. Municipal governments are also being rejected as customers. Bank of America just announced that it no longer wants the business of some smaller cities, which have been given 90 days to find somewhere else to put their money. Hundreds of local BofA branches are also disappearing. Hardest hit, however, are the community banks. Today there are 1,524 fewer banks with assets under $1 billion than there were in June 2010, before the Dodd-Frank regulations were signed into law. Collateral Damage or Intended Result? The rapid demise of community banking is blamed largely on Dodd-Frank’s massively complex rules and onerous capitalization requirements. Just doing the paperwork requires an army of compliance officers, and increased capital and loan requirements are eliminating the smaller banks’ profit margins. According to Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, the disappearance of community banks was not an unintended consequence of Dodd-Frank. 

October 2015: Unofficial Problem Bank list declines to 264 Institutions - This is an unofficial list of Problem Banks compiled only from public sources. Here is the unofficial problem bank list for October 2015.   During the month, the list fell from 276 institutions to 264 after 12 removals. Assets dropped by $2.8 billion to an aggregate $79.2 billion. A year ago, the list held 422 institutions with assets of $133.5 billion.  Actions have been terminated against Severn Savings Bank, FSB, Annapolis, MD ($779 million Ticker: SVBI); Artisans' Bank, Wilmington, DE ($472 million); Valley Bank & Trust, Brighton, CO ($295 million); The Citizens Bank of Logan, Logan, OH ($191 million); United International Bank, Flushing, NY ($184 million); First National Bank, Goodland, KS ($181 million); Goldwater Bank, N.A., Scottsdale, AZ ($103 million); Tri-Valley Bank, San Ramon, CA ($103 million Ticker: TRVB); PNA Bank, Chicago, IL ($96 million); and Park State Bank & Trust, Woodland Park, CO ($91 million). Two banks failed during the month -- The Bank of Georgia, Peachtree City, GA ($294 million) and Hometown National Bank, Longview, WA ($5 million). Astonishingly, there was a bank failure in Georgia as we thought there were not any banks left to fail in the state. Since the on-set of the Great Recession, 90 banks headquartered in Georgia have failed. Nearly 26 percent of the 352 banks headquartered in Georgia at year-end 2007 have failed. These failures have cost the FDIC insurance fund about $11.7 billion, with the average cost approximating an exorbitant 34 percent of failed bank assets. It does not take rocket science to understand this is what happens when unfettered construction & development lending collides with a housing downturn.

The Promise and Limits of Postal Banking - It’s easy for Progressives to get excited about the idea of postal banking: a public option for banking! What’s not to love? I’m glad to see the idea of public options in financial services getting some play of late; it’s something I’ve championed for a while in payments and housing finance. But I think it’s necessary to recognize some of the limits to postal banking. In particular, it's not at all clear to me why we would want to involve the Post Office in the public provision of financial services. What the Post Office offers is a way to recreate a brick-and-mortar branch bank network. This really doesn't make a lot of sense for 21st century banking. Additionally, postal banking is often pitched as an alternative to payday and title lenders. Before we go running down that path, we should think about what it means to have the government in the payday lending business.  Postal banking proposals are a subset of public option banking proposals that aim to solve one of two problems: lack of access to financial services and inadequate competition in financial services. It’s worth exploring each of these issues a little more to understand what postal banking can and cannot deliver.

Elizabeth Warren on How Clinton Backed Student Loan and Mortgage Debt Slavery with 2005 Bankruptcy “Reform” Vote -- Yves Smith - A sorry chapter of Hillary Clinton’s legislative record was her vote in support of the 2005 bankruptcy “reform” bill. This bill had been keenly sought by the credit card industry, had come up repeatedly in Congress and had managed to be beaten back….until 2005, when it became law. One of its biggest proponents was the big credit card issuer MBNA, which is now part of Bank of America. MBNA has estimated that getting the bill passed would enable them to get an additional $10 a month from consumers who were eligible for bankruptcy, which would mean an additional $85 million a year to them in profits. In addition to restricting access to Chapter 7 bankruptcies, which enabled borrowers to wipe out their debts, and forced more into Chapter 13 bankruptcies, which force borrowers to negotiate a 60 month repayment plan with budgets that require them to live at an extremely meager level. As you can see in this Bill Moyers segment, Elizabeth Warren recounts how Hillary Clinton sought out Warren’s advice on the bankruptcy bill in 1999, and persuaded her husband to veto it, one of the last acts he took as an outgoing President. Warren points out that this bill at the time was not very high priority pro-business measure and by implication was not unduly costly for a departing Chief Executive to veto.  Hillary Clinton was so proud of her role in stopping the bankruptcy legislation that she touted it in her autobiography. Yet in her first act as a newly-elected Senator from New York, she made a 180 degree change and voted in favor of the bill. And Warren makes clear that from her earlier discussions with Clinton that she knew full well what was at stake in terms of the consequences to families. How does Warren explain that change? She attributes it to the power of lobbying dollars in Washington, particularly from the consumer financial services industry, which has long been a top spender. Warren also highlights that financial firms were now Clinton’s constituents and she therefore was obligated to represent them.

Freddie Mac: Mortgage Serious Delinquency rate declined in September, Lowest since October 2008 --Freddie Mac reported that the Single-Family serious delinquency rate declined in September to 1.41%, down from 1.45% in August. Freddie's rate is down from 1.96% in September 2014, and the rate in September was the lowest level since October 2008.  Freddie's serious delinquency rate peaked in February 2010 at 4.20%.  These are mortgage loans that are "three monthly payments or more past due or in foreclosure".  Although the rate is declining, the "normal" serious delinquency rate is under 1%.   The serious delinquency rate has fallen 0.55 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% until the second half of 2016.  So even though delinquencies and distressed sales are declining, I expect an above normal level of Fannie and Freddie distressed sales through 2016 (mostly in judicial foreclosure states).

MBA: Mortgage Applications Decrease in Latest Weekly Survey, Purchase Applications up 23% YoY - From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey  Mortgage applications decreased 3.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 23, 2015. The previous week’s results included an adjustment for the Columbus Day holiday. ..The Refinance Index decreased 4 percent from the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index increased 7 percent compared with the previous week and was 23 percent higher than the same week one year ago.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.98 percent from 3.95 percent, with points increasing to 0.44 from 0.43 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index. Refinance activity remains low. 2014 was the lowest year for refinance activity since year 2000, and refinance activity will probably stay low for the rest of 2015. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 23% higher than a year ago.

Sam Zell Dumps 23,000 Apartments For $5.4 Billion In Peak Housing Bet -- If you’ve been apartment shopping in the US lately, you might have noticed that rents are becoming more and more unaffordable seemingly by the month.  We’ve documented the inexorable rise in the cost of renting on too many occasions to count, but for those who need a refresher, we recommend rereading one of our more lengthy treatments in “The Mystery Of The ‘Missing Inflation’ Solved, And Why The US Housing Crisis Is About To Get Much Worse”, published late last month. In it, we explained why riotous laughter invariably ensues every time the Fed tells Americans that inflation is negligible.  In short, the collapse of the housing bubble transformed America into a nation of renters as the following chart of the homeownership rate makes abundantly clear: When looking at the above, and when considering that, as we reported over the summer, in no state can a minimum wage worker afford a 1-bedroom apartment, one might be tempted to suggest that the top is in.  One person who’s betting that we may have hit peak-rent is billionaire Sam Zell who just dumped a quarter of the apartments held by his real estate company for some $5.4 billion. Here’s more via WSJ: Sam Zell has agreed to sell more than 23,000 apartments controlled by his real-estate company, Equity Residential, for $5.4 billion to Starwood Capital Group, the companies said. The transaction, announced Monday, represents about a quarter of the units in Equity Residential’s portfolio of apartments and would be one of the largest since the recession. It also comes on the heels of Blackstone Group LP’s announcement on Tuesday that it is buying Stuyvesant Town and Peter Cooper Village in Manhattan for $5.3 billion.

Black Knight: House Price Index up 0.3% in August, Up 5.5% year-over-year -- Black Knight uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted. From Black Knight: U.S. Home Prices Up 0.3 Percent for the Month; Up 5.5 Percent Year-Over-Year Today, the Data and Analytics division of Black Knight Financial Services, Inc. released its latest Home Price Index (HPI) report, based on August 2015 residential real estate transactions in the United States. The Black Knight HPI combines the company's extensive property and loan-level databases to produce a repeat sales analysis of home prices as of their transaction dates every month for each of more than 18,500 U.S. ZIP codes. The Black Knight HPI represents the price of non-distressed sales by taking into account price discounts for REO and short sales. For a more in-depth review of this month's home price trends, including detailed views of results from the 20 largest states and 40 largest metros, please download the full Black Knight HPI Report. The Black Knight HPI increased 0.3% percent in August, and is off 5.3% from the peak in June 2006 (not adjusted for inflation). The year-over-year increase in the index has been about the same for the last year.  The report has data for the 20 largest states, and 40 MSAs.  Black Knight shows prices off 37.4% from the peak in Las Vegas, off 31.1% in Orlando, and 27.4% off from the peak in Riverside-San Bernardino, CA (Inland Empire).

Case-Shiller Home Price Appreciation 'Stable' At Around 5% YoY -- For the first time since April, Case Shiller Home Prices rose month-over-month (though barely at +0.11%). However, this very modestly better than expected print was all thanks to downward revisions of previous data. San Francisco continues to lead the 20-city index with a 10.7% YoY gain. This is the 6th month in a row in which year-over-year gains are basically stagnant at +5% The first MoM gain in 3 months, thanks to downward revisions... The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a slightly higher year-over-year gain with a 4.7% annual increase in August 2015 versus a 4.6% increase in July 2015. The 10-City Composite increased 4.7% in the year to August compared to 4.5% in the prior month. The 20-City Composite’s year-over-year gain was 5.1% versus 4.9% in the year to July. Before seasonal adjustment, the National Index posted a gain of 0.3% month-over-month in August. The 10-City Composite and 20-City Composite both reported gains of 0.3% and 0.4% month-over-month respectively. After seasonal adjustment, the National Index posted a gain of 0.4%, while the 10-City and 20-City Composites both increased 0.1% month-over-month. Eighteen of 20 cities reported increases in August before seasonal adjustment; after seasonal adjustment, five were down, 11 were up, and four were unchanged. San Francisco, Denver and Portland reported the highest year-over-year gains among the 20 cities with price increases of 10.7%, 10.7%, and 9.4%, respectively. Fifteen cities reported greater price increases in the year ending August 2015 versus the year ending July 2015. San Francisco and Denver are the only cities with double digit increases, and Phoenix had the longest streak of year-over-year increases. Phoenix reported an increase of 4.9% in August 2015, the ninth consecutive increase in annual price gains. Portland posted a 9.4% annual increase, up from 8.5% in July 2015; this is the biggest jump in year-over-year gains this month.

Case-Shiller: National House Price Index increased 4.7% year-over-year in August -- S&P/Case-Shiller released the monthly Home Price Indices for August ("August" is a 3 month average of June, July and August prices).  This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index. From S&P: Widespread Gains in Home Prices for August According to the S&P/Case-Shiller Home Price Indices  The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a slightly higher year-over-year gain with a 4.7% annual increase in August 2015 versus a 4.6% increase in July 2015. The 10-City Composite increased 4.7% in the year to August compared to 4.5% in the prior month. The 20-City Composite’s year-over-year gain was 5.1% versus 4.9% in the year to July.  Before seasonal adjustment, the National Index posted a gain of 0.3% month-over-month in August. The 10-City Composite and 20-City Composite both reported gains of 0.3% and 0.4% month-over-month respectively. After seasonal adjustment, the National Index posted a gain of 0.4%, while the 10-City and 20-City Composites both increased 0.1% month-over-month. Eighteen of 20 cities reported increases in August before seasonal adjustment; after seasonal adjustment, five were down, 11 were up, and four were unchanged. The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices.  The second graph shows the Year over year change in all three indices. The Composite 10 SA is up 4.7% compared to August 2014. The Composite 20 SA is up 5.1% year-over-year.. The National index SA is up 4.7% year-over-year. Prices increased (SA) in 13 of the 20 Case-Shiller cities in August seasonally adjusted. (Prices increased in 18 of the 20 cities NSA) Prices in Las Vegas are off 39.2% from the peak, and prices in Denver and Dallas are at new highs (SA). The last graph shows the bubble peak, the post bubble minimum, and current nominal prices relative to January 2000 prices for all the Case-Shiller cities in nominal terms.

Home Price Rose 5.1% Year-over-Year in August; Growth Mainly in Few Cities in West -- With this morning's release of the August S&P/Case-Shiller Home Price we learned that seasonally adjusted home prices for the benchmark 20-city index were up fractionally month over month at 0.1%. However, the year-over-year change has hovered between 4.9% and 5% for six months. Price growth, we're told, is mostly in the west.  The adjacent column chart illustrates the month-over-month change in the seasonally adjusted 20-city index, which tends to be the most closely watched of the Case-Shiller series. It was up 0.1% from the previous month. The nonseasonally adjusted index was up 5.1% year-over-year. Here is an excerpt of the analysis from today's Standard & Poor's press release. "Home prices continue to climb at a 4% to 5% annual rate across the country," says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Dow Jones Indices. "Most other recent housing indicators also show strength. Housing starts topped an annual rate of 1.2 million units in the latest report with continuing strength in both single family homes and apartments.  Sales of existing homes are running about 5.5 million units annually with inventories of about five months of sales. However, September new home sales took an unexpected and sharp drop as low inventories were cited as a possible cause. "A notable part of today’s economy is the continuing low inflation rate; in the year to September, consumer prices were unchanged. Even excluding food and energy, the core inflation was 1.9%. One result is that a 5% price increase in the value of a house means more today than it did in 2005-2006, the peak of the housing boom when the inflation rate was higher. The rebound from the recent lows was faster than the 1997-2005 housing boom, and also much less driven by inflation." [Link to source] The chart below is an overlay of the Case-Shiller 10- and 20-City Composite Indexes along with the national index since 1987, the first year that the 10-City Composite was tracked. Note that the 20-City, which is probably the most closely watched of the three, dates from 2000. We've used the seasonally adjusted data for this illustration.

Real Prices and Price-to-Rent Ratio in August -- The year-over-year increase in prices is mostly moving sideways now at between 4% and 5%.. In October 2013, the National index was up 10.9% year-over-year (YoY). In August 2015, the index was up 4.7% YoY. Here is the YoY change since January 2014 for the National Index:  In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $276,000 today adjusted for inflation (38%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).  It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 6.7% below the bubble peak.   However, in real terms, the National index is still about 20.6% below the bubble peak.  The first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through August) in nominal terms as reported.  The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices. In real terms, the National index is back to July 2003 levels, the Composite 20 index is back to April 2003, and the CoreLogic index back to January 2004.This graph shows the price to rent ratio (January 1998 = 1.0).  On a price-to-rent basis, the Case-Shiller National index is back to May 2003 levels, the Composite 20 index is back to December 2002 levels, and the CoreLogic index is back to November 2003.

Zillow Forecast: Expect September Year-over-year Change for Case-Shiller Index Similar to August -- The Case-Shiller house price indexes for August were released Tuesday. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.From Zillow: September Case-Shiller Forecast: Look for Continued Modest Growth in Pace of Appreciation The August S&P Case-Shiller (SPCS) data published [Tuesday] showed home prices rising on a seasonally-adjusted monthly basis, with slight rises in the 10- and 20- city indices and almost half a percentage point rise in the national index. We expect the September SPCS to show similar slight increases of 0.1 percent for the 10-City Index and 0.2 percent for the 20-City Index from August to September. The national index is expected to gain half of a percentage point over the same period (seasonally adjusted). We expect the 10- City and national indices to both grow 4.7 percent for the year ending in September, and the 20-City Index to grow 5.1 percent, the same rates of annual appreciation reported for August.All SPCS forecasts are shown in the table below. These forecasts are based on today’s August SPCS data release and the September 2015 Zillow Home Value Index (ZHVI), released October 26. The SPCS Composite Home Price Indices for September will not be officially released until Tuesday, November 24.This suggests the year-over-year change for the September Case-Shiller National index will be about the same as in the August report.

September Pending Home Sales Declined in September -- Earlier today the National Association of Realtors released the September data for their Pending Home Sales Index. "Pending home sales cooled in September for the second straight month and to their second lowest index reading in 2015, according to the National Association of Realtors®. All four major regions experienced a pullback in activity in September." (more here). The chart below gives us a snapshot of the index since 2001. The MoM change came in at -2.3%. had a forecast of 1.0%.   Over this time frame, the US population has grown by 13.4%. For a better look at the underlying trend, here is an overlay with the nominal index and the population-adjusted variant. The focus is pending home sales growth since 2001. The index for the most recent month is 16% below its all-time high in 2005. The population-adjusted index is 23% off its 2005 high. The NAR explains that "because a home goes under contract a month or two before it is sold, the Pending Home Sales Index generally leads Existing Home Sales by a month or two." Here is a growth overlay of the two series. The general correlation, as expected, is close. And a close look at the numbers supports the NAR's assessment that their pending sales series is a leading index.

NAR: Pending Home Sales Index decreased 2.3% in September, up 3% year-over-year -- From the NAR: Pending Home Sales Lose Further Steam in September The Pending Home Sales Index, a forward–looking indicator based on contract signings, declined 2.3 percent to 106.8 in September from a slightly downwardly revised 109.3 in August but is still 3.0 percent above September 2014 (103.7). With last month's decline, the index is now at its second lowest level of the year (103.7 in January), but has still increased year–over–year for 13 straight months. The PHSI in the Northeast fell 4.0 percent to 89.6 in September, but is still 3.9 percent above a year ago. In the Midwest the index declined 2.5 percent to 104.7 in September, but remains 4.3 percent above September 2014. Pending home sales in the South decreased 2.6 percent to an index of 118.3 in September and are now 0.1 percent below last September. The index in the West inched back 0.2 percent in September to 104.4, but is still 6.6 percent above a year ago. This is well below expectations of a 1% increase for this index.  Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in October and November.

September 2015 Pending Home Sales Index Declines: The National Association of Realtors (NAR) seasonally adjusted pending home sales index declined. Our analysis of pending home sales agrees. The quote of the day from this NAR release: There continues to be a dearth of available listings in the lower end of the market for first-time buyers, and Realtors in many areas are reporting stronger competition than what is normal this time of year because of stubbornly-low inventory conditions. Pending home sales are based on contract signings, and existing home sales are based on the execution of the contract (contract closing). The NAR reported:

  • Pending home sales index was down 2.3 % month-over-month and up 3.0 % year-over-year (last month was reported +6.1 % year-over-year).
  • The market was expecting month-over-month growth of -1.0 % to 2.5 % (consensus 1.0 %) versus the growth of -2.3 % reported.

Econintersect's evaluation using unadjusted data:

  • the index growth was down 4.1 % month-over-month and up 2.5 % year-over-year.
  • The current trends (using 3 month rolling averages) declined but remains in expansion.
  • Extrapolating the pending home sales unadjusted data to project October 2015 existing home sales, this would be a 2.5 % decline year-over-year for existing home sales.

Pending Home Sales Tumble Most Since 2013 Amid "Signs Of A Slowing US Economy" -- Following the carnage in new home sales in September, amid sliding mortgage apps and despite soaring homebuilder sentiment, pending home sales in September also plunged - dropping 2.3% MoM (missing expectations of a 1.0% rise) and worse still from a downwardly revised history. This is the biggest MoM drop sicne Dec 2013 andthe second lowest level of pending home sales this year. While there is plenty of blame for this, NAR's Larry Yun, rather ominously warns, "signs of a slowing U.S. economy may be causing some prospective buyers to take a wait–and–see approach." Worst MoM drop since Dec 2013... Only The West region saw increased sales... The PHSI in the Northeast fell 4.0 percent to 89.6 in September, but is still 3.9 percent above a year ago. In the Midwest the index declined 2.5 percent to 104.7 in September, but remains 4.3 percent above September 2014. Pending home sales in the South decreased 2.6 percent to an index of 118.3 in September and are now 0.1 percent below last September. The index in the West inched back 0.2 percent in September to 104.4, but is still 6.6 percent above a year ago.

New Home Sales decreased to 468,000 Annual Rate in September -- The Census Bureau reports New Home Sales in September were at a seasonally adjusted annual rate (SAAR) of 468 thousand.  The previous three months were revised down by a total of 39 thousand (SAAR). "Sales of new single-family houses in September 2015 were at a seasonally adjusted annual rate of 468,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.5 percent below the revised August rate of 529,000, but is 2.0 percent above the September 2014 estimate of 459,000." 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 since the bottom, new home sales are still fairly low historically. The second graph shows New Home Months of Supply. The months of supply increased in September to 5.8 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). Starting in 1973 the Census Bureau broke inventory down into three categories: Not Started, Under Construction, and Completed. The third graph shows the three categories of inventory starting in 1973. The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low. The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate). In September 2015 (red column), 36 thousand new homes were sold (NSA). Last year 37 thousand homes were sold in September. The all time high for August was 99 thousand in 2005, and the all time low for September was 24 thousand in 2011. This was well below expectations of 549,000 sales SAAR in August, and prior months were revised down - a disappointing report. 

New Home Sales Well Below Expectations - This morning's release of the Stepember New Home Sales from the Census Bureau at 468,000 disappointed general expectations, and the previous month was revised downward by 23K. The forecast was for 550K. Here is the opening from the report: Sales of new single-family houses in September 2015 were at a seasonally adjusted annual rate of 468,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.5 percent (±11.3%) below the revised August rate of 529,000, but is 2.0 percent (±17.9%)* above the September 2014 estimate of 459,000. [Full Report] For a longer-term perspective, here is a snapshot of the data series, which is produced in conjunction with the Department of Housing and Urban Development. The data since January 1963 is available in the St. Louis Fed's FRED repository here. Over this time frame we see the steady rise in new home sales following the 1990 recession and the acceleration in sales during the real estate bubble that peaked in 2005.  Now let's examine the data with a simple population adjustment. The Census Bureau's mid-month population estimates show a 71% increase in the US population since 1963. Here is a chart of new home sales as a percent of the population.

New Home Sales Sank in September -- After reaching a seven-year high in May of this year, sales of newly constructed single-family homes took a nosedive in September. New home sales fell 11.5% in September, the Wall Street Journal reports, from a seasonally adjusted rate of 529,000 monthly new home purchases in August to just 468,000. The drop defied economists’ projections for the month, which, according to the WSJ, placed September’s figure closer to 555,000 purchases.  Most affected was the Northeast, where, after new home sales surged 87.5% in May alone, they fell 61.8% from August to September. New home sales in the region are down 56.7% from September 2014. The current slump isn’t a good sign for the economy, but it could be a good sign if you’re looking to buy, and especially if you’re looking to buy your first home. October is a month for real estate bargains as is, and the slow market is sure to help.Plus, it seems new home sales in the U.S. on average show slight overall growth—2%—from this time last year, suggesting the real estate market may be on the mend after all. Existing home sales, meanwhile, are up 4.7%.

New Home Sales Plunge -11.5% While Prices Soar  - The September 2015 New Residential Single Family Home Sales plunged by -11.5%.  Sales dropped by 61,000 annualized units to 468,000 for the month.  August was significantly revised downward from 552 thousand to 529 thousand sales.  The plunge took annual growth from 21.6% as reported last month to only 2.0% growth from the 459,000 year ago sales levels.  The annual increase is way within the ±17.9% margin of error.  In this Census survey, amounts are annualized and represent what the yearly volume would be if just that month's rate were applied to the entire year.  These figures are also seasonally adjusted.  The monthly percentage change is outside the ±11.3% margin or error, a rarity, although sales figures are almost always revised.  Many in the press are saying this plunge is temporary.  We think the economy is slowing and more importantly, people are tapped out and simply cannot afford the soaring home prices.  The September 2015 average home sale price was $364,100.  This is a 6.2% soaring monthly increase..  From a year ago the average price has soared up by 14.1%.  With these kinds of price changes it is no surprise that new home sales plunged.  The median home price is $296,900 and had a 2.7% change from the previous month.  From September 2014, the median new home sales price has increased a whopping 13.5%.   Median means half of new homes were sold below this price and both the average and median sales price for single family homes are not seasonally adjusted.  New homes available for sale is now 225,000 units, a 4.2% increase from last month.  From a year ago inventories have increased 7.7% and this is outside the ±6.5% margin of error.  The monthly change is also outside the ±1.9% error margin. The graph below shows how long it would take to sell the new homes on the market at each month's sales rate.  For September the time stands at 5.8 months.  This is a 18.4% monthly change and a 5.5% annual one.  The median time a house was completed and on the market to the time it sold was 3.3 months.  From a year ago that time period was 3.0 months.  This implies the median time to move new properties is still somewhat stable.

Housing Recovery Horror: New Home Sales Crash Most Since 2013 As Median Price Soars -- Homebuilders were exuberant, The Fed was confident, and stock markets have recovered... so why did New Home Sales collapse 11.5% in September (missing a 0.6% drop expectation by a proverbial mile)? This is the largest MoM drop since July 2013. Worst still, the excitement of July and August data has been notably revised lower to press the current New Home Sales SAAR to 468k - its lowest since November 2014. At the same time, median home prices surged to $296,900 - the highest in 2015. Time to hike rates? Biggest MoM drop since July 2013... (and weakest YoY growth +2.0% since Nov 2014). It seems Homebuilders really don't know anything after all... Chart: BBG One possible culprit: the raging housing bubble, as the median new home sales price rises to the highest in 2015 and just why of its all time high at $296,900. Dragging the SAAR to its lowest since Nov 2014... Who could have seen that coming? Home Sales collapse as the ongoing bubble push to drive asset prices higher crushes affordability.

September 2015 New Home Sales Crashes.: The headlines say new home sales significantly declined from last month (even though last month was revised downward). The rolling averages smooth out much of the uneven data produced in this series - and this month there was a deceleration in the rolling averages. As the data is noisy, the 3 month rolling average is the way to look at this data. This data series is suffering from methodology issues. Econintersect analysis:

  • unadjusted sales growth decelerated 22.3 % month-over-month (after last month's revised deceleration of 3.4 %).
  • unadjusted year-over-year sales down 2.7 % (Last month was up 19.4 %). Growth this month is on the low end of the range of growth seen last 12 months.
  • three month unadjusted trend rate of growth decelerated 6.3 % month-over-month - is up 13.0 % year-over-year.
  • seasonally adjusted sales down 11.5 % month-over-month
  • seasonally adjusted year-over-year sales up 2.0 %
  • market expected (from Bloomberg) seasonally adjusted annualized sales of 535 K to 560 K (consensus 549 K) versus the actual at 468 K.

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

Comments on September New Home Sales -- The new home sales report for September was well expectations and sales for July and August were revised down. Sales were up only 2.0% year-over-year in September (SA).   Overall this was a disappointing report.. Even though the September report was disappointing, sales are still up solidly year-to-date.  The Census Bureau reported that new home sales this year, through September, were 392,000, not seasonally adjusted (NSA). That is up 17.6% from 333,000 sales during the same period of 2014 (NSA). That is a strong year-over-year gain for the first nine months of 2015!  This graph shows new home sales for 2014 and 2015 by month (Seasonally Adjusted Annual Rate). The year-over-year gain was weak in September, and I expect the year-over-year increases to be lower over the remaining months compared to earlier this year - but the overall year-over-year gain should be solid in 2015. And here is another update to the "distressing gap" graph that I first started posting a number of 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 2015. I expect existing home sales to move sideways (distressed sales will continue to decline and be partially offset by more conventional / equity sales). And I expect this gap to slowly close, mostly from an increase in new home sales. However, this assumes that the builders will offer some smaller, less expensive homes.

Residential Building Sector Confirming Slowing Economy or Simply Less Need? -  In my usual weekly economic highlight, I try to hone in on an element which is positively or negatively affecting the economy. Recently, data which would indicate increases in the rate of economic expansion have been very hard to find. This week the most significant data release to me was the U.S. Census data release on the residential building sector. In the "olden" days, residential building was a major element driving GDP growth. With new residential construction still around half of the pre-Great Recession peak, it is an important but no longer significant element of GDP. (click on below graphic to enlarge). Residential construction continues to show a moderately declining rate growth rate for both building permits and construction completions. The reason we believe these two data points are important is that they show the beginning of the residential building process and the end of the process. Accelerating future growth in residential construction would be shown as higher growth in permits versus the growth rate of residential construction completions as shown on the above graphic. Another way to look at this situation would be to simply subtract construction completions from permits issued (graph below). There is seasonality in simply subtracting completions from permits. However, standing back from the data, there was a general improvement trend since the Great Recession. It is difficult to tell at this point if this trend is still continuing using the method of simply subtracting completions from permits. The positive aspect of analyzing this series is that inflation does not apply as it counts the permits and completions. The negative aspect of this series is that there is significant backward revision so the current month's data can be very inaccurate. Also the nature of this industry naturally varies from month to month so the rolling averages are the best way to view this series - and still the data remains in the range we have seen over the last 3 years.

Lawler: Builders say Labor Shortages Delaying Closings, Pushing Up Costs; and Some Other Observations - From housing economist Tom Lawler:  Several builders have released earnings and had earnings conference calls for the quarter ended September 30, 2015, and one of the key “themes” from builders was that resource “constraints,” specifically with respect to labor, slowed home closings last quarter, and in some cases contributed to weaker than expected net orders. PulteGroup, M/I Homes, Meritage Homes, and MDC Holdings all said, in one form or another, that labor “shortages” – laborers, land development, and various trades – had resulted both in accelerating labor costs and delays in land development and home construction. Most builders said that the main impact in terms of their operating results were lower-than-expected home closings last quarter, though one said that in some markets longer construction timelines appear to have led some buyers to forgo a home purchase.  Most builders noted that both land and labor costs had increased “significantly” of late, though costs of most materials were down. Several of the builders said that they were “able” to increase prices to match increases in overall construction costs in most markets, though at least one builder implied that price hikes in a few markets where costs had increased significantly may have led to fewer home orders.

What Oil Prices Mean for Apartment Rent Growth in the South and the West - It is no secret that a number of metropolitan areas in the south and west have benefited significantly from the recent oil and gas drilling boom. Metro GDP data for 2014 recently released from the Bureau of Economic Analysis shows a broad range in growth rates across the country. The metro areas that saw the highest growth rates were the same ones that saw the sharpest apartment rent growth for the same period.While technology-focused economies such as San Francisco and San Jose were among the top 10 metros, the remaining high-growth metros were those fueled by drilling-related business.The top two markets, Greeley, Colo. and Midland-Odessa, Texas posted metro GDP per capita growth rates of 11.6 percent and 10.9 percent respectively. Greeley has seen a sizable jump in both oil and gas drilling in the Denver-Julesburg basin that cuts across the northeast corner of the state. Odessa-Midland’s growth came from drilling in the Permian basin. Both areas saw strong energy-related job growth in a short time period. Greeley’s “natural resources and mining” industry added 2,525 jobs in one year, a growth rate of 25 percent. These added jobs accounted for 9 percent of the overall job growth in Greeley county. In Odessa-Midland, the mining industry grew by 14 percent from 2013 to 2014, accounting for 40 percent of the total job growth in the metro.

HVS: Q3 2015 Homeownership and Vacancy Rates --  The Census Bureau released the Residential Vacancies and Homeownership report for Q3 2015.  This report is frequently mentioned by analysts and the media to track household formation, the homeownership rate, and the homeowner and rental vacancy rates.  However, there are serious questions about the accuracy of this survey.  This survey might show the trend, but I wouldn't rely on the absolute numbers.  The Census Bureau is investigating the differences between the HVS, ACS and decennial Census, and analysts probably shouldn't use the HVS to estimate the excess vacant supply or household formation, or rely on the homeownership rate, except as a guide to the trend.   The Red dots are the decennial Census homeownership rates for April 1st 1990, 2000 and 2010. The HVS homeownership rate increased to 63.7% in Q3, from 63.4% in Q2. I'd put more weight on the decennial Census numbers - and given changing demographics, the homeownership rate is probably close to a bottom. The HVS homeowner vacancy increased to 1.9% in Q3. This has been mostly moving sideways for the last 2+ years.

Home Ownership Remains Near Its Interim Low  -- Over the last decade the general trend has been consistent: The rate of home ownership continues to decline. The Census Bureau has now released its latest quarterly report with data through Q3. The seasonally adjusted rate for Q3 is 63.5 percent, unchanged from Q2. The nonseasonally adjusted Q3 number is 63.7 percent, the same as Q1 but up from the 63.4 percent interim low in Q2. The Census Bureau has been tracking the nonseasonally adjusted data since 1965. Their seasonally adjusted version only goes back to 1980. Here is a snapshot of the nonseasonally adjusted series with a 4-quarter moving average to highlight the trend. The consensus view is that trend away from home ownership is a result of rising residential real estate prices in general and limited supply of entry level priced homes that would attract first-time buyers.  The snapshot below gives us a crude comparison of the US homeownership rate compared to seventeen other countries. Our data source is a subset of the nearly four dozen countries in this Wikipedia entry on home ownership. We included the outliers at the top and bottom, Romania at 95.6% and Switzerland at 44.0%, both as of 2013.

The Homeownership Rate Is Near a 30-Year Low. Could It Be Hitting Bottom? - The homeownership rate remained near its lowest point in three decades in the third quarter, but economists said the good news is that it may not go much lower. Not seasonally adjusted, the homeownership rate ticked up slightly to 63.7% from 63.4% in the last quarter–still near its lowest point in 30 years. The seasonally adjusted homeownership rate remained at 63.5% in the third quarter, according to estimates published by the Commerce Department on Tuesday, unchanged from the quarter earlier. The number of homeowner households increased by 123,000 in the third quarter from a year earlier, while the number of renter households increased by 1.3 million. Mark Zandi, chief economist for Moody’s Analytics, said the numbers could show that the homeownership rate, which has been declining steadily for a decade, is finally leveling out. “I don’t expect any significant increase any time soon, but I think we’re finally at bottom,” he said. The quarterly estimates are viewed as not terribly reliable by some economists and the overall trend still points to a declining homeownership rate.

Bankruptcy Filings declined 11% in Fiscal 2015, Lowest Filings since 2007 --  From the US Court: Fiscal Year Bankruptcy Filings Continue Fall Bankruptcy cases filed in federal courts for the fiscal year 2015—the 12-month period ending September 30, 2015—totaled 860,182, down 11 percent from the 963,739 bankruptcy filings in FY 2014, according to statistics released today by the Administrative Office of the U.S. Courts. This is the lowest number of bankruptcy filings for any 12-month period since 2007, and the fifth consecutive fiscal year filings have fallen. The number of filings for the fiscal year ending Sept 2015 were the lowest since 2007, and business filings were the lowest in decades. This graph shows the business and non-business bankruptcy filings by year since 1987. The sharp decline in 2006 and 2007 was due to the so-called "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005". (a good example of Orwellian named legislation since this was more a "Lender Protection Act"). Other than 2007, this was the lowest level for filings since 1994. This is another indicator of an economy mostly recovered from the housing bust and financial crisis.

BEA: Personal Income increased 0.1% in September, Core PCE prices up 1.3% year-over-year -- From the BEA, the Personal Income and Outlays report for September:  Personal income increased $18.6 billion, or 0.1 percent ... in September, according to the Bureau of Economic Analysis. ...Real PCE -- PCE adjusted to remove price changes -- increased 0.2 percent in September, compared with an increase of 0.4 percent in August. ... The price index for PCE decreased 0.1 percent in September, compared with a decrease of less than 0.1 percent in August. The PCE price index, excluding food and energy, increased 0.1 percent in September, the same increase as in August. The September price index for PCE increased 0.2 percent from September a year ago. The September PCE price index, excluding food and energy, increased 1.3 percent from September a year ago. On inflation: the PCE price index was up 0.2% year-over-year (the decline in oil prices pushed down the headline price index).  However core PCE is only up 1.3% year-over-year - still way below the Fed's target.

US Personal Income & Spending Growth Slows To A Crawl In Sep --  Deceleration weighed on personal income and spending growth for the US last month, according to this morning’s update from the Bureau of Economic Analysis. Consumer spending rose just 0.1% in September vs. the previous month—the smallest rise in eight months. Disposable personal income growth was weak too, rising only 0.1% in September—the weakest gain since April. Consider, too, that private-sector wage growth—the foundation for consumer spending and the US economy in general—just posted its first monthly decline in more than a year. Adding to the gloomy numbers is the sight of the year-over-year comparisons ticking lower as well. September, in sum, was a weak month for the consumer sector. It’s unclear if this is a one-off event or the start of something more troubling. In any case, the margin of comfort for the consumption and spending trends stumbled last month. The slowdown in private-sector wage growth is especially conspicuous. The annual pace for workplace earnings slid to a 3.8% increase—the smallest year-over-year gain since Dec. 2013.

September 2015 Inflation Adjusted Personal Income and Expenditure Growth Slows: The data this month showed relatively weaker income growth (and on the low side of market expectations) - and spending growth slowed (and also was on the low side of expectations).

  • The monthly fluctuations are confusing. Looking at the inflation adjusted 3 month trend rate of growth, income growth trend is flat whilst expenditures is up.
  • Real Disposable Personal Income is up 3.4 % year-over-year (3.3 % last month), and real personal expenditures is up 3.2% year-over-year (3.1% last month)
  • this data is very noisy and as usual includes moderate backward revision (detailed below) - this month the changes were mixed.
  • The advanced estimate of 3Q2014 GDP indicated the economy was expanding at 1.5% (quarter-over-quarter compounded). Expenditures are counted in GDP, and income is ignored as GDP measures the spending side of the economy. However, over periods of time - income and expenditure must grow at the same rate.
  • The savings rate continues to be low historically, improved marginally this month.

The inflation adjusted income and consumption are "chained", and headline GDP is inflation adjusted. This means the impact to GDP is best understood by looking at the chained numbers. Econintersect believes year-over-year trends are very revealing in understanding economic dynamics. Per capita inflation adjusted expenditure has exceeded the pre-recession peak - but growth has been weak in 2015.

Personal Income, Consumer Spending Rise Less Than Expected; PCE Price Index Negative; 4th Quarter Acceleration?  - Today's Personal Income and Outlays report came in below Consensus Estimates.Inflation is not building based on the Fed's favorite reading, the core PCE price index which inched a lower-than-expected 0.1 percent higher in September with the year-on-year rate steady and flat at only plus 1.3 percent. These results will not lift the odds for a December hike at the next FOMC. Income and spending data also came in below expectations, at plus 0.1 percent each vs expectations for plus 0.2 percent each. Income got no boost from wages & salaries in September which were unchanged following, however, strong gains of 0.5 percent in the two prior months that underscore this morning's employment cost index which shows pressure in the third quarter. Spending in September was pulled down by a 1.2 percent plunge in nondurable goods that likely reflects the low price of fuel. Spending on durable goods, driven by vehicles, rose a strong 0.8 percent with spending on services up a solid 0.4 percent. Other details include a 0.1 percent decline for the total PCE price index, again an effect likely based on fuel. Here the year-on-year rate is barely over zero at plus 0.2 percent. The savings rate continues to edge higher, up 1 tenth to 4.8 percent in a gain that hints at strength for future consumer spending. Third-quarter consumer activity slowed in September, pointing to lack of momentum for October consumer data. Still, the consumer is in charge in the U.S. economy and, given low unemployment, the outlooks for holiday spending and fourth-quarter acceleration are favorable. 4th Quarter Acceleration? Action in shippers except those most impacted by online shipping, store hiring plans, new home sales, and consumer spending expectations do not point to a robust acceleration in holiday spending.

September Disposable Income Per Capita Rose 0.07%, 0.15% When Adjusted for Inflation -  With the release of today's report on September Personal Incomes and Outlays we can now take a closer look at "Real" Disposable Personal Income Per Capita. The first chart shows both the nominal per capita disposable income and the real (inflation-adjusted) equivalent since 2000. This indicator was significantly disrupted by the bizarre but predictable oscillation caused by 2012 year-end tax strategies in expectation of tax hikes in 2013. In today's deflationary environment, the September nominal 0.07% month-over-month increase in disposable income rises to 0.15% when we adjust for inflation. The year-over-year metrics are 2.82% nominal and 2.66% real.  The BEA uses the average dollar value in 2009 for inflation adjustment. But the 2009 peg is arbitrary and unintuitive. For a more natural comparison, let's compare the nominal and real growth in per capita disposable income since 2000.  Nominal disposable income is up 63.7% since then. But the real purchasing power of those dollars is up only 22.7%.

The Big Four Economic Indicators: Real Personal Income for September - Personal Income (excluding Transfer Receipts) in September rose 0.11% and is up 4.0% year-over-year. When we adjust for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) rose 0.20%. The real number is up 3.82% year-over-year. Real PI less TR is one of those indicators that warrants adjustment for population growth. Here is a chart of the series since 2000 adjusted accordingly by using the Civilian Population Age 16 and Over as the divisor. Excluded Transfer Receipts are benefits received for no direct services performed. They include Social Security, Medicare & Medicaid, Unemployment Assistance, and a wide range other benefits, mostly from government, but a few from businesses. Here is an illustration Transfer Receipts as a percent of Personal Income. The chart and table below illustrate the performance of the generic Big Four with an overlay of a simple average of the four since the end of the Great Recession. The data points show the cumulative percent change from a zero starting point for June 2009. The US economy has been slow in recovering from the Great Recession. Weak Retail Sales and Industrial Production since December initially triggered a replay of the "severe winter" meme from last year. However, as we now finish the second month of Q3 of 2015, two of the four indicators are showing relatively consistent growth. Employment and Income have been been trending upward, while Industrial Production and Real Sales have remained relatively week, although sales have been up for three consecutive months.

Consumer Confidence Declined in October - The latest Conference Board Consumer Confidence Index was released this morning based on data collected through October 15. The headline number of 97.6 was a decline from the September final reading of 102.6, a downward revision of September's initial 103.0. Today's number was below the forecast of 103.0. Here is an excerpt from the Conference Board press release. "Consumer confidence declined in October, following September’s modest gain," "Consumers were less positive in their assessment of present-day conditions, in particular the job market, and were moderately less optimistic about the short-term outlook. Despite the decline, consumers still rate current conditions favorably, but they do not anticipate the economy strengthening much in the near-term." Putting the Latest Number in Context The chart below is another attempt to evaluate the historical context for this index as a coincident indicator of the economy. Toward this end we have highlighted recessions and included GDP. The regression through the index data shows the long-term trend and highlights the extreme volatility of this indicator. Statisticians may assign little significance to a regression through this sort of data. But the slope resembles the regression trend for real GDP shown below, and it is a more revealing gauge of relative confidence than the 1985 level of 100 that the Conference Board cites as a point of reference.

Consumer Confidence Slides As Low Gas Prices No Longer Lift Sentiment - Moments ago we got a double whammy of both the Conference Board and Gallup's consumer confidence data. We were not surprised to observe that the gaping divergence between these two data series which supposedly measure the exact same thing and yet which both report dramatically different results, have started to converge. To the downside. First, it was the Conference Board, which at 97.6 slid from 103 the month before, badly missing expectations of a 102.9 print. Worse still, "hope" slid to its lowest in 3 months as "jobs plentiful" slid notably with fewer jobs and decreasing income. Here is what the survey said: “Consumer confidence declined in October, following September’s modest gain,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers were less positive in their assessment of present-day conditions, in particular the job market, and were moderately less optimistic about the short-term outlook. Despite the decline, consumers still rate current conditions favorably, but they do not anticipate the economy strengthening much in the near-term.” Consumers’ appraisal of current conditions was somewhat less positive in October. Those saying business conditions are “good” decreased from 28.1 percent to 26.5 percent, while those claiming business conditions are “bad” increased from 16.4 percent to 18.3 percent. Consumers were also less upbeat about the job market. Those stating jobs are “plentiful” decreased from 24.8 percent to 22.2 percent, while those claiming jobs are “hard to get” edged up to 25.8 percent from 24.9 percent.

Michigan Consumer Sentiment: Down from October Preliminary - The University of Michigan Final Consumer Sentiment for October came in at 90.0, a decrease from the 92.1 Preliminary October reading. had forecast 92.5 for the October Final. Surveys of Consumers chief economist, Richard Curtin makes the following comments: The entire October rebound from September was due to gains in confidence among lower income households, while confidence among households with incomes in the top third of the income distribution retreated a bit due to concerns about financial markets. Nonetheless, the overall impact from volatile stock prices has been quite small. Indeed, the average level of the Sentiment Index thus far in 2015 (93.1) is higher than any other year since 2004 (95.2). More importantly, future financial prospects were viewed more favorably by all households in October than anytime since 2007. In addition, the expected long term inflation rate dropped to the lowest level in over a quarter century. While these favorable trends will keep the pace of growth in consumer spending at 2.9% in 2016, consumers will continue to make increases in their buying plans contingent on the availability of price discounts and low interest rates. Indeed, it was consumers' disappointment with available price discounts that was responsible for the small retrenchment in confidence in the last half of October. [More...] See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.

U.S. Companies Warn of Slowing Economy -- Quarterly profits and revenue at big American companies are poised to decline for the first time since the recession, as some industrial firms warn of a pullback in spending. From railroads to manufacturers to energy producers, businesses say they are facing a protracted slowdown in production, sales and employment that will spill into next year. Some of them say they are already experiencing a downturn.  “The industrial environment’s in a recession. I don’t care what anybody says,” Daniel Florness, chief financial officer of Fastenal Co. , told investors and analysts earlier this month. A third of the top 100 customers for Fastenal’s nuts, bolts and other factory and construction supplies have cut their spending by more than 10% and nearly a fifth by more than 25%, Mr. Florness said. Caterpillar Inc. last week reduced its profit forecast, citing weak demand for its heavy equipment, and 3M Co. , whose products range from kitchen sponges to adhesives used in automobiles, said it would lay off 1,500 employees, or 1.7% of its total, as sales growth sagged for a wide range of wares.The weakness is overshadowing pockets of growth in sectors such as aerospace and technology. Profit and revenue are falling in tandem for the first time in six years, with a third of S&P 500 companies reporting so far. Analysts expect the index’s companies to book a 2.8% decline in per-share earnings from last year’s third quarter, according to Thomson Reuters. Sales are on pace to fall 4%—the third straight quarterly decline. The last time sales and profits fell in the same quarter was in the third period of 2009.

Gardner Business Index Shows Small to Medium Sized Businesses Struggling Most  - I have an interesting update from Steve Kline Jr., Director of Market Intelligence at Gardner Business Media, Inc., a B2B media company that conducts surveys similar to the ISM.  For a description of Gardner Business Media, please see Alternative ISM for Metalworking, Plastics, Composites Suggests Economic Contraction. Steve writes ...  I wanted to give you an update on the comparison between the Gardner Business Index and the ISM. I included the initial portion of our data for October even though we only have about 60% of the responses we should get by the end of the month. So far in October the index has dropped with small companies getting worse and big companies doing better.  I included an additional chart that compares the ISM to our index for companies with more than 250 employees and companies with 1-19 employees. Note that the ISM correlates quite well with our index for companies with more than 250 employees. Also, the trend/pattern of the ISM correlates with our index for small companies, but the index level of the ISM is significantly higher. So, clearly the ISM focuses on larger companies. This gives the ISM a skewed perspective on what is happening throughout the entire manufacturing community, especially when roughly 30% of the manufacturing facilities in our database of more than 100,000 manufacturing facilities have fewer than 20 employees.

When Titans collide: UPS petitions the PRC to change USPS costing methodologies - The United Parcel Service is very concerned that you might be paying too much for a postage stamp. If you’re wondering why UPS would be worried about something like that, it has to do with the way postal rates are set. According to the law, each USPS product is supposed to cover its share of the Postal Service’s operating costs, which includes costs attributable to that product as well as a share of total institutional costs. UPS believes that market-dominant products — First Class mail, Standard mail, and periodicals — are covering more than their fair share of the Postal Service’s operating costs, while competitive products — Priority and most shipping services — are not paying enough. As a result, argues UPS, the average customer who buys a First-Class stamp is paying too much because part of the stamp’s price is being used to subsidize competitive products. UPS wants the cost allocation methodology changed so that competitive products pay a larger share of the Postal Service’s operating costs. Then the Postal Service will to have to raise the prices of the products with which UPS competes, which will put UPS in a better competitive position and increase its profits. UPS doesn’t really care that some USPS customers are paying too much for postage. UPS cares about UPS.

UPS Continues Its “Wreck the Post Office” Campaign, Presses for Increases on Parcel Prices - naked capitalism - Yves here. One of the “too many to count” looting operations underway is the effort to make the constitutionally-mandated Post Office uncompetitive in price terms so that private contractors like UPS and Fedex have a greater and more lucrative share of parcel and letter delivery. The latest offense is an under-the-radar effort by UPS to argue that the Post Office is pricing its products unfairly, and overcharging on services like first class letter delivery to subsidize parcel shipments.  This post is a bit lengthy because it goes into important detail as to how UPS is mounting its attack and the procedural mechanisms it is using. The author, Mark Jamison, describes worryingly how the traditional Post-Office haters, which were stalwart right-wingers as well as Post Office competitors, have recently been joined by neoliberals.   I urge you to share this post widely, to family, friends, colleagues, and on your Facebook and Twitter accounts. Alert local newspapers and television stations to the issue. Please also call or write your Senators (contact details here) and Representative (contact details here) and tell them you’ve had enough of private companies, which have profit targets and no obligation to serve the public, need to be slapped back in their plan to pick the Postal Service’s carcass clean. Give a forceful, loud “no” to this stealth privatization.

New York launches probe into speeds at major Internet broadband providers - (Reuters) - The New York attorney general is probing whether three major Internet providers could be short-changing consumers by charging them for faster broadband speeds and failing to deliver the speeds being advertised, according to documents seen by Reuters. The letters, which were sent on Friday to executives at Verizon Communications Inc, Cablevision Systems Corp and Time Warner Cable Inc, ask each company to provide copies of all the disclosures they have made to customers, as well as copies of any testing they may have done to study their Internet speeds. "New Yorkers deserve the Internet speeds they pay for. But, it turns out, many of us may be paying for one thing, and getting another," New York Attorney General Eric Schneiderman said in a statement. Time Warner Cable spokesman Bobby Amirshahi said in a statement: “We’re confident that we provide our customers the speeds and services we promise them and look forward to working with the AG to resolve this matter.” Cablevision spokesman Charlie Schueler said the company's Optimum Online service "consistently surpasses advertised broadband speeds, including in FCC and internal tests. We are happy to provide any necessary performance information to the Attorney General as we do to our customers.” Verizon declined comment, saying it had not yet seen the letter. The probe by the attorney general is particularly focused on so-called interconnection arrangements, or contractual deals that Internet service providers strike with other networks for the mutual exchange of data. In the letters, the office says it is concerned that customers paying a premium for higher speeds may be experiencing a disruption in their service thanks to technical problems and business disputes over the interconnection agreements.

International trade in goods October 28, 2015 --  September reversed August's outsized goods trade gap, coming in at $58.6 billion vs $67.2 billion. Exports jumped 3.1 percent following August's 3.2 percent decline with wide gains in consumer goods, autos, industrial supplies and capital goods. Imports fell 2.5 percent following the prior month's 2.2 percent gain. Decreases are wide including industrial supplies, capital goods, autos and consumer goods. The results do point to slowing demand but, because imports are counted as a subtraction in the national accounts, they should nevertheless give a boost to third-quarter GDP estimates.  The Census Bureau is now publishing an advance report on U.S. international trade in goods. The BEA will incorporate these data into its estimates of exports and imports for the advance GDP estimates. This is expected to reduce the size of revisions to GDP growth in the second estimates.

US Rail Freight Drops Again in Q3, No Relief Q4, Execs Say - (MNI) - U.S. freight railroads reported declining volumes of many categories of freight carried in the third quarter, continuing a year-long pattern, and anticipate more contraction in coming months, executives said. The major rail networks hauled less petroleum, grain, metals, and especially coal in the three months from June to September than they did a year earlier as the demand for coal dropped in response to switching to natural gas by power generators, the strong dollar cut into export demand, and commodity prices remained low. Those headwinds will continue to buffet the industry in 2016 when oil prices are expected to remain low and the U.S. power industry continues to substitute natural gas for coal in response to low prices and regulatory pressure to cut carbon emissions, executives said during third-quarter earnings calls with financial analysts. Union Pacific, which operates in 23 western and midwestern states, reported freight volume dropped in five out of six categories, led by coal which fell 15% from a year earlier, and shipments of industrial products which were down 12%. The only rising category was automotive, which rose 5%, the company reported in its third-quarter earnings statement on Oct. 22. "Low natural gas prices continue to put downward pressure on coal demand as coal's share of electricity generation declined from 38% in the third quarter of last year to 35% this year," said Eric Butler, the railroad's executive vice president of marketing and sales, during the earnings call. Higher-than-normal coal inventories also contributed to the sluggish demand, he said. Cameron Scott, the railroad's executive vice president of operations, said there is little prospect of any change to that situation in 2016.

Rail Week Ending 24 October 2015: A Worse Week Among Bad Weeks: Week 42 of 2015 shows same week total rail traffic (from same week one year ago) and monthly total rail traffic (from same month one year ago) declined according to the Association of American Railroads (AAR) traffic data. Intermodal traffic contracted year-over-year, which accounts for approximately half of movements. and weekly railcar counts continued in contraction. This analysis is looking for clues in the rail data to show the direction of economic activity - and is not necessarily looking for clues of profitability of the railroads. The weekly data is fairly noisy, and the best way to view it is to look at the rolling averages (carloads and intermodal combined).  A summary of the data from the AAR:  For this week, total U.S. weekly rail traffic was 553,144 carloads and intermodal units, down 5.6 percent compared with the same week last year. Total carloads for the week ending Oct. 24 were 284,523 carloads, down 7.4 percent compared with the same week in 2014, while U.S. weekly intermodal volume was 268,621 containers and trailers, down 3.7 percent compared to 2014. Three of the 10 carload commodity groups posted an increase compared with the same week in 2014. They are: grain, up 13 percent to 25,301 carloads; motor vehicles and parts, up 9.9 percent to 18,984; and miscellaneous carloads, up 2.6 percent to 8,972. Commodity groups that posted decreases compared with the same week in 2014 included: petroleum and petroleum products, down 21.7 percent to 13,273 carloads; metallic ores and metals, down 18.5 percent to 21,759 carloads; and coal, down 12.7 percent to 100,829 carloads. For the first 42 weeks of 2015, U.S. railroads reported cumulative volume of 11,725,829 carloads, down 4.5 percent from the same point last year; and 11,236,197 intermodal units, up 2.2 percent from last year. Total combined U.S. traffic for the first 42 weeks of 2015 was 22,962,026 carloads and intermodal units, a decrease of 1.3 percent compared to last year.

ATA Truck Tonnage Index rises in September - Truck News: – The American Trucking Associations’ For-Hire Truck Tonnage Index rose 0.7% in September after a 0.9% decrease in August. In September, the index equaled 135.1 (2000=100), up from 134.1 in August. The all-time high of 135.8 was reached in January 2015. Year-over-year the SA index went up 3.1% and tonnage increase 3.3%. “The see-saw pattern in truck freight tonnage continued again in September, except that the gain didn’t fully wipe out August’s decline,” said ATA chief economist Bob Costello. “However, over the last few months tonnage has snapped back from softness this past spring and early summer, and is approaching the record high. “I remain concerned about the high level of inventories throughout the supply chain. We recently learned that inventories throughout the supply chain and relative to sales rose slightly in August, which is not a good sign. This could have a negative impact on truck freight volumes over the next few months.”

And Now Trucking is Suddenly Slowing Down -- This comes at the totally wrong time. Trucking had been booming. 2014 had been a banner year. Capacity was squeezed, and rates were rising, so trucking companies went on a buying binge, ordering everything in the book in preparation for red-hot demand in 2015 and more banner years down the road. But then came 2015. Among businesses, over-ordering and tepid sales caused inventories to rise and the inventory-to-sales ratio to spike to Financial Crisis proportions. And now businesses are trying to bring them down by trimming orders because they’re having trouble selling more to the middle class, the over-indebted modern proletariat whose stagnant incomes are being eaten up by skyrocketing costs of housing, healthcare, college, and the like – and they simply can’t spend that much on shippable items. And now this is ricocheting through the industry. Monday after hours, the largest US truckload carrier, Swift, announced earnings. And on Tuesday, it clarified the debacle. It’s suffering from indigestion. The high costs from its red-hot capacity increase – average truck count jumped by 831 trucks in the third quarter from a year earlier – are now slamming into swooning freight demand.  Operating revenue declined 1%, which Swift blamed on the disappearing fuel surcharge, though it didn’t explain why it is getting away with still charging $109 million in fuel surcharges when diesel prices have plunged to rock-bottom.

Vehicle Sales Forecast for October: Over 17 Million Annual Rate Again -- The automakers will report October vehicle sales on Tuesday, November 3rd. Sales in September were at 18.1 million on a seasonally adjusted annual rate basis (SAAR), and it appears sales in October will be over 17 million SAAR again. Sales in September were boosted by the timing of Labor Day.  There were 28 selling days in October, up from 27 in October 2014.  Here are two forecasts: From WardsAuto: Forecast: SAAR Expected to Remain Above 17 Million in October  WardsAuto forecast calls for October U.S. light-vehicle sales to reach a 17.5 million-unit seasonally adjusted annual rate, making it the sixth consecutive month above 17 million. The 17.5 million-unit SAAR would be higher than the 17.2 million recorded year-to-date through September and an 11-year peak for the month. From J.D. Power: October New-Vehicle Retail Sales Strongest in 15 years New-vehicle retail and total sales in October 2015 are expected to be the strongest for the month since 2001, according to a monthly sales forecast developed jointly by J.D. Power and LMC Automotive. ... . “Through the first 18 days in October, retail sales are up 7 percent compared with the same period a year ago.” [17.4 million SAAR] Another solid month for auto sales, although I expect Volkswagen sales to be down year-over-year.

US durable goods orders down 1.2% in Sept vs 1.2% drop expected: A gauge of U.S. business investment plans fell for a second straight month in September, the latest indication that economic growth braked sharply in the third quarter. The Commerce Department said on Tuesday non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, slipped 0.3 percent last month after a downwardly revised 1.6 percent decline in August. Economists polled by Reuters had forecast these so-called core capital goods unchanged after a previously reported 0.8 percent drop in August. Manufacturing has been hobbled by a strong dollar and spending cuts in the energy sector. Manufacturing, which accounts for about 12 percent of the economy, has also been hit by efforts by businesses to reduce an inventory bulge and by slowing global demand. The downbeat report added to weak trade, retail sales and industrial production data that have suggested the economy lost significant momentum in the third quarter.

Global Slowdown Weighs on Durable-Goods Orders - WSJ: A strong dollar, weak commodity prices and slow global growth are restraining U.S. factories, highlighting a deepening divide between the American service sector and manufacturers exposed to international turmoil. New orders for durable goods—turbines, trucks and other products designed to last at least three years—offered the latest evidence of malaise at factories. They declined a seasonally adjusted 1.2% in September from a month earlier, the Commerce Department said Tuesday, the second consecutive monthly drop.“More than at any time in this expansion, the fortunes of the key sectors of the economy are diverging,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. The global turmoil and domestic manufacturing slowdown haven’t infected U.S. households much so far. Consumer spending has been steady, for instance, helping to buoy the U.S. auto industry with sales on pace to match volumes last seen in the early 2000s. In the durable-goods report, new orders for motor vehicles rose 1.8% last month. International troubles may be starting to bleed into other areas of the economy. The Conference Board’s measure of consumer confidence fell from September to October, the group said Tuesday, though it remained above levels that were typical in 2014. And a gauge of the service sector, which makes up the bulk of the economy, declined this month. The Markit services purchasing managers index, also released Tuesday, fell to 54.4 this month from a final reading of 55.1 in September.

Cracks in the Economy Widen as Durable Goods Orders Sink -- The word of the day is "awful". That's the best description of today's durable goods report. Durable goods orders came in at -1.2% lower than the Bloomberg Consensus Estimate of 1.0%. And last month's numbers were revised lower across the board.  There is no way put lipstick on that pig.   The factory sector is showing cracks with orders contracting slightly more than expected, down 1.2 percent in September with August's contraction revised lower to minus 3.0 percent. Other readings are likewise weak with ex-transportation down 0.4 percent following a downward revised 0.9 percent decline in August and with core capital goods orders down 0.3 percent after falling a downward revised 1.6 percent in August. Other readings include a second straight and sharp 0.6 percent decline in unfilled orders and a third straight decline in inventories, down 0.3 percent which is the sharpest decline since May 2013. The decline in unfilled orders suggests that factories, lacking new orders, are working down backlogs while the decline in inventories points to growing caution in the business outlook. But factories are keeping up shipments which is good for GDP, up 0.2 percent after August's 0.5 percent decline with core capital goods shipments up 0.5 percent after a 0.8 percent decline.  Motor vehicles are a positive in the report, showing a 1.8 percent gain in new orders and a 1.6 percent gain in shipments with both reversing similar sized declines in August. Also positive are electrical equipment and fabricated metals, with both perhaps getting a boost from construction, along with defense aircraft and defense capital goods. Industries showing declines in new orders include primary metals, machinery, and computers & electronics. Orders for civilian aircraft fell 62 percent in September following a 23 percent decline in August.  This report falls in line with industrial production data where manufacturing in September slipped for the fourth time in five months. Weakness in exports is the balancing factor tipping the factory sector away from growth.

September Durable Goods: Down -1.2%, Core Goods Down -0.4% - The Advance Report on Manufacturers’ Shipments, Inventories and Orders released today gives us a first look at the September durable goods numbers. Here is the Bureau's summary on new orders: New orders for manufactured durable goods in September decreased $2.9 billion or 1.2 percent to $231.1 billion, the U.S. Census Bureau announced today. This decrease, down two consecutive months, followed a 3.0 percent August decrease. Excluding transportation, new orders decreased 0.4 percent. Excluding defense, new orders decreased 2.0 percent. Transportation equipment, also down two consecutive months, led the decrease, $2.2 billion or 2.9 percent to $75.5 billion. Download full PDF. This series is down -3.0 percent year-over-year (YoY). If we exclude transportation, "core" durable goods came in at -0.4 percent month-over-month (MoM), which was below the estimate of 0.1 percent. The core measure is down ad disappointing -5.3 percent YoY. If we exclude both transportation and defense for an even more fundamental "core", the latest number was down -1.5 percent MoM and down -7.7 percent YoY. Core Capital Goods New Orders (nondefense capital goods used in the production of goods or services, excluding aircraft) is an important gauge of business spending, often referred to as Core Capex. It posted a -0.3 percent decline, and it is down -7.3 percent YoY. For a look at the big picture and an understanding of the relative size of the major components, here is an area chart of Durable Goods New Orders minus Transportation and Defense with those two components stacked on top. We've also included a dotted line to show the relative size of Core Capex.

Durable Goods New Orders Declined in September 2015. Rolling Averages Falling.: The headlines say the durable goods new orders declined. This series has been in a general downtrend since seen since November 2014. The three month rolling average declined this month and remains in contraction.Last months data was revised downward. Econintersect Analysis:

  • unadjusted new orders growth decelerated 1.0 % (after decelerating a downwardly revised 17.4 % the previous month) month-over-month , and is down 3.6 % year-over-year.
  • the three month rolling average for unadjusted new orders decelerated 1.0 % month-over-month, and down 8.7 % year-over-year.
  • Inflation adjusted but otherwise unadjusted new orders are down 5.2 % year-over-year.
  • The Federal Reserve's Durable Goods Industrial Production Index (seasonally adjusted) growth decelerated 0.2 % month-over-month, up 1.2 % year-over-year [note that this is a series with moderate backward revision - and it uses production as a pulse point (not new orders or shipments)] - three month trend is decelerating, and has been decelerating for a year..

Durable Goods Orders Tumble For 6th Consecutive Month As Core Capex Plunges Most Since 2009 -- After a significant downward revsision to August's data (to -2.3% MoM), September Durable Goods New Orders dropped 1.2% (better than the expected 1.5% drop only due to historical revisions) for the 5th monthly drop this year. Year-over-Year, Durable Goods orders tumbled 3.6%, accelerating weakness from August amid major revisions. This is the 6th consecutive YoY drop, something not experienced outside a recession. Under the covers it was just as ugly with Non-defense, ex-aircraft orders dropping 0.3% (notably missing expectations) after a huge downward revision for August. What is most worrisome, however, is the collapse in Core Capex YoY down 7.9% NSA - the worst since 2009.

Weak U.S. business spending plans point to slower economic growth - Reuters: A gauge of U.S. business investment plans fell for a second straight month in September, pointing to a sharp slowdown in economic growth and casting more doubts on whether the Federal Reserve will raise interest rates this year. Other data on Tuesday showed consumer confidence slipped this month amid worries over a recent moderation in job growth and its potential impact on income. Housing, however, remains the bright spot, with home prices accelerating in August. That should boost household wealth, supporting consumer spending and the broader economy, which has been buffeted by a strong dollar, weak global demand, spending cuts in the energy sector and efforts by businesses to reduce an inventory glut. The continued weakness in business spending, together with the slowdown in hiring, could make it difficult for the Fed to lift its short-term interest rate from near zero in December, as most economists expect. The U.S. central bank's policy-setting committee started a two-day meeting on Tuesday. "The drift of data suggests that the first time the Fed will raise rates will be in the spring," . Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, slipped 0.3 percent last month after a downwardly revised 1.6 percent decline in August, the Commerce Department said.

Dallas Fed Manufacturing Outlook Disappoints -- This morning we got the most recent Dallas Fed Texas Manufacturing Outlook Survey (TMOS). The latest index came in at -12.7, a 3 point increase from last month's -9.5. The forecast was for a reading of -6.0. Here is an excerpt from the latest report: Texas factory activity increased in October after nine months of flat or declining output, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose to 4.8, marking the first month of output growth this year. Perceptions of broader business conditions remained weak in October. The general business activity index, which has been negative all year, fell 3 points to -12.7. The company outlook index remained negative for a third consecutive month but edged up to -4.1. Monthly data for this indicator only dates back to 2004, so it is difficult to see the full potential of this indicator without several business cycles of data. Nevertheless, it is an interesting and important regional manufacturing indicator. The Dallas Fed on the TMOS importance: Texas is important to the nation’s manufacturing output. The state produced $159 billion in manufactured goods in 2008, roughly 9.5 percent of the country’s manufacturing output. Texas ranks second behind California in factory production and first as an exporter of manufactured goods. Texas turns out a large share of the country’s production of petroleum and coal products, reflecting the significance of the region’s refining industry. Texas also produces over 10 percent of the nation’s computer and electronics products and nonmetallic mineral products, such as brick, glass and cement. Here is a snapshot of the complete TMOS.

Another Recession Alarm After Dallas Fed Outlook Deteriorates For 10th Consecutive Month -- For the 10th month in a row, Dallas Fed's Manufacturing Outlook printed a deteriorating negative signal. At -12.7 (against expectations of a modest rise from September's -9.5 to -6.5) it appears ex-Dallas Fed head Fisher was dead wrong as recession warnings loom large. Below the already ugly headline, the components were a disaster. While production and employment rose (somehow), New orders plunged, Prices Received continued to fall, and Average employee workweek fell for the 9thg time in the last 10 months. Perhaps worst was the drop in hope amid falling workweek and wage growth expectations.

Richmond Fed: Manufacturing "Remained Soft" in October - - Today the Richmond Fed Manufacturing Composite Index jumped 4 points to -1 from last month's -5. had forecast an increase to -3. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at -2.0, indicating contraction. The complete data series behind today's Richmond Fed manufacturing report (available here), which dates from November 1993. Here is a snapshot of the complete Richmond Fed Manufacturing Composite series. Here is the latest Richmond Fed manufacturing overview. Fifth District manufacturing activity remained soft in October, according to the most recent survey by the Federal Reserve Bank of Richmond. Order backlogs and shipments declined, while new orders leveled off. Manufacturing employment remained soft, growing at the same pace as a month ago. The average workweek shortened and average wages rose moderately. Raw materials prices rose at nearly the same pace as in September, while prices of finished goods dropped in October. Manufacturers looked for better business conditions during the next six months. Survey participants continued to expect faster growth in shipments and in the volume of new orders in the six months ahead. Producers also looked for increased capacity utilization and anticipated rising backlogs. Expectations were for an increase in vendor lead times during the next six months. Here is a somewhat closer look at the index since the turn of the century.

Richmond Fed Manufacturing Survey Also In Contraction in October 2015 - at Expectations.: Of the five regional Federal Reserve surveys released to date,four are in contraction and one is in expansion. The market expected values (from Bloomberg) from -4 to 0 (consensus -2) with the actual survey value at -1 [note that values above zero represent expansion]. Fifth District manufacturing activity remained soft in October, according to the most recent survey by the Federal Reserve Bank of Richmond. Order backlogs and shipments declined, while new orders leveled off. Manufacturing employment remained soft, growing at the same pace as a month ago. The average workweek shortened and average wages rose moderately. Raw materials prices rose at nearly the same pace as in September, while prices of finished goods dropped in October. Manufacturers looked for better business conditions during the next six months. Survey participants continued to expect faster growth in shipments and in the volume of new orders in the six months ahead. Producers also looked for increased capacity utilization and anticipated rising backlogs. Expectations were for an increase in vendor lead times during the next six months. Survey participants planned more hiring, along with moderate growth in wages and a pickup in the average workweek during the next six months. Looking ahead, manufacturers anticipated faster growth in prices paid and prices received.

Regional Fed Manufacturing Surveys Weak Again in October --Earlier from the Richmond Fed: Manufacturing Sector Activity Remained Soft; Volume of New Orders Leveled Off Overall, manufacturing conditions remained soft in October. The composite index for manufacturing flattened to a reading of −1, following last month's reading of −5. Additionally, the index for new orders leveled off this month, gaining 12 points to end at 0. The index for shipments remained negative, losing one point to end at −4. Manufacturing employment continued to increase mildly this month. The indicator remained at a reading of 3 for a second month.   This was the last of the regional Fed surveys for October. All of the regional surveys indicated contraction in October - although mostly slower than in September - and mostly due to weakness from oil and exports. Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:The New York and Philly Fed surveys are averaged together (yellow, through October), and five Fed surveys are averaged (blue, through October) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through September (right axis).  It seems likely the ISM index will be weak again in October, and could possibly show contraction - a reading below 50.

Regional Fed Reports Five for Five in Contraction; Texas Region Worsening, Richmond Negative Again -- Yesterday the Dallas Fed general activity index slipped further into contraction to -12.7, well below the Bloomberg Consensus Estimate of -6.0, and also lower than the lowest guess of -7.0.   Look no farther than to the Dallas Fed manufacturing survey for evidence on how severely low oil prices are affecting the energy sector. Contraction for the general activity index deepened to minus 12.7 in the October report from September's minus 9.5. This is the 10th negative reading in a row. New orders are now negative for a 12th month in a row, at minus 7.6, while unfilled orders are on a similar streak, at minus 3.1. Production is positive for a second straight month, at plus 4.8 in a reading that, however, is very likely to return to the negative column given how low orders are. Hiring is flat with price readings, especially for finished goods, in contraction. This report joins those from Empire State, Philly Fed, and Kansas City which are all pointing to another month of contraction underway for the nation's factory sector.  Today's Richmond Fed report makes it five for five in contraction, albeit just barely, at -1. Bloomberg Econoday reports ...  The Richmond Fed makes it five for five, that is five regional Fed reports all showing negative headlines for October. The Richmond Fed index did improve, however, to minus 1 from September's minus 5. New orders came in at zero following the prior month's steep contraction of minus 12. But backlog orders, at minus 7, are down for a third month which is not a plus for future shipments or employment. Shipments in October fell to minus 4 from minus 3 which is also a third month of contraction. Hiring is still positive, unchanged at plus 3, but continued growth here is uncertain. Price data are mute with prices received showing slight contraction as they are in other reports. This morning's report on durable goods orders showed another month of broad weakness in September and this report, together with the other regional reports, point to another weak month for the factory sector in October.

Chicago PMI increases Sharply, Final October Consumer Sentiment at 90.0  - Chicago PMI: Oct Chicago Business Barometer Up 7.5 Points To 56.2 The Chicago Business Barometer increased 7.5 points to 56.2 in October from 48.7 in September, led by strong gains in both Production and New Orders. The sharp increase in the Barometer pushed it to the highest since January and marks a promising start to the fourth quarter, building on the small gain made in Q3.  , “The dissapointing September data look more like an aberration than the start of a trend, and the October results mark a good start to the final quarter of the year. Respondents were optimistic that orders will continue to pick-up, consistent with an acceleration in economic activity in Q4.“ This was well above the consensus forecast of 49.2. The final University of Michigan consumer sentiment index for October was at 90.0, down from the preliminary reading of 92.1, and up from 87.2 in September.

October 2015 Chicago Purchasing Managers Barometer Production Growth Significantly Improved: The Chicago Business Barometer significantly improved and now is in expansion. .Last months contraction seems to have been a flash-in-the-pan. From Bloomberg, the market expected the index between 48.0 to 51.5 (consensus 49.2) versus the actual at 56.2. A number below 50 indicates contraction. Chief Economist of MNI Indicators Philip Uglow said, The dissapointing September data look more like an aberration than the start of a trend, and the October results mark a good start to the final quarter of the year. Respondents were optimistic that orders will continue to pick-up, consistent with an acceleration in economic activity in Q4.  From ISM Chicago: The Chicago Business Barometer increased 7.5 points to 56.2 in October from 48.7 in September, led by strong gains in both Production and New Orders. The sharp increase in the Barometer pushed it to the highest since January and marks a promising start to the fourth quarter, building on the small gain made in Q3. Production led the latest increase, jumping just under 20 points to 63.4, while New Orders also rose sharply, leaving both at the highest since the start of the year. Firms reported signficant growth in inventories, which accounted for part of the leap in output in October.

Chicago PMI Soars To Highest Since January With 7-Sigma Beat On Huge Inventory Build -- Having spent most of 2015 below the 50 (deteriorating) level, Chicago PMI bounced incredibly hard in October from 48.7 to 56.2. This is the highest level since January, the biggest MoM jump since August 2014, and above even the highest economist estimate (7 standard deviations above the median). A huge surge in inventories (back above 60) drove the surprising shift, along with a rise in new orders (even as employment tumbled) but as MNI reports, in line with weaker Order Backlogs, other metrics of the report caution against reading too much into the latest surge in demand.  Supplier Delivery times continued to shorten, a phenomena that  typically occurs when demand is low.

Goldman Says The US Manufacturing Decline Is "Contained" -- First, the bad news: We continue to see the underlying pace of economy-wide growth as moderately above-trend. But manufacturing surveys and recent earnings reports suggest that the manufacturing sector might be following the energy sector into contraction. The large gap between the manufacturing and non-manufacturing sectors that opened at the beginning of this year has widened in recent months, raising concerns that the more foreign-exposed manufacturing sector could become a channel through which weaker global growth affects the US economy.  The good news, however, is that "this time is always, always different" - apparently: US states vary in the manufacturing intensity of their economies, though the variation in the mining share (which includes energy) is much larger. We find that the loss of 1 manufacturing job has been associated historically with the loss of 1.5-2 jobs outside of the mining and manufacturing sectors. But how large have spillovers from the recent slowdown been? To find out, we compare state-level employment growth outside of the manufacturing and mining sectors over the last year to three other state-level measures: (1) the manufacturing share of total payroll employment, (2) manufacturing earnings as a share of total earnings from the personal income report, and (3) exports originating in the state as a share of GDP. We do not find evidence of negative spillovers using any of these three variables, and the same holds for the manufacturing share of state GDP and growth rate of manufacturing employment over the last year.

Reality Check: US Packaging Industry Sees Only Sluggish Growth - U.S. demand for corrugated packaging is no better than modest as manufacturers place minimal orders and inventories of the material post double-digit gains over a year ago, industry executives said. The industry that supplies cardboard for consumer products, the food and beverage industry, and manufactured goods reported another month of lackluster orders, continuing a pattern of the last two years, the officials said. Executives told MNI that revenue growth is below budget, orders are volatile, and customers appear to lack confidence. Steve Young, president of the Association of Independent Corrugated Converters, which represents about 20% of corrugated and paperboard manufacturers, said box shipments have been increasing at a rate of only about 1.5% annually for the last couple of years. "It's very anemic," Young said. Of particular concern, he said, is the latest indication of sluggish growth at a time of year when demand usually rises as retailers and other businesses get ready for the holiday season. Young said the slow growth is also driven by a reduction in the use of packaging for things like point-of-purchase displays.

US Services Economy Tumbles To Weakest Since Weather-Crushed January -- In January when Markit Services PMI printed 54.2, the weakness was blamed on weather (and port strikes). Now it is sunny October, following the warmest September ever on Earth, andServices PMI has plunged to 54.4 - its lowest in 9 months (handily missing the 55.5 bounce expectation). This flash data shows the weakest payroll numbers since Februaryand business confidence remains just marginally higher than the three-year lows of July. As Markit warns this weakness "will add to calls for policymakers to delay hiking interest rates until the economy finds a firmer footing."

Employment Cost Index October 30, 2015: The employment cost index came in on the hot side as expected, up 0.6 percent in the third quarter vs a record soft 0.2 percent in the second quarter. Outside of the second quarter, however, this index has been showing pressure with outsized 0.7 percent gains in the first quarter this year and the second and third quarters of last year that make for an average 0.6 percent pace over the past six quarters. A look at components shows a strong 0.6 percent gain for wages & salaries in the latest quarter and a sizable 0.5 percent rise in benefits. Year-on-year, the ECI is unchanged at plus 2.0 percent with wages & salaries up 2.1 percent and benefits up 1.8 percent. The latest quarter is on the high side and though it follows a very weak prior quarter, policy hawks can definitely cite a tangible upward trend in this series consistent with low levels of unemployment that may be forcing employers to raise wages and benefits to attract employees.

Weekly Initial Unemployment Claims increased to 260,000, 4-Week Average Lowest since 1973 -- The DOL reported: In the week ending October 24, the advance figure for seasonally adjusted initial claims was 260,000, an increase of 1,000 from the previous week's unrevised level of 259,000. The 4-week moving average was 259,250, a decrease of 4,000 from the previous week's unrevised average of 263,250. This is the lowest level for this average since December 15, 1973 when it was 256,750. There were no special factors impacting this week's initial claims.  The previous week was unrevised at 259,000. The following graph shows the 4-week moving average of weekly claims since 1971.

New Jobless Claims In and Out of the Fracking Patch -- The United States has a curious relationship with the price of oil and gasoline. For much of the U.S., falling fuel prices represent a positive economic situation, which gives Americans the opportunity to spend their disposable income on things other than fuel, such as dining out, clothes, and cars. And yes, even more fuel (for leisure travel).   These are the kinds of oil price-sensitive industries that can grow and expand when oil prices fall, which because these kinds of businesses are found in every state, means that American consumers benefit in every state from that dynamic.  In some states however, whose economies include significant contributions from oil production, falling oil prices can have a negative consequence as well. As revenues and profits in the oil producing sector of their economies fall, the benefits of falling oil prices for consumers is offset by losses in the productive part of their economies.  That's something that becomes especially clear when we look at statistics like new jobless claims. If we look across the nation, we see that there has been a general trend of improvement in the level of initial unemployment insurance claims filed each week since oil prices began falling from their peaks in early July 2014.  At present, we find that the seasonally-adjusted level of new jobless claims for the states of Colorado, North Dakota, Ohio, Oklahoma, Pennsylvania, Texas, West Virginia and Wyoming is essentially the same as it was before oil prices began falling. In these states, for new jobless claims, the positive economic benefits of falling oil and gasoline prices for consumers has been almost perfectly offset at this point of time by increased new jobless claims taking place in their oil production sectors.

How Tight is the US Labor Market? -  The US unemployment rate was 5.1% in August and September. This rate is low by the standards of recent decades, but concerns remain over the extent to which is it not reflecting those who were long-term unemployed, have dropped out of looking for a job--and thus are no longer officially counted in the ranks of the unemployed. Alan B. Krueger tackles this and related issues in "How Tight Is the Labor Market?", . An edited version of the talk is here; If you would like to watch the lecture and see the Powerpoint slides, you can do so here. (Full disclosure: Alan was Editor of the Journal of Economic Perspectives, and thus was my boss, from 1996-2002.) Short answer: The long-term unemployed dropping out of the labor market do contribute modestly to a lower labor force participation rate and the lower unemployment rate. However, if one focuses on short-run unemployment levels, the labor market is tight enough that it is leading to higher wages in much the same way as in previous decades.  Here are a few figures to set the stage. Here, I'll use versions generated by the ever-useful FRED website run by the Federal Reserve Bank of St. Louis, which has the advantage of updating the figures a bit from the ones provided in Krueger's talk last summer.  For starters, the US unemployment rate has now dropped dramatically, back to levels that are relatively low in the context of recent decades.

The decline in prime age labor participation: the smoking gun (Part 1of 2) -- I recently wrote about the compelling evidence that the biggest reason for the decline in the prime working age labor participation rate was the increase in the number of second-earner spouses who decided to stay at home and raise their children, occasioned by the particularly significant decline in wages among lower quintile jobs, together with the soaring costs of outside day care.  Since that time (and I'd like to think in part because of my argument), the issue of the "child care cost crunch" has become much more visible, with the candidates in the recent Democratic Presidential debate weighing in, in support of more assistance for working mothers.  For example, Fortune magazine repored that: the Economic Policy Institute (EPI), a worker advocacy group, finds that caretaking costs have become so exorbitant that in most parts of the U.S., families spend more on childcare than they do on rent (included in that number: babysitting, nannies, and out-of-home day care centers. And the Pew Research Foundations updated its study of the impact of child care on the careers of mothers in the labor force: [W]hile 42% of mothers with some work experience reported in 2013 that they had reduced their work hours in order to care for a child or other family member at some point in their career, only 28% of fathers said the same. Similarly, 39% of mothers said they had taken a significant amount of time off from work in order to care for a family member (compared with 24% of men). And mothers were about three times as likely as men to report that at some point they quit a job so that they could care for a family member (27% of women vs. 10% of men).
It’s important to note that when we asked people whether they regretted taking these steps, the resounding answer was “No.”

The decline in prime age labor force participation: the smoking gun (part 2 of 2) -   I recently wrote about the compelling evidence that the biggest reason for the decline in the prime working age labor participation rate was the "child care cost crunch," i.e., the increase in the number of second-earner spouses who decided to stay at home and raise their children, occasioned by the particularly significant decline in wages among lower quintile jobs, together with the soaring costs of outside day care. In my post yesterday, I showed that the biggest reason why the percentage of both mothers and fathers of minor children who have dropped out of the labor force has increased, is in order to care for their children -- not discouragement, not disability, not education, and not any other reason. But that is not the end of the story, even though over 80% of men and women eventually become parents of minor children.  In particular, there are other studies which put the spotlight on an increase in disability claims.  In particular, the Atlanta Fed went to the trouble of decomposing the monthly data as to why people aren't in the labor force over the last 16 years.  The graphs are interactive, and illuminating. To cut to the chase, the Atlanta Fed found that the single biggest reason for the increase in labor force non-participation was disability claims: So that's it, the real reason for the increase isn't the "child care cost crunch" but disability, right?  Well, yes and no.  To see why, let's go into the Atlanta Fed's interactive database a little more closely. At age 50 and above, there has been an outsized increase in the percentage of labor force participants who say they are disabled.  That is the lion's hsare of the increase in disability claims:

Global Economy Slowdown Leads to U.S. Job Cuts: Job cuts are on the rise, although the workforce at some tech firms has been spared.U.S. companies are far from optimistic that next year will see them get a break from the tough economic and market conditions they have faced in 2015. And that may well hurt capital investment and jobs growth.In the first three weeks of October, 165 American companies have cited the slowing global economy in their outlooks for earnings and revenue. That is up from 108 in the same period last year, and 97 in the year-earlier quarter, according to an analysis of earnings reports by Thomson Reuters.Among the phrases that have appeared in many of those statements are “challenging macroeconomic environment,” or “global headwinds.”Earnings and revenue have been depressed this year largely because of the strong dollar, economic weakness in China and Brazil, and tumbling oil and commodities prices.The rise in the value of the American currency means that profits earned in foreign currencies are worth less when translated into dollars, possibly making American exports less competitive.The weakness in major emerging markets has hit sales by U.S. multinationals and the plunge in the prices of energy, metals and minerals have not only hit oil producers and miners but the manufacturing and service companies who sell to them.

Onshoring Isn't Bringing Back Good Jobs - In the last several years some American companies have moved their operations back to the states, but the resulting factory work isn't providing the prosperity and security that such work once did. A year ago, GM announced it was moving production of its best-selling vehicle, the Cadillac SRX, from Mexico to this plant in Tennessee. Today 3,000 people work on this 6.9 million square-foot campus, and more are being hired. GM is one of the hundreds of companies, big and small, that have moved manufacturing back to the United States from overseas. Outsourcing decimated American manufacturing in the 1980s and 1990s, erasing nearly six million jobs between 1989 and 2009. But the number of manufacturing jobs has started to slowly grow again, and about 700,000 jobs have been added since 2010. . Whirlpool in 2013 said it was moving production of commercial washing machines from Mexico to the U.S. The company that makes Otis elevators announced in 2012 that it would move production from Mexico to South Carolina. Caterpillar moved some heavy-equipment manufacturing back to the U.S.  But these are not your father’s manufacturing jobs. Many of the companies are locating their new plants in right-to-work states where it’s less likely their workers will join a union, and the prevailing wages are far lower. In fact, nationally, the average wages of production and non-supervisory employees in manufacturing are lower than they were in 1985, when adjusted for inflation. In September, those employees made an average $8.63 an hour, in 1982 to 1984 dollars, while they made an average of $8.80 an hour in 1985, according to the Bureau of Labor Statistics.

Offshoring the Economy: Why the US is on the Road to the Third World - On January 6, 2004, Senator Charles Schumer and I challenged the erroneous idea that jobs offshoring was free trade in a New York Times op-ed.  Our article so astounded economists that within a few days Schumer and I were summoned to a Brookings Institution conference in Washington, DC, to explain our heresy. In the nationally televised conference, I declared that the consequence of jobs offshoring would be that the US would be a Third World country in 20 years. That was 11 years ago, and the US is on course to descend to Third World status before the remaining nine years of my prediction have expired. The evidence is everywhere.  In September the US Bureau of the Census released its report on US household income by quintile. Every quintile, as well as the top 5%, has experienced a decline in real household income since their peaks.  The bottom quintile (lower 20 percent) has had a 17.1% decline in real income from the 1999 peak (from $14,092 to $11,676).  The 4th quintile has had a 10.8% fall in real income since 2000 (from $34,863 to $31,087). The middle quintile has had a 6.9% decline in real income since 2000 (from $58,058 to $54,041). The 2nd quintile has had a 2.8% fall in real income since 2007 (from $90,331 to $87,834). The top quintile has had a decline in real income since 2006 of 1.7% (from $197,466 to $194,053).  The top 5% has experienced a 4.8% reduction in real income since 2006 (from $349,215 to $332,347).  Only the top One Percent or less (mainly the 0.1%) has experienced growth in income and wealth. The Census Bureau uses official measures of inflation to arrive at real income. These measures are understated. If more accurate measures of inflation are used (such as those available from, the declines in real household income are larger and have been declining for a longer period. Some measures show real median annual household income below levels of the late 1960s and early 1970s.

CEOs Offshore Jobs for "Humanitarian" Reasons  - Is it America's moral duty and global responsibly to make sacrifices in our own lives to help other people in other countries to raise their standard-of-living?  Some people will use that argument to defend their practices of offshoring jobs overseas to low-wage countries, making it appear that somehow our "job creators" are doing something noble for humanity.  Last June the New York Times wrote in a post titled The Democratic Tea Party"In Asia, the American-led open trade era has created the greatest reduction in poverty in human history. The Pacific trade deal [the TPP trade agreement] would lift the living standards of the poorest Asians, especially the 90 million people of Vietnam."  Nike has 345,000 workers in Vietnam working in 67 factories paying young women 42 cents an hour to make shoes selling for $150 in the United States (not counting all the other factories they have outside the U.S.). So it's odd that Obama decided to give his speech on trade at Nike's headquarters. Meanwhile, the U.S. has 67,161 less factories today than it did in 1997. On May 12, 1998 Nike's CEO Phil Knight gave a speech at the National Press Club where he spoke of Nike’s reasons for moving factories out of the United States and into mainly third world countries in Asia.: "During the 1990s, all our experiences have caused us to really believe in the benefits of international trade. The uplifting of impoverished people, the better values for consumers in industrialized nations, and most of all, the increased understandings between peoples of different cultures." As I noted in a previous post, this corporate strategy allows for the cheapest labor costs and bargains with the worst governments. The result? Companies like Nike can keep manipulating their stocks, dodging corporate taxes while making shoes for only $1.60 a day — just so that Nike's CEO can earn $96,000 a day.

Company That Promised a $70,000 Minimum Wage Is Reaping The Rewards - A Seattle-based credit-card processing company made headlines in April when the CEO announced that it would raise the minimum salary for all employees to $70,000 over the next three years. Now, several months into the experiment, that company is thriving.  Dan Price, the CEO of Gravity Payments, told Inc. in a recent article that Gravity’s profits have doubled, and revenues are growing at twice their previous rate since he made the announcement in April.   Price, who decided to take a major personal paycut (from $1.3 million to $70,000) and mortgage two houses to invest another $3 million of his own money into the company in addition to raising the minimum salary of his 120-person staff, was inspired to make the move by a previous pay experiment. In 2012, Price raised company salaries 20% after a conversation with an entry-level employee pushed him to question whether his employees were being sufficiently compensated. In 2013, he did it again. Both years, profits grew, and productivity rose 30% to 40%.  Price told Inc. that the April announcement has energized the company. “I want the scorecard we have as business leaders to be not about money, but about purpose, impact, and service,” he said. “I want those to be the things that we judge ourselves on.”

Weaker Unions Correlated with More Inequality, Higher Pay for Top Earners --  Naked Capitalism - Yves here. This is an important short paper, in that it provides evidence that contradicts the story our elites would like to tell about inequality: that’s it’s because our modern economy requires more skills, so those at the top can command, and indeed deserve more, and the rest are increasingly servant classes. In other words, the great unwashed public is to believe that the outcomes are meritocratic. Never mind the ample evidence to the contrary, for instance, that the most lavishly paid CEOs are the worst performing. This article looks at an institutional factor, namely union power, and finds it plays an important role in explaining the rise in inequality in advanced economies. The authors are surprised to find that union weakness is correlated with better pay among top 10% earners. You’ll see they describe why the relationship could be causal. I’d argue that that both outcomes are an effect of the rise in neoliberal ideology, which in particular depicted CEOs as needing to have share-preformance-linked pay, which actually served as a justification for every-widening pay gaps between CEO compensation and that of ordinary workers. On top of that, the rise of pay for the CEO increased C-level pay, and also legitimated higher pay, meaning higher fees, among the professionals that sell services to big corporations.

As Bad as You Think Inequality Is, It's Worse! - How much do you think the CEO of a large corporation makes in a year, on average? How much do you think an entry-level factory worker earns in a year, on average? Your answers allow for the construction of an important statistic about inequality – the wage-gap ratio. These same two questions were asked of more than 50,000 people around the world, of whom 1,581 were Americans of all stripes. It turns out that the median American response – that is, the response that is exactly in the middle of survey results from Americans – estimated that a CEO of a large company earned about $900,000 per year and that the average factory worker earned about $25,000. That makes for a wage-gap ratio of 36 to 1. But how close are these estimates to reality? Not very.The chart below gives us a pretty good estimate of the growing gap between total compensation for the top 100 CEOs and the pay of a typical worker. (The number for workers’ pay was derived by using the average wages of production or nonsupervisory workers, which includes workers in the service sector as well as other private industry sectors.) In 1970, for every dollar earned by the average worker, the top 100 CEOs earned on average $45. By 2013 the ratio had jumped to $829 to $1, which is 20 times greater that what the typical American in the survey guessed. More amazing still is that on average Americans think CEOs of large companies receive about $900,000 per year in compensation, when in reality they receive nearly $30,000,000.

What Stumped the Loquacious Larry Summers - The usually loquacious former U.S. Treasury Secretary Larry Summers is rarely a man at a loss for words, especially on economic matters. But he was stumped at a recent event—at least for a moment. The Harvard University economist was asked to expound on Matthew 19:24, the Bible passage that says it’s harder for a rich man to enter heaven than a camel to pass through the eye of a needle. In the airy halls of the National Cathedral, Mr. Summers and International Monetary Fund Managing Director Christine Lagarde this week were exploring “Capitalism and Morality: The Inequality Challenge” with Adi Ignatius, the editor-in-chief of Harvard Business Review. Mr. Ignatius asked the two economic policy leaders whether the Christian faith is compatible with having vast wealth. Ms. Lagarde quickly tapped her catechism of old, pointing to the “parable of the talents,” a biblical lesson on the use of personal resources. “It’s how you use it, what you do with it, and what purpose you give to your life as a result which really matters,” the head of the world’s emergency lender said. All eyes in the cathedral turned to the man who had largely dominated the panel discussion for the previous hour. Mr. Summers had adopted a puzzled pose not too dissimilar from Rodin’s “The Thinker.” “I really don’t know what to say,” he said.

What Recovery? Record Number Of Americans Become Blood Plasma "Sellers" To Make Ends Meet  -- Having previously explained President Obama's recovery in charts, we thought words and pictures would be a better indicator of the dire situation facing so many Americans that get missed by the business media's spotlight. With 9.4 million more Americans below the poverty line than before the crisis, as The LA Times reports, it's disturbing to see so many people so destitute - even if they're working - that they've resorted to selling body fluids to make ends meet. The going rate for plasma donation, which can take a couple of hours, is about $25 or $30. But Octapharma is offering $50 for the first five visits, "when you get that $50, you feel good," one plasma 'seller' said, "I paid my gas bill." Despite the Fed continuing to kick this down the road, they continue to claim that we are in the middle of an ongoing recovery. There’s just one problem with that: things are getting worse than pre-crisis levels for millions of the poorest Americans.  But it gets worse, as 1000s of unemployed (and under-employed) Americans resort to selling their blood plasma to make ends meet (as The LA Times reports)  "The line was too long," a middle-aged woman named Joyce Rogers said as she got into her car outside Octapharma Plasma in Van Nuys. Rogers, a certified nurse assistant, told me she was going to a job interview and would return later to see if the line had thinned. But it seldom seems to. I've seen dozens of people reclined on lounges, fat 17-gauge needles in their arms, while dozens more wait in the packed lobby and the parking lot, some of them with children in tow. The going rate for plasma donation, which can take a couple of hours, is about $25 or $30. But Octapharma is offering $50 for the first five visits, and a poster in the lobby says: "Donate 10X by the end of October for a chance to win a TV!!!"

Big U.S. Cities Are Adding Jobs, Cutting Jobless Rates. How Does Yours Rank? -- Big U.S. cities are adding jobs and cutting unemployment rates. Of the 51 metropolitan areas with a population greater than 1 million, all but two saw nonfarm payrolls increase over the past year. The San Jose, Calif., metro area led the way, boosting employment 4.8% from September 2014 to September 2015, the Labor Department said Wednesday. Orlando, Fla., Salt Lake City, Utah, and San Antonio, Texas, followed with gains of 3.7%. Jobs fell in New Orleans and Richmond, Va. More jobs helped lower unemployment rates. At 3.1%, Minneapolis-St. Paul and Salt Lake City had the lowest rates in September among metro areas with populations greater than 1 million. All together, 49 large areas had over-the-year unemployment rate decreases and two had no change. The national unemployment rate in September was 4.9%, down from 5.7% a year earlier. The figures are not seasonally adjusted. (The seasonally adjusted unemployment rate, which is more widely reported, was 5.1% in September.) It took years for cities to recover from the recession. Earlier this year, the U.S. Conference of Mayors said just over half of U.S. metropolitan areas have surpassed prerecession employment. Urban centers and their suburbs are home to almost 86% of the nation’s population and account for 88% of nonfarm employment, according to the group. Cities like Detroit have been beneficiaries of steady economic growth and healthy consumer demand. Among major metro areas, the Motor City has had the steepest plunge in unemployment over the past year, though that’s not all good news. The city’s labor force has been shrinking, accounting for some of the decline in unemployment. In places like Minneapolis and Salt Lake City, the civilian labor force grew from September 2014 to September 2015.

New study finds state subsidies go overwhelmingly to large companies - Good Jobs First has just issued a new report analyzing state investment incentive programs open to small and large businesses alike. With the financial support of the Surdna Foundation and the Ewing Marion Kauffman Foundation, Shortchanging Small Business: How Big Businesses Dominate State Economic Development Incentives finds that 70% of the awards and 90% of the money goes to large companies. This is a big deal: The justification for many major incentive programs is that they benefit small business. This study is the first in a planned series of reports which show that this claim does not stand up. If subsidy programs disproportionately benefit large businesses, they reduce market competition and thereby make the economy less efficient. As I discussed in Competing for Capital, subsidies to capital exacerbate income inequality (post-tax, post-subsidy). This effect will be magnified if the incentives are flowing primarily to large firms rather than smaller ones, as this new study suggests to be the case. The report’s findings are relevant to the European Commission’s ruling last week on Starbucks and Fiat, that subsidies created by tax havens harm the ability of small- and medium-sized enterprises (SMEs) to compete. Shortchanging Small Business looks at 15 incentive programs in 13 states that are well-documented in Good Jobs First’s Subsidy Tracker database, plus one Missouri program that is highly transparent online (and will soon be included in Subsidy Tracker), for a total of 16 programs in 14 states. Overall, these programs account for 4228 individual awards allocating over $3.2 billion.

Chicago aldermen approve Emanuel's property tax hike - The City Council has approved Mayor Emanuel's bad-news city budget, including plans for a record $543 million city property tax hike over the next four years. The action came on a voice vote after a relatively tepid two-hour debate. But aldermen did take a roll-call vote on the related appropriation of funds for 2016, and it was approved 36-14. "No, it's not a piece of art," Emanuel told the council. "But are we better off? Yes." In the end, a couple of key lakefront aldermen—Tom Tunney, 44th, and Michele Smith, 43rd—ended up voting for the budget, despite concerns about how the property tax hike would disproportionately impact their area.Meanwhile, the Chicagoland Chamber is less than thrilled. In a statement it said that it "remains concerned" that Emanuel is still trying to shift part of the property tax increase from residential owners to commercial owners and is worried that the mayor still is counting on help from Springfield to reduce the pension tab. Perhaps so. But on this day, Emanuel got what he wanted—and rather easily. Moody's says the budget is helpful, but the budget "assumes certain actions from the State of Illinois and Illinois Supreme Court that directly impact the city’s statutory pension funding requirements. Should these decisions not match the city’s assumptions, new operating pressures could materialize in the immediate- and longer-term."

Emanuel, aldermen ask taxpayers 'to take medicine' to cure 'municipal illness': After weeks of discussion, debate and flat-out complaining by some, Ald. Patrick O'Connor told his colleagues it finally was time for Chicago to face up to its woeful condition. O'Connor, an alderman since 1983, said decades of financial mismanagement had brought them to the point where approving a budget stacked with $755 million in new taxes and fees was the lone remaining option. "Nobody wants to be told you're sick, you need to take medicine. You need chemo. You need an operation. This is an equivalent of a municipal illness," said O'Connor, 40th. "We don't have an option of saying, 'No.' We have the option of picking our choices to stay alive." A short time later, 35 of the 50 aldermen voted to serve Chicagoans dose after dose of tax, fee and fine increases that will lighten their pockets for years to come with a declared promise of restoring the city's financial health. A record $543 million property tax to pay for police and fire pensions. An additional $45 million property tax hike for school construction. More than $62 million in new garbage pickup fees. Some $48 million in taxi and ride-share fare and fee hikes. Another $40 million in new taxes on streaming services and cloud businesses. An additional $13 million in more expensive building permit fees, $2 million to remove vehicle boots and $1 million in e-cigarette taxes. Down the hatch it all went as Emanuel looked on. The mayor later applauded aldermen for "voting to put progress for the city ahead of their own individual politics, and I think that's the highest thing of public service."

New results on preschool from a Tennessee RCT -- This is the most extensive and careful study of preschool (pdf) I have seen to date, conducted by Vanderbilt.  The core result is this: The third question we addressed involved the sustainability of effects on achievement and behavior beyond kindergarten entry. Children in both groups were followed and reassessed in the spring every year with over 90% of the initial sample located tested on each wave. By the end of kindergarten, the control children had caught up to the TN‐VPK [preschool] children and there were no longer significant differences between them on any achievement measures. The same result was obtained at the end of first grade using both composite achievement measures. In second grade, however, the groups began to diverge with the TN‐VPK children scoring lower than the control children on most of the measures. The differences were significant on both achievement composite measures and on the math subtests. In other words, after some period of time the children who had preschool actually did worse.  I found this interesting too: First grade teachers rated the TN‐VPK children as less well prepared for school, having poorer work skills in the classrooms, and feeling more negative about school. It is notable that these ratings preceded the downward achievement trend we found for VPK children in second and third grade. So does preschool make kids more grumpy?  Immigrant children by the way did well: …whether or not ESL children experienced TN‐VPK, by the end of third grade, their achievement was greater than either of the native English speaking groups of children. Arnold Kling offers comment, and for the pointer I thank Peter Metrinko.

Broke CPS approves 2 new charters, including SW Side school -- While Chicago Public Schools continues to beg Springfield for $480 million to balance its budget and enrollment has dropped another 4,400 students, the Board of Education on Wednesday unanimously decided to open two new charter schools in the fall. Board Chairman Frank Clark, who’s donated so much money to the Noble Network of Charter Schools that one is named for him, recused himself from the vote, 6-0, to put a 17th Noble school on the Southwest Side. Mark Furlong turned up after missing the morning meeting to vote, according to CPS. Also approved was a fifth KIPP charter elementary school in West Garfield Park.  The votes taken by a board rarely known to dissent hardly came as a shock. Still, hundreds on both sides seized the meeting as their last chance to sway the votes after months of lobbying.    Chicago Teachers Union organizer Martin Ritter spent his two minutes reading tens of thousands of dollars in campaign contributions made by Noble Network board members to the mayor, to powerful Ald. Ed Burke, whose ward is home to the proposed school and recommended it, and to CEO Forrest Claypool when he ran for public office.

Gates Undercover -- Several months ago, while conducting some much overdue research into the back-story of Common Core, I stumbled across a document from the Gates Foundation that painted such a frighteningly clear picture of next-gen ed-reform that I actually wondered for a time if perhaps I was hallucinating. I wasn’t, and within a very short time, it became unmistakably obvious that the Common Core Standards, our new Smarter Balanced test, and Maine’s one of a kind (but not for long if they have their way, so watch out!) proficiency-based diploma mandate were all linked like pieces of a puzzle to a corporate-driven agenda to transform our schools into “personalized” (digital!) learning environments. (If you’re not sure what I’m talking about, see here  for more.) Quite literally sick to my stomach, I emailed a union rep to ask if he knew anything about the paper I had found. “It’s ghastly,” he replied, “but in Maine, it has been the Nellie Mae Education Foundation and the Great Schools Partnership that has been behind these policies.”  The Gates Foundation and Nellie Mae are clients of Bellwether Education, who suggest in their “Policy Playbook” setting up nonprofits to help create demand for personalized learning. “Independent nonprofits can also serve as advocates for innovation with state policymakers, schools, and districts, working to spur demand for new models. For example, an organization might coordinate “field trips” for policymakers, principals, and civic leaders to visit schools in and outside the state that are implementing personalized learning model,” the playbook says.  Of course. Coordinate field trips, to help convince lawmakers to vote for legislation that will allow you to experiment on children, and sell your products.

VIDEO: Cop Violently Attacks High School Girl Sitting at Her Desk -   A video was uploaded to Instagram on Monday which shows a jaw-dropping assault on a female high school student by a cop.  Parents are outraged after watching a school resource officer, reportedly Ben Fields, of Spring Valley High School, violently attack a peaceful young girl. The video began spreading on social media sites Monday afternoon. In the video, a female student is seen being 100% non-violent when the officer approaches her.   </SCRIPT">When the officer grabs her, the girl does not respond. The officer then puts her in a headlock, and then he flips her backwards, throws her on the ground, and drags her several feet like an animal. According to the Richland County Sheriff’s office, the girl in the video was “resisting arrest.”

Why Are Eva Moskowitz’s Success Academy Charter Schools Suspending Students Left and Right? - According to a report by the website Chalkbeat, in New York City charter schools suspended students at about three times the rate of traditional public schools. Chalkbeat found that “charter schools suspended at least 11 percent of their students that year, while district schools suspended 4.2 percent of their students.” Their study also concluded “The charter-school suspension rate is likely an underestimate because charter schools don’t have to report suspensions that students serve in school.” In a PBS NewsHour interview with John Merrow, Eva Moskowitz, CEO of the Success Academy Charter Schools bragged about high test scores and parental applications for the networks entrance lottery. But she was much more defensive when questioned about the charter school network’s code of conduct and suspension policies. Merrow also interviewed Marie Chauvet-Monchik, Principal of PS-138 Brooklyn on the show. Chauvet-Monchik was adamantly opposed to suspending from school children in younger grades. According to Chauvet-Monchik, “When you send a child home, the child is missing instruction. So, I’m actually robbing the child of an education if I suspend the child.” Merrow then turned to the Success Academy Charter Schools where discipline for their “scholars” is much more punitive. According to Merrow, “Last year, principal Monica Komery issued 44 out-of-school suspensions to her 203 kindergartners and first graders.” Her school is one of 34 Success Academies operating in New York City. The schools are publicly funded, but under private control. Komery admitted “We do have a zero-tolerance policy around certain behaviors,” but claimed “I don’t just suspend children as the first course of action” and argued “It’s well-thought-out. It’s a process, and there are systems in place.”

Obama thinks kids are spending too much time on standardized tests -- US president Barack Obama said today (Oct. 24) that his administration is moving to reduce the amount of time public schools spend administering standardized tests, including annual exams linked to the controversial “Common Core” mandates for measuring math and reading skills. In an announcement today, via Facebook, Obama said he wants to prevent public school students from spending more than 2% of their total classroom hours on testing. The proposal comes at the same time as a new study of the nation’s 66 largest school districts that found that students are spending between 20 and 25 hours a year taking tests. American families and public school teachers have been increasingly put-upon by government-mandated annual testing schemes since the advent of No Child Left Behind, the 2002 law that tied public school funding to student performance on standardized math and reading exams. The Obama administration has been criticized for upping the stakes of these exams by requiring states to evaluate teachers based on their students’ test scores. As a result, critics say, teachers are forced to spend valuable classroom time “teaching to the test” and administering practice exams instead of cultivating true learning experiences. He wants to prevent public school students from spending more than 2% of their total classroom hours on testing.   The president and his cabinet acknowledge that they’ve contributed to the problem of over-testing; as education secretary Arne Duncan told the New York Times, “At the federal, state and local level, we have all supported policies that have contributed to the problem in implementation. We can and will work with states, districts and educators to help solve it.”

Update on the National School Lunch Program - "On a typical schoolday in October 2014, over 30 million U.S. schoolchildren and teens took their trays through the lunch line. Seventy-two percent of these students received their meals for free or paid a reduced price, and the remaining 28 percent purchased the full-price lunch." However, the number of children receiving a free lunch is rising, while the number purchasing a school lunch is falling. Katherine Ralston and Constance Newman take "A Look at What’s Driving Lower Purchases of School Lunches," in Amber Waves, published by the US Department of Agriculture (October 5, 2015). Here are some facts to organize the discussion. First, here's a figure showing total number of students getting school lunch over time. The number receiving free lunches has risen substantially; the number paying for lunch has dropped.Another angle on this same data is instead of looking at total numbers, look at the proportion of students in each category. About 60% of all students are provided a lunch at school. The share of those who are eligible to get a lunch, and actually getting one, is about 90%. The share of students who would need to pay for their own lunch, and are paying for the school lunch, is down in the last few years.The National School Lunch program cost $11.6 billion in 2012, according to a USDA fact sheet. Why is it leading to fewer paid lunches? Perhaps the obvious explanation for fewer paid lunches is the 2007-2009 recession and its aftermath. It seems plausible that a number of families who weren't eligible for free lunches were concerned about saving some money, and started sending their children to school with a home-packed lunch instead. But this answer seems incomplete, because the program has been tweaked in a number of ways in recent years.

The Death Of The First Amendment: Majority Of College Students Now Favor "Regulation" Of Free Speech - While the public's attention has been largely focused on the Obama administration's crusade against the Second Amendment, a more troubling development is taking place in the fight against free speech, and the First Amendment, a war waged far from D.C., on the campuses of America's liberal colleges. We read the following excerpt from the upcoming issue of the New Criterian, in which we find that 51% - or a majority - of college students favor "speech codes" (i.e., regulated "free speech"), with only 36% against, first with amusement (as we thought it has to be a joke) and then great concern (once we realized it is all too real) because it reveals that America's best and brightest young minds have decided on their own that they don't really need all those liberties enshrined by America's founding fathers, especially if they "infringe" upon the current mania of "politically correct" everything. From the WSJ: A recent survey reported college students, by a margin of 51% to 36%, favor speech codes.

When We Betray Our Students - A couple of months ago, at the beginning of the semester, I posted on Facebook a plea to my fellow faculty that they not post complaints there about their students. I said that I considered such public commentary a kind of betrayal, even when the students weren’t named. Yesterday, Gothamist reported that an undercover cop had been spying for months, if not years, on a group of Muslim students at Brooklyn College, leading to the arrest of two women last spring for allegedly planning to build a bomb. Set aside the problem of entrapment with these schemes. Set aside Mayor de Blasio’s promise to stop this kind of surveillance of Muslims in New York. Let’s focus instead on the leadership of CUNY that either knowingly allows this kind of spying on our students to continue or does little to nothing to stop it. Tolerating, actively or passively, undercover officers of the state on our campus, allowing them to spy on our students, to report back to the state what our students say, as they meet with their friends to share in their studies, swap their stories, figure out their faith, shoot the shit, or whatever it is that students do when they believe themselves to be among friends, is a betrayal. Of the worst sort.

The Rise and Fall of For-Profit Colleges -- New Yorker: Not too long ago, for-profit colleges looked like the future of education. Targeting so-called “nontraditional students”—who are typically older, often have jobs, and don’t necessarily go to school full time—they advertised aggressively to attract business, claiming to impart marketable skills that would lead to good jobs. They invested heavily in online learning, which enabled them to operate nationwide and to keep costs down. The University of Phoenix, for instance, enrolled hundreds of thousands of students across the country, earning billions of dollars a year. Between 1990 and 2010, the percentage of bachelors’ degrees that came from for-profit schools septupled.  Today, the for-profit-education bubble is deflating. Regulators have been cracking down on the industry’s misdeeds—most notably, lying about job-placement rates. In May, Corinthian Colleges, once the second-largest for-profit chain in the country, went bankrupt. Enrollment at the University of Phoenix has fallen by more than half since 2010; a few weeks ago, the Department of Defense said that it wouldn’t fund troops who enrolled there. Other institutions have experienced similar declines. The fundamental problem is that these schools made promises they couldn’t keep. For-profit colleges are far more expensive than community colleges, their closest peers, but, according to a 2013 study by three Harvard professors, their graduates have lower earnings and are actually more likely to end up unemployed. To make matters worse, these students are usually in a lot of debt. Ninety-six per cent of them take out loans, and they owe an average of more than forty thousand dollars. And the ones who don’t default often use deferments to stay afloat: according to the Department of Education, seventy-one per cent of the alumni of American National University hadn’t repaid a dime, even after being out of school for five years.

The Law School Debt Crisis -  In 2013, the median LSAT score of students admitted to Florida Coastal School of Law was in the bottom quarter of all test-takers nationwide. According to the test’s administrators, students with scores this low are unlikely to ever pass the bar exam.  Despite this bleak outlook, Florida Coastal charges nearly $45,000 a year in tuition, which, with living expenses, can lead to crushing amounts of debt for its students. Ninety-three percent of the school’s 2014 graduating class of 484 had debts and the average was almost $163,000 — a higher average than all but three law schools in the country. In short, most of Florida Coastal’s students are leaving law school with a degree they can’t use, bought with a debt they can’t repay.If this sounds like a scam, that’s because it is. Florida Coastal, in Jacksonville, is one of six for-profit law schools in the country that have been vacuuming up hordes of young people, charging them outrageously high tuition and, after many of the students fail to become lawyers, sticking taxpayers with the tab for their loan defaults.Yet for-profit schools are not the only offenders. A majority of American law schools, which have nonprofit status, are increasingly engaging in such behavior, and in the process threatening the future of legal education.Why? The most significant explanation is also the simplest — free money.  In 2006, Congress extended the federal Direct PLUS Loan program to allow a graduate or professional student to borrow the full amount of tuition, no matter how high, and living expenses. The idea was to give more people access to higher education and thus, in theory, higher lifetime earnings. But broader access doesn’t mean much if degrees lead not to well-paying jobs but to heavy debt burdens. That is all too often the result with PLUS loans.

The average student loan debt grew 56% over the past 10 years - The average student debt at college graduation grew from $18,550 in 2004 to $28,950 in 2014, a 56% jump, according to a report released Tuesday by the Institute for College Access and Success, a nonprofit focused on expanding access to higher education. While the share of graduates with debt only ticked up slightly — from 65% in 2004 to 69% in 2014 — the increase in the average amount of debt far outpaced inflation growth at 25% over that time. While the share of graduates with debt only ticked up slightly — from 65% in 2004 to 69% in 2014 — the increase in the average amount of debt far outpaced inflation and wage growth, which increased 25% and 23% respectively during that time. Though the TICAS report finds a significant increase in the debt levels of college graduates, it likely underestimates the increase because it only includes data from graduates of private nonprofit colleges and public universities. The report doesn’t include data on graduates of for-profit colleges, who are both more likely to have debt than their peers at nonprofit schools and carry 43% more debt on average, according to the report. The research also doesn’t include loan figures for students who never graduated but may still have debt. State disinvestment in higher education over the past 10 years has played a big role in the growth in student debt, says Lauren Asher, the president of TICAS. “It’s quite clear that one major factor is a shifting of more and more of the cost of higher education onto students and families,” she said. “Family incomes have not kept up with the costs they’re expected to cover for college.” Between 2004 and 2014, the share of funding states provide to public colleges dropped from 62% to 51%, and during the same period, the share of tuition colleges have asked families to pay grew from 32% to 43%, the report notes.

Student Loan Debt: A Closer Look - - Many reports on student loan debt over the last decade have focused on the rapid growth of educational debt per student. Here we examine loan debt per student over time, including current costs of undergraduate education and enrollment. Some argue that rising student enrollment over the decades has led to the higher costs of education, but the chart below shows otherwise.The shocking increase in student aid could be attributed to a number of different reasons apart from a rise in tuition: a rise in cost of living, decrease in average wages and thus the ability to pay for education, among others. Let’s take a look at the rise in tuition over the same time frame, adjusted for inflation.In the first chart, we can see that since 2001, total student aid has gone up by 114%, while enrollment only increased by 29%. If we go back to 1971, student aid has jumped 757%, while enrollment by 109%, essentially doubling. Let’s now focus on the changes in tuition, aid, and enrollment over time.As we mentioned before, student aid has jumped to 7 times what it was in 1971, peaking in 2010 at 812% or 8 times what it was in 1971.  The average rise in cost of a four year degree has jumped 228% since 1971. While does not match the 821% increase in aid, it makes sense. The average American consumer could no longer pay for even half of the sticker price, especially during the stagflation era of 1980s, thus the steady and rapid rise in aid. If we take a look at the CPI over time, we see inflation jump a few times, only to come back down to its present day ten-year MA of 2.05%. This proves that tuition price increases cannot be blamed on inflation – a closer look at CPI components since 2000 shows the dramatic tuition inflation (which is overly dramatic, as the BLS calculates tuition based on sticker price, not on what households actually pay).

“Boehnerland” Lobbyists Win Right to Bombard Student Borrowers With Robocalls -- Deep inside the 114-page budget deal that passed the House Wednesday, legislative leaders tucked in a provision that will free debt collectors to bombard student loan borrowers with unlimited robocall and automated text messages where it hurts most — on their mobile devices — even when they are asked to stop. The change is a major victory for the debt collections industry, which has retained a small army of lawyers and lobbyists for years to weaken the Telephone Consumer Protection Act, the law that protects people from unwanted robocalls and pre-recorded messages. It’s also a big win for the small network of lobbyists within outgoing Speaker John Boehner’s inner circle, a cadre nicknamed “Boehnerland” by D.C insiders. Marc Lampkin, Boehner’s former general counsel and close personal friend, is a lobbyist with Brownstein Hyatt Farber Schreck, a law firm that has led the charge on Capitol Hill and with the Federal Communications Commission requesting liability exemptions from the TCPA on behalf of student loan servicing giant Nelnet. Barry Jackson, Boehner’s chief of staff for nearly twelve years, also works at Brownstein Hyatt Farber Schreck.

Pension problems expected to hammer UPS retirees -- UPS earned more than $3 billion last year. But 8,737 of its former workers could see their pension checks cut next summer. The problem is that some UPS retirees receive their pensions from the cash-strapped Central States Pension Fund, which covers hundreds of thousands of workers from different companies. That fund says it needs to make cuts in order to keep from running out of money. Jim Dopp, 63, retired in May of 2007 after more than 30 years on the job with a monthly pension check of $2,903. But last month, he received a letter saying his check could be slashed in half -- to $1,452 -- as soon as July, if the Treasury Department approves the plan. The real kicker is that UPS would've covered the cuts made to his pension if Dopp had retired just eight months later. The Central States Pension Fund used to administer pension benefits to a group of unionized UPS drivers, but the company left the fund in 2008 as a way to save money and provide retirees with better benefits. It set up its own pension fund, but only took current workers with it. Any UPS drivers who had already retired would still be covered solely by the Central States fund.

As Retirees Outnumber Employees, Pensions Seek Saviors: The $300 billion California Public Employees’ Retirement System began showing its age this year: It started paying out more money to retirees than it gained in contributions and investments. In roughly 20 years, CalPERS’ retirees will outnumber active workers by a ratio of nearly 2-to-1 in some of its plans. In fact, a lot of state and local pension systems are already showing their age. Back in the 1970s, the typical pension fund had four to five times more active employees than it had retirees. Today, that ratio has slipped to 1.5-to-1 and is falling. In the investment world, financial planners advise older individuals to steer their retirement accounts toward more conservative, fixed-income investments, such as bonds. The idea is to reduce the risk that an investment could turn south just when it’s time to start withdrawing funds. But most pension plans have been doing the exact opposite. In search of high returns, they have been turning to alternative investments. The focus has mainly been on hedge funds and private equities. Hedge funds are investment pools in high-risk assets that are aggressively managed for big or so-called absolute returns. Private equity funds pool money to buy companies with the goal of selling them or taking them public for a profit. Both funds’ managers typically charge 2 percent of the total investment value as a fee (roughly twice the rate of more traditional fund managers), and managers take a 20 percent cut of the profits. They are by their very nature opaque, built on secret investment formulas that make tracking money in the funds next to impossible. The investments have been sold to institutional investors as a way to diversify and lower a plan’s dependence on the swings of the stock market. But many are now questioning whether, for public pension plans -- especially maturing plans that are paying out more than is coming in -- these high-risk, high-fee investments are worth it.

Baby Boomers Hugely Underestimate What They Need for Retirement - When it comes to saving for retirement, there’s a huge gap between what Americans say they want and what they’re doing to make it happen. A new survey from BlackRock on attitudes about money and financial goals found Americans are holding nearly twice as much cash as they think they ought to in order to reach their retirement goals. Fewer than a quarter of them regularly set aside money into long-term savings or investment plans—yet 74% said they feel financially secure and “prepared to pursue their dreams.” Baby boomers, who are retiring in droves, face a staggering shortfall. People ages 55 to 64 who responded to the online survey said they expected to have about $45,000 in annual income in retirement. But the amount they had saved would only provide an estimated $9,129—a potential $36,371 gap. Even affluent retirees—those earning more than $250,000 a year—hadn’t set aside enough to generate the income they said they needed to meet their retirement expectations. “The amount of money you need to generate a certain level of income is a lot higher than it used to be,”  Even if an investor has saved diligently for decades, the amount that a nest egg can generate is much smaller, especially with interest rates so low, Koesterich said. “That’s coming as a very unpleasant surprise,” he added. The problem is especially acute for younger workers, who will likely spend decades in retirement–much longer than their parents or grandparents. But research has shown Americans are generally bad at guessing how long they’re going to live–in the short term and in the long run. That in turn can affect their financial behavior and investment decisions.

Hillary Clinton Indicates She is Open to Raising the Retirement Age - naked capitalism Yves here. One of the things that is troubling about Clinton’s hinting at the idea of raising retirement age is that this is occurring when gains in lifespan in the US have stalled out. And with diabetes only becoming more prevalent and having a negative impact on life expectancy, it’s not out of the question that lifespans in the US could even fall. As Alan Grayson said, ” If you get sick, America, the Republican health care plan is this: ‘Die quickly.'” The problem is it’s not clear that the Democrats have a viable alternative….although as Lambert points out there is countervailing pressure from the medical industrial complex, which is very fond of the “insert tube, extract rents” model.   At a forum in New Hampshire on Wednesday, Hillary Clinton stood by her support for the death penalty, which made headlines. But her remarks about Social Security that day didn’t get as much attention. She offered a lot of the same rhetoric many Democrats are now saying, that we need to look at how the poorest Social Security recipients are faring and think about how to shore up payments there. But she also left the door open to raising the retirement age if there were a way to exclude people who are not working labor-intensive jobs, while at the same time not fully endorsing simply raising the tax cap, which would ensure the system is fully funded going forward.

The Oligarch Recovery – U.S. Military Veterans are Selling Their Pensions in Order to Pay the Bills  Welcome to the oligarch recovery. An economic rebound so robust that an ever increasing number of Americans are being forced to borrow money at usurious rates just to pay the bills. Today, I want to introduce you to the latest scheme to profit from poverty: Pension Advance Companies. Here’s some of the Washington Post’s article on the subject from today: Keith Moore, a 40-year-old military veteran recovering from post-traumatic stress disorder in Oklahoma, left the military after 21 years of service, because his disabilities — PTSD, arthritis and other injuries — made it difficult to work.  But the transition to civilian life came with a different struggle: the need to provide for his family and pay the same bills with only half the paycheck. Moore soon found himself two months behind on rent and at least 10 days from payday. In bed that night, he saw a TV ad for Future Income Payments, a company based in Irvine, Calif., that buys pensions in exchange for a lump sum. The company said it had worked with military personnel and government workers. Ten minutes later, he got up and made the call. The next day, a company representative called Moore back and explained that he would receive a $5,000 cash advance for selling part of his pension. In exchange, Moore would have to pay the company $510 a month for five years  — a total of $30,600.  If it were a typical loan, that would amount to $25,600 in interest — a rate of 512 percent. Pension advances are complex products that offer retirees a lump-sum cash advance in exchange for all, or part, of their future pension payments. Consumer groups say they are pitched disproportionately to retired military members and federal retirees. In a 2014 report, the Government Accountability Office identified 38 companies that had recently offered pension advances. Future Income Payments did not return calls seeking comment.  Would you return a phone call when your business model consists of peddling 500% interest rate loans to broke U.S. military veterans?

Someone is Spending Your Pension Money -- John Mauldin - Retirement is a relatively new dream. The notion of spending the last years of your life in relative relaxation came about only in the last century or two. Before then, the overwhelming number of people had little choice but to work as long as they physically could. Then they died, usually in short order. That’s still how it is in many places in the world.  Retirement is a new phenomenon because it is expensive. Our various labor-saving machines make it possible at least to aspire to having a long, happy retirement. Plenty of us still won’t reach the goal. The data on those who have actually saved enough to maintain their lifestyle without having to work is truly depressing reading. Living on Social Security and possibly income from a reverse mortgage is limited living at best.  In this issue, I’ll build on what we said in the last two weeks on affordable healthcare and potentially longer lifespans. Retirement is not nearly as attractive if all we can look forward to is years of sickness and penury. We are going to talk about the slow-motion train wreck now taking shape in pension funds that is going to put pressure on many people who think they have retirement covered. Please feel free to forward this to those who might be expecting their pension funds to cover them for the next 30 or 40 years. Cutting to the chase, US pension funds are seriously underfunded and may need an extra $10 trillion in 20 years. This is a somewhat controversial letter, but I like to think I’m being realistic. Or at least I’m trying.

Self-absorbed millennials? Not the ones who are caregivers for their elders -- Nearly one-quarter of America’s adult caregivers are between 18 and 34, part of a rising generation expected to shoulder more responsibilities as their parents and grandparents age. The typical caregiver is still a 50-something woman feeding, bathing and transporting her ailing mother. But an estimated 9.5 million millennials now provide such help, usually to a parent or grandparents, according to recent reports by AARP and the National Alliance for Caregiving. Unlike older caregivers, 60 percent of whom are women, millennial caregivers are equally likely to be male as female. The typical millennial caregiver is 27, works at a job 35 hours a week and has an average household income below the national median. Most live with, or within 20 minutes of, those they care for. And as more people live long enough to suffer debilitating diseases such as Alzheimer’s, experts predict that the ranks of young caregivers will rise. “Its an emerging issue that we’re going to have to grapple with, all these young people who are potentially caring for a parent or a grandparent and how they’re going to manage all these responsibilities at the same time that they’re trying to go to school or hold down a paying job,”

We Mapped the Uninsured. You'll Notice a Pattern. - The New York Times#: Two years into Obamacare, clear regional patterns are emerging about who has health insurance in America and who still doesn’t.The remaining uninsured are primarily in the South and the Southwest. They tend to be poor. They tend to live in Republican-leaning states. The rates of people without insurance in the Northeast and the upper Midwest have fallen into the single digits since the Affordable Care Act’s main provisions kicked in. But in many parts of the country, obtaining health insurance is still a problem for many Americans. These trends emerged in an analysis we undertook with the help of two organizations that are closely monitoring the progress of the health law. Last year, we used similar data to show the the substantial effects Obamacare had on reducing the number of Americans without health insurance. This year, the same groups updated their estimates of where America’s uninsured live, and the change is a lot less drastic. States that were late to expand Medicaid, including Pennsylvania and Indiana, showed substantial reductions in their uninsured residents compared with last year. In other places, the changes have been more modest. In a few — like Mississippi — things appear to have gotten worse, with fewer people having health insurance this year than last.  “This year it’s more of a state-specific story,”“There was a pronounced drop pretty much everywhere last year, and we don’t see that pattern again this time around.”

Uniting Behind the Divisive ‘Cadillac’ Tax on Health Plans - Larry Summers and Greg Mankiw -  One of us, a former member of the Obama administration, remains a fan of the president. The other, not so much. But we agree on one thing: The excise tax on high-cost health care plans, the so-called Cadillac tax, is good policy. Congress should side with President Obama and resist calls to scrap it. ... To some, the Cadillac tax is unpopular because unions oppose it, having negotiated especially generous health plans. But legislators should not let special interests stand in the way of a more rational health care system for all Americans. To some, the Cadillac tax is unpopular because it was passed as part of the Affordable Care Act, a.k.a. Obamacare. But the Cadillac tax can be evaluated as a stand-alone measure. Both fans and critics of Obamacare should see the merits in a more level playing field between alternative forms of compensation. One of us worked for President Obama when the Affordable Care Act was passed. One of us worked for President George W. Bush and supported John McCain and Mitt Romney in their attempts to defeat Mr. Obama. We disagree on many things, but we agree that health policy is too important to treat as if it were nothing more than another political battlefield. Some policies deserve bipartisan support. The Cadillac tax is one of them.

Costs for Dementia Care Far Exceeding Other Diseases, Study Finds - Three diseases, leading killers of Americans, often involve long periods of decline before death. Two of them — heart disease and cancer — usually require expensive drugs, surgeries and hospitalizations. The third, dementia, has no effective treatments to slow its course.  So when a group of researchers asked which of these diseases involved the greatest health care costs in the last five years of life, the answer they found might seem surprising. The most expensive, by far, was dementia.The study looked at patients on Medicare. The average total cost of care for a person with dementia over those five years was $287,038. For a patient who died of heart disease it was $175,136. For a cancer patient it was $173,383. Medicare paid almost the same amount for patients with each of those diseases — close to $100,000 — but dementia patients had many more expenses that were not covered. On average, the out-of-pocket cost for a patient with dementia was $61,522 — more than 80 percent higher than the cost for someone with heart disease or cancer. The reason is that dementia patients need caregivers to watch them, help with basic activities like eating, dressing and bathing, and provide constant supervision to make sure they do not wander off or harm themselves. None of those costs were covered by Medicare.For many families, the cost of caring for a dementia patient often “consumed almost their entire household wealth,” said Dr. Amy S. Kelley, a geriatrician at Icahn School of Medicine at Mt. Sinai in New York and the lead author of the paper published on Monday in the Annals of Internal Medicine.

It’s time to stop watching football - Mathbabe -- My husband and I have boycotted football. It’s hard, especially at this time of year when baseball is winding down, and our traditional Sunday and Monday night activities involve beer and relaxation while watching bunches of men in tight jumping on other bunches of men in tights (although the Mets being in the World Series certainly helps for now). I’ve been a football fan for more than 20 years, so it’s a deeply held habit.  Nowadays, though, every time I hear the familiar crunch of football helmets crashing against each other on the front lines or the receivers being thrown to the ground, all I can think is “concussion.” And it’s more than just one concussion, or even a few. It’s known to accumulate and lead to a serious and debilitating brain disease, called chronic traumatic encephalopathy, or CTE. Memory loss, dementia, that kind of thing, at young ages. Here’s a wiki page listing the players who are known to have CTE and who are involved in a lawsuit against the NFL for concussion-related injuries. The lists are far from complete. In fact, a recent study showed that 96% of deceased players suffered from CTE. So a good approximation of a complete list would be “all football players, ever.” Acute readers have pointed out that the group studied in this paper were self-selected, so there’s likely a bias involved. Even so, nobody would argue that football isn’t rife with CTE. Here’s the thing. I have three sons, and I wouldn’t let any of them play football. So what does it mean that I let myself be entertained by other people playing it?

Study Suggests Autism Is Being Overdiagnosed - NBC News: Autism may be overdiagnosed in as many as 9 percent of children, U.S. government researchers reported Friday. It might be because autism covers such a broad range of symptoms and behaviors and is difficult to diagnose, and it may also be because increasing awareness about autism means there are resources to help kids who get the diagnosis, the team at the Centers for Disease Control and Prevention and the University of Washington found. The survey also suggests that up to 4 percent of children are helped with early therapy, or outgrow their symptoms, Stephen Blumberg of the National Center for Health Statistics and colleagues found. "The results of this study suggest that some children with developmental delays, attentional flexibility problems, or other conditions may be receiving provisional yet inaccurate diagnoses of autism spectrum disorder from nonspecialists," they wrote in their report, published in the journal Autism.

Unexpected Honey Study Shows Woes of Nutrition Research -- Just a few weeks ago, a study was published in the Journal of Nutrition that many reports in the news media said proved that honey was no better than sugar as a sweetener, and that high-fructose corn syrup was no worse. This shocked people on all sides of the sweetener debate. It has become an article of faith among many that natural sweeteners like honey are better for you than engineered sweeteners like high-fructose corn syrup, especially for people concerned about diabetes.  A more careful reading of this research would note its methods. The study involved only 55 people, and they were followed for only two weeks on each of the three sweeteners. Sure, glucose and insulin levels and measures of insulin resistance were no different for honey, sugar and high fructose corn syrup. But should we really place so much faith in such a small, short-lived trial? The truth is that research like this is the norm, not the exception. I’ve written about nutrition quite often here at The Upshot — about weight loss, dietary guidelines, healthy food choices, the role of exercise in weight loss, the potential benefits of coffee — and a fair amount of the time, it’s to counter conventional wisdom, for example about milk, red meat or artificial sweeteners. Just a short while ago, I argued that while more recent nutritional guidelines are, perhaps, more evidence-based, they may still be straying from what we can glean from studies. Readers often ask me how myths about nutrition get perpetuated and why it’s not possible to do conclusive studies to answer questions about the benefits and harms of what we eat and drink. Almost everything we “know” is based on small, flawed studies. The conclusions that can be drawn from them are limited, but often oversold by researchers and the news media. This is true not only of the newer work that we see, but also the older research that forms the basis for much of what we already believe to be true.

Peer-Review Fraud — Hacking the Scientific Publication Process -- In August 2015, the publisher Springer retracted 64 articles from 10 different subscription journals “after editorial checks spotted fake email addresses, and subsequent internal investigations uncovered fabricated peer review reports,” according to a statement on their website.1 The retractions came only months after BioMed Central, an open-access publisher also owned by Springer, retracted 43 articles for the same reason. “This is officially becoming a trend,” Alison McCook wrote on the blog Retraction Watch, referring to the increasing number of retractions due to fabricated peer reviews.2 Since it was first reported 3 years ago, when South Korean researcher Hyung-in Moon admitted to having invented e-mail addresses so that he could provide “peer reviews” of his own manuscripts, more than 250 articles have been retracted because of fake reviews — about 15% of the total number of retractions. Peter Chen, who was an engineer at Taiwan's National Pingtung University of Education at the time, developed a more sophisticated scheme: he constructed a “peer review and citation ring” in which he used 130 bogus e-mail addresses and fabricated identities to generate fake reviews. An editor at one of the journals published by Sage Publications became suspicious, sparking a lengthy and comprehensive investigation, which resulted in the retraction of 60 articles in July 2014.

Though Labeled ‘Wild,’ That Serving of Salmon May Be Farmed or ‘Faux’ - The wild-caught salmon sold by restaurants and fishmongers is frequently farm-raised fish that has been mislabeled, said a report released Wednesday. Using DNA analysis, the nonprofit ocean conservation group Oceana studied 82 samples and found that two-thirds of the salmon appearing on restaurant menus were incorrectly labeled. Twenty percent of salmon from groceries was incorrectly identified, the group found. Over all, 43 percent of the salmon the group collected — in New York, Washington, Chicago and Virginia, from upscale and takeout restaurants, and from various neighborhood and chain groceries — was misidentified. The researchers reported that the most common mislabeling in their survey involved Atlantic salmon being sold as “wild salmon.” The group also found instances of chum salmon being advertised as costlier king salmon, and of rainbow trout sold as wild salmon.

Yelp experiments with warning labels for restaurants that have low health inspection scores - A 2014 post in this blog noted that food safety problems are fundamentally about lack of public information.  If consumers had magic sunglasses that displayed the presence of Salmonella on chicken in the grocery store, there would be no need for government regulation. Immediately, faced with market consequences for distributing chicken with Salmonella, the companies would clean up their product.  The Washington Post's Wonkblog this week reports on Yelp's San Francisco restaurant review site, which is conducting an experiment with the online equivalent of these magic sunglasses.  Yelp, the popular Web site that lets consumers review everything from bistros to body shops to yoga studios, quietly began running an experiment in San Francisco over the past week. The pages for a small fraction of the city's restaurants on the site now bear a new consumer alert. The warnings are shown for the review pages of restaurants that received very low scores from health inspectors. One feels bad for the restaurants, but this idea is intriguing. The National Restaurant Association mentioned concerns. Yet, if the inspections use standards that all restaurants really can satisfy, this ought to help consumers get access to safer and cleaner restaurants without doing the restaurants much lasting harm.

The Flu --  Government officials and poultry farmers across the globe are preparing for a possible resurgence of bird flu strains that originated in China in late 2014 and have spread to three dozen countries. In the U.S., it resulted in the worst animal disease outbreak in the country’s history, killing 49 million birds, diminishing poultry-product exports and costing the federal government almost $1 billion, mostly to dispose of infected birds and compensate farmers. As temperatures dropped in the northern hemisphere, migratory wild waterfowl and seabirds that are the main sources of deadly flu viruses were on the move, potentially spreading disease again. Prevention measures at poultry farms include firing sonic cannons to keep wild birds away and stockpiling bird vaccines. The flu strains responsible for the outbreak are not known to have sickened humans. So for now, regular, seasonal flu probably poses the bigger threat to people.

Exclusive: Landmark Study Finds Elevated Carbon Dioxide Levels Impair Human Brain Function  --  Joe Romm - In a landmark public health finding, a new study from the Harvard School of Public Health finds that carbon dioxide (CO2) has a direct and negative impact on human cognition and decision-making. These impacts have been observed at CO2 levels that most Americans — and their children — are routinely exposed to today inside classrooms, offices, homes, planes, and cars.   Carbon dioxide levels are inevitably higher indoors than the baseline set by the outdoor air used for ventilation, a baseline that is rising at an accelerating rate thanks to human activity, especially the burning of fossil fuels. So this seminal research has equally great importance for climate policy, providing an entirely new public health impetus for keeping global CO2 levels as low as possible. In a series of articles, I will examine the implications for public health both today (indoors) as well as in the future (indoors and out) due to rising CO2 levels. This series is the result of a year-long investigation for Climate Progress and my new Oxford University Press book coming out next week, “Climate Change: What Everyone Needs to Know.” This investigative report is built on dozens of studies and literature reviews as well as exclusive interviews with many of the world’s leading experts in public health and indoor air quality, including authors of both studies.  Significantly, the Harvard study confirms the findings of a little-publicized 2012 Lawrence Berkeley National Laboratory (LBNL) study, “Is CO2 an Indoor Pollutant? Direct Effects of Low-to-Moderate CO2 Concentrations on Human Decision-Making Performance.” That study found “statistically significant and meaningful reductions in decision-making performance” in test subjects as CO2 levels rose from a baseline of 600 parts per million (ppm) to 1000 ppm and 2500 ppm.

A Bad Bet on Synthetic Biology -- Earlier this month, the international food conglomerate Cargill chose the city’s famous Strip to introduce what it hopes will be its next blockbuster product: EverSweet, a sweetener made of “the same sweet components in the stevia plant.” And yet, despite Cargill’s heavy reliance on stevia in its promotional material, EverSweet does not contain a single leaf of the plant. Cargill’s new product is an example of synthetic biology, a form of genetic engineering that uses modified organisms to manufacture compounds that would never be produced naturally. What makes EverSweet taste sweet is not stevia; it is a compound produced by a bioengineered yeast. Synthetic biology is high-tech, and it is also potentially high-risk. Even as it attracts billions of dollars in investment, it is the subject of growing international concern. Tellingly, Cargill does not advertise its use of the controversial technology; instead, the company describes EverSweet as the product of “specially crafted baker’s yeast,” as if it were a recipe brewed for centuries in Bavarian villages.  Discerning the risks that may be posed by food ingredients made from this kind of genetic engineering – different from those known from other types of transgenic foods – is still at an early stage. In a recent opinion, European Union scientific committees concluded that while the risk assessment used for evaluating genetically modified organisms should be applicable to aspects of synthetic biology, in specific cases new approaches may be needed to evaluate the safety of the technology.

World Health Organization: Prolonged Exposure to Even LOW Level Radiation Increases the Risk of Cancer - A major new study coordinated by World Health Organization’s cancer division – the International Agency for Research on Cancer (IARC) – finds that even low-level radiation increases the risk of cancer, if exposure occurs over time. The IARC announced last week: New results from a study coordinated by the International Agency for Research on Cancer (IARC), the cancer agency of the World Health Organization, show that protracted exposure to low doses of ionizing radiation increases the risk of death from solid cancers. The results, published today in The BMJ [the prestigious British Medical Journal], are based on the most powerful study to date and provide direct evidence about cancer risks after protracted exposures to low-dose ionizing radiation. “The present study demonstrates a significant association between increasing radiation dose and risk of all solid cancers,” says IARC researcher Dr Ausrele Kesminiene, a study co-author. “No matter whether people are exposed to protracted low doses or to high and acute doses, the observed association between dose and solid cancer risk is similar per unit of radiation dose.” .. A collaboration among international partners, evaluated the exposures of more than 300 000 nuclear workers in France, the United Kingdom, and the USA over a period of time between 1943 and 2005. The scientists involved in the study come from government agencies such as the U.S. National Institute for Occupational Safety and Health, Public Health England Centre for Radiation, Chemical and Environmental Hazards and the International Agency for Research on Cancer, as well as universities including the University of North Carolina, Chapel Hill and Drexel University.  The study confirms – once again – what we’ve been saying for years.

Processed meat can cause cancer, red meat probably can: WHO: Eating processed meat can lead to bowel cancer in humans while red meat is a likely cause of the disease, World Health Organisation (WHO) experts said on Monday in findings that could sharpen debate over the merits of a meat-based diet. The France-based International Agency for Research on Cancer (IARC), part of the WHO, put processed meat such as hot dogs and ham in its group 1 list, which already includes tobacco, asbestos and diesel fumes, for which there is "sufficient evidence" of cancer links. "For an individual, the risk of developing colorectal (bowel) cancer because of their consumption of processed meat remains small, but this risk increases with the amount of meat consumed," Dr Kurt Straif of the IARC said in a statement. Red meat, under which the IARC includes beef, lamb and pork, was classified as a "probable" carcinogen in its group 2A list that also contains glyphosate, the active ingredient in many weedkillers. The lower classification for red meat reflected "limited evidence" that it causes cancer. The IARC found links mainly with bowel cancer, as was the case for processed meat, but it also observed associations with pancreatic and prostate cancer. The agency, whose findings on meat followed a meeting of health experts in France earlier this month, estimated each 50 gram portion of processed meat eaten daily increases the risk of colorectal cancer by 18 percent.

Processed Meats Linked to Cancer, WHO Report Says -  Bad news for bacon lovers. Processed meat, such as sausage, hot dogs, ham and bacon, was officially classified today as “carcinogenic to humans based on sufficient evidence in humans that the consumption of processed meat causes colorectal cancer,” according to a new report from the International Agency for Research on Cancer (IARC), the cancer agency of the World Health Organization. The agency also found that the consumption of red meat, which it defines as “all types of mammalian muscle meat, such as beef, veal, pork, lamb, mutton, horse and goat,” is “probably carcinogenic to humans” (classified as Group 2A). The finding is based on “limited evidence that the consumption of red meat causes cancer in humans and strong mechanistic evidence supporting a carcinogenic effect.” The agency found an association between the consumption of red meat and colorectal, pancreatic and prostate cancer.

Industry set to reject WHO’s processed meat carcinogens ruling - The global meat industry has reacted with fury to the prospect of its products being declared carcinogenic by the cancer research arm of the World Health Organisation. The International Agency for Research on Cancer, part of the WHO, is on Monday due to issue a report that is expected to rule that processed meat such as bacon and sausages is a carcinogen, while red meat is probably carcinogenic. In an attempt to undermine the IARC findings in advance, The North American Meat Institute (Nami) accused the body of “dramatic and alarmist over-reach”. “Red and processed meat are among 940 substances reviewed by IARC found to pose some level of theoretical ‘hazard’,” said Barry Carpenter, Nami president. “Only one substance, a chemical in yoga pants, has been declared by IARC not to cause cancer.” Robert Pickard, a Cardiff university professor who sits on the UK’s Meat Advisory Panel (MAP), an industry group, added: “Avoiding red meat in diet is not a protective strategy against cancer. Choosing a meat-free diet is a lifestyle choice; it is not vital for health.” Carrie Ruxton, a dietitian and MAP member, said Britain’s average meat intake of 71g per day was very close to the 70g a day recommended by government experts. “Most people don’t need to reduce their red meat consumption,” she said. “Indeed some groups such as women, girls and pre-school children could eat more red meat to access the many nutritional benefits.” The IARC declined to comment ahead of the report’s publication in The Lancet Oncology journal.

Does Red Meat – or FAKE Meat – Cause Cancer? The World Health Organization said today that eating even unprocessed red meat “probably” causes cancer. But as we reported in 2012, it may not be red meat – but FAKE meat – that’s killing us. Specifically, the modern factory farm creates meat that is much higher in saturated fats – and much lower in healthy omega 3s – than traditional grass-fed cows. Feedlot cows are also dosed with large quantities of antibiotics and estrogen. Worse, the FDA allows a drug banned in 160 nations and responsible for hyperactivity, muscle breakdown and 10 percent mortality in pigs to be added to animal feed shortly before slaughter. While the practice of feeding cow parts to other cows – one of the main causes of mad cow disease – has been banned on paper, cow blood “products”, feather meal, pig and fish protein, and chicken manure are all still fed to cows. (And cows are fed to  chickens, pigs and fish – which are then fed back to the cows – so cows may be eating the mad cow disease-causing “prions” from other cows anyway.) And yet the government is so protective of the current model of industrial farming that private citizens such as ranchers and meat packers are prohibited from testing for mad cow disease. And genetically-engineered meat isn’t even tested for human safety. (Read this if you think there is a scientific consensus that gm foods are safe.) On top of that, there are a slew of meat additives added after butchering. So yes … factory-farmed, mass-produced red meat may be bad for us.  But that doesn’t necessarily mean that organic, grass-fed meat is …

Colbert: There’s Human DNA in Your Hot Dogs and Veggie Dogs -- On the Late Show last night, Stephen Colbert discusses a recent investigation, which, he says, “found that after testing 75 brands of hot dogs, two percent of them contained human DNA.” Colbert’s theories on how that human DNA got into these frankfurters leave viewers with some pretty awful mental images.  But that’s not all. Colbert also makes mention of the recent finding from the World Health Organization that processed meat is “carcinogenic” and red meat is “probably carcinogenic.” But to all those “smug vegetarians” out there, he’s got bad news for you, too.

Tampons, sterile cotton, sanitary pads contaminated with glyphosate – study - RT - The vast majority ‒ 85 percent ‒ of tampons, cotton and sanitary products tested in a new Argentinian study contained glyphosate, the key ingredient in Monsanto's Roundup herbicide, ruled a likely carcinogen by the World Health Organization.  Meanwhile, 62 percent of the samples tested positive for AMPA, glyphosate's metabolite, according to the study, which was conducted by researchers at the Socio-Environmental Interaction Space (EMISA) of the University of La Plata in Argentina.  All of the raw and sterile cotton gauze analyzed in the study showed evidence of glyphosate, said Dr. Damian Marino, the study's head researcher.  “Eighty-five percent of all samples tested positive for glyphosate and 62 percent for AMPA, which is the environmental metabolite, but in the case of cotton and sterile cotton gauze the figure was 100 percent,” Marino told Télam news agency. An English translation of the Télam report can be found here. The products tested were acquired at local stores in Argentina. “In terms of concentrations, what we saw is that in raw cotton AMPA dominates (39 parts per billion, or PPB, and 13 PPB of glyphosate), while the gauze is absent of AMPA, but contained glyphosate at 17 PPB.”

Colombia plans to eradicate Monsanto weed killer in drug war - Colombia is planning to ban the use of a controversial herbicide supplied to the South American country by US agrochemical giant Monsanto to battle illegal coca fields, over fears of health hazards and collateral damage to legal farmlands. For decades, Colombia used US contractors to spray a popular weed killer, known as RoundUp over more than four million acres of land to control the illegal growth of cocoa leaves used in the production of cocaine that ultimately hit US market. Aerial fumigations targeted illegal plantations that were often used by the rebels of the Revolutionary Armed Forces of Colombia (FARC) to sponsor their fight against the central government in Bogota. But with FARC’s influence and threat steadily diminishing in the country over the last few years, the government has now been weighing up the health and environmental hazards of continual use of Monsanto’s product. “I am going to ask the government officials in the National Drug Council at their next meeting to suspend glyphosate spraying of illicit cultivations,” said Colombian President Juan Manuel Santos. Santos’ concern follows a report released by the World Health Organization earlier this year which claimed that the active ingredient in the world’s most widely-used Roundup herbicide is “probably” carcinogenic to humans.

GMO backlash threatens beet farmers as foodmakers swap sugars | Reuters: America's sugar beet growers are under siege as U.S. food companies increasingly shun genetically modified (GMO) crops. In the past seven years, the farmers – many in Minnesota, North Dakota, Michigan, and Idaho – have all switched to GMO seeds created by Monsanto Co and sold by others as they seek to increase yields and cut costs. Genetically Modified Organisms include plants that have had been created through gene splicing — the introduction of DNA from a different species to make a new one. Now, as public sentiment moves against GMO crops and imports of cane sugar rise, sugar beet growers have seen their share of the U.S. sugar market slip to the smallest on record. Critics believe GMO crops contribute to the industrialization of farming and question promises of safety. Beets' share of all U.S. sugar deliveries – which represent total demand to major users and customers – fell to less than 41 percent of the U.S. total of 11.8 million tons (10.7 million tonnes) in the last fiscal year, a record low, down from 47 percent of 10.4 million tons in the 2008 crop year, the year the biotech seeds were introduced on a commercial scale, according to U.S. government data dating from 1992.  Though it's not clear that the erosion in demand comes from reaction against GMO food, industry sources said the trend is beginning to pressure the beet industry.

DuPont reveals in talks over ag sector deals: DuPont stoked ideas of consolidation in the struggling agrichemicals and seeds sector by revealing it was in talks over deals in the sector, which could involve a sale of the group's own operations. Jim Borel, the executive vice-president of the DuPont agriculture business, backed a statement last week from Dow Chemical boss Andrew Liveris that "everyone is talking to everyone" in the industry. "That's a true statement," Mr Borel said. "And I am personally talking to the CEOs of some of the other companies." DuPont, besides boasting a wide portfolio of agrichemicals, owns seed giant Pioneer. "Something will give here on the ag side," he added, saying that "consolidation should happen" in a sector which is suffering markedly from the dent to farm spending from lower crop prices, with companies reporting particular headwinds in Brazil. A number of groups, including FMC Corp and Syngenta as well as DuPont, have highlighted the dent from weakness in the Brazilian real which makes imported goods particular expensive, in a country where farmers and wholesalers are said to have built up stocks in expectation of currency decline. The soft real also, for groups reporting in dollars, cuts the value of what business is done in Brazil.

Is the growth in agricultural productivity slowing? - Last week I gave a talk at the University of Nebraska, and Julian Alston from UC Davis was also there.  He presented some recent research with Matt Anderson and Phil Pardey about productivity growth in agriculture.  While I have seen some discussions about the possibility of a slowdown in productivity growth in developing countries, Alston's research suggest it is a phenomenon alive and well here at home.  This is important stuff.  Falling productivity growth has important implications for sustainability, food security, and research and development. They write“We detect sizable and significant slowdowns in the rate of productivity growth. Across the 48 contiguous states for which we have very detailed data for 1949– 2007, U.S. multifactor productivity (MFP) growth averaged just 1.18 percent per year during 1990–2007 compared with 2.02 percent per year for the period 1949–1990. MFP in 44 of the 48 states has been growing at a statistically slower rate since 1990. Using a longer-run national series, since 1990 productivity growth has slowed compared with its longer-run growth rate, which averaged 1.52 percent per year for the entire period, 1910–2007. More subtly, the historically rapid rates of MFP growth during the 1960s, 1970s and 1980s can be seen as an aberration relative to the long-run trend. A cubic time-trend model fits the data very well, with an inflection around 1962. We speculate that a wave of technological progress through the middle of the twentieth century—reflecting the progressive adoption of various mechanical innovations, improved crop varieties, synthetic fertilizers and other chemicals, each in a decades long process—contributed to a sustained surge of faster-than-normal productivity growth throughout the third quarter of the century. A particular feature of this process was to move people off farms, a one-time transformation of agriculture that was largely completed by 1980.” Here's a graph from their paper showing the change in proportional growth rate in yields (i.e., the log of yields) over time for 6 crops with the inflection point indicated for when growth rates began decelerating. 

Leaked Doc Shows 'Toxic Trade Deal' Putting Environmental Safeguards on the Chopping Block -- A leaked of draft of negotiating text from a pending EU-U.S. trade deal shows that the bloc is ready to empower corporate polluters while going back on its promise to uphold environmental protections, groups on both sides of the Atlantic warn. The text is of the sustainable development chapter of the Transatlantic Trade and Investment Partnership (TTIP) and was published Friday by the Guardian—the same day negotiators wrapped up the 11th round of talks on the deal in Miami.  The Guardian reports that the text "contains only vaguely phrased and non-binding commitments to environmental safeguards"—that's despite a promise (pdf) issued in January that the EU would seek to "safeguard basic rules that protect people's rights at work and the environment." The UK paper adds, "No obligations to ratify international environmental conventions are proposed, and ways of enforcing goals on biodiversity, chemicals and the illegal wildlife trade are similarly absent." Sierra Club, Friends of the Earth Europe, and PowerShift published on Friday an analysis (pdf) of the document, and write that "[t]he chapter’s weak and unenforceable environmental provisions stand in sharp contrast to the strong and highly-enforceable privileges for foreign investors that are proposed for TTIP."

Poachers kill 22 more elephants in Zimbabwe’s Hwange Park by lacing oranges with cyanide – ‘The rate at which we are losing animals to cyanide is alarming’ – Cyanide poisoning has killed 22 elephants in Zimbabwe's Hwange National Park, the Zimbabwe National Parks and Wildlife Management Authority said on Monday. This brings to 62 the number of elephants poisoned by poachers in this southern Africa country in October. Rangers found the carcasses of the elephants in Hwange park's Sinamatella area on Monday morning, national parks spokeswoman Caroline Washaya-Moyo told The Associated Press. "Again, it is cyanide poisoning," said Washaya-Moyo, who said the poachers got away with three ivory tusks. "We are now trying to check how many elephants had fully developed tusks because babies are among those killed," she said. "The rate at which we are losing animals to cyanide is alarming. Many other species are also dying from the cyanide used by poachers to target elephants. We are appealing to people in communities close to national parks to cooperate with authorities." In early October, the parks reported three incidents in which 40 elephants were killed by cyanide poisoning. Three were killed in the Kariba area of cyanide put in oranges. The rest were killed in Hwange park.  In 2013, more than 200 elephants died from cyanide poisoning in Hwange. Washaya-Moyo said the parks agency is hoping that trained dogs from South Africa and the deployment of drones will help tighten monitoring of the vast park in the west of this wildlife-rich country.

295 Bears Killed in Florida’s First Black Bear Hunt in Decades -- It was a sad weekend for bears in Florida. Saturday marked the start of Florida’s first statewide bear hunt since 1972. Wildlife officials ended the season on Sunday after hunters killed 295 bears in just two days, approaching the statewide limit of 320 bears. The hunt had been approved for up to seven days. In two of the four management regions where hunting was allowed, officials ended the hunt even earlier following just one day of hunting, as hunters approached or exceeded regional quotas. In the eastern Panhandle, hunters far exceeded the 40-bear quota for the season, killing 112 bears over the weekend, and in the central region, where the limit was set at 100 bears, 139 were killed. The hunt was unanimously approved by the Florida Fish and Wildlife Conservation Commission (FWC) in June. All seven commissioners were appointed by Republican Gov. Scott and have ties to the private sector, including in ranching, contracting, real estate and land development. The state issued 3,778 bear hunting permits in anticipation of the hunting season. Florida’s bear population is currently estimated at around 3,500 bears, compared to 12,000 before European settlement.

US hunters kill more than 700 lions in a year - American big-game hunters are killing African lions in record numbers as US regulators threaten to curtail one of world's most exclusive, expensive and controversial pursuits. The US Fish and Wildlife Service has a Thursday deadline to make a final determination on the status of the African lion, which it has proposed to list as threatened under the Endangered Species Act. The agency has also recommended requiring a special permit to import lion trophies. Those findings could curtail the number of slain lions entering the US, while also driving up safari costs that are often more than $US100,000 (about $AUD138, 500). That's leading to a rush of Americans taking their guns to Africa in pursuit of the king of the jungle. Last year, Americans imported a record 745 African lions as trophies, up 70 percent since 2011 and more than double the total in 2000, according to data from the Fish and Wildlife Service. "Guys fearing that I'll never get my opportunity to get a lion, they're getting it while the getting's good," said Aaron Neilson, an African safari broker based in Colorado whose exploits, including lion hunts, are featured on a Sportsman Channel television show. "The overall consensus among everybody selling lion hunts has been, 'Man, get it now.' "

Lion Population in Africa Likely to Fall by Half, Study Finds -  Lion populations throughout many parts of Africa have declined sharply since the early 1990s and are likely to shrink by half again in the next two decades unless a major conservation effort is mounted to save them, a new study has found. The study, which analyzed data from 47 of the 67 African lion populations totaling an estimated 8,221 lions, found pronounced reductions in West and Central African populations — in two national parks, Comoé and Mole, the animals appeared already to be extinct. There were less drastic but still substantial declines in the East African countries where lions have traditionally thrived.  Over all, the African lion population in these regions has decreased by about 50 percent since 1993, said Luke Hunter, president of Panthera, an organization focused on the global conservation of big cats, and one of eight authors of the study, published this week in the journal Proceedings of the National Academy of Sciences. In contrast, most populations in Southern Africa remained stable or even increased over the same time period; an exception was a large population in the Okavango Delta, in Botswana, which declined. Lion experts attributed the stability in southern countries to a lower density of humans, the establishment of fenced wildlife preserves that protect both lions and humans, and national policies that have given ownership of wildlife — and the profits from tourism or legal hunting — to landowners and communities.

Burning in their home: 20,000 orangutans on verge of being WIPED OUT by raging forest fire - UP to 20,000 orangutans are in danger of being burned out of their last forest retreats by raging wildfires.  For two months, uncontrolled fires have been raging across the Borneo landscape, spewing up thick black clouds of smoke that have caused respiratory infections in 500,000 people.  Conservationists are warning the fires' impacts have taken a sinister twist by setting light to huge swathes of virgin peat swamp forest, a precious tropical wilderness where endangered clouded leopards and orangutans keep one step from extinction. For how long. "The situation is dire and deteriorating by the day," the Orangutan Tropical Peatland Project (OuTrop) warned today as it revealed the increasing fire threats. OuTrop reports fires are currently destroying orangutan strongholds at Tanjung Puting National Park, which is home to 6,000 orangutans, the Katingan Forest, where there are still 3,000 orangutans, and at the Mawas Reserve, home to an estimated 3,500 of the wild apes.But, says OuTrop, it is the Sabangau Forest, with the world's largest population of nearly 7,000 wild orangutans, which is facing the greatest threat. OuTrop's Founder and Director of Conservation, Simon Husson, appealed today: "People are choking in the smoke and one of the world's last, great rainforests is burning down. The only way to tackle this is with huge manpower on the ground, supported by intensive and sustained aerial water-bombing. "Mobilising these resources requires raising international awareness of the catastrophe unfolding in Sabangau. We need the eyes of the world on Indonesia, we need more support and we need it now."

Four UK bird species including puffins 'face extinction' - BBC News: Puffins are among four UK bird species now at risk of extinction, according to the latest revision of a global conservation database. Atlantic puffins, European turtle doves, Slavonian grebes and pochards are on the International Union for Conservation of Nature (IUCN) Red List of Threatened Species for birds. This means the number of UK species on the critical list has doubled to eight. Puffins are vulnerable to pollution and declining food sources, ecologists say. Another 14 UK species are considered to be "near threatened".  Martin Harper, conservation director with the Royal Society for the Protection of Birds (RSPB), said the "global wave of extinction is now lapping at our shores". "The erosion of the UK's wildlife is staggering and this is reinforced when you talk about puffin and turtle dove now facing the same level of extinction threat as African elephant and lion, and being more endangered than the humpback whale," he said. Although the Atlantic puffin population is still in the millions, fewer young birds are surviving to breed. Reasons include a recent decline in the population of puffins' prey, such as the sand eel, and vulnerability to pollution such as oil spills, according to advisory body the Joint Nature Conservation Committee. They have been listed as vulnerable to extinction, the lowest of three categories behind critically endangered and endangered.

On the News With Thom Hartmann: One in Five Animal Species Are at Risk of Extinction - You need to know this. Ecowatch has a sobering article. One in five animal species are at risk of extinction. This rapid decline of our wildlife is what experts are calling a planetary "sixth mass extinction." It appears to be happening 100 times to 1,000 times higher than before humans were around. Almost 900 extinctions have been recorded, but scientist are concerned that tens of thousands of lesser-known or undiscovered species have likely disappeared as well. Deforestation, climate change, urbanization, habitat fragmentation, pollution, overhunting, overfishing and the global transport of invasive species and diseases have all push the acceleration of extinction in the last few centuries. We need new tools and strategies to stop the rapid decline of wildlife species before they become endangered and need the protection of the Endangered Species Act. Oh-oh. according to a new study published in the Endocrine Society's journal Endocrinology, fracking chemicals are tied to reduced sperm count in mice. Prenatal exposure to a mixture of chemicals used hydraulic fracturing, at levels found in the environment, lowered sperm counts in male mice when they reached adulthood. The scientists tested 24 chemicals used in fracking and found that 23 of them were endocrine-disrupting chemicals, or EDCs. EDCs mimic, block or otherwise interfere with hormones. Hormones interact with receptors that regulate the activity of cells and biological processes such as metabolism, reproduction, growth and digestion. Despite these dangers, oil and gas companies are not required to disclose all of the chemicals in the mixtures they use for fracking.

New Report Maps Growing Impact Of Ocean Acidification On Marine Life Worldwide: — New research maps the growing impact of ocean acidification and identifies the regions worst affected, while scientists and world governments are collaborating more and sharing ways to slow or reverse its progress. Fossil fuels and human industry are releasing increasing amounts of carbon dioxide into the atmosphere where it is absorbed by the oceans as carbonic acid, an invisible but highly destructive substance that’s rapidly changing the chemistry of the earth’s waters and disrupting underwater ecosystems in a process called ocean acidification. The latest effort at mapping ocean acidification comes from research led by the U.S. National Oceanic and Atmospheric Administration and published last week in the science journal “Global Biogeochemical Cycles.” The study tracked the saturation levels of the mineral aragonite, which is crucial to the formation of shells in marine species. According to the NOAA, “The study identifies the Arctic and Antarctic oceans, and the upwelling ocean waters off the west coasts of North America, South America and Africa as regions that are especially vulnerable to ocean acidification.”

Plastic Bags and Fishing Nets Found in Stomach of Dead Whale - A mature sperm whale found dead in Taiwan had vast quantities of plastic bags and fishing nets filling its stomach, highlighting the devastating toll of marine pollution.  According to the Association Foreign Press (AFP) news agency, the 15-meter (49-foot) whale was first found stranded near the town of Tongshi on Oct. 15. Coastguards and scientists returned it to the sea, but three days later, the same whale was found dead around 20 kilometers (12 miles) away. After conducting an autopsy of the whale, local marine biologists reported that there was enough plastic bags and fishing nets found in its stomach to fill an excavator bucket. Professor Wang Chien-ping, head of the whale research center at National Cheng-Kung University, told the AFP that while the whale might have died from many causes, such as heart or lung disease or infections, trash was also a culprit. “The large amount of man-made garbage in the stomach could reduce its appetite and cause malnutrition,” he said. “It was likely a critical cause of death.” About 80 percent of the sperm whale’s diet is giant squid, so this whale might have mistaken plastic bags for food.

Another Whale Dead From Ingesting a Plastic Bag - Marine debris can be a dangerous problem for the animals that inhabit the marine environment. Unfortunately, we recently saw this first-hand on a Florida beach. A melon-headed whale that was recovered along Florida’s east coast died due to a large plastic bag in its digestive system. NOAA Fisheries’ stranding network staff, partnering with the Florida Fish and Wildlife Conservation Commission and Harbor Branch Oceanographic Institute responded to the call about a stranding on Riviera Beach. A decision was made to euthanize the whale after vets at the Palm Beach Zoo determined that the animal was in very poor condition and extremely thin. A necropsy (a non-human autopsy) was performed by a veterinarian to discover the cause of the animal’s poor health and subsequent death, during which a large plastic bag was found to be blocking the whale’s intestinal tract. The whale had suffered from starvation due to the blockage.

Algal Blooms Linked to Largest Die-Off of Great Whales Ever Recorded -- In Argentina baby whales have been dying off the coast in increasingly high numbers for the past decade and no one has known exactly why. “The average number of right whale deaths per year at Peninsula Valdes jumped more than 10-fold, from fewer than six per year before 2005 to 65 per year from 2005 to 2014,” reports National Oceanic and Atmospheric Administration (NOAA) Fisheries West Coast Region. “Even more striking,” they say, “90 percent of the deaths from 2005 to 2014 were very young calves fewer than three months old. The mystery killer appeared to be targeting the nearly newborn, sometimes more than 100 calves of the endangered species each year.”  This will have a long-lasting effect on the southern right whale population, explains Dr. Mariano Sironi, scientific director of the Institute de Whale Conservation in Argentina. “In 2012 we lost nearly one third of all calves born at the Peninsula. Southern right whales have their first calf when they are nine years old on average,” he says. “This means that it won’t be until a decade from now that we will see a significant reduction in the number of calves born, as all of the female calves that died will not be contributing any new offspring to the population.” Now, thanks to a report published in Marine Mammal Science, NOAA Fisheries and NOAA Ocean Service scientists and others from the U.S. and Argentina believe they have found the culprit: toxic algal blooms. These blooms have been found to pose a significant threat to fisheries and other wildlife, so it’s no surprise that the blooms are wreaking havoc on whale populations, as well.

Plastic Trash Found in Arctic Ocean, Likely Forming Sixth Garbage Patch - Not even the Arctic Ocean is safe from marine pollution. In a study published last week in the journal Polar Biology, researchers from the Alfred Wegener Institute for Polar and Marine Research (AWI) in Germany found marine litter on the surface of Arctic waters. It was the first litter survey conducted north of the Arctic Circle, and it shows that this trash makes its way to the “farthest reaches of the planet,” according to AWI. “We found a total of 31 pieces of litter” in about a 3,500 mile area, Though this number seems low, Bergmann and her team say they are certain there is much more litter in the Arctic region. “Since we conducted our surveys from the bridge, 18 meters above sea level, and from a helicopter, we were only able to spot the larger pieces of litter. Therefore, our numbers are probably an underestimate,” the marine biologist explained. “We currently know of five garbage patches worldwide,” said the researchers. Now they are hypothesizing that a sixth garbage patch is “most likely in the early stages of formation.” Increasingly populated coastal areas, along with more and more cruise liners and fish trawlers operating further north, are driving the pollution in this remote part of the world’s oceans. And, clearly, far more ocean debris can be found below the surface. “In a previous study, Melanie Bergmann analyzed photographs from the deep Arctic seafloor for signs of plastic, glass and other types of litter,” said AWI. “Her conclusion: in the time frame of 10 years the amount of litter in the deep sea has doubled with densities in a similar range to those from southern Europe. In fact, the litter density on the deep seafloor of the Fram Strait is 10 to 100 times higher than at the sea surface.”

Study shows more extensive coral damage related to BP spill — Gulf coral damage from the massive BP oil spill is more extensive than previously thought, according to a new study that revealed sick and dying corals in the rich, deep-water environment off the coasts of Alabama and Mississippi known as the Pinnacles. Using remotely operated submarines, researchers explored the Pinnacle Reef in September 2011 and found more than 400 coral colonies were injured. Corals — such as sea whips, sea fans and black corals — were covered in a scum of dead tissues and oily residue. Some showed severe damage, such as bare skeletons and missing branches. These colonies are found about 35 miles to 68 miles to the north of BP PLC’s blown-out well, which spewed more than 130 million gallons of oil into the Gulf of Mexico in 2010. Previous discoveries of coral damage were found south of the BP well and in much deeper water. The coral in the Pinnacles live about 200 feet under the water surface. The Pinnacles is a rocky outcropping on the Continental Shelf about 70 miles off the coasts of Mississippi and Alabama.

NOAA: Strong El Niño sets the stage for 2015-2016 winter weather: Forecasters at NOAA’s Climate Prediction Center issued the U.S. Winter Outlook today favoring cooler and wetter weather in Southern Tier states with above-average temperatures most likely in the West and across the Northern Tier. This year’s El Niño, among the strongest on record, is expected to influence weather and climate patterns this winter by impacting the position of the Pacific jet stream. “A strong El Niño is in place and should exert a strong influence over our weather this winter,” “While temperature and precipitation impacts associated with El Niño are favored, El Niño is not the only player. Cold-air outbreaks and snow storms will likely occur at times this winter. However, the frequency, number and intensity of these events cannot be predicted on a seasonal timescale.”  Other factors that often play a role in the winter weather include the Arctic Oscillation, which influences the number of arctic air masses that penetrate into the South and nor'easters on the East Coast, and the Madden-Julian Oscillation, which can impact the number of heavy rain storms in the Pacific Northwest.   Wetter-than-average conditions most likely in the Southern Tier of the United States, from central and southern California, across Texas, to Florida, and up the East Coast to southern New England.  Drier-than-average conditions most likely for Hawaii, central and western Alaska, parts of the Pacific Northwest and northern Rockies, and for areas near the Great Lakes and Ohio Valley.  Above-average temperatures are favored across much of the West and the northern half of the contiguous United States. Temperatures are also favored to be above-average in Alaska and much of Hawaii. Below-average temperatures are most likely in the southern Plains and Southeast.

South Africa Sets Earth’s Hottest October Temperature on Record: 119°F -- Earth’s hottest temperature ever recorded in the month of October occurred on Tuesday, Oct. 27 in South Africa, when Vredendal hit a remarkable 48.4°C (119.1°F). According to weather records researcher Maximiliano Herrera, this is also the highest temperature ever observed at Vredendal and the third highest temperature in South African history. The new global October heat record was made possible by a “Berg wind” — a hot dry wind blowing down the Great Escarpment from the high central plateau to the coast. As the air descended it warmed via adiabatic compression, causing the record heat. These sorts of foehn winds are commonly responsible for all-time record temperatures; mainland Antarctica’s all-time record high of 17.5°C (63.5°F), set on March 24, was due, in part, to a foehn wind (see wunderground weather historian Christopher C. Burt’s blog post on this). According to Herrera, the previous world October heat record of 47.3°C was set at Campo Gallo, Argentina on Oct. 16 1936, and South Africa’s highest reliable temperature for any month is 48.8°C (119.8°F), recorded at Vioosdrif in January 1993.

A megacity without water: São Paulo’s drought – The biggest city in the Western hemisphere is facing its greatest water crisis in over 80 years — and climate change is only part of the problem. Millions of residents in São Paulo, Brazil face daily water shutoffs unless the city manages its water better. It is not only a problem of drought. The city of 20 million is plagued by failing infrastructure across the city, and it has been unable to deliver the water it does have to residents in need. Without major changes to the city’s infrastructure and planning, commentators say the crisis is bound to continue.  The crisis is most acutely felt in the Periferia — the generally poorer districts on the outskirts of the city. These oft-neglected neighborhoods, many of which sit at higher altitudes in the hills around the city, require more water pressure to reach their tanks. And even on days when it is raining outside, the pipes in the Periferia are often dry.  On top of it all, São Paulo has now suffered two of the driest seasons on record, back-to-back.  The Cantareira reservoirs, which supply water to over 9 million residents, were operating at 12% capacity in October. The water level has fallen so low that large parts of the surface of the reservoirs are dried mud.  “This is what we would call a real emergency,” said Paulo Dallari, deputy secretary for the São Paulo mayor’s office. “The reservoirs are much lower than they used to be. It is raining much lower than the average. So we might have some difficult situations in the near future.”

Perth's double whammy: as sea levels rise the city itself is sinking --  Growing demand for water in Perth has caused the city to sink at up to 6mm a year and could be responsible for an apparent acceleration in the rate of sea level rise, according to new research released by Curtin University. The study, published in the Journal of Geophysical Research in October, found that the rate of subsidence in Perth increased between 2000 and 2005, at the same time as the Water Corporation of WA increased the amount of water it was drawing from the city’s two main aquifers to meet the demands of a growing population. Will Featherstone, professor of geodesy at Curtin and the lead author of the study, described the effect as “like slowly letting the air out of a balloon”. “If you take the water out of the ground, the overburden of all the rocks above pushes down,” he told Guardian Australia. The city appears to be sinking at a rate of between 2mm and 6mm a year, variable throughout the Perth basin. The greatest change was measured at the seaside suburb of Hillarys, which has a GPS sensor to measure the rate of subsidence and a tidal marker operating side by side. Data for much of the Perth basin is patchy.

Carbon emissions from Indonesia’s peat fires exceed emissions from entire U.S. economy: Greenhouse gas emissions from peat fires in Borneo and Sumatra are currently exceeding emissions from the entire U.S. economy, putting Indonesia on track to be one of the world’s largest carbon polluters this year, according to data published a researcher at the University of Amsterdam. By Guido van der Werf’s calculations — posted on the Global Fire Emissions Database (GFED) website — carbon emissions from Indonesia’s fires have just topped the CO2 equivalent of a billion tons — more than the annual emissions of Germany. Since the beginning of September, Indonesia’s fires have been emitting carbon at a rate of 15-20 million tons per day, or more than the 14 million tons emitted on a daily basis by the whole American economy.  Shockingly, the estimates are likely conservative because they account for carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O) emissions only from fire. They don’t include emissions from peat oxidation. Given the acreage of peatlands affected by fire, van der Werf said the findings shouldn’t be surprise. “No matter how astonishing the rate of these emissions is, I don’t think anybody who looks into these fires should be surprised,” van der Werf told “There is such a tight link between droughts and fires that [it was only a matter of time] for another big drought to [trigger] a big fire year. There is just so much idle land underlain by peat that is not properly managed, mix that with socio-economic tension and dry conditions and you have a recipe for disaster.” Van der Werf said 2015 is certainly the largest fire year since the cataclysmic 1997-1998 El Nino event when some eight million hectares of land went up in smoke. Whether it will surpass 1997-1998 will depend on how long drought conditions last.

Indonesia’s palm oil fires are emitting more greenhouse gases every day than the entire US - It happens every year, but this year is shaping up as one of the worst ever. During Indonesia’s dry season, certain people—rarely identified, much less punished—set fires to make land suitable for the palm oil and paper-and-pulp industries. Those fires generate huge amounts of smoke, and the toxic haze often reaches neighboring countries, including Singapore and Malaysia. But this year the El Niño weather phenomenon has created extremely dry conditions, leading to an unusually intense, long-lasting “smoke-out” for the region, affecting everything from travel to sporting events to respiratory health.  So far this year, Indonesia’s fires have produced more pollution than Germany or Japan does in a year. On 26 days from the period of Sept. 1 to Oct. 14, their daily emissions surpassed those of the entire US (the world’s second-largest emitter of greenhouse gases after China), according to researchers led by Guido van der Werf from VU University Amsterdam. They calculated that the 100,000-plus fires in Indonesia detected so far this year (as of Oct. 21) have emitted about 1.4 billion metric tons (1.5 billion tons) of carbon dioxide equivalents.   Tropical peatland fires are not like regular forest fires. They generate enormous amounts of smoke and are fiendishly difficult to extinguish. Draining and burning these lands for agricultural expansion leads to huge spikes in greenhouse gas emissions. According to the institute, peat fires can emit up to 10 times more methane—a greenhouse gas 21 times more potent than carbon dioxide—than fires occurring on other types of land. Taken together, the impact of peat fires on global warming can be more than 200 times greater than fires on other lands. Don’t expect such fires to go away anytime soon. Indonesia and Malaysia—which control about 85% of the world’s palm oil production—recently announced their intentions to establish a palm oil cartel. This could help them set their own environmental standards (or maintain the status quo), and pay less heed to calls to produce palm oil in ways that preserve wildlife habitat, protect the environment, and don’t make breathing so difficult for millions of people living in Southeast Asia.

Indonesia is burning. So why is the world looking away? -- I’ve often wondered how the media would respond when eco-apocalypse struck. I pictured the news programmes producing brief, sensational reports, while failing to explain why it was happening or how it might be stopped. Then they would ask their financial correspondents how the disaster affected share prices, before turning to the sport. As you can probably tell, I don’t have an ocean of faith in the industry for which I work. What I did not expect was that they would ignore it. A great tract of Earth is on fire. It looks as you might imagine hell to be. The air has turned ochre: visibility in some cities has been reduced to 30 metres. Children are being prepared for evacuation in warships; already some have choked to death. Species are going up in smoke at an untold rate. It is almost certainly the greatest environmental disaster of the 21st century – so far. And the media? It’s talking about the dress the Duchess of Cambridge wore to the James Bond premiere, and are sausages really so bad for your health? What I’m discussing is a barbecue on a different scale. Fire is raging across the 5,000km length of Indonesia. It is surely, on any objective assessment, more important than anything else taking place today. And it shouldn’t require a columnist, writing in the middle of a newspaper, to say so. It should be on everyone’s front page. It is hard to convey the scale of this inferno, but here’s a comparison that might help: it is currently producing more carbon dioxide than the US economy. And in three weeks the fires have released more CO2 than the annual emissions of Germany. But that doesn’t really capture it. This catastrophe cannot be measured only in parts per million. The fires are destroying treasures as precious and irreplaceable as the archaeological remains being levelled by Isis. Orangutans, clouded leopards, sun bears, gibbons, the Sumatran rhinoceros and Sumatran tiger, these are among the threatened species being driven from much of their range by the flames. But there are thousands, perhaps millions, more.  After the last great conflagration, in 1997, there was a missing cohort in Indonesia of 15,000 children under the age of three, attributed to air pollution. This, it seems, is worse. The surgical masks being distributed across the nation will do almost nothing to protect those living in a sunless smog. Members of parliament in Kalimantan (Indonesian Borneo) have had to wear face masks during debates.

Indonesians take fight against haze into their own hands - Desperate civilians at the epicentre of Indonesia's haze crisis are taking the fight into their own hands, using whatever meagre resources they have to confront the fires ravaging their communities as they tire of waiting for the government to take action. Wearing an oversized T-shirt and ill-fitting rubber boots, 13-year-old Yosua Oktavianus assisted his father douse a fire burning outside their hometown in Borneo as acrid smoke belched from the scorched earth. "I just want to help my dad," he told AFP near Palangkaraya, a city of 240,000 where respiratory illnesses have soared as the smog has worsened in recent weeks. Communities worst exposed to the toxic smog are becoming increasingly frustrated at authorities in Jakarta, insisting not enough is being done to aid their plight. The government has launched water-bombing raids dumping water over blazes on Borneo and neighbouring Sumatra but has failed so far to bring thousands of fires under control. It has also sent warships to Kalimantan - Indonesia's half of Borneo island - in case large-scale evacuations are needed, but many on the ground are choosing to fight not flee, using wooden sticks, pails of water and anything else on hand to douse the flames.

Bikini islanders seek US refuge as sea levels threaten homes - BBC News: About 1,000 Bikini islanders have applied to relocate to the United States as rising seas threaten their adopted home. The residents were moved from their Pacific atoll as result of atomic bomb tests in the 1940s. But their new home, on another of the Marshall Islands, is struggling against huge tides and increasing storms. The islanders have now asked Washington to change the terms of a trust fund to allow them settle in the US. In 1946 several hundred islanders were moved from Bikini Atoll by the US government, which wanted to test atomic weapons on the remote atoll. Some 23 nuclear tests were conducted including the huge Bravo hydrogen bomb, the largest weapon detonated at that time by the US. The islanders moved to a nearby island in the Marshall chain called Kili in 1948.  Under an agreement with the US, a resettlement trust fund was eventually established to help the Bikini residents. This would pay for construction of homes within the Marshall Islands. But now the islanders say that their homes are being swamped by the increased ingress of sea water during king tides.

And as if Greenland melting exponentially wasn't bad enough -- permafrost thawing is off the charts - Researchers from the U.S. Geological Survey and key academic partners have quantified how rapidly ancient permafrost decomposes upon thawing and how much carbon dioxide is produced in the process. Huge stores of organic carbon in permafrost soils ­­— frozen for hundreds to tens of thousands of years across high northern latitudes worldwide — are currently isolated from the modern day carbon cycle. However, if thawed by changing climate conditions, wildfire, or other disturbances, this massive carbon reservoir could decompose and be emitted as the greenhouse gases carbon dioxide and methane, or be carried as dissolved organic carbon to streams and rivers.The researchers found that more than half of the dissolved organic carbon in yedoma permafrost was decomposed within one week after thawing. About 50% of that carbon was converted to carbon dioxide, while the rest likely became microbial biomass.  "What this study adds is that we show what makes permafrost so biodegradable," said Travis Drake, the lead author of the research. "Immediately upon thaw, microbes start using the carbon and then it is sent back into the atmosphere." Drake was both a USGS employee and a master’s degree student at the University of Colorado during the investigation. The researchers attribute this rapid decomposition to high concentrations of low molecular weight organic acids in the dissolved organic carbon, which are known to be easily degradable and are not usually present at high concentrations in other soils.

Tracking the 2C Limit - September 2015: The latest temperature anomaly coming out of GISS is, same as last month, 0.81°C. Adjusting that for our preindustrial baseline we show we're now at 1.062°C over preindustrial times.  The current El Niño continues to grow and is now predicted to have a 95% probability of continuing into the Spring of 2016. Ironically, the University of Alabama, Huntsville (UAH) satellite temperature data is still showing little sign of warming now 5 months into the warming you see above in the equatorial upper-ocean anomaly. I've asked other more knowledgeable folks about this and everyone is in agreement this is probably about right, but we should start seeing the satellite data begin spiking in the next month or so. With the Pacific "blob" off the coast of California, I would guess much more heat is entering the atmosphere than even during the 1998 el Nino, as such we would expect a similar or greater spike in the satellite data. If not, something must be amiss. Far more dramatic this month are the figures coming out of the Japanese Meteorological Agency (below). September shows a sharp rise in surface temperature for the month.  It's going to be very interesting to watch how the next few months pan out with all the various surface station and satellite datasets. 

Global warming could be more devastating for the economy than we thought -- A new study published in Nature by scientists at Stanford and UC Berkeley has made waves for its finding that thus far we have dramatically underestimated the damage human-caused climate change will do to the global economy. By looking at data from 160 countries across the 50-year period from 1960 to 2010, the authors found that an average local temperature of 13°C (55°F) is economically optimal, particularly for agricultural productivity. That temperature roughly reflects the current climate in many wealthy countries like the USA, Japan, France, and China. If regional temperatures are cooler, then warming benefits the local economy, but past that peak temperature, warming reduces economic productivity. The robustness of this result is particularly interesting. The study found that it held true for both rich and poor countries, and that the relationship held for both the 1960–1989 and 1990–2010 time frames. The study finds that if we continue on a business-as-usual path of high fossil fuel consumption and carbon pollution, 77% of countries will be poorer in 2100 than they would be in a world in which we curb global warming. Some countries (5–43% of the world’s nations) might even be poorer in 2100 than they are today as a result.

Upside of addressing climate change -- Martin Wolf, FT - Will the inter-governmental climate conference in Paris in December be a decisive turn in the world’s efforts to curb risks of catastrophic climate change? At present this is highly unlikely but not inconceivable. It will certainly not be enough of itself. But a combination of new technological opportunities and new approaches to a deal opens up fresh opportunities. The conference might mark the end of the beginning, the point at which serious efforts to change our trajectory begin. In his book Why Are We Waiting? , Nicholas Stern, author of the Stern Review on the economics of climate change, lays out the challenges and opportunities with clarity and passion. He advances three propositions. First, humanity’s overriding goals for the 21st century should be the elimination of mass poverty and risk of catastrophic climate change. Second, these goals are complementary. Third, the case for early action is overwhelming, both because greenhouse gases stay in the atmosphere for centuries and be­cause investments in energy, transport and urban infrastructure will lock in the carbon intensity of our economies. These arguments rest on the view that climate risks are large and the costs of addressing them bearable. Doing nothing implies that risks are negligible. That position implies an absurd degree of certainty. On the costs, we will never know if we do not try. But the evidence is ever greater that what Professor Stern calls an “energy industrial revolution” is within our grasp. If so, the long-run economic costs of addressing climate risk could be quite modest: maybe as little as the loss of one year’s growth of consumption by 2050.

Joseph Stiglitz: Under TPP, Polluters Could Sue U.S. for Setting Carbon Emissions Limits | Democracy Now!: Nobel Prize-winning economist and Columbia University professor Joseph Stiglitz warns about the dangers of the TPP, the Trans-Pacific Partnership. "We know we’re going to need regulations to restrict the emissions of carbon," Stiglitz said. "But under these provisions, corporations can sue the government, including the American government, by the way, so it’s all the governments in the TPP can be sued for the loss of profits as a result of the regulations that restrict their ability to emit carbon emissions that lead to global warming." On a provision very similar to this, Uruguay is being sued by Philip Morris, the successor to Philip Morris, because Uruguay passed a regulation, as did Australia, that on the package you have to say that this is bad for your health. GOODMAN: What we have in the United States. STIGLITZ: Exactly. It’s a little bit more graphic, because they had the picture of what it did to your lungs. It worked. People started—you know, stopped smoking. Not everybody, but smoking was reduced. Under the provisions of this, TPP-like provision, Philip Morris can sue Uruguay for the loss of their expected profits as result of the regulation. In other words, the view is, they have the right to kill people, and if you want to take away that right, you have to pay them not to kill.

Climate change deal will not include global carbon price - UN climate chief  - A climate change deal to be agreed in Paris in December will not be able to come up with a global carbon price, the United Nations’ climate chief, Christiana Figueres, said on Tuesday. Big multinational companies and investors, and most recently oil majors, have called for a global carbon price to help spur investments in low-carbon energy. A global carbon price would help to create an incentive for operators of power plants and factories to switch to cleaner fuels such as gas or to buy more energy-efficient equipment. When the European Union launched a carbon trading scheme in 2005 there were expectations this would eventually lead to a global carbon scheme by 2020 worth around $2 trillion. But the difficulties of bringing together different carbon schemes from countries around the world means the goal of a global carbon price remains elusive.

Progress on climate targets not good enough - In a key moment on the road to the much anticipated Paris climate meeting this December — and one underscoring just how difficult solving the climate problem will be — the United Nations has released a “synthesis” report assessing all of the emissions cutting pledges made by countries in advance of the meeting. And the upshot is both that countries have raised their climate ambitions greatly, but also that even by 2025 or 2030, global emissions are expected to still be rising despite of their efforts. One hundred forty-six countries made pledges by Oct. 1 of this year, accounting for 86 percent of all of the world’s greenhouse gas emissions. These pledges, or “INDCs” (intended nationally determined contributions), have been a major factor in raising hopes that Paris will succeed where Copenhagen failed in 2009. In the run-up to Copenhagen, just 27 countries announced pledges that contained “concrete mitigation targets” for cutting greenhouse gases, according to Taryn Fransen of the World Resources Institute. But this time around, more than 100 countries have made pledges, including many developing nations, she said. It’s “a real evolution in terms of how countries are appreciating the need to firmly reduce emissions, and seeing it as something that could be compatible with development,” Fransen said in a conference call with the media on Thursday. However, the United Nations’ assessment is sobering. If all of the INDCs are implemented, then global emissions will stand at roughly 55 gigatons of carbon dioxide equivalents annually by 2025, and 57 gigatons by 2030, the report states. That’s an increase from current levels of about 48 gigatons in 2010.

Europe's greenhouse gas emissions fall to record low -- Greenhouse gas emissions in Europe have plunged to the lowest level ever recorded after the EU’s member states reported an estimated 23% drop in emissions between 1990 and 2014. The bloc has now overshot its target for 2020 of cutting emissions by one-fifth – at the same time that its economy grew by 46%, according to the EU’s climate chief.  Diplomats are currently meeting in Bonn to try to thrash out a negotiating text for the Paris summit, amid concern that a slimmed-down 20-page proposal has crept back up to 34 pages, following objections from developing countries.  Negotiators in Bonn are likely to note that the pace at which Europe is greening its economy is stalling, according to the European Environment Agency (EEA), which collated the report. It projects that on current trends, EU emissions cuts will slow to 24% in 2020 and 27% in 2030. This is substantially below a 40% emissions cut that EU states signed up to last October.. Further measures planned by EU countries could add up to 3% to those figures, but new policies will also be needed before 2030, the report says.

Europe's most popular source of 'renewable energy" is worse for the planet than coal -- Burning wood — technically labeled a "renewable" resource since more trees can be replanted and they'll absorb carbon from the air — is the European Union's largest source of "renewable" energy, and will continue to be through the year 2020, according to the European Parliament.  Yet using wood biomass in power plants is heating the atmosphere faster than using coal does, a deeply reported Climate Central investigation found.  In 2013 alone, Europe burned 40 billion pounds of wood pellets for bioenergy, making up 79% of the world's consumption, according to the European Biomass Association. Companies are converting their power plants from coal to wood across Europe to meet renewable energy goals, Climate Central reported, and the biggest driver is government subsidies. This is because the European Union classifies wood-generated electricity as "carbon neutral," so companies end up reporting far fewer emissions than their factories are actually generating.

Minnesota receives $8 million to expand biofuel infrastructure — The U.S. Department of Agriculture (USDA) has awarded Minnesota $8 million in federal funding under the Biofuels Infrastructure Partnership (BIP) to expand biofuel infrastructure. Minnesota is one of 21 states to receive federal funding to expand biofuel infrastructure and increase the number of biofuels pumps at fueling stations. The investment will boost local economies across Minnesota and the country, give drivers more choices at the pump and reduce our dependence on foreign oil. The federal funds will be matched more than 100 percent by state and private funds, with the total joint partnership investing $210 million across the country to strengthen the rural economy. The funds received through the BIP will help install nearly 5,000 pumps offering higher blends of ethanol nationwide. “We should be doing everything that we can to support the expansion of renewable fuels and today’s investment for Minnesota is a great step forward for Minnesota farmers,” said U.S. Sen. Amy Klobuchar, D-Minnesota.  “Minnesota-made biofuels create jobs, strengthen our economy, and reduce our dependence on foreign oil,” said U.S. Sen. Al Franken, a member of the Senate Energy Committee. “I’m pleased that Minnesota farmers, biofuel producers and marketers, and consumers will benefit from the increased support that our state is receiving for biofuel infrastructure. These investments will help Minnesotans continue to lead in the development and advancement of clean biofuel technology.”

Berkeley: Environmentalists warn of state refinery projects amid oil glut — A coalition of environmentalists warned against the ravages of the “oil economy” Tuesday, noting that Americans, reversing a years-long trend, have begun to drive more again now that gasoline is relatively cheap, putting more pollutants and greenhouse gases in the air, with ominous implications for public health and climate change. “The world is awash in oil,” journalist and author Antonia Juhasz told an audience of several dozen people at the David Brower Center. The author of the books “The Tyranny of Oil” and “Black Tide: The Devastating Impact of the Gulf Oil Spill” noted that the industry is in a “state of turmoil.” Cheaper oil means less profit for oil companies at the production level, but potentially more profit “upstream” at the refining level, she said, notably in California, where several refinery expansion projects are in the works. “A Just Transition: Refineries to Renewables,” co-sponsored by the Sunflower Alliance, was held in conjunction with an exhibit by photographer Edward Burtynsky, whose work focuses on the way industry alters and reshapes natural landscapes. Images on display include: nickel tailings outside a mine in Ontario; an abandoned granite quarry in Vermont; Shasta Lake reservoir; polders in the Netherlands; dry land farming in Spain; the Xiaolangdi Dam in China; and salt ponds in the Colorado River Delta. The exhibit runs through Feb. 4. Gallery hours are 9 a.m. to 5 p.m. weekdays and 10 a.m. to 2 p.m. Saturdays. Admission is free. The Brower Center is at 2150 Allston Way.

Leaked TAFTA/TTIP Chapter Shows EU Breaking Its Promises On The Environment -   One sign of that panic is that the original ambitions to include just about everything are being jettisoned, as it becomes clear that in some sectors -- cosmetics, for example -- the US and EU regulatory approaches are just too different to reconcile. Another indicator is an important leaked document obtained by the Guardian last week. It's the latest (29 September) draft proposal for the chapter on sustainable development. What emerges from every page of the document, embedded below, is that the European Commission is now so desperate for a deal -- any deal -- that it has gone back on just about every promise it made (pdf) to protect the environment and ensure that TTIP promoted sustainable development. Three environmental groups -- the Sierra Club, Friends of the Earth Europe and PowerShift -- have taken advantage of this leak to offer an analysis of the European Commission's real intent in the environmental field. They see four key problems:  The leaked text fails to provide any adequate defense for environment-related policies likely to be undermined by TTIP. For example, nothing in the text would prevent foreign corporations from launching challenges against climate or other environmental policies adopted on either side of the Atlantic in unaccountable trade tribunals.  The environmental provisions are vaguely worded, creating loopholes that would allow governments to continue environmentally harmful practices. The chapter lacks any obligation to ratify multilateral agreements that would bolster environmental protection and includes a set of vague goals with respect to biological diversity, illegal wildlife trade, and chemicals.  The leaked text includes several provisions that the European Commission may claim as "safeguards," such as a recognition of the "right of each Party determine its sustainable development policies and priorities" but none would effectively shield environmental policies from being challenged by rules in TTIP.  There is no enforcement mechanism for any of the provisions mentioned in the text. Even if one were included, it would still be weaker than the enforcement mechanism provided for foreign investors either through the investor-state dispute settlement mechanism or the renamed investment court system.

Reauthorizing The Ex-Im Bank Is Bad News For The Climate, Environmentalists Say - With bipartisan support, the House of Representatives voted this week to approve the reauthorization of the U.S. Export-Import Bank. The measure passed 313-118, with a majority of Republicans joining almost all Democrats.  Even with years of uproar from environmental organizations and restrictions on the financing of coal projects, the reauthorization of the Ex-Im Bank did not include reforms needed to stop the agency from financing fossil fuel and fracking projects overseas. The Ex-Im Bank, a federally-owned agency that promotes U.S. exports by providing credit and loan guarantees to foreign buyers, has financed billions of dollars worth of coal and gas fired power plants in South Africa, Papua New Guinea, and the Great Barrier Reef World Heritage Area, among other places. Practices such as these have been proven to worsen climate change, increase pollution, and degrade human health. According to Friends of the Earth, an Ex-Im Office of Inspector General report found that 19 people have died on the Ex-Im-financed Sasan coal operation in India.  “The House of Representatives’ Ex-Im reauthorization bill exposes the U.S. government to increasing financial and corruption risks by failing to institute reforms to ensure projects abide by environmental and social safeguards,” said Kate DeAngelis, international policy analyst at Friends of the Earth (FOE), in a statement.

Time to Stop Tiptoeing Around the United States on Climate Change  - This blog post, from regular Triple Crisis contributor Sunita Narain, expands on the arguments put forth in her earlier letter (with co-author Chandra Bhushan) about their recent report on U.S. government policy on climate change: “Captain America: U.S. Climate Goals—A Reckoning.” Why should we look at the U.S. to check out its climate action plan? The fact is that the U.S. is the world’s largest historical contributor to greenhouse gas emissions—the stock that is already in the atmosphere and already warming the earth’s surface—and the second largest contributor (after China) to annual emissions. What the U.S. does makes a huge difference to the world’s fight against runaway climate change. It will also force others to act. It is, after all, the leader. And now, after nearly three decades of climate change denial, the U.S. has decided enough is enough. President Barack Obama has said clearly that climate change is real, and his country must act. It has submitted its Intended Nationally Determined Contribution (INDC)—its emissions reduction framework—to the climate treaty secretariat. The world is already celebrating—the prodigal has returned. My colleague Chandra Bhushan and I humbly disagree. Our research, which we present in our just released report, Captain America, presents a few inconvenient truths that might throw cold water on the celebration. The U.S. climate action plan is neither ambitious nor equitable. Worse, it is but business-as-usual. When implemented emissions reduction will be marginal. Whatever reduction is achieved, whether due to increased efficiency or a shift in fossil fuel use, will be negated by runaway gluttonous consumption. We conclude, for the sake of the world’s future: American lifestyle can no longer remain non-negotiable.

Climate Villains - Paul Krugman - Two stories you should read in tandem.  First, it’s now very clear that Exxon has been spending millions of dollars to prevent public action against a slow-motion catastrophe it itself was well aware was on its way. The company’s own research pointed to global warming as a serious problem almost 40 years ago — but it has gone all out to confuse the issue, basically trying to get itself another few decades of profits at humanity’s expense. The cynicism is remarkable. Meanwhile, David Roberts has a piece pointing out the McCarthyite tactics the House science committee has been using to persecute and intimidate scientists, especially but not only those working on climate.   If we fail to grapple with climate change in time to avoid catastrophe — which seems ever more likely — it won’t be because we didn’t have the knowledge to realize the problem, or the tools to fix it. It will because of cynicism and greed that, given the stakes, rise to the level of evil.

VW Emissions Cheating Scandal May Have Deadly Impact, Study Says -- Pollution from vehicles at the center of Volkswagen’s ongoing emissions scandal may have contributed to 60 premature deaths in the United States, according to new research. The new study, published in the journal Environmental Research Letters, also suggests that as many as 130 additional people may die if the company doesn’t fix the problem by the end of 2016. The emissions problem will also add nearly half a billion dollars in social costs, researchers found. In early September, the U.S. Environmental Protection Agency revealed the car manufacturer had installed devices in its diesel vehicles that cheated emissions tests. The software, called a “defeat device,” triggered reduced emissions of the pollutant nitrogen oxide only when a Volkswagen vehicle was undergoing an emissions test. The vehicles would pass the government-mandated tests while actually emitting 40 times as much pollutants as the Clean Air Act permits. Experts were careful to note that nitrogen oxide emissions from Volkswagen vehicles are one of a range of factors contributing to premature deaths. The harmful chemicals exacerbate problems caused by particulate matter, small solids and liquids that pollute the air, and are a risk factor for lung cancer and other cardiopulmonary ailments. People are significantly more vulnerable to the Volkswagen emissions in cities than in rural parts of the country, researchers found.

The House Science Committee’s Witch Hunt Against NOAA Scientists – We have long been suspicious of the House Science Committee’s expanded subpoena power. The evidence now demonstrates that the committee is using this new authority not to conduct effective oversight but to harass those who produce robust scientific analysis it refuses to accept. The committee is harassing individuals, launching an investigation into the actions of a climate scientist who, in the words of my colleague Andrew Rosenberg, had the “temerity to express his views that fossil fuel companies should be held accountable for climate change.” Although subpoenas have not been formally issued, an investigation has begun.  The committee is now stepping up its harassment of government agencies. On October 13, the committee subpoenaed nearly seven years of internal deliberations and communications among scientists at the National Oceanic and Atmospheric Administration, including “all documents and communications” related to NOAA’s measurement of our climate.  “All documents and communications” would presumably include emails, preliminary drafts, peer review comments, notes,  audio recordings, and a treasure trove of other material. This would mean thousands upon thousands of records for employees to identify and go through and analyze for no clearly stated purpose.  NOAA was given two weeks to comply.

Wave of litigation hits Obama climate rule -- The publication of the EPA's carbon rule for power plants has prompted a flurry of legal and legislative action, ushering in a lengthy battle over the future of the Obama administration's key climate change initiative. More than two dozen states and a slew of interest groups and companies sued over the Clean Power Plan on Friday after it was published in the Federal Register. Leading state attorneys general called the rule an illegal expansion of federal power that they said will have a dramatic impact on electricity pricing, grid reliability and jobs. On Capitol Hill, Republicans geared up for their own attempt at repealing the rule, perhaps forcing a veto from President Obama. The Clean Power Plan is intended to cut carbon emissions from the power sector by 32 percent over the next 15 years by assigning carbon targets to states and asking them to find ways to hit them. The rule, finalized in August, is the centerpiece of Obama’s climate agenda — but its sweeping scope and strict standards make it an especially contentious regulation. Conservatives and coal-state lawmakers say the rule threatens to wipe out American jobs and hobble the economy.

24 States Sue Obama Over Clean Power Plan -- Twenty four states and a coal company filed lawsuits yesterday over President Obama’s Clean Power Plan, which was formally published Friday. “The Clean Power Plan, which requires states to reduce carbon dioxide emissions from power plants 32 percent by 2030, is intended to help slow climate change resulting from the burning of fossil fuels,” explains InsideClimate News. “The plan has been the target of legal challenges and legislative campaigns since it was proposed in 2014 and finalized in August.” The two dozen states and Murray Energy have accused the U.S. Environmental Protection Agency (EPA) of “going far beyond the authority Congress granted to it,” according to The Hill. They are calling on the Court of Appeals for the District of Columbia Circuit to overturn the rule, and they are asking the court to “immediately stop its implementation” while the lawsuit plays out.”  West Virginia Attorney General Patrick Morrisey, who is leading the charge, called it “the single most onerous and illegal regulations that we’ve seen coming out of DC in a long time.” He added, “the EPA cannot do what it intends to do legally.”  Morrisey is joined by attorneys general from Texas, Alabama, Arkansas, Colorado, Florida, Georgia, Indiana, Kansas, Kentucky, Louisiana, Michigan, Missouri, Montana, Nebraska, New Jersey, Ohio, South Carolina, South Dakota, Utah, Wisconsin, Wyoming, Arizona and North Carolina.

23 states rally against EPA -— West Virginia led a 23-state, two agency coalition of opponents to the federal Environmental Protection Agency’s Clean Power Plan in filing a “Petition to Review and Stay motion” in the U.S. Court of Appeals for the District of Columbia Circuit. “Today is a really important day for the people of West Virginia and citizens in all of the states that have joined the coalition,” West Virginia Attorney General Patrick Morrisey said in a telephone interview. “People should really be concerned by what the Obama administration and the EPA is doing. “The cap and trade effort was rejected by a Democrat controlled House of Representatives in 2009,” Morrisey said. “What the EPA is attempting to do is to set environmental policy. The EPA is a regulatory agency, not a central energy policy planner.” While Morrisey and the coalition of states that opposes the Clean Power Plan claim that the new regulation will dramatically increase utility costs for people who can afford it the least, the EPA boasts on its website that the plan will reduce carbon emissions by 32 percent in 15 years. “There’s already momentum towards a clean energy future,” according to a graphic on the EPA’s web site. “The Clean Power Plan increases and secures carbon and air pollution reductions that further protect our health.”

This Bill Might Be The Most Creative Attempt Yet To Kill The Clean Power Plan --The Clean Power Plan, published in the Federal Register on Friday, is already the subject of a legal challenge by 24 states. But on Tuesday, legislators on the House Judiciary Committee will mark up a bill that could take a more roundabout way of subverting the EPA rule.  H.R 2834, sponsored by Rep. Tom Marino (R-PA), is a relatively straight-forward, if somewhat odd, bill. It takes the Clean Air Act — a comprehensive environmental protection law that the EPA says is responsible for reducing pollution from six common pollutants by nearly 70 percent since 1970 — and reorganizes it into its own part of the U.S. code. The intent, lawmakers say, is to make it easier for researchers to find the relevant parts of the Clean Air Act.   But the EPA, in a letter from its general counsel in July, says the codification will confuse existing case law.   “I am concerned that if H.R. 2834 were enacted, it would further complicate the already complex task of interpreting the Clean Air Act in regulatory proceedings and court cases,” wrote Avi Garbow.  Garbow noted that the codification picks one version of one section of the Clean Air Act — 111(d) — that would invalidate the Clean Power Plan, over another version that authorizes it.One of the major legal arguments against the Clean Power Plan, which seeks to reduce carbon emissions from the electricity sector under the Clean Air Act, rests on a clerical error. There are actually two different versions of Section 111(d) — one enacted by the House and one by the Senate. The House version, which is the one in the Marino bill, says that the EPA can’t regulate additional pollutants from power plants, because it already regulates mercury from power plants in Section 112.

Congress Introduces Resolutions To Kill The Clean Power Plan  -- Sen. Shelley Moore Capito, (R-WV) and Senate Majority Leader Mitch McConnell (R-KY) have both come out strongly against the Clean Power Plan. Republicans in Congress are trying every means available to stop the Clean Power Plan, and they might go as far as putting a government shutdown on the line, experts say.  A resolution announced by Sen. Shelley Moore Capito (R-WV), Sen. Heidi Heitkamp (D-ND), and Rep. Ed Whitfield (R-KY) this week will seek to use the Congressional Review Act to essentially strike the Clean Power Plan from the books. If the resolutions disapproving of the Clean Power Plan pass — and the president signs them into law — the rule would be prohibited from going into effect.  Granted, there is no way that President Obama is going to sign a resolution killing what is widely considered to be his most important legacy on climate, and possibly his most important legacy as president, overall.  The Clean Power Plan, authorized under the Clean Air Act, will limit the amount of carbon pollution from power plants, fundamentally reducing U.S. emissions. Under the rule, states have broad flexibility to develop plans that will reduce greenhouse gas emissions while maintaining reliability. The rule is a critical component of U.S. climate action.  But the mostly Republican move to invoke the Congressional Review Act (Heitkamp is joined on the Senate resolution by 47 Republicans and fellow Democrat Joe Manchin of West Virginia; Whitfield’s resolutions in the House do not have any cosponsors) highlights the uncertainty facing America’s climate policy.

Murray Energy Sues U.S. Gov. Over “Illegal And Destructive” Regulations -- US coal miner Murray Energy Corp., one of the top producers in Northern Appalachia and the Illinois Basin, is suing the Obama administration over new ozone standards it says will harm the coal industry.  The new standards, which decrease the threshold for ground-level ozone to 70 parts per billion, set the levels so that even some of the country’s national parks will be out of compliance, the Ohio-based company claims. “For the past seven years, the Obama Administration has waged a regulatory rampage against the United States coal industry, and the thousands of high paying, well-benefitted jobs which it provides,” said Robert E. Murray, chairman, president and chief executive officer of Murray Energy, in a statement. “This Ozone Rule is yet another illegal and destructive action aimed at killing these jobs.” The move follows a lawsuit filed last week by 24 states, which are challenging President Obama's climate change plan in federal court. It also comes on the heels of a new study published by the National Mining Association that claims the costs of a so called “Stream Protection Rule,” proposed in July, will take away between 40,038 and 77,520 mining jobs and between $14 billion and $29 billion in annual value of coal lost to production restriction.  Coal markets have collapsed over the last few years due to a perfect storm of factors.  U.S. producers first faced increasing competition from shale gas in America’s electric power sector as fracking took off about a decade ago. Thermal coal prices are currently down to six-year lows of around $42 a tonne, far from the US$150 per tonne the commodity was fetching in 2011.

LNG glut to steal coal market share – A wave of liquefied natural gas due to hit energy markets over the next couple of years is expected to displace tens of millions of metric tons coal demand globally, helped by government initiatives to move away from polluting power generation. Both coal and LNG are oversupplied after higher prices during the past decade triggered investments in new projects and expansion plans. At the same time the gap between their prices has narrowed as LNG has become more competitive, particularly where governments penalize coal via taxes or emissions trading schemes. “There is a monstrous amount of LNG coming into the market, on pure cost economics you can say coal is cheaper than LNG at any realistic price, but it’s going to be used somewhere and if it is coming in the volume that’s forecast, it will be displacing coal,” a coal trader said. “New coal generating capacity is less likely to be realized in a world awash with LNG.” One of the biggest factors in how much switching occurs will be what the world’s largest coal consumer China does.

West Virginia Power Company Admits Coal Is Doomed  -- On Tuesday, in front of a roomful of energy executives, the president of Appalachian Power declared that the war on coal was over, and coal had not emerged victorious. According to the Charleston Gazette-Mail, Charles Patton, president of Appalachian Power, told energy executives that coal consumption is likely to remain stagnant whether or not federal regulations like the Clean Power Plan are allowed to go forward. He also said that in the national debate about coal and climate change, the public has largely settled on the side of climate change.  “You just can’t go with new coal [plants] at this point in time,” Patton reportedly said. “It is just not economically feasible to do so.”  Regardless of how the Clean Power Plan — President Obama’s signature climate effort placing limits on carbon emissions from power plants — shakes out, Patton estimated that Appalachian Power’s use of coal could drop 26 percent by 2026. The Clean Power Plan was published in the Federal Register last Friday, and already faces more than 20 legal challenges from fossil fuel-producing states, utilities, and coal companies. It’s also being challenged by a group of Republican lawmakers who want to use the Congressional Review Act to essentially negate the rule. West Virginia is one of the states leading the legal challenges to the Clean Power Plan, and Patton said that he supports West Virginia’s lawsuit. West Virginia’s governor Earl Ray Tomblin (D) has said that the state will craft a plan in compliance with the rule while the legal challenges proceed.

What has to be left in the ground (from the Guardian) -- from here:  Major fossil fuel companies face the risk that significant parts of their reserves will become worthless, with Anglo American, BHP Billiton and Exxaro owning huge coal reserves and Lukoil, Exxon Mobil, BP, Gazprom and Chevron owning massive oil and gas reserves. If the world’s nations keep their pledge to combat climate change, the analysis finds the prospects are bleakest for coal, the most polluting of all fossil fuels. Globally, 82% of today’s reserves must be left underground. In major coal producing nations like the US, Australia and Russia, more than 90% of coal reserves are unused in meeting the 2C pledge. In China and India, both heavy and growing coal users, 66% of reserves are unburnable. While the prospects for gas are better, the study still found 50% of global reserves must remain unburned. But there are stark regional variations, with the giant gas producers in the Middle East and Russia having to leave huge quantities underground, while the US and Europe can exploit 90% or more of their reserves to replace coal and provide local power to their large cities. Some fracking for shale gas is consistent with the 2C target, according to the study, but is dominated by the existing industry in the US, with China, India, Africa and the Middle East needing to leave 80% of their potential shale gas unburned.  Oil has the lowest proportion of unburnable fuel, with a third left unused. However, the Middle East is still required to leave 260bn barrels of oil in the ground, an amount equivalent to Saudi Arabia’s entire oil reserve. The study’s conclusion on the exploitation of Canada’s oil sands is blunt, finding production must fall to “negligible” levels after 2020 if the 2C scenario is to be fulfilled. The research also finds no climate-friendly scenario in which any oil or gas is drilled in the Arctic.

Fossil fuel companies risk plague of 'asbestos' lawsuits as tide turns on climate change - Oil, gas and coal companies face the mounting risk of legal damages for alleged climate abuse as global leaders signal an end to business-as-usual and draw up sweeping plans to curb greenhouse gas emissions, Bank of America has warned.Investors in the City are increasingly concerned that fossil fuel groups and their insurers are on the wrong side of a powerful historical shift and could be swamped with exhorbitant class-action lawsuits along the lines of tobacco and asbestos litigation in the US. “It is setting off alarm bells that there could be these long tail risks,” said Abyd Karmali, Bank of America’s head of climate finance. Mr Karmali said the United Nations’ "COP21" climate summit in Paris in December is likely to be a landmark event that starts to shut the door on parts of the fossil industry. “It is a non-exchangeable, one-way ticket to a low-carbon economy,” he said. Christiana Figueres, the UN’s top climate official, said 155 countries have already put forward detailed plans covering 88pc of global CO2 emissions, and others are expected to join before the deadline expires. “It is unstoppable. No amount of lobbying at this point is going to change the direction,” she told a Carbon Tracker forum in London. Mrs Figueres said the mood has changed entirely since the failed summit in Copenhagen in 2009. This time China is fully on board. “China is already spending more on renewables than any other country. It is going to introduce its own emissions trading scheme in 2017,” she said.

How Big Oil investors were robbed of a great opportunity - Exxon Mobil’s CEO Rex Tillerson gets a $40 million salary. Along with the myopic bosses of the other major oil firms, Shell, Conoco, Chevron and BP, they all threw away massive future earnings for their shareholders, and likely each signed their company’s death warrants in what Foreign Policy, BusinessWeek, Science, the Economist, National Geographic and other journals are officially calling the “End of the Oil Age.” “Exxon’s Own Research Confirmed Fossil Fuel’s Role in Global Warming Decades Ago,” screams an headline. And the Department of Justice attorney who successfully sued Big Tobacco says America should sue Big Oil on racketeering charges, a fraud against investors as well as the public, covering up their own research and hiring goons to undermine other legitimate research. Blame. Accusations. Damages. Lawsuits. Moral condemnations.  But that’s not the No.1 question for investors. The biggest question: Why didn’t Exxon Mobil’s CEO, its board and every other Big Oil CEO look at their global-warming research as a new market opportunity rather than as a problem?  Get it? Why the hell didn’t those presumably savvy multimillion-dollar-a-year executives diversify their companies into alternative energy resources, balance old and new? Fossil fuels with alternative energies? Yes, No.1 question nobody’s asking is simple: Why did they ignore the marketing opportunity to diversify? They were in the lead. Why did they react out of fear rather than act decisively on an opportunity? Why? Exxon’s research was solid, decades ahead of the competition, and at the time even ahead the UN’s work.  A historic blunder: Exxon would have virtually owned the world of alternative-energy technology and product development, today a high-growth sector. If they acted not out of fear but on positive opportunities, today they’d be balancing returns in innovative growth technologies from solar, wind, nd biofuel divisions against declines in their traditional gas and petroleum businesses.

Blimp prompted power-down at Salem Twp. nuclear plant -- The wayward military blimp that wreaked havoc in and around Columbia County led to a power-down of Unit 2 at the Susquehanna Nuclear power plant in Salem Township as a precautionary measure. Todd Martin, spokesman for the plant’s owner, Talen Energy, said the operator of the regional power grid, PJM Interconnection, directed the company at approximately 2:30 p.m. to reduce the amount of energy Susquehanna 2 was putting into the grid. Martin stressed that nuclear operations were not compromised, and that the blimp was “many miles” from the station. “At no point was nuclear safety impacted. At no point were operations affected,” he said. The 240-foot-long helium-filled military surveillance blimp broke free from the Aberdeen Proving Ground in Maryland Wednesday morning, making its way up to central Pennsylvania where its dangling tether downed electric lines, causing thousands of people to lose power before it was finally brought to ground in Muncy, Lycoming County, later in the day.

Nuclear Hotseat #227: SPECIAL – St. Louis Nuclear Nightmare – West Lake Radioactive Waste Fire – Dr. Caldicott, Bob Alvarez, Dawn Chapman - A full-length Nuclear Hotseat SPECIAL on the West Lake Landfill in North St. Louis – a Manhattan Project-era radioactive waste dump – and the encroaching underground fire less than a quarter mile away. FEATURED INTERVIEWS:

  • The history of the West Lake Landfill nuclear waste with Bob Alvarez, who served as senior policy adviser to the Energy Department’s secretary and deputy assistant secretary for national security and the environment from 1993 to 1999. He is a senior scholar at the Institute for Policy Studies and wrote the landmark November, 2013 report: The West Lake Landfill: A Radioactive Legacy of the Nuclear Arms Race.
  • The medical consequences faced by those exposed to the West Lake radioactive waste with Dr. Helen Caldicott, arguably the single most articulate and passionate advocate of citizen action to remedy the nuclear and environmental crises in the world.   A medical doctor and former instructor in pediatrics at Harvard Medical School, she co-founded Physicians for Social Responsibility – which won the Nobel Peace Prize in 1985 – and was herself nominated for the Nobel Peace Prize by Nobel Laureate Linus Pauling. She is the author of Nuclear Power is Not the Answer.
  • What it’s like on the ground in the North St. Louis neighborhoods impacted by the radioactive waste with Dawn Chapman, a mother who lives less than two miles from the West Lake Landfill. She Admins the Facebook West Lake Landfill page.

Like Everything Else, Alternative Energy Requires Cheap Oil - In February, at Resilience, Frank Kaminski reviewed The World After Cheap Oil by three Finnish energy analysts. The book ranges from the looming shock to an unprepared world to the climate crisis dependence on oil has helped foment to evaluating alternative energy sources. Kaminski singles out two unusual features of Peak Oil that the authors cover. First, the “energy trap.”  Once world oil production begins to decline and the resource goes from being abundant to scarce, the oil that would be needed to reduce society’s dependence on oil is no longer available. This is because, as noted earlier, alternative energy sources sorely depend on oil just for their current production, not to mention the massive build-outs required to make them the dominant fuels. In a world of scarce oil, every ounce of it we possess will have to meet essential needs before those of alternative energy.  In other words, alternative energy is dependent on the availability of cheap oil. Second, Kaminski writes, the authors are: … know of the mounting evidence that catastrophic climate shifts may already be unavoidable. As for the likely interplay between peak oil and climate change in coming decades, they foresee an ongoing “wrestling match” between the two issues. Though we may undertake earnest efforts on the climate, they will be undermined whenever the economy suffers and we have to burn more fossil energy to restart economic activity. But, under the category of thank-goodness-for-small-favors, they are also… well aware of key points in the peak oil argument that are lost on most climate change activists, chief among them the fact that we don’t really have the quantities of hydrocarbons required to bring about the worst climate impacts. This reminds me of the argument that the nuclear winter following a nuclear war would slow global warming. Pessimism prevails.

Environmental group appealing FirstEnergy coal ash permit (AP) — An environmental group is appealing a state permit that would let FirstEnergy Corp. ship coal ash from a Shippingport power plant to a dump near a former power plant in Greene County. The Beaver County Times says EarthJustice is representing the Sierra Club in the appeal. The groups say the coal dust includes arsenic and other toxins that could blow off the barges and contaminate the rivers as it is shipped. Company spokeswoman Stephanie Walton says FirstEnergy shipping the ash to the shuttered 107-acre Hatfield Ferry Power Plant is only one of many options being considered. FirstEnergy currently sends waste to the Little Blue Run coal ash impoundment on the Pennsylvania-West Virginia border. The company will no longer be allowed to ship waste there after December 2016.

Gates Mills Council candidates discuss gas, oil wells: Voter Guide 2015 (video) -   — Gas and oil wells dominated the conversation among the Gates Mills Council candidates in a recent debate with, for its 2015 voter guide. Village leaders have been weighing ways to deal with potential deep-well drilling since Mayor Shawn Riley announced controversial plans to form a land trust last year. Voters last year also denied a bill of rights residents proposed to give the village more control over drilling, which is regulated by the state. A charter amendment, drafted with the help of council candidate Charles Belson, on the Nov. 3 ballot would require the village to ask voters any time it wanted to change an existing lease for oil and gas wells on village land or enter into a new agreement. According to Belson, there are three wells on village-owned property now. Belson is seeking one of three seats against incumbent Councilwoman Sandra Turner and new candidate Jay Auwerter. Incumbent Councilman Ed Welsh is also seeking re-election. He did not attend the debate.

Groups: More action, less talk on Ohio fracking tax - – Ohio’s development of oil and gas extraction from fracking has exploded in recent years, leaving local communities carrying the costs associated with the boom. The state’s tax rate on oil and gas is less than a half percent, much lower than in other oil and gas states. Ohio lawmakers are discussing raising the state’s severance tax, and charged the 2020 Tax Policy Study Commission with examining reforms. But the state director of the advocacy group One Ohio Now says the commission’s new report delays action on raising the tax. “There’s really nothing new, which is the very disappointing thing,” explains Gavin Devore Leonard. “We’ve been looking at this for so long. It says in the report what we know, which is that the rates are too low, that there’s nowhere lower in the country, and we just feel that it’s time to act on this instead of keep talking about it.” The report notes that market forces are financially burdening the industry, and opponents argue a higher severance tax would discourage new production.Gov. John Kasich supports a higher tax, and several Ohio organizations are pushing for 5 percent to better compensate for increased infrastructure needs, better regulatory oversight and the negative environmental impacts. A 5 percent severance tax would match West Virginia’s tax rate on oil and gas production.

Trump mocks Kasich's economic achievements: John got lucky with fracking -- It didn’t take long for Donald Trump and John Kasich to mix it upWednesday over economic policy at the Republican presidential primary debate. Mr. Kasich, the Ohio governor, took a broadside at the so-called outsider candidates without government experience, saying his “greatest concern is we’re on the verge of picking someone who cannot do this job.” He cited proposals by other candidates to slash Medicare and Medicaid, deport illegal aliens, and other ideas that he described as “fantasy.” “Folks, we’ve got to wake up,” Mr. Kasich said at the debate held at the University of Colorado’s Coors Event Center. “We cannot elect someone who does not how to do the job.” Meanwhile, the businessman Trump challenged Mr. Kasich for taking credit for Ohio’s economic rebound, saying the recovery can be attributed to hydraulic fracturing and the oil and gas boom. “John got lucky with a thing called fracking,” said Mr. Trump, adding that Mr. Kasich’s remarks came because “his poll numbers tanked, that’s why he’s at the end [of the stage].”

Pennsylvania and Ohio drill permit report, Oct. 18-24 | Pennsylvania’s oil and gas permit activity took a bit of a tumble since last week, but still shows signs of improvement from earlier this month. The state’s Department of Environmental Protection’s Office of Oil and Gas Management approved a total of 58 permits throughout the state. As the state’s approved permits pile up, so could the Pennsylvania’s tax on natural gas operators. Shale operators throughout the Marcellus region rallied against Gov. Tom Wolf’s proposed natural gas severance tax to bolster funding for public schools and other services. Seventeen executives penned a joint letter to the General Assembly, arguing that the bump “defies good economic policy to single out a key industry and economic engine by instituting an onerous energy tax that would generate limited additional revenue.”  The total of 23 new permits issued by the Ohio Department of Natural Resources echoes the previous week’s total of 21 new permits. The newest permits only approve drilling in the Utica Shale, driving the total rig permits up to 2,066.  Ohio lawmakers also grappled with a newly proposed severance tax for the state’s energy industry. The seven-member commission met to discuss the new taxes in an approved two-year budget, albeit 21 days past their Oct. 1 deadline.  Lawmakers will meet several more times before a conclusion is made, though Gov. John Kasich has made it clear he sees the severance tax as a “total and complete rip-off to the people of this state.”

Fracking Nearby Private Wells -The Methane Mafia has been misleading the public about how safe Fracking is, because they have been hiding the truth about frack jobs that go “out of zone”, or that “communicate” with old & abandoned wells by repeating the same lie that “fracking has never contaminated a private well” – so here is how it can happen.   Hydraulic fracturing can form cracks that can connect new shale gas wells to nearby abandoned wells, possibly allowing methane to leak into the atmosphere or aquifers underground, according to a University of Vermont study published this week. The study is one of the latest efforts to answer an elusive question: How do fracked oil and gas wells leak methane and other hydrocarbons into underground aquifers and into the atmosphere?  Previous research has shown that shale gas drilling and production may leak a large but not fully known amount of methane into the atmosphere, possibly up to 1,000 times more methane than previously thought. The U.S. Environmental Protection Agency has proposed rules to curb methane emissions from oil and gas wells and pipelines, seeking to slash emission from the oil and gas industry by up to 45 percent below 2012 levels over the next decade. Abandoned gas wells in the Marcellus shale in Pennsylvania have been found to leak methane, but nobody knows yet how many wells leak and how much methane they’re emitting.

As the Fracking Boom Spreads, One Watershed Draws the Line: Only one area of Pennsylvania’s Marcellus has escaped the fracking storm — the portion that lies within the watershed of the Delaware River, the longest undammed river east of the Mississippi. Four years ago the gas industry was poised to spread into the Delaware River basin, which encompasses 13,000 square miles of land in four states. The industry had signed thousands of leases with watershed landowners. And although many of those landowners’ neighbors looked west at the industry’s growth in the Susquehanna River basin and wanted no part of it, the Delaware River Basin Commission (DRBC) was ready to give the go-ahead. But in November 2011, with only two of the four states in the Delaware Basin in support of fracking, the DRBC abruptly withdrew its proposed regulations and instituted a moratorium. The fracking industry in the Pennsylvania portion of the Delaware basin was stopped in its tracks.  The contrast between the two watersheds — the fracked territory of the Susquehanna basin, and the unfracked of the Delaware basin — is sharp. Extensive areas of the Susquehanna watershed contain the well pads, drilling rigs, pipelines, and roads trafficked by large trucks supporting the industry. By contrast, much of the Delaware River watershed remains extraordinarily well-protected. It still provides drinking water to 15 million watershed residents, more than half of those in New York City. The water runs unfiltered from the Delaware's headwaters to the city’s taps, an amenity New York prizes and protects through ownership or easement of 130,000 acres of watershed.

Plains Twp. residents form group to protest pipeline plan - Township residents upset with the proposed path of the PennEast natural gas pipeline through their community have joined forces to start a new group. Plains Township Citizens Against the Pipeline made its official debut on Tuesday, according to a press release from Lori Pascucci Leggio, the group’s secretary. The group believes “the impacts the pipeline will have in the township and on the individual homeowners will far outweigh the benefits to this community.” The group has a six-person board and numerous members; at its first meeting, held recently in the Plains Township fire hall, “we had well over 50 people,” Leggio said. PennEast Pipeline Co. LLC filed a formal application with the Federal Energy Regulatory Commission on Sept. 24 to construct a $1 billion, 114-mile, 36-inch diameter pipeline from Dallas Township to Mercer County, New Jersey. The pipeline would deliver approximately 1 billion cubic feet of Marcellus Shale gas per day to customers in New Jersey and southeastern Pennsylvania. Claims the gas will be shipped overseas are untrue, PennEast spokeswoman Patricia Kornick said. The petitions allege the pipeline is unnecessary because “research has shown that (New Jersey) is enjoying the lowest natural gas prices in decades and is well served by the existing pipeline network. The entire state … consumes on average 1.8 billion cubic feet of natural gas per day. That includes everybody — residential customers, electrical generation plants, industrial users and vehicles. The proposed PennEast pipeline will carry 1 billion cubic feet of natural gas per day. This represents 55 percent over capacity for New Jersey — this one pipeline could literally power more than half the state … all by itself.”

More than 1,400 intervenors want to be part of PennEast Pipeline process -- By Thursday evening’s deadline, more than 1,400 individuals, governmental bodies and other entities filed as intervenors to PennEast Pipeline’s proposed 114-mile natural gas pipeline. The status is important for those who oppose the project because it makes them a party to the proceedings and allows them to appeal any decisions made by the Federal Energy Regulatory Commission, the independent agency responsible for approving natural gas pipelines. Among the intervenors are 22 of the 29 municipalities along the pipeline route, which extends from Wilkes-Barre to Mercer County, N.J., cutting through Northampton County along the way. Locally, Bethlehem Township, Lower Saucon, Williams, Moore, Lower Nazareth and Lehigh townships and the City of Easton are among those municipalities that intervened. The majority of intervening municipalities oppose the project, though not all of them have taken a stance. In their interventions, the Northampton municipalities, except for Williams, called the project a threat to the Lehigh Valley’s environmental resources.  Lower Saucon, which hired an environmental attorney and adopted a resolution in January opposing the pipeline, said construction of the pipeline and a two-mile “Hellertown lateral” threatens to significantly damage streams, wildlife habitat, existing farm operations and quality of life in the township.

Fracking Cocktail May Lower Sperm Count: Fracking chemicals may pose a threat to male reproductive health, according to a new study published this month in the scholarly journal Endocrinology. “Our results suggest possible adverse developmental and reproductive health outcomes in humans and animals exposed to potential environmentally relevant levels of oil and gas operation chemicals,” the study said. The research focused on how mice react when exposed before birth to chemicals used during fracking and at other phases of natural gas production, The Huffington Post reported. “Researchers found that male mice exposed in the womb to minute levels of the mixture developed enlarged testes and decreased sperm counts later in life.” The scientists tested 24 chemicals including benzene, toluene, and bisphenol A. The concoction was “administered to mice throughout the course of their pregnancy so that researchers could observe the effects on their male babies. The mixture mirrored chemical levels that human are likely exposed to from wastewater or drinking water contaminated with fracking fluids.” The researchers found that 23 of the chemicals disrupted the natural functions of estrogens, androgens, and other hormones. That included functions vital to healthy development of sex organs and fertility, the report said.  "This study is the first to demonstrate that [endocrine-disrupting chemicals or EDCs] commonly used in fracking, at levels realistic for human and animal exposure in these regions, can have an adverse effect on the reproductive health of mice,". "These findings may have implications for the fertility of men living in regions with dense oil and/or natural gas production."

EPA wants to expand toxic chemicals database -- The U.S. Environmental Protection Agency has proposed requiring large oil and gas processing facilities to publicly report, to the federal Toxics Release Inventory, the names and amounts of the toxic chemicals they emit. It would be the first expansion in 20 years of the TRI, the online public database in which most other industries must list their pollution emissions, and, according to the EPA, would affect more than half of the 517 existing large oil and gas processing plants around the nation, including three in Western Pennsylvania. Those are the Mark West-Liberty Midstream & Resources facilities in Washington and Butler counties and the Mountain Gathering LLC facility in Butler County, according to Tom Pelton, a spokesman for the Environmental Integrity Project, a Washington, D.C., environmental organization. The EPA’s decision to add the large oil and gas facilities to the TRI settled a lawsuit filed in January by the Environmental Integrity Project and nine other environmental and open-government groups. But the settlement will not require shale gas well sites, compressor stations, pipelines and other smaller processing facilities that employ fewer than 10 people to disclose their toxic emissions as the groups had sought.

Why does firewood cost so much? Fracking's part of it - —Northeasterners who are digging deeper into their pockets to pay for firewood this season can add a new scapegoat to the roster of usual market forces: fracking. Yep, a timber industry representative in New Hampshire said those hydraulic fracturing well sites in Pennsylvania's Marcellus Shale formation to suck natural gas out of the ground are using construction "mats" made of hardwood logs - think of the corduroy roads seen in sepia-toned photographs from the 1800s - to get heavy equipment over mucky ground, wetlands or soft soils. That increased demand has crept down the chimney into fireplaces. Prices in parts of New England are averaging $325 a cord and can even push past $400 for a seasoned, delivered load. That's anywhere from $50 to $75 more a cord than last year - or an increase of 18 to 23 percent. Jasen Stock, executive director of the New Hampshire Timberland Owners Association, said it's not just fracking sites that are hogging the logs. Pipelines and transmission wires - really any large-scale construction project - have in the past three years ramped up the appetite for the perfect mat log: a hardwood trunk, 16 to 20 feet long and 8 to 10 inches in diameter. As a result, the cost of cordwood on the stump (that is, live trees) went from $10 in 2012 in northern New Hampshire to $15 this year, Stock said. "If you're putting in a power line or gas line over wetlands or soft soil, they use thousands and thousands of these mats, and they're made of hardwood logs," Stock said. "If you're in the firewood business, that's your sweet spot. That's the log you want."

Very Bad Gas: Fracked Gas Worse Climate Changer Than Coal For Power Plants -- Natural gas doesn’t smell, burns clean and cooks planets faster than coal ! It’s the Frackers Way to Global Disaster. You’ve read about Armageddon in the Bible, time to make it happen – with gas ! The greenhouse gas leaks of methane during producing, distribution and burner tip use of natural gas makes fracked gas actually worse than coal in power plants. The only way that is not so is to assume that the methane leaks as much as the EPA estimates – which is about half of all scientifically measured amounts. Fracked gas is the largest new contributor to climate change; methane is the molecule of choice to cook a planet. Time to do something about it. One fracker at a time. Just in time for Halloween, a decommissioned, coal-burning power plant north of Crestwood on Seneca Lake is being brought back to life, and plans are being laid to convert it to natural gas (methane).  The old Greenidge (Dresden) Power Plant–located just 20 miles north of Crestwood’s gates and shuttered for four long years—may be repowered with natural gas. And, yes, this plant is connected by a series of pipelines to Crestwood’s Seneca Lake Methane Storage Facility. At the very least, if it is approved, it will create further demand in the region for natural gas. The NY Public Service Commission will be holding an information session and public hearing next Wednesday on the proposal to repower the Dresden power plant on Seneca Lake.. We need all lovers of Seneca lake in attendance! Please consider offering oral testimony. Or, just wear blue and show up. We need a showing of concerned citizens opposed to the further build-out of fracked-gas infrastructure in the Finger Lakes.

Natural-Gas Market Goes Cold - WSJ: The benchmark U.S. natural-gas price tumbled to its biggest one-day decline since February 2014 on expectations of a deepening supply glut. Forecasts for warm fall weather across swaths of the U.S. spurred the nearly 10% plunge on Monday. Above-average temperatures at the start of heating season will undercut seasonal demand, analysts say, boosting stockpiles that already are near record highs. “The market is now in absolute free fall,” . “There’s no real strong forecast for any weather-[related] demand in the near future.” The North American natural-gas market has been mired in a supply glut for years amid robust output. Companies continue to grow more efficient at extracting the fuel from shale rocks in Pennsylvania, Texas and elsewhere, and they’re able to maintain production even as gas prices plumb three-year lows. But Monday’s selloff nevertheless is another blow to energy producers, which now must grapple with falling natural-gas prices in addition to low oil prices. Producers have struggled with persistently low gas prices for years and are now seeing additional threats to their earnings due to the past year’s plunge in oil prices. . Energy producers have sharply cut spending on new drilling this year in response, but many analysts and investors expect both oil and natural-gas prices to remain low through the end of 2015 and into 2016 as large inventories continue to pressure the market.  November natural gas slid 22.4 cents, or 9.8%, to $2.062 on the New York Mercantile Exchange, the lowest close since April 2012 and the largest one-day percentage drop in 20 months.

NatGas Crashes To April 2012 Lows On Weather, Inventories -- For once, blaming the weather is not a 'joke'. Natural gas futures fell to the lowest since April 2012 as traders reacted to near-record inventories and mild weather that’s pushing back the start of winter demand for the heating fuel. As Bloomberg details The eastern U.S. may be warmer than usual from Nov. 1 to Nov. 10, according to Commodity Weather Group. Washington might reach 74 degrees Fahrenheit (23 Celsius) on Nov. 5, 12 degrees above normal, AccuWeather data show. The city’s low on that day could be 54 degrees, 10 above normal. Stockpiles totaled 3.81 trillion cubic feet Oct. 16, 4.5 percent above the 5-year average, according to a government report. BofA Merrill Lynch analysts lowered their year-end price target. “The pressure is on here with the lack of weather and the storage situation,”  “It’s really gotten the attention of a lot of investors suddenly just how oversupplied we are.”

U.S. natural gas futures ease on continued warm forecasts - U.S. natural gas futures eased on early Wednesday on forecasts for well above normal temperatures over the next two weeks, expected to keep heating demand lower than normal. On its last day as the front-month, the November gas future on the New York Mercantile Exchange fell 3.6 cents, or 1.72 percent, to $2.056 per million British thermal units at 10:02 a.m.   The December contract, which will be the front month on Thursday, was off about six cents to $2.302. “With a very weak November contract heading into the history books after today’s session the market could then set-up for an overdue bout of short covering in the coming week or so as the overall market remains extremely oversold,” The front-month was on track to remain in oversold territory on the Relative Strength Index (RSI) for a fourth day in a row, the longest since December 2014. The market however remains bearish with gas inventories expected to reach a record high around 4 trillion cubic feet in mid November. “With an El Nino winter playing out most projections are calling for heating fuel consumption coming in well below normal through the majority of the winter,” If the winter is warmer than normal as expected, traders noted the end of the winter season storage level could turn out to be at a record high level for that time of year and a major drag on prices throughout the winter heating season and into the spring. The warm winter forecasts were taking their toll on the winter futures.

Natural Gas Retreats on Warm Weather - WSJ: Natural gas retreated from gains Thursday as expectations for soft demand and heavy stockpiles outweighed a smaller-than-expected weekly stockpile addition. Prices for the front-month December contract settled down 4.1 cents, or 1.8%, at $2.257 a million British thermal units on the New York Mercantile Exchange. Front-month prices had fallen 18% during the six sessions before Thursday when December and its higher winter prices became the front-month contract. Thursday’s 1.8% losses are measured from the December contract’s settlement on Wednesday, which was nearly 27 cents higher than the November contract’s expiration price. Near-record production is on pace to put what may be a record amount of gas in storage ahead of a winter that could bring mild weather and tepid heating demand, analysts said. Gas prices have fallen in six of the past seven sessions, a pattern still holding because weather forecasts keep showing more unseasonably warm weather into mid-November, analysts said.The U.S. Energy Information Administration did say producers added 63 billion cubic feet of natural gas to storage in the week ended Oct. 23. That is five bcf less than the average forecast of 22 analysts and traders surveyed by The Wall Street Journal. But that still brought stockpiles to 3.9 trillion cubic feet, 4.1% above their five-year average level for this week of the year and 12% above their level at this time a year ago. At this pace, the market could set a record of around four trillion cubic feet heading into the winter heating season, analysts have said.

Shadow of Storage Surplus Threatens Winter Natural Gas Prices - The Energy Information Administration (EIA) yesterday (Thursday) reported the U.S. natural gas storage inventory is 3,877 Bcf as of Oct. 23, which is above the 5-year maximum for this week and within striking distance of breaching the all-time record high of 3,929 Bcf (Nov. 2, 2012) by the end of the traditional storage injection season on Oct. 31.  And, while the production growth rate has slowed compared to recent years, and even dipped a bit over the past couple of weeks, total gas production is still near record levels and about 2.0 Bcf/d higher than last year. Now the gas market is about to flip to withdrawal season, when winter heating demand typically exceeds available local production, leading to storage drawdowns.  The combination of high storage and production levels sets up a bearish dynamic for the winter market.  Today, we take a look at the supply and demand balance going into the winter gas market.  Our last update on the natural gas supply and demand balance was at the end of August 2015 At that time the market had worked off some of the supply surplus it started with back in April. At the start of the summer injection season in April there was 600 Bcf more gas in storage and production was 4.0 Bcf/d higher than last year. By August end, near-record demand from power generators and flattening production helped to whittle down the year-over-year storage overhang to just under 500 Bcf. Since then, demand has maintained record highs each month. And, while average production set a new record in September, year-over-year increases continued to flatten out.

How super low natural gas prices are reshaping how we get our power - This week, U.S. natural gas prices plunged briefly below $ 2 per million Btu (British thermal units), lower than they have been since early 2012. It’s part of a long term price drop that is closely tied to the fracking and shale gas boom, but also more immediately to high levels of natural gas storage and warm weather.  Meanwhile, Duke Energy, the nation’s single largest utility company by market capitalization, purchased Piedmont Natural Gas for $ 4.9 billion, paying a premium for the natural gas distributor.  The two overlapping stories hint at one of the most important consequences of the natural gas glut — it’s already changing not only what we pay to heat our homes in winter but also how we get electricity across the board. Natural gas displaced coal as the largest source of electricity generation in the U.S. for two months so far this year — a landmark development that has been long forecast — and if prices like these continue, that could become a much more frequent occurrence.  Indeed, a Duke spokesman says frankly that gas-fired electricity is the better deal right now. “Thirty percent of our coal plants’ cost is in transportation,” says Duke’s Thomas Williams. “It’s rail to bring the coal from the mines to the plants. With gas at two and a half bucks or two bucks, incredibly low, it’s way in the money compared to coal.” The reason for such changes, across the country, is both the construction of more gas plants but also more “switching” from coal to gas plants as gas prices get lower, says Sam Andrus, a senior director with the North American natural gas practice at IHS. “Switching really is a real time decision, the replacement of gas capacity for coal capacity is a long term permanent decision. Both are happening right now,” Andrus says.

New Shale Gas Boom Could Be on the Way - Natural gas prices plunged Monday to their lowest level in more than three years on concerns that the market will remain oversupplied this winter. Adding to investors’ fears, some companies are hinting at a new production boom.  Most of the growth in natural-gas production in recent years has been in the Marcellus Shale in Pennsylvania and West Virginia. Some industry experts say the Utica Shale, which stretches into Ohio and also lies underneath the Marcellus in some places, could be just as bountiful. EQT Corp. said in an earnings call Thursday that it has drilled wells in the Utica with very high production rates. EQT’s shares fell more than 7% that day.  “A year ago, it would have been hard to imagine a more prolific play than the Marcellus,” said David Porges, EQT chief executive, on the call. “However, if the deep Utica works, it is likely to be larger than the Marcellus over time.” This comes on top of already-booming production. Total output rose to a record of 74.9 billion cubic feet per day in September, according to the latest Energy Information Administration estimate. Deutsche Bank said in a note Monday it expects production from six companies focused on Northeast natural-gas production to exceed expectations for the third straight quarter. Investors have been adding to their bearish bets on natural-gas prices. As of Oct. 20, money managers including hedge funds held one of the largest net bets on record that natural-gas prices would fall, according to the Commodity Futures Trading Commission. To be sure, some analysts expect natural-gas production to decline in the coming months, as producers drill fewer new wells. The number of rigs drilling for natural gas in the U.S. has dropped 42% in the past year, according to oilfield-services firm Baker Hughes. In addition, oil production has started to decline, which could limit the amount of natural gas extracted from oil wells.

Cheniere expects to ship first U.S. LNG export cargo in January – Cheniere Energy expects to start receiving natural gas to convert into super-chilled liquid fuel at its first U.S. LNG export terminal before the end of the year, with shipments to start in January, its chief executive said on Monday. Cheniere’s plant will mark the first exports of cheap and abundant U.S. shale gas as liquefied natural gas (LNG), adding to a huge boost in output out of Australia as well. The ample supplies, combined with slowing growth in China and falling demand in top importers Japan and South Korea, have cut prices and prompted a battle for market share. First natural gas supplies will arrive at its U.S. LNG plant this year, Chief Executive Officer Charif Souki told reporters on the sidelines of Singapore International Energy Week. “We will ship our first cargo sometime in January.” Spot LNG prices in Asia have tumbled by half from a year ago, narrowing the gap with U.S. benchmark prices.  Once Cheniere’s first LNG plant starts up, the company will have a new production train starting up every six months until mid-2019, leaving it with seven total lines of gas liquefaction at its Sabine Pass project in Cameron Parish, Louisiana, and at another terminal in Corpus Christi, Texas.

Coming LNG wave more likely to head to Europe than China -- What’s well known is that a wave of new liquefied natural gas (LNG) is about swamp already well-supplied markets, what’s less known is how exactly these new cargoes will be absorbed. The consensus assumption has always been that China would soak up vast quantities of the super-chilled fuel, driven by rising energy demand and the need to switch away from more polluting coal. But this view has been challenged by China’s slowing growth profile, and by evidence that natural gas is failing to make the anticipated inroads into China’s energy markets, mainly as it remains a higher cost option for industry, consumers and power generators. China’s LNG imports dropped 3.8 percent to 14.13 million tonnes in the first nine months of the year compared to the same period last year, although pipeline imports of natural gas gained 8 percent to 18.13 million tonnes. There is the possibility that as the global LNG supply expands by 170 million tonnes from around 300 million currently over the next few years that China will switch from pipeline supplies, especially if LNG prices fall as much as many analysts expect. But even assuming a fairly dramatic increase in LNG purchases by China, there is still likely to be a supply glut by 2020, which will need to find a home or be idled, which is less likely given the need to keep production going to repay the enormous capital invested to build LNG projects. How will the market absorb some 66 million tonnes of new LNG from Australia and 61 million tonnes from the United States by 2020.

La. lost $1.1 billion from 2010-2014 because of severance tax exemption on horizontal drilling, audit says - Louisiana's generous severance tax exemption on horizontal drilling for oil and gas cost the state more than $1.1 billion in revenue from fiscal years 2010 to 2014, according to a report by the Louisiana Legislative Auditor.. Among top producing oil and gas states, Louisiana is the only one that allows a severance tax suspension for horizontal wells, the report said. The audit was completed in August and will be presented Thursday (Oct. 29) to legislators who sit on the Legislative Auditor Advisory Council, an oversight committee, said Karen LeBlanc, director of performance audits. The audit was not prompted by a request or any particular action, LeBlanc said. The severance tax exemption is among a number of exemptions the Legislative Auditor's office will be examining, she said. As an incentive to spur the industry, the state adopted a law in 1994 to exempt companies from paying severance taxes on oil and gas produced from horizontally drilled wells. The law suspends the tax for the first 24 months or until the exploration company recovers the costs of drilling the well, whatever came first. But because horizontal wells are most productive during their first two years, Louisiana is forfeiting substantial revenue during the most productive period of a well's life, the report said.

Chinese companies purchasing Texas oil assets - Chinese national oil companies (NOC) are purchasing west Texas oil assets for $1.3 billion. Shanghai-listed Yantai Xinchao Industry Co. Ltd. said it would buy oil fields in Howard and Borden counties from Nevada-based companies Tall City Exploration and Plymouth Petroleum, according to The Associated Press. Yantai Xinchao signed a letter of intent Friday with Ningbo Dingliang Huitong Equity Investment Center, a limited liability partnership, and its seven shareholders to buy the west Texas oil properties through a subsidiary, Moss Creek Resources LLC. The oil fields lie within the Permian Basin, which has seen resurgence in recent years thanks to horizontal drilling and hydraulic fracturing. Investors have been attracted to the Permian Basin due to low drilling costs and easy access to market. Declining oil prices have resulted in an oversupply and made asset prices particularly attractive to potential buyers. Chinese investment in American energy resources has been limited due to restrictions, but the transaction was approved by the Committee on Foreign Investment in the United States, according to Moss Creek Resources.

Oil execs attending secret meeting are schooled on how to handle ‘green radicals’: play dirty or lose -- In a room filled with oil & gas executives,  a veteran lobbyist called Richard Berman held a crash course on how companies can use scare tactics and manipulation to make environmental groups look like radical morons. This includes digging up dirt on opponents (celebrities are the focus), exploiting basic emotions like fear and anger, skewing information and other dirty tactics, because in the end “you can either win ugly or lose pretty,” Berman said. Of course, these things would have never been admitted in public, but unbeknownst to Berman the whole meeting was taped by one of the executives who found the whole affair appalling, then made public by the New York Times. Richard “Rick” Berman is well known in Washington, being a PR specialist and long time lobbyst operating through his consulting firm, Berman and Company, Inc. In the past couple of years he’s been involved with almost 50 campaigns lobbying for powerful interest against environmental groups. Some of these campaigns include “PETA kills animals” ( smears People for the Ethical Treatment of Animals), “Stepup Wyoming” (attacks Wyoming’s teachers union and advocates for anti-union legislation), “Minimum Wage” (opposes all federal, state, and local efforts to raise the minimum wage), “EPA Facts” (disparages the Environmental Protection Agency and claims that environmental regulations will hurt the economy), and many other shady and distasteful attempts to manipulate the public.  At the meeting in Washington, sponsored by Western Energy Alliance, a group whose members include Devon Energy, Halliburton and Anadarko Petroleum, Berman was trying to raise cash (a measly $3 million) for his latest attack: “Big Green Radicals”. Let’s take a look at the first introductory paragraph posted on the campaign’s website (

Alarming Uptick of Earthquakes in Kansas Linked to Fracking With 52 in Just Last Two Weeks - Just like in Oklahoma, Kansas is seeing a shocking uptick in earthquakes connected to the underground disposal of wastewater from the hydraulic fracturing, or fracking, process.  The Washington Post reports that Kansas has recorded more earthquakes in the past two weeks alone than there have been in the years between 1990 and 2013. According to the Kansas Geological Survey, between Oct. 15-26, there were 52 quakes, most with a magnitude between 2.0 or 3.0. That’s a huge increase from the 19 earthquakes recorded in the state between 1990 and 2010.  In all, the number of earthquakes in the state jumped from four in 2013 to 817 in 2014, the Post reported. In recent years, Kansas has seen an energy boom-and-bust due to technological advancements in fracking and horizontal drilling. However, this quest for oil and gas has produced mixed results, from harmful waste spills to an increase in seismic activity. Earlier this year, the Kansas Corporation Commission, which regulates the state’s oil and gas industry, decided to limit the underground injection disposal of saltwater from oil wells mainly in Harper and Sumner Counties. The decision reportedly tamped down on the number of earthquakes in the area, according The Wichita Eagle. However, one can only wonder if the recent spate of tremors in the state has anything to do with the commission’s regulations expiring Sept. 13.

Kansas Regulators Extend Limits on Oil and Gas Wastewater Disposal --  Kansas regulators have decided to continue limits on wastewater disposal associated with oil and gas production in south central Kansas. It’s part of an effort to study and reduce earthquake activity. The rules regulate how much water can be pumped into underground disposal wells in Sumner and Harper County. Samir Arif, with the Kansas Corporation Commission, says regulators have been studying whether wastewater injection is influencing earthquakes. “The results were pretty much inconclusive, so they’d like to study it further. That is sort of the impetus for extending this order for another six months,” Arif says. The wastewater is a byproduct of oil and gas production. Early results show reducing the amount of wastewater pumped into the ground may reduce the strength and frequency of earthquakes in the area.

Kansas extending fracking limits until at least mid-March in effort to decrease earthquakes - Oil and gas industry restrictions meant to decrease the frequency and intensity of earthquakes in south-central Kansas will remain in place until at least March 2016, state regulators decided Thursday. The Kansas Corporation Commission issued an order extending limits on the injection of wastewater into the ground by oil and natural gas producers during fracking. The limits, first imposed in March of this year, apply to five earthquake-prone areas in Harper and Sumner counties. The restrictions had been set to expire in September, but the commission’s staff recommended continuing them after a drop in the number and intensity of earthquakes in the spring and summer. The restrictions will be revisited early next year, the order said, but they could stay in effect longer. Both the commission’s staff and the Kansas Geological Survey have said there needs to be more study to determine whether limiting wastewater injection in the area is reducing seismic activity. The order described the restriction’s results thus far as “encouraging but inconclusive.” “(The restrictions) will give us a better chance to observe the real impact,” said Ryan Hoffman, the director of the commission’s Conservation Division. “That will give us a bigger picture.” More than 200 earthquakes have been recorded in Kansas since the start of 2013 after only five in the previous 10 years. Environmentalists believe hydraulic fracturing, or fracking, is to blame because after reaching previously inaccessible oil and gas deposits, drillers inject large volumes of wastewater into disposal wells.

Oklahoma Earthquakes Are a National Security Threat -  In the months after Sept. 11, 2001, as U.S. security officials assessed the top targets for potential terrorist attacks, the small town of Cushing, Okla., received special attention. Even though it is home to fewer than 10,000 people, Cushing is the largest commercial oil storage hub in North America, second only in size to the U.S. government's Strategic Petroleum Reserve. The small town's giant tanks, some big enough to fit a Boeing 747 jet inside, were filled with around 10 million barrels of crude at the time, an obvious target for someone looking to disrupt America's economy and energy supply.  After the shale boom added millions of additional barrels to Cushing, its tanks swelled to a peak hoard of more than 60 million barrels this spring.  Now the massive oil stockpile faces an emerging threat: earthquakes. In the past month, a flurry of quakes have hit within a few miles of Cushing, rattling the town and its massive tanks. According to the Oklahoma Geological Survey, more than a dozen quakes have registered 3.0 or higher on the Richter scale within a few miles of Cushing since mid-September. The biggest, registering at 4.5, hit about three miles away on Oct. 10.This is all part of the disturbing rise in earthquakes in Oklahoma, which has corresponded to increased fracking activity and oil production in the state. Since 2008, Oklahoma has gone from averaging fewer than two earthquakes per year that measure at least 3.0 in magnitude to surpassing California as the most seismically active state in the continental U.S. This year, Oklahoma is on pace to endure close to 1,000 earthquakes. Scientists at the National Earthquake Information Center in Colorado recently published a paper (PDF) raising concerns that the welter of moderate-sized earthquakes around Cushing could increase the risk of larger quakes in the future.

Bakken backlog: ND extends timeline to bring new wells online - Last week North Dakota regulators approved a plan to allow oil and gas producers an additional year to bring a new well online in order to give the industry a buffer zone amidst the persisting oil price slump. As reported by Reuters, oil and gas companies operating in the Bakken will now have up to two years to hydraulically fracture drilled-but-uncompleted wells. The extension comes with unanimously approved changes made by the North Dakota Industrial Commission. Prior to the change, companies had only one year to bring new wells into production, but could be granted a six month extension if the window passed. Since oil prices have dropped by more than half since last year, though, more companies are opting to delay the completion of new wells under the market climate improves. Currently, North Dakota is home to approximately 1,000 uncompleted wells, and without the rule change, companies would be forced to spend billions of dollars after hitting the one-year cut off in December. Some investors feared that the backlog of wells coming online would only add to the current oil market oversupply.For North Dakota, the change means delayed but higher tax revenues. Helms told Reuters, “The state would prefer to tax the oil at a higher price in the future.” Applications for an extension must be submitted by producers on a per-well basis. Helms anticipates that about half of the 1,000 uncompleted wells will be granted delays, which will likely impact state oil output by approximately 100,000 to 150,000 barrels per day. To read the full report, click here.

Iraqis tour North Dakota to study gas-capturing technologies — The Iraqi government has turned to North Dakota for help in finding solutions to the wasteful burning of natural gas that’s a byproduct of oil production. Iraq, OPEC’s second-biggest oil producer behind Saudi Arabia, is having much the same problem dealing with excess natural gas that North Dakota has had as oil production there has increased, though the state has made strides recently to capture and use it, said Julio Friedmann, the U.S. Energy Department’s deputy assistant secretary for fossil energy. Iraq’s oil production has surged to more than 4 million barrels a day, up about 2 million barrels in the past five years. “Iraq is unquestionably serious about reducing flaring,” Friedmann said. “They hope to learn from the experience in North Dakota.” U.S. Energy Department officials along with Hamed Younis Saleh al-Zoba’ei, Iraq’s deputy minister of gas affairs, and Hillal Ali Ismaeel Mushtaq, Iraq’s director of general of studies, concluded a three-day tour of North Dakota’s oil patch on Wednesday, after visiting gas-processing facilities and meeting with state and industry leaders.

Oilfield firm working with Williston center on oil cleanup -— An oil industry company is trying to establish a biological process in which oil-eating bacteria are used to clean up a spill with the help of a Williston-based research center. Rick Reese, founder and CEO of Colorado-based Compliant Resources, calls his method aggressive bioremediation instead of land farming, a similar concept, mainly because it’s seen limited success. “Land farming in the oil field is almost a dirty word, and for a good reason,” Reese said. “It’s been tried between Williston and Denver, at least 100 times and maybe even 200, and there are only two documented successes.” While visiting the Bakken formation in the North Dakota-Montana border, Reese was able to develop his ideas and arrive at a successful grant proposal for a study involving the Williston Research Extension Center. After speaking with center director Jerry Bergman and soil science expert James Staricka, Reese discovered the missing component in many oilfield-led efforts was agricultural expertise,  the Williston Herald reported. “There are hundreds of examples of oil field companies who have gone and tried to do this, and they just don’t get it because they don’t know a Dr. Bergman, and they don’t know agronomy,” Reese said. “They are engineers.

ND seeking public comment on oilfield waste landfill The North Dakota Department of Health has opened a 30-day window to receive public comments regarding a proposed 39-acre oilfield waste landfill, reports the Forum News Service (FNS).  The Black Mallard Disposal Facility, which would be located three miles south of Ross in Mountrail County, would mostly take in solidified drill cuttings and soils or other materials contaminated by spills. The site would not, however, accept radioactive oilfield waste despite state rules pertaining to accepting such materials. The proposal has been in review for about two years as local officials have worked with Green Group Holdings, an environmental services company specializing in the planning, implementation and operation of waste disposal, recycling and reuse sites. As reported by the FNS, the site has been granted a conditional use permit, but it included several stipulations, such as not accepting filter socks or other naturally occurring radioactive materials. As permitted, the landfill would be able to accept up to 200,000 tons of waste per year and is anticipated to be in operation for about 27 years. The facility will have an inspector working on-site who will be trained and supervised by the health department. The disposal site is expected to have 18 to 20 trucks hauling in waste every day.

ND likely to ship inmates out of state to curb overcrowding — Negotiations are underway to send North Dakota inmates to an out-of-state private lockup to relieve overcrowding that’s due largely to an increased population spurred by oil development, the state’s top prison administrator said. “There are too many inmates and not enough capacity,” said Leann Bertsch, director of the state Department of Corrections and Rehabilitation. North Dakota’s prison system topped 1,800 inmates last week, a record level for inmate numbers and 500 more than ideal, Bertsch said. “It’s very likely” an agreement will be reached soon to send some North Dakota inmates by year’s end to a lockup in Colorado that is among some 60 detention facilities owned or managed nationwide by the Corrections Corporation of America, based in Nashville, Tennessee. The company operates four facilities in Colorado. Bertsch said she did not know yet which facility would house the North Dakota inmates. The private prison operator specifies what types of inmates it will accept and those who have had disciplinary problems and prisoners with recurring medical and mental problems are not eligible, she said.

Bakken worker death caused by toxic gas, lawsuit claims - The family of a man found dead atop an oil collection tank in the North Dakota oil patch in 2013 is suing the Texas-based company the deceased was working for.   As reported by the Billings Gazette, on July 18, 2013, the body of Blaine P. Otto of Sidney, Montana, was discovered on a catwalk above the tanks where he was checking oil levels. Bradley T. Otto, Blaine’s brother, is representing the estate of the deceased and is suing Newfield Exploration Co.  The company has denied any responsibility for Otto’s death. The official death certificate states that the 39-year-old died from natural causes due to heart problems and obesity. Otto’s family, however, believes he was killed by toxic gasses that were released upon opening of the hatch at the site located in McKenzie County.An investigator that has determined the cause of death in other, similar oilfield worker deaths, told the Tribune that heart attacks are often wrongly attributed to the cause of death when workers are exposed to the released toxic gases. By the time the victims are found, the concentration of harmful gases have usually dissipated. The investigator said that when coroners are evaluating a scene such as this, they will check for natural causes of death because there is no obvious evidence of an accident. The lawsuit points to nine other deaths which have occurred in the Bakken oilfields under similar circumstances.

Samson Resources And American Eagle File For Bankruptcy; Bakken Operators -- The Dickinson Press is reporting: Two debt-heavy operators in the state, Tulsa, Okla.-based Samson Resources and Denver-based American Eagle Energy, filed for Chapter 11 bankruptcy, planning to sell off Bakken assets to pay back what they owe.   Samson, with production acres in the Three Forks and Middle Bakken plays, has not yet succeeded in selling off acreage.  According to 2012 reports, Samson had 400,000 acres in the Bakken. Later that year, it would sell 116,000 acres, primarily in Divide and Williams counties, to Continental Resources for $650 million. No other sale of assets has been reported by the company since then.  American Eagle held 54,262 acres in the Bakken in late 2014. In early 2015, it sold 1,185 leasehold acres in Divide County for $9.5 million. The Samson Resources story is not exactly "news." It was announced August 15, 2015, that the company was planning to file for bankruptcy

More companies operating in Bakken oil patch file bankruptcy — Two more energy companies operating in North Dakota’s Bakken oil patch have filed for Chapter 11 bankruptcy in the midst of slumping crude prices. The Bismarck Tribune reports Tulsa, Oklahoma-based Samson Resources and Denver-based American Eagle Energy plan to sell off Bakken assets to pay debts.  Between June and late September, 10 oil and gas companies filed for bankruptcy. Others have agreed to sell shale oil acreage and assets in North Dakota. Bismarck-based MDU Resources Corp. also is trying to sell off its oil and gas exploration subsidiary, Fidelity Exploration and Production Co. North Dakota sweet crude on Tuesday was fetching about $36 a barrel — about half of what it sold for a year ago. The number of drilling rigs in North Dakota has plummeted by nearly two-thirds.

West Coast refining: Higher yields make Bakken crude by rail economical - Tesoro Corp. says that in spite of higher costs, it is continuing to see the value in receiving rail shipments of North Dakota Bakken crude at its Washington state refinery due to improved yields. As reported by Reuters, Tesoro CEO Greg Goff told analysts, “We still see economic value to be able to move Bakken to the West Coast and achieve the benefits that we have always stated, which primarily are driven by the yield improvements in the refineries.” The discounts applied to crude produced in the Bakken and other areas have narrowed in the wake of the global oil price slump, greatly reducing the profitability of transporting crude by rail. Last month at the North Dakota Petroleum Council’s annual meeting, Justin Kringstad, director of the state’s pipeline authority, said that North Dakota’s Bakken crude will continue to head to the U.S. West Coast via rail. According to data from the American Assocation of Railroads, oil-by-rail shipments across the nation are down by approximately 13 percent over the past year. Although new pipelines have become operational in recent years, no pipelines have been planned to cross the Rocky Mountain Range. Kringstad said, “The West Coast will be serviced by rail for the foreseeable future.”

Range Resources losses mount on low commodity prices -  Struggling with lower prices for oil and natural gas, Range Resources lost $301 million in the third quarter despite aggressively cutting its operational costs and the number of drilling rigs in the field. The Fort Worth-based energy company reported late Wednesday that it lost $1.81 per diluted share compared to a $146 million profit, or 86 cents a diluted share, during the third quarter of last year. Revenue for the period was $479 million, a 22 percent decline. The third-quarter results included a $502 million writedown on the value of oil and gas properties in northern Oklahoma and northwest Pennsylvania. Other companies, including Chesapeake Energy, also have been writing down asset values. Any sales proceeds will be used to reduce debt and strengthen our balance sheet. President and CEO Jeff Ventura Excluding charges, Range said its adjusted net income for the period was $5.5 million, or 3 cents per diluted shares, compared to $62 million, or 37 cents, in the prior-year quarter.

Range Resources looking to sell assets as low gas prices remain a drag  -- Range Resources Corp. expects to sell some assets outside the Marcellus shale as it battles low natural gas prices that pummeled its revenue. “We are continuing to work on potential noncore asset sales for areas in our portfolio that cannot compete against the Marcellus for capital,” CEO Jeff Ventura said Wednesday in announcing third-quarter financial results. The Fort Worth-based company swung to a net loss of $301 million, or $1.81 per share, during the quarter, which compares to a profit of $146 million, or 86 cents per share, during the same period last year. The loss included a $502 million write-down on oil and gas properties in Oklahoma and northwest Pennsylvania. Without that charge and other one-time financial items, Range reported adjusted net income of $5.5 million or 3 cents per share. Range, Pennsylvania’s fourth largest shale producer, increased its production by 20 percent during the quarter and brought online 23 wells, including a second Utica shale well in Washington County. But the company said it got 30 percent less for that gas. Revenue from gas, oil and liquids fell 43 percent to $252 million.

Occidental slips to Q3 loss, quits North Dakota oil patch - Occidental Petroleum Corp, the fourth-largest U.S. oil producer, swung to a significant net loss for the third quarter on Wednesday as it booked charges for dropping futures prices and halted projects while saying it was exiting North Dakota. The company, which also has operations in the Middle East and Colombia, showed a net loss of $2.61 billion, or $3.42 per share, in the third quarter ended Sept. 30, compared with a profit of $1.21 billion, or $1.55 per share, in the year-ago quarter. The result reflects the tough times a more than 50 percent drop in crude prices over the last year has wrought on oil companies. Charges it took “reflect the sharp decline in the oil and gas futures price curves, as well as projects that management determined it would cease to pursue,” Occidental said in a statement. On an adjusted basis, Occidental was able to beat expectations as it lifted output from a year earlier and slashed costs to offset tumbling prices. Houston-based Occidental slashed its capital budget by $300 million in the quarter, and Chief Executive Steve Chazen said the company has “made a strategic decision to exit” the Bakken, which had drained resources away from Occidental’s core Texan shale fields.   Reuters reported this month that Occidental had sold its North Dakota assets to private equity fund Lime Rock Resources. It was the most significant pullback by a big company from the Bakken fields of North Dakota since the downturn started.

Hess posts third-quarter loss on crude price slump, beats expectations  -- Oil producer Hess Corp reported an adjusted quarterly loss on Wednesday but beat expectations as a sharp drop in capital spending and other cost cuts helped offset a 60 percent slump in crude prices in the past year. Hess said it would further pare costs in 2016, aiming to spend 27 percent less on its capital budget, in a range of $2.9 billion to $3.1 billion. Much of the reduction will come from the company’s workhorse Bakken shale fields, where it expects to run four drilling rigs next year, about half of the 2015 average. That should depress Bakken output, which rose in the latest quarter by 31 percent to 113,000 barrels of oil equivalent per day. “The net loss attributable to Hess was $279 million, or 98 cents per share, in the third quarter, compared with a net profit of $1.01 billion, or $3.31 per share, a year earlier. Excluding one-time items, Hess lost $1.03 per share. By that measure, analysts expected a loss of $1.20 per share, according to Thomson Reuters I/B/E/S. Production jumped nearly 20 percent to 380,000 barrels of oil equivalent per day during the quarter, though the average selling price Hess received for its crude fell 53 percent to $45.66 per barrel.  Shares of New York-based Hess fell 4.8 percent to $54.18 in early trade.

Anadarko Petroleum posts loss as crude prices slump - U.S. oil and natural gas company Anadarko Petroleum Corp reported a quarterly loss that met Wall Street expectations compared with a year-earlier profit as results were hurt by a slump in crude prices. Anadarko, like other oil companies faced with a more than 50-percent decline in crude, is working to improve drilling efficiency and productivity while keeping a close eye on costs, Chief Executive Officer Al Walker said in a news release. The Houston-based company reported a third-quarter net loss of $2.24 billion, or $4.41 per share, for the third quarter ended Sept. 30. A year earlier, Anadarko had a profit of $1.09 billion, or $2.12 per share. Excluding one-time items, Anadarko had a per-share loss of 72 cents per share, a figure that was in line with Wall Street’s expectations for a loss of 73 cents per share, according to Thomson Reuters I/B/E/S. In the third quarter, the company’s total sales volumes of oil and gas averaged 787,000 barrels oil equivalent per day, down from 849,000 boepd in the year-ago period.

BP shrinks again to weather extended oil slump --  BP announced a third round of spending cuts and more asset sales over the coming years on Tuesday to tackle an extended period of low oil prices and help pay for its $54 billion (35 billion pound) U.S. oil spill settlement. The British oil and gas company, which has already sold nearly $50 billion in assets since the deadly 2010 Gulf of Mexico spill, said it expected an additional $3-5 billion of divestments in 2016. Oil companies have been aggressively cutting spending and operating costs over the past year to deal with a sharp drop in cashflow due to lower oil prices. The cuts have resulted in thousands of job losses and the scrapping of many new projects. For the first time since 2010, BP was able to report quarterly results knowing how large its oil spill liabilities are, removing a huge element of uncertainty. "Now finally, BP can be more of a normal oil company and do what oil and gas companies do and I'm very excited about that," Chief Executive Bob Dudley told Reuters in a telephone interview. BP said that its capital spending, known as capex, for this year would now come in at close to $19 billion, down from a previous estimate of under $20 billion, and capex would fall to $17-19 billion a year through to 2017. This is the third time the company has reduced its 2015 capex target from an original goal of $24-$26 billion.

BP’s big plans need crude at $60 -- BP has big plans to balance its cashflows by 2017, but it needs crude prices to hold $60 a barrel and St James’s Place has reported a terribly polite 17 per cent rise in net fund inflows. FT City editor Jonathan Guthrie rounds up the morning’s main news and puts it into context.   BP is battening down the hatches for oil to stay at $60 per barrel, publishing plans for “balanced cashflows by 2017” at that level. The oil major says this will“sustain” the dividend and produce growth in distributions over the long term.   The oil industry has been hopeful of a recovery in the price of the black stuff, which traded at over $110 per barrel until around this time last year. BP is preparing for low prices to persist. It will curb capex at around $17-$19bn a year through to 2017 and expects to make additional divestments of $3-$5bn in 2016.   What happens if Brent stays below $50 per barrel? Presumably BP would have to make another plan.  Replacement cost profits for the quarter were $1.2bn lower year-on-year for the third quarter at $1.8bn.

Next Few Weeks Will Reveal Full Extent Of Oil Industry Suffering -- With the bulk of quarterly earnings reports in the energy industry yet to be announced, there are already $6.5 billion worth of asset write-downs, according to Bloomberg. And that could be just the tip of the iceberg. A Barclays’ assessment last week predicted $20 billion in impairment charges from just six companies. Write-downs occur when the expected future cash flow from an asset falls sufficiently that a company has to report that the asset has lost some of its value. With oil prices half of what they were from mid-2014, oil and gas fields around the world are no longer worth what they used to be. Some oil fields that were previously expected to produce in the future may no longer even make sense to develop given current oil prices. As a result, investors should expect billions of dollars in further write-downs in the coming weeks. Persistently low oil prices are putting a lot of pressure on the dividend policies of oil and gas producers. The Wall Street Journal reported that four oil majors – BP, Royal Dutch Shell,  ExxonMobil and Chevron have a combined cash flow deficit of $20 billion for the first half of 2015. In other words, these big players are not earning enough revenues to cover expenditures, share buybacks, and dividends. With such a large cash flow deficit, something has to give. All four are focusing on slashing spending in order to preserve their promises to shareholders, with dividends especially seen as untouchable.

Whiting Petroleum posts third quarter losses, increased production - Whiting Petroleum Corp., the largest oil producer operating in North Dakota, posted losses for the third quarter following the oil price rout and the writedown of its purchase of rival Kodiak Oil & Gas in 2014. In its third quarter financial and operating results report, Whiting reported a net loss of $1.87 billion, compared with a net income of $158 million, or $9.14 and $1.32 per share respectively, in the one-year-ago timeframe. Also during this timeframe, Whiting production rose 38 percent to 160,590 barrels of oil equivalent per day (BOE/d), despite witnessing the average price or each barrel sold decrease by 49 percent. In a statement, Whiting Chairman, President and CEO James J. Volker said, “Our third quarter results demonstrate we remain on track to balance capital spending and cash flow in 2016 at approximately $1 billion while maintaining our longer term growth profile. Total capital expenditures decreased 46 percent from the second quarter while production adjusted for asset sales was relatively flat.”

Shell Has Biggest Loss in More Than a Decade on Price Slump -  Royal Dutch Shell Plc reported its biggest net loss in at least 16 years after Europe’s largest energy group abandoned some projects and lowered its oil-price expectations, resulting in a charge of almost $8 billion. The loss highlights the pain oil and gas companies are enduring as prices plunge, forcing them into the biggest belt-tightening in a generation. Eni SpA, the Italian oil group, also fell into a loss in the third quarter, while profit slumped at BP Plc and Total SA. The oil price rout has wiped almost $500 billion since the end of last year from Bloomberg World Oil & Gas Index, which tracks energy stocks globally including Shell, ExxonMobil Inc and Chevron Corp. Shell, which is buying BG Group Plc in the energy industry’s largest deal this year, reported a third-quarter net loss of $7.42 billion, compared with a profit of $4.46 billion a year earlier. Adjusted for one-time items and inventory changes, profit dropped 70 percent to $1.77 billion, The Hague-based Shell said Thursday in a statement. That missed the $2.92 billion average estimate of 17 analysts surveyed by Bloomberg. Shell took a $4.61 billion charge resulting from the withdrawal from offshore drilling in Alaska and an oil-sands project in Canada, and $3.69 billion triggered by cuts to its outlook for oil and natural gas prices. BG Deal The loss increases the pressure on Europe’s biggest oil producer, which has cut jobs and reduced spending this year, as Chief Executive Officer Ben Van Beurden prepares the company for enduring low prices. Shell’s market value fell last month to the lowest this decade amid concerns that it may be overpaying for BG.

Chevron cutting up to 7,000 jobs as profits shrink -- Chevron is cutting up to 7,000 jobs, or 11 percent of its workforce, the latest indication of the toll that low oil prices are taking on the industry. The two biggest U.S. oil companies reported huge profits for the third quarter. Chevron Corp. said Friday that it earned $2 billion, and Exxon Mobil Corp. earned more than $4.2 billion. But those profits are down sharply from a year ago. Chevron’s profit was 64 percent lower than last year’s third quarter; Exxon’s profit fell 47 percent, its worst third quarter since 2003. Both companies are slashing costs to boost profits. Chevron plans to cut capital and exploratory spending next year by one-fourth, with further cuts in 2017 and 2018 depending on the oil industry’s condition then. That will include cutting the workforce by 6,000 to 7,000 jobs and shedding a similar number of contract workers, said Chairman and CEO John Watson. Many of the layoffs will be in Australia, he said, and an unspecified number will be in the U.S. Chevron has 64,700 employees. Exxon doesn’t announce job cuts, and a spokesman declined to say whether the company had reduced its headcount in response to low oil prices. Vice president of investor relations Jeffrey Woodbury told analysts that Exxon has “continuously … right-sized our global function organization” and has the same number of employees today that it had in 1999, before its merger with Mobil. Halliburton, Schlumberger and other oilfield-service providers have also cut thousands of jobs. While workers in the oil industry lose their jobs, consumers are saving money from lower energy prices.

The Shale Massacre: Chevron Fires Another 7,000 After Laying Off 1,500 Three Months Ago -- Back in January, in the aftermath of the first plunge in commodity prices, and oil in particular, oil major Chevron had the unsavory distinction of being the first US oil giant to admit cash flow "constraints" when it was forced to scrap its buyback. And since oil's dead cat bounce fizzled just around the summer before resuming is slide, it was inevitable that Chevron would proceed with trimming even more cash outflows. It did so for the first time in July, when as we reported at the time, Chevron would layoff 1,500 jobs globally, saying that "the cost reductions due to cuts in the corporate center are expected to total $1 billion with additional cost savings expected across the company." And even though Chevron said in July that its cost-cutting initiatives would be "completed by mid-November of 2015" it decided to surprise everyone moments ago when on its earnings call it announced it would not only slash its capex by another 25%, but will shortly distribute another 7,000 pink slips. The reason: another terrible quarter in which the $2 billion in earnings were a 73% plunge from a year earlier. From the company's press release: “Third quarter earnings were down substantially from a year ago,” said Chairman and CEO John Watson. “While downstream earnings remained strong, lower overall earnings reflected weaker market prices for both crude oil and natural gas, which depressed upstream profitability. We are focused on improving results by changing outcomes within our control. Operating and administrative expenses are 7 percent lower than last year, and we expect further reductions in the quarters ahead.”

Oil industry slipping into the red as outlook dims – The oil sector is slipping into the red after years of fat profits as the steep slump in oil prices shows little sign of ending, with this quarter shaping up to be the worst since the downturn started. The world’s top oil companies have struggled to cope with the halving of oil prices since June 2014. They have cut spending repeatedly, made thousands of job cuts and scrapped projects. The lower-for-longer outlook for oil prices took its heaviest toll yet in the third quarter as oil companies again reported a dramatic drop in income. Some saw results swing into the loss column, and the industry had billions of dollars in impairment charges. “This downcycle poses significant challenges,” Jeff Sheets, ConocoPhillips’ chief financial officer, told investors on a conference call after the company posted a loss. With 10 of the top 20 European and North American oil and gas producers having reported third-quarter results, seven have posted losses. These include Royal Dutch Shell, Italy’s Eni and in North America Occidental Petroleum Corp, Anadarko Petroleum Corp, Hess Corp, Suncor and ConocoPhillips. Shell posted a third-quarter loss of $7.4 billion on Thursday, hit by a massive $8.2 billion charge after halting its exploration in Alaska’s Arctic sea and a costly oil sands project in Canada.

Bad timing: Big Oil ramps up output just as prices sink – After years of declining output, major oil companies have ramped up crude production this year, just as they are being battered by a plunge in prices due to already excessive supplies. Executives have taken pride in seeing billions worth of investments in new technologies and new fields in places such as Brazil, the North Sea and West Africa kick in and boost output. But most of the investment was made three to five years ago when oil was about $100 a barrel, around double current levels. Now, the new production is contributing to a glut in supply due mostly to the North American shale boom, a faltering global economy and OPEC’s decision not to cut output. Recent third-quarter results show the scale of the problem. According to Reuters calculations, oil production from nine of the world’s largest oil and gas producers rose a combined 8 percent in the first nine months of the year to over 10 million barrels per day (bpd) for the first time since 2013. With low prices pushing some companies into the red, oil majors have had to sharply cut costs and rein in growth plans. “The priority for these companies is to achieve cash flow neutrality and investment will be pulled back in order to achieve that where possible,”

OilPrice Intelligence Report: Reality Setting In For The Oil Majors: Third quarter earnings capture some of the worst losses recorded since the downturn in oil prices began last year. Oil prices have displayed great volatility over the last twelve months, rallying to $60 per barrel in the second quarter before dropping back down to current levels in the mid-$40s. That has contributed to some large impairment charges and quarterly losses for the world’s biggest oil companies. Here is a quick snapshot of some of the quarterly figures:
•    Hess (NYSE: HES) reported a net loss of $291 million, or a loss of $1.03 per share. Production jumped, however, from 318,000 boe/d in 3Q2014 to 380,000 boe/d in 3Q2015. 
•    Marathon (NYSE: MRO) became the first large U.S. shale producer to cut its dividend, slashing it from 21 cents to 5 cents per share, or a cut of 76 percent.

  • •    ConocoPhillips (NYSE: COP) reported a $1.07 billion loss, or $0.87 per share, the largest in six years.
  • •    Royal Dutch Shell (NYSE: RDS.A) revealed a huge $6.1 billion loss for the quarter, which included impairment charges of $7.9 billion. Shell ditched its drilling campaign in the Arctic and also wrote off assets in Canada’s oil sands.
  • •    Eni (NYSE: ENI) lost 952 million euros in the third quarter. Eni also announced a sale of 12.5 percent stake in Saipem, an oilfield services company. 
    •    ExxonMobil (NYSE: XOM) posted a reasonable $4.24 billion profit, or $1.01 per share, beating expectations and outperforming its peers. However, profits are still half of the $8.07 billion from last year’s third quarter, and the year is shaping up to be the company’s worst performance since 2009.
  • •    Chevron (NYSE: CVX) earned $2 billion for the quarter, or $1.09 per share. That is down by 35 percent from year ago figures. The company also announced it would lay off 6,000 to 7,000 workers and it would sell off $5 to $10 billion in assets by the end of 2017.
    •    Even PetroChina (PTR), China’s largest oil and gas producer, reported miserable numbers. Earnings fell to 5.2 billion yuan, or 0.03 yuan per share. That is about one fifth of the level from a year ago. The performance was the worst for PetroChina on record.

Oil Producers Curb Megaproject Ambitions to Focus on U.S. Shale -  Big U.S. oil companies are starting to think small. A stubborn 16-month crude rout with no end in sight is driving the largest U.S. oil producers away from costly, high-risk megaprojects long touted as the industry’s future and toward safer shale operations that generate the cash needed to satisfy anxious investors. Exxon Mobil Corp., Royal Dutch Shell Plc, Chevron Corp., ConocoPhillips and Hess Corp. have all either delayed or abandoned projects that range from the deep seas of the Gulf of Mexico to Canada’s oil sands and the U.S. Arctic. At the same time, Exxon and Chevron both announced plans to substantially increase U.S. crude production, largely as a result of their shale operations. “What makes more sense in this environment: drill a $100 million well in the deepwater Gulf that might come up empty, or poke lots of holes in west Texas where you already know there’s oil for a few million apiece?” Explorers are expected to slash spending on deepwater wells by 20 percent to 25 percent next year, compared with a 3 percent to 8 percent overall reduction on all types of fields. The type of giant reservoirs that require megaproject treatment are now found in only the roughest, deepest and coldest parts of the world.  International producers are failing to deliver 80 percent of megaprojects on time and on budget, compared with about 50 percent in 2005, “It’s really bad for megaprojects now,” “When oil was $90 or $100 a barrel, there was a lot of wiggle room to make a return. But at $45 oil, there’s no wiggle room. Enormous projects can’t go over or be late.”

After a decade, oil begins flowing from National Petroleum Reserve-Alaska -- Commercial oil production has begun in the National Petroleum Reserve-Alaska. ConocoPhillips Alaska made that announcement on Tuesday, saying oil has begun flowing at its CD5 drill site, part of the Alpine field on the North Slope. The production is coming from Alaska Native lands within the boundaries of the Indiana-sized reserve, created as a naval petroleum reserve after World War I. The oil giant is also pursuing other development in the reserve, including Greater Moose’s Tooth 1 where the Bureau of Land Management recently approved a drilling permit. If funding is approved by ConocoPhillips, a decision is expected later this year, the $900 million project is expected to result in the first production from federal land in the reserve. CD5 is located eight miles east of Greater Moose’s Tooth 1. ConocoPhillips said in a statement that peak production at the $1 billion CD5 project could reach 16,000 barrels of oil daily. “First oil at CD5 is a landmark for our company, Kuukpik Corporation, Arctic Slope Regional Corporation and for Alaska,” said Joe Marushack, president of ConocoPhillips Alaska. “This announcement is the culmination of more than 10 years of work and collaboration with key stakeholders, including the residents of the nearby village of Nuiqsut.” CD5 sits on land owned by the Kuukpik Corporation, the village corporation for Nuiqsut. Mineral rights are owned largely by ASRC, the Alaska Native regional corporation for the North Slope.

As Alaska lawmakers debate how to build pipeline, some ask: ‘Should we?’ –– Gov. Bill Walker and the Alaska Legislature have fought over budgets, but one thing the two branches of government agree on: Alaska should be trying to build the $55 billion gas pipeline that’s currently under discussion at a special legislative session here. While there’s often discord over how, exactly, the project should move forward, it’s rare for an Alaska politician to question outright the merits of the pipeline. In interviews this week, however, a pair of legislators said they expect to start hearing more questions about whether the project is truly feasible. The state is facing multibillion-dollar budget deficits, and market prices for natural gas have recently plunged along with oil. “I think you’re going to see us start talking about it,” said Rep. Lynn Gattis, R-Wasilla. “Can we afford it and should we? Who’s got the plan?” Sen. Bill Wielechowski, D-Anchorage, meanwhile, said it was a “legitimate question whether we should continue to pour money and time and effort” into the project. “The problem with this pipeline is it’s going to cost money — you can’t build it for free,” he said.

Fracking, landslide blamed for contamination of Northern B.C. creek -  A relentless landslide that's contaminated a source of drinking water near a community in northeastern B.C. has residents blaming oil and gas exploration's effects underground for causing the slide that's contaminating the creek with silt and heavy metals. Farmers and ranchers near Hudson's Hope say they've lost their sole water source and blame landslides on changes to underground aquifers and land stability because of nearby fracking and the effect of two nearby hydro dams, but officials say there is no proof of this.  Last year, a landslide started oozing grey mud, filling the creek with silt and sand. Tests by the Ministry of the Environment showed dangerously high concentrations of heavy metals, including lead, barium, cadmium, and arsenic.In September 2014, the District of Hudson's Hope and Northern Health issued an advisory to stop using the creek's water for drinking, stock watering or farm irrigation. "Clean water is essential for life and all of us need to feel confident that the ground and surface water we all depend on is of good quality. We will continue to press for answers to how exotic metals came to be present in the groundwater,"  In the past, hydraulic fracturing, or fracking, in the region has triggered earthquakes. However, an internal report prepared by B.C.'s Oil and Gas Commission, and obtained by CBC News, states there's "no evidence" that five fracking and disposal wells in the area are associated with the landslide. The report also notes a "prevalence of natural metals" in the soil and historic instability in the area.

Enbridge Montreal Line Reversal Likely to Squeeze Bakken Crude Supply -- Delays to the Enbridge Sandpiper project bringing greater volumes of Bakken crude onto the Enbridge Mainline system at Superior, WS threaten to limit the supply of crude to feed refineries in Quebec when Enbridge’s Line 9B reversal project comes online in November 2015. The market impact could push crude prices higher in North Dakota.  Today we discuss the crude supply picture and possible impact when Line 9B opens up. In Episode 1 we explained the somewhat tortuous path that crude oil has to travel to get to the origin of Enbridge’s Line 9B at Westwood, Ontario – via Line 5 that runs across the top of Lake Michigan or via Lines 78 and 6B that deliver crude northeast from Flanagan, IL to Sarnia, Ontario.  The predominantly light crude oil that Line 9B will deliver to refineries in Quebec Province was expected to mostly come from the North Dakota Williston Basin (Bakken) as well as some synthetic light crude processed from oil sands bitumen in Alberta. We pointed out that Enbridge plans to deliver light crude to Line 9B appear to rely on additional Bakken crude volumes that will flow onto their system from North Dakota at Superior, WS once the 225 Mb/d Sandpiper pipeline comes online in 2017. However, delays to Sandpiper (originally expected online early in 2016) mean that committed shippers on Line 9B may initially struggle to source adequate supplies to meet their take or pay arrangements with Enbridge.  In the paragraphs below, we consider the existing crude diet of the refineries that Line 9B will feed in Quebec and then assess the market impact of limited crude supply before Sandpiper comes online.

Lockdown: The End of Growth in the Tar Sands - Oil Change International - The pipelines exporting tar sands out of Alberta are almost full, according to new analysis by Oil Change International. Without major expansion-driving pipelines such as Energy East, Kinder Morgan or Keystone XL, there will be no room for further growth in tar sands extraction and tens of billions of metric tonnes of carbon will be kept in the ground. This would be a significant step towards a safer climate. All proposed new pipeline routes out of Alberta are facing legal challenges, opposition by local authorities and regulators, and broad-based public opposition. All of the major projects have been significantly delayed with some cancellations seemingly imminent. No pipeline has been built since 2010, despite active industry efforts. Key findings from the report and the model on which it is based include:

  • the current system is 89% full
  • the industry will run out of transportation capacity as soon as 2017
  • further growth in the sector is unlikely to be viable without major pipeline expansions
  • transporting tar sands by rail is found to be too expensive to justify major new growth
  • the emissions savings of no new growth would be 34.6 gigatons of CO2 equivalent (equivalent to the annual emissions of 227 coal plants over 40 years)

Download the report here.

Pipeline Opposition Has Put A Serious Dent In Tar Sands Expansion -- All of those marches, rallies, arrests, and inflatable pipelines are working.  That’s the main finding of a report released this week by pro-clean energy group Oil Change International. According to the report, public opposition has been successful in stopping or delaying tar sands pipeline construction in North America. The existing pipelines carrying oil from Alberta’s tar sands region are 89 percent full, meaning that expansion of tar sands development depends heavily on new pipelines to get that oil to market. Oil Change International’s models found that without new pipelines or expansions on existing routes, tar sands producers will run out of pipeline capacity by 2017.   There are four major proposed pipelines that are key to the expansion of the tar sands: Keystone XL, which runs from Alberta to the Gulf Coast of the United States, and Energy East, Northern Gateway, and the Trans Mountain Expansion, all of which run through Canada. These projects are all facing major opposition, the report notes. Keystone XL has been embroiled in protests, legal suits, and delays for six years, and the Canadian pipelines are all facing protests, both from citizens and from elected officials: the country’s new prime minister Justin Trudeau has said he opposes the Northern Gateway pipeline. In order to expand tar sands production, at least one of these pipelines will need to be approved, the report states.   “The tar sands have run out of room to grow,” Hannah McKinnon of Oil Change International said in a statement. “Production is close to peaking, and now it is time for a recognition that tar sands production has no place in a climate safe world.”

Trump: US needs 'better deal' before approving Keystone pipeline | TheHill: Donald Trump says the United States needs a “better deal” from the developer of the Keystone XL oil pipeline before the project is approved. At a Tuesday rally in Iowa, the GOP presidential front-runner complained that the United States is “not really getting anything” in return for the controversial project, which President Obama is considering whether to approve seven years after TransCanada Corp. first applied to build it, the Toronto Star reported. The new position on Keystone contrasts with Trump’s earlier comments that he would approve the Canada-to-Texas pipeline immediately upon taking office, similar to his Republican rivals. The billionaire mogul also disparaged the oil sands that the pipeline would carry and said the United States’s oil is better. “We have really great-quality oil. Higher than Canada. You know, they have the tar sands, which is a problem, for them; very expensive to get it out. We have great stuff,” Trump said, using a term for oil sands that environmentalists often use to reinforce their position that the petroleum is dirty. “So I would approve it, because I love the jobs of building it, I love the jobs of building it, but I may just say, ‘Maybe we should get 10 percent, 15 percent, maybe 20 percent as that oil flows,’ ” he continued.

Shell halts construction on new Alberta oil sands project – Royal Dutch Shell Plc will not continue construction of its 80,000 barrel per day Carmon Creek thermal oil sands project in northern Alberta because of the lack of infrastructure to move Canadian crude to market, the company said on Tuesday. Shell said the decision to halt the project was also the result of “current uncertainties” and chief executive Ben van Beurden said the company was having to manage costs in today’s low oil price environment. “We are making changes to Shell’s portfolio mix by reviewing our longer-term upstream options world-wide, and managing affordability and exposure in the current world of lower oil prices. This is forcing tough choices at Shell,” van Beurden said in a statement. Canada’s oil sands hold the world’s third largest crude reserves but carry some of the highest project breakeven costs globally. Western Canada also struggles with market access issues due to limited export pipelines, which can lead to a glut of crude building up in Alberta and weighing on prices. The plunge in benchmark oil prices has prompted a number of companies to defer costly new oil sands projects, although so far few have been canceled outright once underway.

Pemex receives U.S. oil swap license, but for less than planned - State oil firm Pemex said on Wednesday it had received a license from the United States to import U.S. light crude in exchange for exports of Mexico’s heavier crude oil for the first time, albeit with a lower ceiling than originally planned. The terms of the year-long license will allow Pemex’s commercial arm, P.M.I. Comercio Internacional, to import U.S. light crude to process in its refineries from October, with the limit capped at 75,000 barrels per day (bpd). Pemex will initially receive conventional U.S. light crudes as part of the swap and later shipments could carry shale crudes as well. A Pemex spokesman said the decision to cut the original plan to import up to 100,000 barrels per day was made in accordance with the company’s present needs at its refineries. The first U.S. shipment would arrive in Mexico from the first half of November,

NT will suffer health, environmental effects unless fracking stopped, Senator Glenn Lazarus warns -  Queensland independent senator Glenn Lazarus has told an anti-fracking meeting in Darwin he will not rest until Australian land owners are allowed to reject shale gas exploration on their properties. Senator Lazarus has renewed calls for a halt to coal seam gas (CSG) mining projects in Queensland after the death by suicide of farmer George Bender. At a meeting in Darwin on Wednesday night Senator Lazarus said it was only a matter of time before another person felt the pressure was overwhelming. "George won't be the last to commit suicide," he said. Senator Lazarus urged people in the Northern Territory to keep campaigning against hydraulic fracturing, known also as fracking. Fracking involves injecting water at high pressures into deep rock formations and is typically used to extract oil and gas. "One of the things we can do is create as much noise as possible. I've got to hope there's something we can do," Senator Lazarus said. While CSG is different to the process used to frack gas, the Senator said the environmental effects were similar. He said the NT would suffer similar health and environmental impacts to that seen in Queensland, if fracking continued.

Ministers accused of trying to sneak through new fracking rules -   -- Ministers have been accused of trying to sneak through new rules allowing shale drilling under national parks without a proper parliamentary debate, in a move condemned by Labour and anti-fracking campaigners.The rules, first proposed in July, would permit drilling underneath protected areas, despite a commitment before the election from Amber Rudd, the energy secretary, to have an outright ban on fracking in national parks, sites of special scientific interest (SSSIs) and areas of outstanding natural beauty.Instead of a full parliamentary debate, the controversial measures will instead be discussed and voted on by a small committee of MPs on Tuesday. All MPs will get to vote on the regulations at some point next week but will be denied the chance of a debate.The 18 committee members include 10 Conservatives, including energy minister Andrea Leadsom, Julian Smith, an assistant whip, and Paul Maynard, a parliamentary aide to Rudd whose local association received a £5,000 donation before the election from Addison Projects, a company that could benefit from fracking..  Greenpeace estimates that 23 MPs have constituencies that include national parks or areas of outstanding natural beauty that could be affected by the new rules – including the former deputy prime minister, Nick Clegg, the Conservative chairman of the Treasury committee, Andrew Tyrie, and Oliver Letwin, the Conservative chancellor of the Duchy of Lancaster.

U-turn will allow fracking in ‘protected areas’, MPs claim -  A government U-turn on fracking regulations will allow fracking under national parks and other areas previously protected, according to campaigners and MPs. Labour MPs Cat Smith and Gordon Marsden made their comments after the ‘Delegated Legislation Committee’ voted to make changes to a ban on fracking to allow the practice to take place more than 1,200 metres below sites including national parks, sites of special scientific interest and areas deemed to be vulnerable to ground water pollution. The committee of 18 MPs voted 10-8 in favour of overturning an amendment to the Infrastructure Bill – passed in January 2015 – which had banned all fracking from such areas.By approving the amendments, the amendments will now receive only a ‘division’ vote in the House of Commons - where MPs shout “aye” or “no” in response, with no debate. Fleetwood MP Ms Smith attended the meeting with Blackpool South MP Mr Marsden. Neither of them were eligible to vote, but the duo were each allocated one minute to speak at the session. Mr Marsden said: “The Government has gone back on promises it made when we asked it to protect these areas. “They say it is deep down and won’t affect the areas – but when you have to put a load of rigs somewhere like the Forrest of Bowland, it’s not going to be great.“And if you are doing things underground, you are inevitably going to affect the surface. “This is an abuse of process and of our trust.

Is fracking really a feminist issue? - When it comes to public relations blunders, the UK's shale gas industry is the gift that keeps on giving. Hot on the heels of self-defeatingly redacted reports, arrests of peacefully protesting MPs, and hysterically optimistic predictions about a fracking bonanza that resolutely refuses to materialise, today we received another present from new UKOOG chairwoman Averil Macdonald and her suggestion women are more likely to oppose fracking because they are less likely to understand it than men. Demonstrating the kind of public relations nous that would make even Donald Trump wince, Macdonald responded to a Nottingham University poll showing 31.5 per cent of women back fracking compared to 58 per cent of men by blaming women's lack of science education for the results. "Frequently the women haven't had very much in the way of a science education because they may well have dropped science at 16. That is just a fact," she told the Times. As a result women are more likely to trust their gut instinct, she continued. "Not only do [they] show more of a concern about fracking, they also know that they don't know and they don't understand. They are concerned because they don't want to be taking [something] on trust. And that's actually entirely reasonable." Yes, it absolutely is a fact that too few women study science at A-Level and university. I, for one, bitterly regret dropping Physics after GCSE despite the A*.But the suggestion opposition to fracking is down to a lack of scientific expertise is an insult to all the women and men who have analysed the environmental, economic, and political implications of building a fracking industry in the UK and concluded the risks outweigh the benefits.

Some U.S. bond funds bet on high-yield survivors of oil carnage -- High-yield energy bonds are on track for their worst year since the global financial crisis yet some funds are holding on, convinced that markets underestimate the ability of many oil companies to ride out the crude price slump. Some money managers such as Western Asset Management Co., Eaton Vance Corp. and Aberdeen Asset Management have broadly held on to their investments in bonds of oil and gas producers throughout the year even as now they lag more than 95 percent of their peers, according to Morningstar data. Their exposure to energy is around 10 percent or more, with varying shares of that in high-yield energy debt. The average yield on U.S. high-yield E&P credits has risen to 13.7 percent through Friday from 10.6 percent at the end of last year, according to Barclays PLC. That increase reflects fears that many companies will struggle with financing their operations and servicing their debt with oil stuck at around $45 a barrel , less than half of last year’s highs. The Barclays U.S. High Yield Energy Index is down 8.6 percent so far this year through Friday, putting it on track for its worst yearly loss since 2008. As of Sept. 30, 8.5 percent of the $117 billion of outstanding high-yield debt issued by U.S. oil and gas firms was in default, either because they missed payments to bondholders, entered bankruptcy or conducted a distressed debt exchange according to Fitch Ratings, a record high since it began tracking the data in 2000.

After Years of Decline, U.S. Oil Imports Rise - WSJ: U.S. imports of foreign oil are rising again after a long decline, as the oil bust forces domestic producers to scale back. Less than a year after the Organization of the Petroleum Exporting Countries opted to continue production despite plummeting prices, member countries including Saudi Arabia and Iraq are clawing back market share they ceded to oil companies pumping in Texas and North Dakota. U.S. crude imports declined 20% between 2010 and 2014 amid the domestic energy boom but have recently started to rise again. Total crude-oil imports rose for three straight months between April and July, according to the most recently available data from the Energy Information Administration. Imports of light crude grew more rapidly, from 5.6% of total imports in April to 11% in July. On the Gulf Coast, vessels carrying nearly a week’s worth of imports waited offshore Friday to unload, according to shipping tracker ClipperData. The slowdown in the nation’s shale-oil output has pushed up the price of high-quality U.S. oil relative to global prices, giving U.S. refiners a reason to buy from countries such as Nigeria. Until very recently, the boom in U.S. shale-oil production forced countries that exported oil to the U.S. to hustle for new customers.

Green incentives seen as key to lifting U.S. oil export ban -– Legislation crawling its way through Congress that would end the U.S. ban on crude oil exports will succeed only if tied to renewable energy incentives, said Senator Heidi Heitkamp, a moderate Democrat working to convince others in her party to support ending the decades-old restrictions. Heitkamp, who represents oil giant North Dakota, said she is convinced her bill or a similar one can pass by the end of the year, though getting the White House and others on board will require some kind of financial support for wind, solar and other renewable energies, energy efficiency and water conservation funds. “The notion that we would be able to do this without some kind of broader compromise in the energy sphere is probably unrealistic at this point,” Heitkamp told the Reuters Commodities Summit on Friday in Williston, epicenter of North Dakota’s oil industry. “Washington is a place where people don’t give up something for nothing.” The United States has limited most oil exports since the early 1970s. The U.S. House of Representatives passed a bill ending the oil export ban earlier this month, but President Barack Obama issued a veto threat, saying Congress should work to move the country to cleaner sources of energy.  Two bills in the Senate similar to the House version have passed through committees – including the one co-sponsored by Heitkamp – but backers are struggling to find enough Democrats to pass legislation in the full chamber.

Forget VW: Oil slump more to blame for weak U.S. diesel demand - Long before Volkswagen AG’s emissions scandal spelled bad times for diesel, U.S. consumption of the fuel was bafflingly weak. Despite surprisingly robust economic growth, rising truck cargo, and pump prices that fell to parity with gasoline for the first time in six years, U.S. diesel use rose by only 0.2 percent in the first seven months of the year. That marked a sharp contrast with gasoline demand, which rose nearly 3 percent at the fastest clip since the 1990s, according to Energy Information Administration (EIA) data. Analysts and traders see several factors at play: lower traffic on diesel-powered railroads due to reduced coal and oil shipments; an economy increasingly tilted to services rather than heavy industry; and the baseline effect from unusually strong heating fuel use during frigid weather in early 2014. Some also say one of the biggest factors is the U.S. oil industry itself. As crude prices tumbled, drillers cut the number of rigs drilling for oil by almost two-thirds over the past year, reducing the number of fracking rigs, tank trucks, generators and other diesel-guzzling equipment. “Production is down, drilling is down, and that spreads to the rest of the economy,”

Natural Gas Growth In The US -- Something called the "NERC" divides North America into eight regions. Most of the regions are multi-state / multi-province, but a couple of them are pretty much just one state, e.g., Texas (TRE) and Florida (FRCC). I assume the latter is based on something other than just economics / customer base.  Be that as it may.   These are three very, very interesting graphs taken from a Seeking Alpha contribution today.  The first graph is projected natural gas-fired generation increase by region (note that only four regions are broken out; the fifth ("rest of the US") consists of the other four regions which includes the midwest (two sub-regions, not very many people), the northeast (a lot of faux environmentalists, looking more and more like the EU) and Florida. Based on the graph, it looks like the following:

  • the western region has a few coal plants to retire, and a bit of wind competition when it comes to NG in the short ter, but by 2025, the writing is on the wall: natural gas will be needed in huge amounts (I wonder if this doesn't correspond to nuclear plants reaching the end of their programmed life?)
  • the Texas region takes off in 2025; probably simply due to growth, residential and commercial
  • the southeast region has the largest number of coal plants to retire; certainly no wind competing; maybe nuclear plants retiring, also (I don't know)
  • the Indiana-Ohio-Pennsylvania corridor as well as the rest of the US appear to simply mirror growth (and/or the loss of nuclear plants)
What stands out most but doesn't necessarily surprise me is the growth in the southeast, which by 2040 passes all the other regions. The "rest of the US" which includes the northeast, the continental midsection, and Florida, plateaus.

Just What We Need: More Natural Gas -- This Time From Alaska -- I just posted this over the weekend:  were so bad that there was serious talk of a 48-inch natural gas pipeline from the Alaskan North Slope to the Northwest Territory (Canada), and from there to the continental US.  Now, today, from Seeking Alpha: BP and ConocoPhillips have provided written assurances that they will commit their shares of Alaska North Slope natural gas to a future pipeline project, Alaska's Governor Walker says, adding that he will not introduce property tax legislation on gas leases within the Prudhoe Bay and Point Thomson units.  The announcement comes as the state legislature begins a special session concerning the project, which now is likely to focus on buying out TransCanada’s interest in the proposed $45B-$65B project that would be the largest single investment in Alaska in the state’s history.  Exxon Mobil, also one of the three top North Slope producers, has not yet made public a similar commitment. It sure doesn't sound like the US oil and gas industry is dead, as Saudi Arabia would like to paint it.

Update On Egypt's Super-Giant Natural Gas Field -- Previously reported; regular readers were aware of this some time ago. The New York Times points out the political side of the gas discovery in Egypt that threatens to upend Mideast energy diplomacy. The company, using drilling rights from the Egyptian government, found what it called a “supergiant” natural gas field. It may be the largest discovery yet in the Mediterranean and is one of the world’s biggest new gas finds in years.  Eni will need to drill more wells to prove its claim that the field, which it calls Zohr, holds up to 30 trillion cubic feet of gas. That could be worth about $100 billion, even when taking into account current low energy prices. But the promise of Zohr — the Arabic word for noon — is already brightening the prospects of the Egyptian economy, which has been benighted by an energy shortage and years of political turmoil.  With a big new supply of natural gas, Egypt might be able to stop burning oil to generate electricity and start exporting the petroleum instead. New domestic supplies of natural gas would help conserve scarce foreign currency resources and might spur investment in gas-fired factories and electric power plants. And natural gas exports might follow.  But Egypt’s good fortune could come at the expense of its much richer neighbor. Eni’s trove could threaten Israel’s ambitions to tap its own giant offshore gas field, called Leviathan.  Israel is already self-sufficient in natural gas by dint of a smaller offshore field — Tamar, discovered in 2009 — that serves the country via pipeline. Noble Energy, an American company that operates Tamar for the Israeli government, discovered the bigger Leviathan field in Israeli waters in 2010. Leviathan has potential reserves far exceeding Israel’s own needs.

Will Pakistan Benefit From LNG Glut Pushing Prices to New Lows? -- LNG spot prices hit a new low of $4 per mmBTU as the supply continue to significantly outstrip demand. It's creating opportunities for Pakistan to get access to large supply of cheap fuel for its power generation.  With softening demand from China and 130 million tons per year (mmpta) of additional LNG supply set to reach market over the next five years, gas research firm Wood Mackenzie sees continuing downward pressure on global LNG spot prices.   “The entire industry is worried because it is hard to tell when China’s demand will pick up again,” according to Wall Street Journal. “Rising demand from smaller countries such as Pakistan, Egypt and Bangladesh is not enough to offset the declining demand from north Asia.” As recently as two years ago, LNG shipped to big North Asian countries like Japan and Korea sold at around $15 to $16 a million British thermal units. This month, the price has already hit $6.65 a million BTUs, down 12% from September, according to research firm Energy Aspects. It expects prices to fall further in Asia next year, to under $6 per million BTUs, as a wave of new gas supply in countries from the U.S. to Angola to Australia comes on line, according to Wall Street Journal.  Petronet LNG Ltd, India’s biggest importer of liquefied natural gas (LNG), is saving so much money buying the commodity from the spot market that it’s willing to risk penalties for breaking long-term contracts with Qatar.  This is a great opportunity for Pakistan to take advantage of historically low LNG prices to alleviate its severe load-shedding of gas and electricity.  Recently, Pakistan has launched its first LNG import terminal in Karachi and started receiving shipments from Qatar.  Pakistan has also signed a $2 billion deal with Russians to build a north-south pipeline from Gwadar to Lahore. But the country needs to rapidly build up capacity to handle imports and distribution of significant volumes of LNG needed to resolve its acute long-running energy crisis.

WTI Crude Contango Collapsed To 5-Month Lows Amid Growing "Over-Supply" Concerns -- At $44.21 (fro the Dec contract), WTI is trading at its lowest level since August 28th (in the middle of the month-end massacre).   The WTI-Brent  spread is at its widest in over 2 weeks "stressing the need for U.S. output to drop to get rid of the oversupply," warns Commerzbank commodity strategist Carsten Fritsch. Even more worrisome (for future hope), is the plunge in prompt contango (1st month - 2nd month) which has collapsed to 5-month lows. ZThis does not suggest good news on the horizon, as Fritsch warns, "unless we get news on U.S. production we should remain at these levels."

OilPrice Intelligence Report: Oil And Natural Gas Prices Crashing Once Again: The Wall Street Journal reported that the four largest oil companies in the world – BP, ExxonMobil, Chevron, and Royal Dutch Shell – had a combined cash flow deficit of $20 billion in the first six months of 2015. All four have plans to bring spending down sufficiently so that revenues cover capex and dividends, but it may take a few years. The emphasis on spending, with promises not to touch dividends, suggests that a large number of planned investments won’t move forward. The WSJ says that cuts in spending have led to the postponement of projects that would ultimately yield 7.3 billion barrels of oil equivalent.  Rising storage levels contributed to increased bearish sentiment in the oil markets. Speculators shorted oil at the highest rate since July, rising by 18 percent for the week ending on October 20, according to new data from the U.S. Commodity Futures Trading Commission. “The decline in U.S. drilling and production is not enough to rebalance even the U.S. market, let alone the global market,” Citi Futures Perspective analyst Tim Evans told Bloomberg in an interview. “How much do you really want to pay for the next million barrels of inventory you don’t need?” Natural gas prices are also crashing, dropping to their lowest levels since 2012. NYMEX prices dropped by nearly 10 percent on October 26 alone, dipping below $2.10 per million Btu. That was the largest decline in a single day in almost two years. During intraday trading on October 27, natural gas prices fell below $2/MMBtu, a threshold not breached in over two and a half years.  Natural gas prices are also crashing, dropping to their lowest levels since 2012. NYMEX prices dropped by nearly 10 percent on October 26 alone, dipping below $2.10 per million Btu. That was the largest decline in a single day in almost two years. During intraday trading on October 27, natural gas prices fell below $2/MMBtu, a threshold not breached in over two and a half years.

U.S. to sell 58 mln barrels from strategic oil reserve - Bloomberg - The United States plans to sell 58 million barrels of crude oil from its strategic petroleum reserve between 2018 and 2025 under a budget deal reached on Monday by the White House and lawmakers from both parties, Bloomberg reported. The proposed sale, which represents more than 8 percent of the 695 million barrels of U.S. strategic reserves, are due to start in 2018 at an annual rate of 5 million barrels and rising to 10 million by 2023, Bloomberg said. The proceeds from the sale will be “deposited into the general fund of the treasury,” Bloomberg said, citing a bill posted on the White House website. The United States may also sell an additional 45 million barrels to cover a $2 billion program from 2017 to 2020 to modernize its strategic reserve, including building new pipelines, Bloomberg said. In all, the sales, if completed, would represent about 15 percent of U.S. strategic reserves and comes as countries such as China and India build their own strategic oil reserves amid a steep drop in global crude prices.

One Chart That Explains The Stupidity Of Congress’ SPR Plan - Buy high, sell low. The definition of stupid. That’s what Congress is considering as it eyes selling oil from the U.S. Strategic Petroleum Reserve (SPR) to pay for certain projects in its latest spending plan. The last time the U.S. bought oil for the SPR in 2000 through 2005, oil prices were rising (Figure 1). Now Congress wants to sell oil when prices are the lowest in a decade and continuing to fall. Members of Congress who routinely tell us that they are good at business need to look at the chart above and explain why we should believe them. Selling oil from the Strategic Petroleum Reserve now is a terrible idea.

Buy High, Sell Low -- US Government Economics 101 -- October 27, 2015; Is The Bakken The New Stragetic Petroleum Reserve? --This may explain why the price of oil continues to drop. Wow, this puts additional pressure on Saudi Arabia and OPEC. I marvel at how things have changed. A few years ago it was all about "peak oil" and $150 oil. Now there's a glut of oil as far out as one can see. Bloomberg is reportingThe U.S. plans to sell millions of barrels of crude oil from its Strategic Petroleum Reserve from 2018 until 2025 under a budget deal reached on Monday night by the White House and top lawmakers from both parties.  The proposed sale, included in a bill posted on the White House website, equates to more than 8 percent of the 695 million barrels of reserves, held in four sites along the Gulf of Mexico coast. Sales are due to start in 2018 at an annual rate of 5 million barrels, rising to 10 million by 2023 and totaling 58 million barrels by the end of the period. The proceeds will be “deposited into the general fund of the Treasury,” according to the bill. Short term, and perhaps a knee-jerk reaction, this seems like a bad omen for the domestic oil and gas industry, but then this: The sale is the second time the U.S. has raised cash from the reserve, created as a counter-balance to the power of Arab producers after the first oil crisis of 1973-74. The U.S. may sell also additional barrels to cover a $2 billion program from 2017 to 2020 to modernize the strategic reserve, including building new pipelines.  With regard to the price of oil and the amount of oil being released from the SPR, let's keep it in perspective.

  • the sales don't begin until 2018
  • the sales go on for eight years
  • the annual rate is 5 million bbls (14,000 bopd)
  • 14,000 bopd of "new" oil coming unto the market won't even be noticed

NatGas Tanks Under $2, Crude Pushes 2-Month Lows After US SPR Decision & BP, Saudi Comments -- The overnight tumble lows in most 'risk' assets is being revisited by oil and gas prices following unhelpful comments from Genel's Tony Hayward that "the next 6-12 months will become challenging" for many in the industry, more details emerging with regard US selling SPR crude to cover budget needs, and finally OPEC's Saudi officials proclaiming that crude prices should be set by the market. NatGas (Nov contract) tumbled under $2 and WTI (Dec) cracks to fresh 2-month lows, erasing well more than half of the August month-end panic-buying surge... Genel’s Hayward Says Some Oil Companies Won’t Survive Next Yr

  • Next 6-12 mos. will “become challenging” for many in industry, Chairman Tony Hayward says at conference in Cape Town.
  • Capital mkts closed for many participants
  • Mkt oversupplied by 2m-3m b/d
  • Shale oil “completely overwhelmed” underlying demand
  • Saudi production strategy “is working;” U.S. rig counts, output dropping
  • Mkt will need 18-30 mos. to clear w/o intervention
  • Supply-side “wild cards” include Iran, Libya: both could ramp up
  • Oil prices will recover; $50 won’t sustain industry

Congressional leaders proposed to sell 58 million barrels of oil from U.S. emergency reserves over six years starting in fiscal 2018 to help pay for a budget deal that ends mandatory spending cuts, according to a copy of the bill posted to a congressional website. Led to an ugly last 24 hours...

Establishment Of Non-Governmental Strategic Petroleum Reserves -- October 27, 2015  With the new, relaxed rules recently announced by the NDIC, we will start to see changes in the Bakken and in the daily activity report. Today's report included a list of seven (7) EOG wells in the Parshall oil field that have been "temporarily abandoned."I only looked at one of the file reports and it said that the well would be temporarily abandoned and would be brought back on line when oil prices improve. I assume that is true for all of them. So, we now have at least three categories of wells that can be brought back on-line fairly quickly if need be:

  • wells on the fracklog; DUCs; wells that have been drilled to total depth but not fracked;
  • wells that are on-line but are choked way back to minimize production and flaring;
  • wells that have been completed and are temporarily abandoned simply because of low prices; they will be inspected annually to insure they remain in good operating order
I've mentioned this before. I assume similar things are happening in the Permian and the Eagle Ford. If so, it is very clear that many (most?) of these wells could be brought to full production within days, if not hours. I think we are seeing a new phenomenon: the birth of a national non-governmental strategic petroleum reserve (NGSPR). 

"They" Must Be Reading The Blog -- October 29, 2015 -- Just a couple of days ago I suggested that we are witnessing a new phenomenon in the United States: the "establishment" of non-government strategic petroleum reserves. Now, CNBC has brought up the same issue, asking whether we need the SPR any more. There is so much craziness in the article. The lede suggests that the government plans to sell a lot of oil out of the SPR. In fact, they will sell on an annual basis, 5 million bbls, starting in 2018. North Dakota has choked back oil production and is producing 5 million bbls every five days; unfettered, in a national emergency, North Dakota could easily produce 5 million bbls every two days. And that's just the Bakken. The Permian is bigger and the Eagle Ford is probably bigger.  Then, the article suggests that the SPR oil sale will raise huge amounts of money to fund the government. In fact, we are talking maybe $2 billion. (5 million bbls x $50 = $250 million annually). Whether it's $2 billion or a fraction of that, both are rounding errors when it comes to the US budget, deficit, and debt. Then this from an analyst who apparently has never heard of the Bakken: McNally says that in addition to the sales already planned, the government has been eyeing the SPR to fund another government project — highway funding and transportation.  "If this turns into a feeding frenzy and we sell down our entire reserve, that's where it could become a market issue," McNally said. "We better be sure we'll be at peace, and I wouldn't make that bet."

Oil prices touch multi-week lows, as supply worries grow - Oil prices fell to their lowest in six weeks on Tuesday, as mounting worries over persistent oversupply grew ahead of U.S. data that was expected to show another increase in crude inventories. Brent December futures fell 82 cents to $47.72 a barrel by 1338 GMT, their lowest since mid-September, after settling the previous session down 45 cents. U.S. crude dropped $1.10 to $42.88 a barrel, having touched a nine-week low of $42.74 earlier in the day. The difference between the price of oil for immediate delivery and in a year’s time yawned to its widest in more than six months, reflecting investors’ perception that supply is likely to be far more widely available now than in the future.“What markets don’t tend to realize is the overhang of crude, which has been developing since September last year, will go into the end of next year,” . U.S. production cuts – from a peak of around 9.6 million barrels a day to around 9.1 million – and optimism over demand have failed to translate into higher prices,. U.S. commercial crude stockpiles are expected to have risen for a fifth straight week, by an average of 3 million barrels to 479.6 million, in the week ended Oct. 23, a Reuters survey showed. While stocks of distillates, which include diesel and jet fuel, are expected to fall by 2 million barrels, storage utilization for distillates in the United States and Europe is nearing historic highs, Goldman Sachs said on Monday.

Crude Oil Price Jumps Following Inventory Report -  The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories increased by 3.4 million barrels last week, maintaining a total U.S. commercial crude inventory of 480 million barrels. The commercial crude inventory remains near levels not seen at this time of year in at least the past 80 years. Tuesday evening, the American Petroleum Institute (API) reported that crude inventories rose by 4.1 million barrels in the week ending October 16. For the same period, analysts had estimated an increase of 3.7 million barrels in crude inventories. Total gasoline inventories decreased by 1.5 million barrels last week, according to the EIA, but remain above the upper limit of the five-year average range. Total motor gasoline supplied (the agency’s measure of consumption) averaged about 9.1 million barrels a day for the past four weeks, up by 3.1% compared with the same period a year ago. Congressional leaders and President Obama agreed earlier this week to sell some 58 million barrels out of the U.S. Strategic Petroleum Reserve (SPR) as part of a deal to prevent another government shutdown at the end of this week. The sales, at an annual rate of around 5 million barrels, would take place between 2018 and 2025. Proceeds from the sale would go to the U.S. Treasury’s general fund. There are plenty of arguments for reducing the size of the U.S. strategic reserve. In this case the reason is Congress lacks the will to raise taxes to pay for needed services — and that’s among the weakest reasons. The SPR held more than 726 million barrels in 2009 and holds about 691 million barrels today.  The average cost to taxpayers of a barrel in the SPR was $29.70, before figuring in inflation.

Crude Jumps Despite API Reporting 5th Consecutive Weekly Inventory Build -- While lower than last week's levels, API reported a still considerable 4.1 million barrel crude inventory build last week. This is the 5th consecutive inventory build. However, despite the size of the overall build, crude prices are rising (extending gains off NYMEX Close ramp) which may be related to a 748k draw on crude stocks at Cushing. 5th week in a row... Charts: Bloomberg

WTI Extends Gains - Tops $45 - On Large Cushing Inventory Draw -- Following last night's API reported 4 million barrel inventory build (against 3.75mm bbl expectations) and Cushing draw, DOE confirms a build (but smaller, at 3.38 million barrels) and Cushing saw a draw of 785k barrels (the largest in 4 weeks). Crude reaction was to extend gains from the earlier knee-jerk and break back above $45, even as crude production rose.And the reaction... Even as crude production ticked back up... (though mostly from Alaska)   Charts: Bloomberg

October 29, 2015  - Jack Kemp's weekly energy tweets:

  • Total US crude and product stocks fell -3.7 million bbls last week, the largest one-week decline in three months
  • US refineries have started to come back from the fall turnaround season and ramp up processing
  • US crude and product stocks all well above the 10-year range, except for distillate fuel stocks which are smack dab in the middle and trending down
  • US refineries pass midpoint of turnaround season; crude stocks rise more slowly; refined fuel stocks draw strongly

From the EIA: US propane exports surging -- (graph)

U.S. crude rises after inventory drawdown at Cushing hub  – U.S. crude futures rose from multi-week lows in thin early Asian trade on Wednesday after an industry group reported that stocks fell at the Cushing hub in Oklahoma, the delivery point for U.S. oil contracts. Crude stocks at the Cushing delivery hub fell by 748,000 barrels, data from the industry group, the American Petroleum Institute, showed late on Tuesday. General inventories rose by 4.1 million barrels in the week to Oct 23 to 477.1 million barrels, the data showed. Gains were limited as a supply glut persists even after U.S. production cuts and investors are awaiting official inventories data due out later on Wednesday that is expected to show further stockpiling. U.S. crude for December delivery was up 6 cents at $43.26 a barrel at 0049 GMT after earlier rising to as high as $43.48. The contract fell to as low as $42.58 on Tuesday, the lowest since late August.

US oil, natural gas rig count declines by 12 this week to 775  — Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. this week declined by 12 to 775. Houston’s Baker Hughes said Friday that 578 rigs were seeking oil and 197 explored for natural gas. A year ago, with oil prices about double the prices now, 1,929 rigs were active. Among major oil- and gas-producing states, Texas lost seven rigs, Oklahoma declined by six, Louisiana lost two and North Dakota, Ohio and West Virginia each lost one. Kansas and New Mexico each gained two rigs and Alaska and Pennsylvania each gained one. Arkansas, California, Colorado, Utah and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.

U.S. Oil Rig Count Declines by 16 - WSJ: The U.S. oil-rig count dropped by 16 to 578 in the latest week, the ninth consecutive week of declines, according to Baker Hughes Inc. BHI 0.17 % The number of U.S. oil-drilling rigs, which is viewed as a proxy for activity in the oil industry, has fallen sharply since oil prices started falling last year. After a streak of modest growth, the rig count has now declined for nine consecutive weeks. There are now 64% fewer rigs from a peak of 1,609 in October 2014. According to Baker Hughes, the number of gas rigs rose by four to 197. The U.S. offshore rig count was 33 in the latest week, down two from last week and down 20 from a year ago. For all rigs, including natural gas, the week’s total fell by 12 to 775. Earlier in the week, oil prices had their highest gains in two months. But that rally soon fell away, like many recent price spikes, as robust supply and expectations of weaker demand from China reminded investors of the market’s poor dynamics. Analysts are increasingly pessimistic that oil will break past $60 a barrel even into next year. U.S. oil prices recently were up 1% to $46.50.

U.S. oil drillers cut rigs for 9th week on low crude prices -Baker Hughes | Reuters: .S. energy firms cut oil rigs for a ninth week in a row this week, the longest losing streak since June, data showed on Friday, a sign low prices continued to keep drillers away from the well pad. Drillers removed 16 oil rigs in the week ended Oct. 30, bringing the total rig count down to 578, the least since June 2010, oil services company Baker Hughes Inc said in its closely followed report. That is about a third of the 1,582 oil rigs operating in same week a year ago. Over the last nine weeks, drillers cut 97 oil rigs. Although U.S. oil futures have averaged $45 a barrel so far this week, the same as the prior week, the December contract was on track for its first weekly gain in three weeks despite a supply glut that has tested storage capacity and hammered oil company results. Energy traders noted the rate of oil rig reductions over the past few weeks - about seven on average - was much lower than the 19 rigs cut on average over the past year since the number of rigs peaked at 1,609 in October 2014 due in part to expectations of slightly higher prices in the future. U.S. crude futures for next year were trading on average over $49 a barrel, according to the full year 2016 calendar strip on the New York Mercantile Exchange. Higher prices encourage drillers to add rigs. The most recent time crude prices were much higher than they are now was in May and June when U.S. futures averaged $60 a barrel. In response to those higher prices, drillers added 47 rigs over the summer even though crude prices had declined to $47 a barrel on average by the time July and August rolled around.  The rig count is one of several indicators traders look at in trying to figure out whether production will rise or fall over the next several months. Other factors include how fast energy firms complete previously drilled but unfinished wells and recent rises in well efficiency and productivity.

OPEC-fueled oil glut to offset waning U.S. output -- Slowing U.S. production is unlikely to offer much respite to low oil prices into next year as high OPEC output feeds a persistent supply glut, a Reuters survey showed on Friday. Benchmark North Sea Brent crude is expected to average $58.52 a barrel in 2016, marginally down from last month’s poll and above $55.94 seen so far this year, the survey of 32 analysts showed. This is the lowest average 2016 forecast in the polls conducted this year. U.S. crude is projected to average $54.44 a barrel next year, up slightly from last month’s forecast of $54.10. Production in the United States will continue to decline in response to cheaper oil, but this is not likely to translate into higher prices, the analysts said. “We think prices will grind slowly higher over the next few years, which should help to ease the falls in production but we don’t expect a sharp rally in prices or a surge in output,” Thomas Pugh of Capital Economics said. The oversupply scenario could also be aggravated by an emerging trend of build-ups in refined products.

Stop Blaming OPEC For Low Prices - We are a little more than a month away from OPEC’s next meeting, which will be held in Vienna on December 4, 2015.  OPEC altered the course of the oil markets last year when it decided to cast aside its traditional role of maintaining balance through production cuts. Instead it pursued a strategy of fighting for market share, contributing to an immediate rout in oil prices. WTI and Brent then went on to dive below $50 in the weeks following OPEC’s decision. OPEC is widely expected to continue its current strategy at its next meeting, and as such, no rebound in oil prices is expected, at least not because of the results of the group’s meeting in Vienna. But that raises a question about what the world of oil expects from OPEC: Why is it that the responsibility for balancing the market falls on OPEC? Why should OPEC be the one to fix the imbalances in the global crude oil trade? On the one hand, it makes a certain degree of sense that market watchers anticipated adjustment from OPEC. After all, the group has historically coordinated its production levels in an effort to control prices, or at least influence them. They could cut their collective production target to boost prices, and vice versa. However, there is an element of imperialism and superiority in the expectation that the burden should fall on OPEC, which is largely made up of producers from the Middle East. It is a bizarre mentality to think that private companies deserve to seize as much market share as they can manage, after which OPEC producers can take what is left. Steven Kopits, President of Princeton Energy Advisors, laid out the concept very nicely in a Platts article earlier this year, in which he says the expression “call on OPEC” should be scrapped.

Governments shouldn't count on low oil prices: IEA -- Countries should not bank on oil prices remaining low when formulating their energy policies, as supplies could tighten from mid-2016 due to a drop in investment and falling U.S. output, a senior industry official said on Monday. Global oil prices have more than halved since June 2014 on rising U.S. shale oil output and as members of the Organization of the Petroleum Exporting Countries (OPEC) decided to defend market share rather than cut production. “It will be a great mistake to index our attention to oil security to the oil price trajectory in the short term,” Fatih Birol, executive director of the International Energy Agency (IEA), said at the Singapore International Energy Week. If prices continued at current levels, oil investment was likely to decline again in 2016, mainly in high-cost regions, after sliding this year by more than a fifth, said Birol, who took over the top post at the Paris-based IEA in September. “If it comes true, this will be the first time in two decades we will see oil investments declining for two consecutive years,” he said. “One should think about medium and long term implications of this lack of investments.”

Sovereign Wealth Funds in the New Era of Oil | iMFdirect - The IMF Blog: As a result of the oil price plunge, the major oil-exporting countries are facing budget deficits for the first time in years. The growth in the assets of their sovereign wealth funds, which were rising at a rapid rate until recently, is now slowing; some have started drawing on their buffers. In the short run, this phenomenon is not cause for alarm. Most oil exporters have enough buffers to withstand a temporary drop in oil prices. But what will happen if low oil prices persist, and how will policymakers react? We explore here the fallout from low oil prices on sovereign wealth funds in oil-exporting countries and find that that they have important domestic implications. The impact on global asset prices will depend on the extent to which the unwinding of oil exporters’ sovereign wealth funds is not compensated by portfolio adjustment in other parts of the world.

Cheap Oil May Force Exporters to Sell Assets, Fueling Market Volatility -- Add one more thing likely to fuel market paroxysms in the months and years ahead: Oil exporters liquidating their rainy-day funds to buffer their economies against anemic crude prices. The International Monetary Fund estimates oil exporters holding $4.2 trillion in global equities, bonds and currencies maybe forced to shed nearly $1 trillion of their assets over the next five years to fill emptying government coffers.  Given weak global growth, gains in energy efficiency and a massive gap between the available supply of oil and demand, economists are predicting a long period of soft oil prices. Although some of those oil-fund sales will likely be offset by oil-importing countries buying assets, those mass liquidations could foment turbulence in markets across the globe. “A substantial change in the path of asset accumulation by sovereign wealth funds will likely have a direct effect on financial markets,” say economists in a new IMF blog post. Markets are already on edge amid tectonic shifts in the global economy. Major emerging market economies, including the world’s No. 2 economy, China, are slowing or shrinking. The U.S. Federal Reserve is preparing to raise rates for the first time in almost a decade. Market bottlenecks, rising risk aversion and falling reserve holdings are inflaming investor jitters and fueling volatility. That’s why any big moves can amplify selloffs. The IMF estimates oil exporters’ sovereign wealth funds will have to sell off roughly $250 billion in assets this year alone.

Saudi central bank foreign assets fall to lowest level in nearly 3 years - Net foreign assets at Saudi Arabia's central bank fell 1.2 percent from the previous month in September to 2.426 trillion riyals ($647 billion), their lowest level since November 2012, official data showed on Thursday. The central bank, which serves as Saudi Arabia's sovereign wealth fund, has been liquidating assets to cover a huge state budget deficit caused by low oil prices, which have slashed the earnings of the world's top oil exporter. The assets shrank 12.2 percent from a year earlier. They reached a record high of $737 billion in August last year before starting to dwindle. The pace of decline has slowed since early this year, however, when month-on-month falls sometimes exceeded 2 percent. One reason for the slower fall is that the government resumed issuing domestic bonds in July for the first time since 2007, reducing the need to sell assets abroad.

Saudi Arabia hit with S&P credit downgrade on weak oil - - Standard & Poor’s Ratings Services on Friday lowered Saudi Arabia’s long-term foreign currency sovereign credit rating to A+ from AA-, citing a widening budget deficit resulting from weaker oil prices. The ratings agency projected the country’s fiscal shortfall will jump to 16% of gross domestic product this year from 1.5% in 2014. S&P said it expects Saudi Arabia to draw down its fiscal assets and issue debt to finance its deficit, though the country does not have much monetary-policy flexibility given the riyal’s peg to the U.S. dollar. “The outlook remains negative, reflecting the challenge of reversing the marked deterioration in Saudi Arabia’s fiscal balance,” said S&P.

Saudi Arabia downgraded after budget surplus turns negative -- The oil crash is crushing Saudi Arabia's budget.The dramatic plunge in oil prices over the past 18 months has caused a "pronounced negative swing" in Saudi Arabia's financial picture, S&P warned. The oil-rich kingdom has gone from a healthy budget surplus of 7% of GDP in 2013 to a projected deficit of 16% this year. S&P estimates that unless oil prices rebound meaningfully, Saudi Arabia will suffer deficits each of the next three years. A lower credit rating means that borrowing becomes more expensive. S&P's outlook on OPEC leader remains negative, leaving the option for the credit ratings firm to downgrade it further if the government fails to rein in deficits or runs low on cash. It's the latest alarm being raised on the trouble facing the oil-dependent Middle East. The International Monetary Fund recently warned most countries in the region will run out of cash in five years or less if oil stays around $50 a barrel. That includes Saudi Arabia as well as Oman and Bahrain. The problem is Saudi Arabia is heavily reliant on oil, from which it derives 80% of its revenue. S&P also pointed to "inflexible" spending plans as one of the country's financial "vulnerabilities." S&P believes that Saudi Arabia will respond by drawing down its stockpile of cash and issuing more debt. The country already sold bonds over the summer to raise at least $4 billion, its first time tapping the bond market in eight years. Saudi Arabia's central bank has also yanked up to $70 billion from asset management firms like BlackRock over the past half year.

Doctors Without Borders Facility Bombed In Yemen - A healthcare facility operated by Doctors Without Borders was bombed by Saudi Arabian aircraft late Monday evening. The facility is one of the only healthcare clinics still operating in the embattled region on Yemen’s border with Saudi Arabia. Staff and patients were successfully evacuated before the Saudi warplanes hit the facility a second time, suffering only minor injuries. Twelve patients and staff were in the small facility at the time, and only one remains in critical condition – a patient injured during the attack.  First images of #airstrike aftermath: Hospital destroyed. Amazingly, no casualties- staff, patients escaped. #Yemen Doctors Without Borders head of mission in Yemen confirmed for the New York Times that the facility’s coordinates had been reported to the Saudi coalition. The coordinates were confirmed every month, in order to avoid collateral damage from the airstrikes which have claimed the lives of some 1,950 civilians since they began in March of this year.

US Ally Saudi Arabia Bombs Another "Doctors Without Borders" Hospital - Whenever you’re running an air campaign there’s always the possibility of collateral damage. In simpler terms, we you’re dropping bombs on populated areas, you’re invariably going to kill some non-combatants.  Now ideally, you want to keep the number of dead civilians to a minimum, which is why The Intercept’s recent investigative report on America’s drone program was so disturbing - it turns out 90% of people killed aren’t the intended target.  And while that would be bad enough on its own, the US and its regional allies in the Mid-East have recently made a number of “mistakes” while attempting to strike Taliban and Houthi targets in Afghanistan and Yemen, respectively.  On Tuesday we learn that yet another Doctors Without Borders facility has been bombed, this time in Saada, Yemen. As Reuters reports, Saudi warplanes apparently “destroyed the entire hospital with all that was inside.” Here’s more: A Yemeni hospital run by medical aid group Medecins Sans Frontieres (MSF) was hit by a Saudi-led air strike, the group said on Tuesday, the latest bombing of a civilian target in the seven-month air campaign in Yemen."MSF facility in Saada Yemen was hit by several air strikes last night with patients and staff inside the facility," the group said in a tweet on Tuesday. Yemen's state news agency Saba, run the Iran-allied Houthi group that is the coalition's enemy, quoted the Heedan hospital director saying that several people were injured in the attack."The air raids resulted in the destruction of the entire hospital with all that was inside - devices and medical supplies - and the moderate wounding of several people," Doctor Ali Mughli said. Saba said other air strikes hit a nearby girls school and damaged several civilian homes.

US Approves $11 Billion Deal To Sell Combat Ships To "Brutal Dictatorship" -- Defying the international call for an arms embargo over war crimes concerns, the U.S. Department of Defense (DoD) announced Tuesday it has approved an $11.25 billion deal to sell combat ships to Saudi Arabia, which has been waging a military assault against Yemen for more than six months. “The selling of arms in the middle of a war will obviously send the message that the Saudis can do whatever they want and get away with it,” Farea Al-Muslimi, Beirut-based Yemeni writer and visiting scholar with Carnegie Middle East Center, told Common Dreams. The U.S. Defense Security Cooperation Agency, which is part of the DoD, announced Tuesday that is has rubber-stamped the export of four “Multi-Mission Surface Combatant (MMSC) Ships and associated equipment, parts and logistical support for an estimated cost of $11.25 billion” to Saudi Arabia. “This proposed sale will contribute to the foreign policy and national security goals of the United States by helping to improve the security of a strategic regional partner, which has been, and continues to be, an important force for political stability and economic progress in the Middle East,” the U.S. agency stated.

Secret Email Leaked From Hillary's Server: The Real Story Of Bush, Blair And Big Oil's Iraq Agenda -  An extremely important story has come and gone in a flash, almost unnoticed, like so many important stories. It revealed that President George W. Bush and British Prime Minister Tony Blair had agreed to invade Iraq long before the first bombs fell on the oil-rich Middle Eastern country. The story is important because it adds to our understanding of the essentially criminal disinformation put out to convince Americans, Britons and the world that war was unavoidable. We’d all been told that Bush and Blair only acted after exhaustive efforts to determine whether Saddam Hussein had weapons of mass destruction (WMD) — and that in any case their focus was on addressing that threat through all possible diplomatic options. In fact, as a leaked White House memo now shows, the UK was committed to backing the US-led invasion almost a year before the war started in March 2003. Well, that had nothing to do with eliminating WMDs (which turned out to be non-existent). It had everything to do with securing a wealth of natural resources. As WhoWhatWhy previously reported, former NATO commander General Wesley Clark has revealed that the Pentagon had a plan dating back even before the attacks of September 11, 2001, to invade seven different countries in the region. According to Clark, it was “all about oil.” (Vice President Dick Cheney, chairing a secret energy task force, tried mightily to pin blame for 9/11 on Iraq — and though there was no truth to that claim, ended up persuading a fair chunk of the American public otherwise.)

Iraq: We Didn't Ask for U.S. Ground Operations - The Iraqi government said Wednesday it didn't ask for — and doesn't need — the "direct action on the ground" promised by the Pentagon.  The revelation came a day after Defense Secretary Ashton Carter said the U.S. may carry out more unilateral ground raids — like last week's rescue operation to free hostages — in Iraq to target ISIS militants.  Iraqi Prime Minister Haider al-Abadi's spokesman told NBC News that any military involvement in the country must be cleared through the Iraqi government just as U.S.-led airstrikes are.  "This is an Iraqi affair and the government did not ask the U.S. Department of Defense to be involved in direct operations," spokesman Sa'ad al-Hadithi told NBC News. "We have enough soldiers on the ground."

Iran total oil loading hits 7-month low in Oct – shipping source – Iran’s exports of crude oil and condensate dropped to a seven-month low this month, hit by refinery maintenance and a lull in demand ahead of winter, according to an industry source with knowledge of the nation’s tanker loading schedule. Still, loadings of the light oil condensate grade were robust – the second highest for the year – due to Iran’s attractive pricing relative to other producers, the source said. Iran this month exported 1.07 million barrels per day (bpd) of crude and condensate, down 13 percent from revised figures in September and the lowest since March, when India and Japan took no oil to stay within sanction limits, said the source who keeps a close watch on the producer’s shipping program. Asia’s Iranian crude oil imports for the last two years have dipped in October, however, before recovering due to seasonal winter demand, and some industry sources said Chinese loadings are likely to rebound again in the coming months. Iran’s exports of condensate, a by-product of natural gas output, in October totalled 240,000 bpd, the second-highest this year and down 10 percent from top-month September. Industry sources attributed the recent high condensate shipments in part to Unipec – the trading arm of Chinese state giant Sinopec – resuming its purchases after laying off the light oil for several months, taking about 1 million barrels each month in September and October.

Iran to join BRICS New Development Bank —  Tehran intends to participate in the BRICS New Development Bank, the Iranian Tasnim news agency reported on Monday, citing an Iranian official.  The Iranian Deputy Minister of Economic Development Mohammad Khazaee said at a meeting of a joint Iran-Brazil economic council that the country is aiming to join the BRICS bank. The Bank was established in July at the BRICS summit in the Russian city of Ufa. The NDB intends to promote sustainable development in BRICS states. The start-up capital is $50 billion and is projected to reach $100 billion. The headquarters of the bank is in Shanghai. NDB is headed by a veteran Indian banker KV Kamath, who said the bank would be giving its first loans in April 2016. BRICS - Brazil, Russia, India, China and South Africa - comprise about 30 percent of world's GDP in PPP terms and are projected to increase to as much as 45 percent by 2030. The bloc already accounts for 17 percent of world trade. Last week, Russian Energy Minister Aleksandr Novak visited Iran where he negotiated a Russia-Iran bank to boost joint projects. The report of Iran joining BRICS bank appears to be linked to Novak’s visit.

Who's Really Isolated? Iran Set To Join BRICS Bank, Strengthen Ties With Brazil As US hegemony wanes in the face of dysfunctional domestic politics, foreign policy confusion, and a “lead from behind” mentality, the world has begun to transition towards a kind of new world order both politically and economically. On the geopolitical front, we’ve seen a resurgent Russia take charge in Syria after the situation spiraled out of control, leaving hundreds of thousands dead and creating the worst migrant crisis in Europe’s history.   On the economic front, the BRICS nations have embarked on a series of projects designed to supplant the US-led multinational institutions that have dominated the post-war world. In what has become one of the bigger stories of the year, China has established its own development bank (the AIIB) and after the UK broke with Washington to support the new venture back in March, the floodgates opened with US ally after US ally jumping on the bandwagon. Although Beijing has promised it doesn’t intend to use the bank as an instrument of foreign policy or as a means of promoting yuan hegemony, the renminbi is set to play a prominent role in loans issued by the bank and there’s little question that development lending will bolster China’s attempt to establish a kind of Sino-Monroe Doctrine. Beijing has similar ambitions with the Silk Road Fund (see our full breakdown here), although part of the story there looks to revolve around an effort to provide a kind of pressure valve for the country's excess industrial capacity. And then there is of course the BRICS bank, which officially launched along with a reserve currency pool back in July. The following chart does a nice job of demonstrating why the bank matters:

China - International - Analysis - U.S. Energy Information Administration -- China has quickly risen to the top ranks in global energy demand over the past few years. China became the largest global energy consumer in 2011 and is the world's second-largest oil consumer behind the United States. The country was a net oil exporter until the early 1990s and became the world's second-largest net importer of crude oil and petroleum products in 2009. The U.S. Energy Information Administration (EIA) reports that China surpassed the United States at the end of 2013 as the world's largest net importer of petroleum and other liquids, in part because of China's rising oil consumption. China's oil consumption growth accounted for about 43% of the world's oil consumption growth in 2014. Despite China's slower oil consumption growth in the past few years, EIA projects China will account for more than one-fourth of the global oil consumption growth in 2015. Natural gas use in China has also increased rapidly over the past decade, and China has sought to raise natural gas imports via pipeline and as liquefied natural gas (LNG). China is the world's top coal producer, consumer, and importer and accounts for almost half of global coal consumption, an important factor in world energy-related carbon dioxide emissions. China's rising coal production is the key driver behind the country becoming the world's largest energy producer in 2009. China's sizeable industrialization and swiftly modernizing economy helped the country became the world's largest power generator in 2011.

Crude "Tipping Point" Arrives: China Runs Out Of Space To Store Oil -- It was just two days ago when we reported that according to Goldman calculations, the world was dangerously close to an almost unprecedented event (with two exceptions: 1998 and 2009): running out of space to store crude distillate products.  As a reminder, this is what Goldman said: "the build in Atlantic distillate inventories this year has been large, following near-record refinery utilization in both the US and Europe, only modest demand growth, especially relative to gasoline, and increased imports from the East on refinery expansion and rising Chinese exports." As a result, and despite a cold winter in both Europe and the US last year, European and US distillate storage utilization is reaching historically elevated levels, driving a sharp weakening in heating oil and gasoil time spreads. This data was fitting with what we have seen outside the US. Earlier this month, we reported that supertanker day-rates has soared to over $100,000 for the first time since 2008 even as Saudi Arabia was slashing its price (to a $3.20 discount to the benchmark with the largest price cut since 2012) which suggested that in an effort to shore up its reserves and capture more market share amid dwindling demand (and excess supply) - a price war has begun led by US ally Saudi Arabia, and China is hoarding crude at these low-low prices.  And then something very unexpected happened: the world quietly hit a tipping point when,according to Reuters, China ran out of space to store oil. In a report explaining why "oil cargoes bought for state reserve stranded at China port" Reuters notes that "about 4 million barrels of crude oil bought by a Chinese state trader for the country's strategic reserves have been stranded in two tankers off an eastern port for nearly two months due to a lack of storage, two trade sources said."

State-Controlled Oil Firms Feel Brunt of China’s Slowdown - WSJ: Once the flag-bearers of China’s economic rise, China’s state-controlled oil behemoths are feeling the brunt of its slowdown. Poor third-quarter earnings released by China’s two biggest oil companies on Thursday underscored big changes under way across China’s economy, and how the government’s push to reorient growth around consumer demand isn’t happening fast enough to support corporate profits. PetroChina, the nation’s biggest oil-and-gas producer by volume, said its net profit plunged more than 80% in the third quarter to 5.19 billion yuan ($817 million), weighed down by lower prices for oil and gas globally and weak demand at home for products it sells, including diesel. The company’s turnover fell by nearly 30% in the period to 427 billion yuan. PetroChina said its marketing segment plunged to an operating loss of nearly 1 billion yuan in the first three quarters, compared with profit of more than 10 billion yuan in the same period last year. PetroChina blamed weak prices for products like gasoline and slow demand growth for the turnabout. Meanwhile, China Petroleum & Chemical Corp, also known as Sinopec, China’s biggest refiner by volume, said net profit dropped 48% in the first nine months to about 27 billion yuan. Net profit for the third quarter fell to 1.64 billion yuan from 19.26 billion yuan a year earlier. Falling oil-product prices in China throughout 2015 have weighed on the company, which operates a vast network of some 30,000 service stations.

China banks come back for more capital as bad loans pile up - Mounting bad loans are running down Chinese banks' capital buffers, forcing them to turn to investors for fresh funds despite raising a record amount last year. Commercial banks are issuing expensive preference shares as well as convertible and perpetual bonds to shore up their capital bases, even after 2014's bumper issuance when lenders raced to meet new regulatory requirements. But with bad loans up 30 percent in the first half of 2015 according to China's banking regulator, doubts are growing about the ability of some banks to withstand the economic slowdown. "China is facing a systemic credit crisis," said Jim Antos, banking analyst at Mizuho Securities in Hong Kong. "Chinese banks, until mid 2014, were able to cope with deterioration of loans. It seems that has changed." Banks' operating profit margins also are expected to worsen, following the central bank's decision on Friday to cut interest rates for the sixth time in less than a year.

How China got rich - I do not understand this Tyler Cowen post about Chinese catch-up growth: It seems obvious to many people that Chinese growth is Solow-like catch-up growth, as the country was applying already-introduced technologies to its development.  But how many other economies have grown at about ten percent for so long?  Was there not a secret ingredient added to the mix?  Something about Communist Party governance which enabled the corruption to be channeled productively into building more infrastructure rather than holding up progress?  Tiger Mom parenting combined with a relatively meritocratic exam system?...  More radically, is there some “natural,” culture-neutral rate at which innovations trickle down from the world leaders to the poorer countries?  The diversity of growth rates would seem to indicate not.  Is each country then not innovating — with varying degrees of success — by building its culture-specific net for catching and transmitting global innovations throughout the nation? I don't know about Tiger Mom parenting, effectively channeled corruption, or "culture-specific nets", whatever those are. I do know, however, that Solow catch-up growth is not about TFP increase or the diffusion of innovation! There are basically two kinds of catch-up growth. The first is where you cheaply copy innovations from countries at the technological frontier. That's what Tyler is talking about. But the second, Solow catch-up growth, is far simpler - it's just about capital accumulation. Countries don't start out with capital - they have to build it. So they save some of their production each year and use it to build productive capital (or trade it to other countries for capital).  Really simple. Save money, build capital. And that's exactly what China has been doing. Here's a graph from a Federal Reserve Board discussion paper from 2013:  A very smooth exponential increase in the capital-to-labor ratio.

China’s Raging Bond Bubble Exposed - Yves here. The problem of China’s private debt bubble keeps festering away in the background. Readers may recall that there was a flurry of concern early in 2014 as some wealth management products, a big part of China’s shadow banking system, started looking wobbly.   From BofAML: Our analysis shows that:

  1. the bond market is clearly not pricing default risk properly;
  2. the bond market has taken a few SME bond defaults in stride and seems to be counting on bail-outs of the few SOE bonds that are reportedly facing default risk; and
  3. leverage in the bond market is rapidly building up.

On the current trajectory, we doubt the market can stay stable beyond a few quarters, especially if some SOE and/or LGFV bonds indeed default. When a developer can issue a 5y bond at 3bp lower than 5y quasi-sovereign CDB bond’s yield, the market appears grossly mispricing risks in our view. Credit spreads of LGFV, corp. and enterprise bonds are all at or close to five-year lows at the moment. Investors are chasing yield, due to rapid money expansion (M2 at 13.1% in Sept vs. 6.2% nominal GDP growth in 3Q). AUM of bond and money market mutual funds expanded by Rmb1.6tr Jan-Sept and by Rmb1.3tr alone since July after the A-share correction vs. Rmb44.1tr bond outstanding as of Sept. Moral hazard is playing a key role – there is no official default so far in the bond market other than some small SME bonds. Credit spreads narrowed on most occasions when major bond default threats surfaced, suggesting that most investors probably counted on bail-outs (Chart 5-7). Meanwhile, about 2/3 of repos are on less than 7-day term.

Why are Chinese Malls Closing if Consumption is Rising? - Rising vacancy rates and plummeting rents are increasingly common in Chinese malls and department stores, despite official data showing a sharp rebound in retail sales that helped the world's second-largest economy beat expectations in the third quarter. The answer to that apparent contradiction lies in the rising competition from online shopping and government purchases possibly boosting retail statistics. Add poorly managed properties into the equation and the empty malls aren't much of a surprise. More importantly, the struggles of Chinese brick-and-mortar retailers amplify a policy conundrum; these malls, built to reap gains from rising consumption, are instead adding to China’s corporate debt problem, currently at 160 percent of GDP - twice as high as the United States. Less foot traffic means cash flow of mall owners and developers are getting squeezed - a potential hazard for an economy growing at its slowest pace in decades. Major listed mall operators are also feeling the pain. Dalian Wanda, a big property developer, said in January it would close or restructure 30 of its retail venues and in August said more adjustments were underway. Malaysia-based Parkson (3368.HK), which operates more than 70 department stores in China, closed several of its stores in northern China last year following a 58 percent drop in China net profit in 2013. "As growth in retail sales slows because of the country's lower GDP growth, and in cities where mall space is abundant, vacancy rates have risen substantially," said Moody's analyst Marie Lam in a research note.

Mind The Empty Malls Of Shanghai–Why Red Capitalism Is Plunging Into The Red -- With China’s official headline GDP number printing at decade lows, the positive spin on the increasingly negative data out of China has been that this is all a part of China’s transition from an export-oriented to a consumption economy. However, there is a problem with this narrative: malls and shopping centers in China have been, and remain, increasingly empty suggesting that the narrative of the  resurgent Chinese consumer – especially in the aftermath of the biggest stock market bubble burst since 2008 – is greatly exaggerated. Case in point: Reuters asks this morning “if why are malls closing if consumption is rising?” Specifically, it looks at the Di Mei shopping center in downtown Shanghai which it finds “a surprisingly depressing place to shop.” The underground mall is located in one of the most shopping-mad cities in China, and yet it is run down and starved of customers.“ “Sometimes I cannot sell even one dress in a day,” said dress shop owner Ms Xu, who rents a space in Di Mei. Rising vacancy rates and plummeting rents are increasingly common in Chinese malls and department stores, despite official data showing a sharp rebound in retail sales that helped the world’s second-largest economy beat expectations in the third quarter. It sure makes one wonder just how credible China’s retail sales “data” are, especially since the government is far less willing to provide official commercial vacancy rates: “As growth in retail sales slows because of the country’s lower GDP growth, and in cities where mall space is abundant, vacancy rates have risen substantially,” said Moody’s analyst Marie Lam in a research note.

China scraps controversial one-child policy; couples can have two: — More than 30 years after China imposed its controversial “one-child” policy, Beijing's ruling Communist Party brought the program to an end Thursday, saying all couples would now be allowed to have two children. The decision to remove the restrictions limiting most couples to a single child was made "to improve the balanced development of (China's) population," the party said in an official communique distributed by the state-run Xinhua News Agency. The announcement came as the party wrapped up a Beijing meeting about China's development plans for the next five years. The restrictions were introduced in 1980 to aggressively cap the number of children Chinese couples could have in an attempt to reduce the burden on resources amid the country's rapidly expanding population. But in recent years the policy has been gradually relaxed as the country has experienced three decades of economic growth and struggles with an aging population. Younger generations also feel less compelled to accept high levels of state involvement in their private lives.

It is already too late to scrap China's one-child policy -  China’s Communist Party has scrapped its hated one-child policy in a bid to shore up political support, but the move comes far too late to avert a collapse of the workforce and a demographic crisis by the late 2020s. All couples will be allowed to have a second child under new rules agreed at the party’s closely-watched 5th Plenum in Beijing. The ban on larger families in cities will remain despite pleas from Chinese academics for total freedom.The policy shift will make no difference to the workforce for almost 20 years and by then China will already be in the full grip of a demographic crunch. “They have merely moved to a two-child policy. The family planning authorities are still there, and there is still an apparatus of state power intruding into people’s intimate lives,” . The coercive anti-natalist policies begun by Mao Zedong in the early 1970s – and pushed further by ideologues have had powerful and perverse effects. They freed workers from family duties and created a “demographic dividend” of sorts that until recently flattered China’s growth rate. Now the process is kicking violently into reverse. The workforce began to decline in absolute terms in 2012 and has since been shrinking by 3m people a year. The International Monetary Fund says the reserve army of labour peaked five years ago and is going into “precipitous decline”, threatening a labour shortage of 140m by the early 2030s. This is happening just as life expectancy soars to 75.2 – with a target of 77 in 2020 – causing a drastic deterioration in the ratio of workers to pensioners, and unlike the demographic decline in Japan it will start to bite before the country is rich. The ratio was 6.6 in 2000. It is expected to be 2.37 in 2030 and 1.25 in 2060.

Ending the one child policy won’t help China’s demographics  Lots of uninformed people got excited this morning when they read the Chinese government will remove the last vestiges of its “one-child policy”. David already explained why a higher Chinese birth rate could be helpful — the number of young people has been shrinking for more than 15 years — as well as the limited significance of what actually happened given the massive exceptions and loopholes introduced over the past few decades. (The bigger reform was two years ago, when the government chose to allow people without siblings to have multiple kids of their own without paying a fine.) We thought we’d add a little context by putting China’s fertility rate in perspective. If you didn’t know about China’s legacy of population suppression, including horrific forced abortions, sterilisation, and infanticide, you wouldn’t be able to guess by looking at the numbers. China’s fertility rate is still higher than in many countries without government restrictions on childbearing, particularly in Asia: Intriguingly, the big downshift in the birth rate didn’t start until about ten years after the one-child policy first came into force. Singapore, by contrast, devotes considerable government resources to raising its birthrate, including bounties paid to parents for every child they produce, yet has a significantly lower number of children being born per woman than in China. Similarly, despite efforts by the Korean and Japanese governments to raise birth rates, their citizens are less fecund than the Chinese. Perhaps, you might argue, Asia is just unusual. According to the Center for Disease Control, which tracks these things, East Asians in the US have significantly lower birth rates than other Americans, but similar to Chinese in China:

Has China Discovered a Better Political System Than Democracy? Since the collapse of several authoritarian regimes in the 1980s and 1990s—most notably the Soviet Union—conventional wisdom in political science has held that dictatorships inevitably democratize or stagnate. This wisdom has even been applied to China, where the Communist Party (CCP) has presided over 26 years of economic growth since violently suppressing protests at Tiananmen Square. In 2012, the political theorist and Tsinghua University philosophy professor Daniel A. Bell aroused controversy among many China-watchers for challenging this idea. In several op-eds published in prominent Western publications, Bell argued that China’s government, far from being an opaque tyranny, actually presented a “meritocratic” alternative to liberal, multiparty democracy. In a new book titled The China Model: Political Meritocracy and the Limits of Democracy, Bell expands on that idea. Bell is under no illusion that China has already perfected its political recipe, admitting that the ideal “China model” is still very theoretical. This involves a “vertical democratic meritocracy,” as he puts it, with open democratic elections at the local level, meritocratic assessment (like China’s civil-service exam) to choose top national leaders, and experimentation in the middle. In this system, local leaders—who handle relatively basic issues—are still accountable to voters. But national leaders, who must handle more complex issues and make tough decisions that may not be popular (like enacting serious climate-change measures), can be chosen based on experience and knowledge without American-style political gridlock or susceptibility to populist approval.

The Chinese government made a music video about economic policy and it’s magic -- In recent years, there's been a considerable amount of hyperventilating among American politicians and pundits about how the U.S. is losing its competitive edge to China. While many of these worries can be easily dismissed as fear-mongering aimed at the darker, xenophobic corners of the American psyche, a video released this week by Chinese state-run news agency Xinhua reveals those fears about the waning of American power may be justified. There's no way the American government could create a cutesy viral video about national economic policy that is anywhere near this amazing.

Warships sent, US ambassador called in as China bolsters Navy presence in disputed Spratly islands, after US sail-by rattles Beijing’s sovereignty claims The People's Liberation Army yesterday sent two vessels to warn a US Navy warship after the guided-missile destroyer sailed close to China's man-made islands in the disputed South China Sea. Defence spokesman Yang Yujun said the PLA would take all steps to protect national security as it sent its own guided-missile destroyer Lanzhou and frigate Taizhou to warn USS Lassen, which had entered waters within 12 nautical miles of the Mischief and Subi reefs in the Spratly archipelago. Subi and Mischief are located among a group of reefs, islets and atolls in the South China Sea, where the Philippines and Vietnam have competing claims.But while USS Lassen's sail-by was the United States' most significant challenge yet to China's territorial claims in the disputed waters, analysts believed neither side would allow the situation to escalate beyond control.

Washington Risks Sparking A War If It Doesn't Stop "Provocative Acts", China Warns -- Imagine two children on a beach. One has built a sandcastle. The other kicks it over. They get into a fight.  That’s exactly what’s going on in The South China Sea right now between Beijing and Washington.  Earlier this week, the US sent a guided missile destroyer on a “let’s see if we can get shot” mission in the South Pacific. The idea, as regular readers are no doubt aware, was to use “freedom of navigation” as an excuse to sail within 12 nautical miles of China’s man-made islands in the Spratlys. Those islands represent the construction of some 3,000 acres of new sovereign territory on which Beijing has built everything from airstrips to cement factories to lighthouses. Washington’s regional allies all but swear that the PLA is planning an imminent invasion and Beijing swears the islands are a largely innocent construction project. These competing accounts underscore the extent to which no one is telling the whole truth.  Caught in the middle, Big Brother decided it was time to show the world that despite being kicked out of the Mid-East and being bullied by Beijing, no one really wants to go to war with Washington and so, America’s Nobel Peace Prize winning President sent a warship to Subi Reef.  And then, nothing happened.  The USS Lassen wasn’t fired upon or surrounded, which was good news for anyone who doesn’t wish to live through World War III. But while cooler heads prevailed in Beijing, the suggestion that the US (and possibly Australia) are set to make these “patrols” a regular occurrence has riled China and on a teleconference between naval commanders, Admiral Wu Shengli told US chief of naval operations Admiral John Richardson that this needs to stop now unless the US wants to go to war.

In defeat for Beijing, Hague court to hear South China Sea dispute | Reuters: In a legal setback for Beijing, an arbitration court in the Netherlands ruled on Thursday that it has jurisdiction to hear some territorial claims the Philippines has filed against China over disputed areas in the South China Sea. Manila filed the case in 2013 to seek a ruling on its right to exploit the South China Sea waters in its 200-nautical mile exclusive economic zone (EEZ) as allowed under the United Nations Convention on the Law of the Sea (UNCLOS). The Hague-based Permanent Court of Arbitration rejected Beijing's claim that the disputes were about territorial sovereignty and said additional hearings would be held to decide the merits of the Philippines' arguments. China has boycotted the proceedings and rejects the court's authority in the case. Beijing claims sovereignty over almost the entire South China Sea, dismissing claims to parts of it from Vietnam, the Philippines, Taiwan, Malaysia and Brunei. The tribunal found it had authority to hear seven of Manila's submissions under UNCLOS and China's decision not to participate did "not deprive the tribunal of jurisdiction". The Chinese government, facing international legal scrutiny for the first time over its assertiveness in the South China Sea, would neither participate in nor accept the case, Vice Foreign Minister Liu Zhenmin told reporters. "The result of this arbitration will not impact China's sovereignty, rights or jurisdiction over the South China Sea under historical facts and international law," Liu said.

Yuan Soars Most In A Decade As China Moves To Relax Capital Controls -- Just two days ago, we took another look at the various means by which Chinese citizens circumvent Beijing’s capital controls. As a reminder, Chinese are only allowed to move up to $50,000 from the country in any given year, presenting a problem for anyone trying to dodge an export-boosting, double-digit deval or for anyone just trying to smuggle a few million out to buy an overpriced penthouse in Manhattan.  As we’ve noted on any number occasions, capital controls are to some extent counterintuitive. That is, the stricter the capital controls, the more people want to move their money out of the country. Here’s how we put it last month: “What better way to spark a capital exodus than with very vocal, and very effective capital controls. Just look at Greece.” Indeed, China will likely need to completely liberalize the capital account in the coming years in order to pacify the IMF which is poised to throw Beijing a bone and grant Beijing's RMB SDR bid. Inclusion could lead to some $500 billion in reserve demand. That helps to explain why overnight, the yuan soared the most in a decade after China moved to loosen capital controls with a trial program in the Shanghai free trade zone that would allow domestic individuals to directly buy overseas assets. The move marks another step towards capital account convertibility, thus bolstering Beijing’s bid for yuan internationalization. The result:

What Will It Mean If the Yuan Gets Reserve-Currency Status? International Monetary Fund representatives have given China strong signals that the yuan is likely to soon join the fund’s basket of reserve currencies, known as Special Drawing Rights, Chinese officials with knowledge of the matter told Bloomberg News this week. Here’s a primer on what that means. The fund created the SDR in 1969 to boost global liquidity as the Bretton Woods system of fixed exchange rates unraveled. While the SDR is not technically a currency, it gives IMF member countries who hold it the right to obtain any of the currencies in the basket -- currently the dollar, euro, yen and pound -- to meet balance-of-payments needs. So the ability to convert SDRs into yuan on demand is crucial. Its value is currently based on weighted rates for the four currencies. The equivalent of about $280 billion in SDRs were created and allocated to IMF members as of September, compared with about $11.3 trillion in global reserve assets. The U.S. reported about $50 billion in SDR holdings as of August. In a 2009 speech, People’s Bank of China Governor Zhou Xiaochuan said the global financial crisis underscored the risks of a global monetary system that relies on national reserve currencies. While not mentioning the yuan by name, Zhou argued that the SDR should take on the role of a “super-sovereign reserve currency,” with its basket expanded to include currencies of all major economies. Chinese officials have since been more explicit. After meeting President Barack Obama last month at the White House, President Xi Jinping thanked the U.S. for its conditional support for the yuan joining the SDR. Winning the IMF’s endorsement would allow reformers within the Chinese government to argue that the country’s shift toward a more market-based economy is bearing fruit.

Japan’s Struggling Economy Finds ‘Abenomics’ Is Not an Easy Fix - — Japan’s economy has contracted so many times in the last few years that the meaning of recession has started to blur. If an economy is shrinking almost as often as it is growing, what does any single downturn say about its health?Now Japan appears to be faltering again. After a decline in the second quarter, there are signs that output may have slipped again in the third, driven down in part by a slowing Chinese economy. Economists expect any recession to be short and shallow, but the deeper lesson looks more troubling: Nearly three years after Prime Minister Shinzo Abe gained office on a pledge to end economic stagnation, a decisive break with the past still appears far off. “The potential growth rate is close to zero, so any small shock can put the economy into recession,” As a result, some economists are betting that the Bank of Japan, which has been pumping vast amounts of money into the economy by buying up government debt, will pull the trigger on more stimulus at its next board meeting on Friday. The central bank’s aggressive intervention has been central to Mr. Abe’s policies, widely known as Abenomics. But events have conspired to blunt its impact.

BoJ cuts growth, inflation view as Japan economy stalls - The Bank of Japan on Friday cut its growth outlook and pushed back the timeline for a key inflation target, but held off fresh easing even as Tokyo's blueprint for reviving the world's number three economy falters.The central bank's chief left the door open to more stimulus, however, and said there was "no limit" to what policymakers could do.Japan is teetering on the edge of recession in the face of slowing growth in China and shaky global economy, while weak inflation and consumer spending at home have also helped slam the brakes on growth. Some analysts had predicted the Bank of Japan would expand its massive 80 trillion yen ($665 billion) annual asset-buying scheme, launched more than two years ago to kickstart growth and drag prices out of a decades-long downward spiral.But it stood pat on Friday -- despite concerns the economy shrank in the three months through September for the second consecutive quarter -- and hours later underscored the problems it faces by cutting its growth and inflation predictions.The central bank said it now expected growth to come in at 1.2 percent in the fiscal year to March 2016, down from an earlier 1.7 percent projection.It also forecast it would reach its two percent inflation target in the six months ending March 2017 -- half a year later than previously expected.

Why Bank of Japan is forced to buy more bonds: The Bank of Japan will be stepping up its unprecedented bond purchases, whether or not it expands its stimulus program this week, Bloomberg reported. BOJ governor Haruhiko Kuroda’s quantitative easing program is now two-and-a-half years old. Redemptions of previously purchased debt mean reinvestment must be added to the BOJ’s regular monthly purchases so it can stay on course to expand the monetary base by 80 trillion yen (US$665 billion) per year. The monthly average amount of bonds the BOJ bought in the quarter to Sept. 30 was 9.3 trillion yen, up from 9 trillion yen in the three months to March 31. The self-propagating nature of the easing program threatens to drain more and more liquidity from a Japanese government bond market in which trading among investors excluding the central bank and government-related agencies has dropped 38 percent over the past year. The BOJ’s share of government debt outstanding will swell to half the market by 2017 from about 29 percent in June, even without an expansion of stimulus, separate estimates from Bank of America Corp. and BNP Paribas SA show. Japan’s quantitative easing program has already gone on longer than the two years Kuroda initially envisaged when he launched it in April 2013.

The BoJ Owns 52% Of The Entire Japanese ETF Market , And Now It Wants More -- Way back in March, after the BoJ’s equity plunge protection had been exposed for all the world to see, we brought you a hilarious set of proclamations from Haruhiko Kuroda who, you’re reminded, is known for surreal soundbites regarding both the effectiveness of unconventional monetary policy and the omnipotence of central banks.   The BoJ’s $90 billion equity portfolio is actually “not large”, Kuroda explained, before adding this amusing bit of color: “stocks aren’t being lifted by the BoJ’s ETF purchases.” You can evaluate the veracity of that statement for yourself using the following chart from WSJ:Kuroda's comments came on the heels of a Nikkei piece which contained the following rather eye-opening passages:  The central bank's portfolio has a book value of around 5.7 trillion yen. But soaring share prices have lifted its market value past the 10 trillion yen mark -- nearly 2% of the tally for all Tokyo Stock Exchange shares.The figure makes the BOJ second only to the Government Pension Investment Fund, whose portfolio boasted a market value of 27 trillion yen as of December's end.Although the central bank does not disclose details of share-buying operations, it frequently steps into the market and buys 30 billion yen to 40 billion yen worth of stocks when equity prices falter in the morning. Its purchases Tuesday reached 35.2 billion yen, underpinning a market that showed signs of a morning struggle. The bank has carried out 20 such operations so far this year.

President says Indonesia intends to join TPP trade deal (Reuters) - Indonesian President Joko Widodo, speaking after a meeting with U.S. President Barack Obama on Monday, said his Southeast Asian country intends to join the Trans-Pacific Partnership trade deal the United States has forged with 11 other nations. "We are the largest economy in Southeast Asia," Widodo said through a translator. "And Indonesia intends to join the TPP." U.S. Trade Representative Michael Froman said the United States would keep sharing information about the TPP, which will set common standards on issues ranging from workers' rights to intellectual property protection. "As we have said from the beginning, TPP is intended to be an open platform to which other countries who are able and willing to meet the standards can potentially accede," he said at a business summit hosted by the U.S. Chamber of Commerce. More broadly, Indonesia had work to do on cutting red tape, addressing barriers such as local content and local packaging requirements, eliminating import and export restrictions and protecting intellectual property rights, Froman said. President Widodo finalized more than $20 billion worth of U.S. deals during his trip, including a $500 million infrastructure investment from Coca-Cola and up to $1 billion from General Electric for Indonesia's energy and healthcare sectors, according to the Indonesian embassy in Washington. Both deals were for a five-year period. Indonesia's state oil firm Pertamina, and Corpus Christie Liquefaction, a subsidiary of Cheniere Energy, also finalized a shale gas deal valued at $13 billion.

RI ‘not ready’ to join TPP - President Joko “Jokowi” Widodo’s intention to push for membership of the US-led Trans-Pacific Partnership (TPP) trade deal signals a reversal in Indonesia’s protectionist traditions, and some experts have warned that the country had yet to carefully calculate the implications of this change, arguing that the decision might put Southeast Asia’s largest economy in an inferior position in relation to other members of the TPP and the world more broadly. Hikmahanto Juwana, an international law professor with the University of Indonesia (UI), said he was surprised by the President’s statement, which contradicted traditional views held by state officials. “The view is that Indonesia is not ready yet to join the TPP, so it’s surprising to hear a different statement from the President,” Hikmahanto told The Jakarta Post over the phone on Tuesday. “We were not given any direction or voice in the TPP drafting process so that if we join the group, we will have acquiesced to set conditions and points that have already been decided and declared final,” Hikmahanto added. Hikmahanto went on to say that involvement in the TPP would force Indonesia to revise many laws and regulations and the concept of state control stipulated in Article 33 of the Constitution would likely become meaningless.

Thailand wants Chinese loan for railway project to be charged with lower than 2% rate - The joint committee on railway cooperation between Thailand and China is due to meet in Beijing during October 27—29 during which a memorandum of cooperation is expected to be signed. An informed Transport Ministry source said that China has wanted a contract to be signed by the Thai side has wanted to wait as there are some points which need to be cleared up. The source expected that the two sides could reach an agreement on the interest rate charged by China for the project which is over 2 percent and on the survey and design of the first section of the rail route from Bangkok to Kaeng Khoi and the third section from Kaeng Khoi to Nakhon Ratchasima. China has of late reduced the interest rate for loan to 2.5 percent but the Thai side has wanted the same rate charged by China for Indonesia which is lower than two percent, said the source. However, the source said that although the two sides could resolve on the interest rate issue, signing of the contract would still have to wait as the total construction cost of the whole project needs to be determined.

India Is Spending Billions to Populate a Remote Area Claimed by China -- India plans to invest billions of dollars to populate a remote northeastern state it has neglected since fighting a war with neighboring China more than five decades ago. Prime Minister Narendra Modi’s government is finalizing blueprints for a $6 billion highway in Arunachal Pradesh, which is also claimed by China. Construction on the 2,000-kilometer (1,243-mile) road will start as early as 2018, Kiren Rijiju, minister of state for home affairs, said in an interview. "If China is developing on their side of the territory, we should develop on our side," Rijiju, a native of Arunachal Pradesh, said at his New Delhi residence on Saturday. "India has failed the people living along that border. We’re now taking very concrete steps in that direction." Modi has taken a more assertive stance toward China as he seeks to constrain its territorial ambitions while still attracting investment to strengthen India’s economy. In addition to developing the northeast, Modi has sided with the U.S. in calling for stability in the South China Sea and bolstered ties with Sri Lanka after it voted out a pro-China government. Arunachal Pradesh -- which means "Land of the Dawn-Lit Mountains" -- is an area in the Himalayas the size of Austria tucked between China, Myanmar and Bhutan. It has 1.4 million people, less than 1 percent of India’s 1.2 billion population, and a third of them live below the poverty line as hydropower, coal and mineral resources sit undeveloped.

India's fiscal deficit reveals strains to budget plans | Reuters: India's fiscal deficit has reached 68 percent of its full-year target at the halfway stage, revealing strains to Finance Minister Arun Jaitley's budget as revenues from asset sales again fall short. Even though falling oil subsidy costs and curbs on spending should help Jaitley hit his borrowing target, he warned this week that it would be a challenge to collect the 695 billion rupees ($10.66 billion) from sell-offs he has budgeted for. The April-September fiscal deficit totalled 3.79 trillion rupees, or 68.1 percent of the full-year target, data released by the Controller General of Accounts showed on Friday. Net tax receipts stood at 3.7 trillion rupees in the first half of the fiscal year to March 2016, while total spending touched 9.1 trillion rupees. That mismatch reflects that spending is typically front-loaded, while revenues peak late in the year. Still, weak proceeds from sell-offs of state assets are putting Jaitley's fiscal arithmetic to the test. So far he has raised only 127 billion rupees from the sale of shares in state companies, less than one-fifth of the annual target. Some finance ministry officials say the target could soon be slashed by half, and cash-rich state companies like Coal India pressed instead to pay higher dividends to plug the gap. Prime Minister Narendra Modi's government faces a revenue shortfall of up to 500 billion rupees in direct tax receipts, estimated at 7.98 trillion rupees for the 2015/16 year to March.

India plans 2 percent flight tax to fund regional air travel boost | Reuters: India plans to impose a 2 percent levy on most domestic and international airline tickets, the government said on Friday, raising funds to improve regional air travel infrastructure as part of a long-awaited proposal to get more Indians flying. Releasing the government's draft aviation policy, civil aviation secretary R.N. Choubey said the tax may raise about 15 billion rupees ($230 million). Funds will go towards reopening hundreds of disused airstrips, building "no-frills airports" and providing finance to airlines to help keep prices on regional routes at 2,500 rupees per hour of travel. India is one of the world's fastest-growing aviation markets, with around 70 million domestic tickets sold annually and passenger numbers rising 20 percent a year. Choubey said raising regional air connectivity would see annual ticket sales jump to 300 million by 2022. The government's aviation policy draft follows a document released last year that the industry criticised for ignoring high operating costs that leave most airlines struggling to make money in India's fiercely competitive market. Although many budget carriers frequently sell fares for less than $20, flying remains out of reach for the vast majority.

Does India Need a New Constitution? -- Writing in Quartz, Atanu Dey and Rajesh Jain have a very interesting argument that historically slow growth and many of India’s other problems can be traced back to its extractive constitution, which was largely inherited from the British. For nearly a century, India was under comprehensive colonial British rule. As can be rationally expected, the government that the British imposed on India was not primarily directed towards development, but rather towards extraction. That is only reasonable because wealth extraction is the rationale for colonial rule. The British, therefore, created the institutional structures, which necessarily includes the government that controlled India through comprehensive government control of the economy. This structure administration and control was left intact when the British decided to leave India, and was taken over by the government of Independent India. Although India attained political independence from the British raj, Indians did not become free of a controlling—and extractive—government. …The conclusion has to be that India’s problem is structural and systemic, and not idiosyncratic. If the constitution were to change, the ultimate rules of the game would change, the policies (the derived rules) will change, and thus the action on the ground (the play of the game) will change, and therefore the outcome will change. India needs a new constitution that is consistent with a nation of free individuals living in a complex, modern, large economy. This modern constitution has to be one that guarantees economic freedom to the individual, prohibits the government from making any laws that discriminate among citizens, guarantees freedom of speech and the press, prohibits the government from entering into businesses that are properly the domain of the private sector, and so on. In other words, India needs a constitution that protects the comprehensive freedom of the individual: economic, social and political.

Pakistan 3G Uptake Doubles: 2.22 million New Subscribers in September 2015  -- Monthly new subscriptions of 3G and 4G in Pakistan doubled to 2.22 million in September 2015, up from 1.1 million new subscribers in August 2015.  This brings the total number of mobile broadband subscribers to 18.04 million and total of all broadband subscriptions to 21.2 million since 3G-4G launch in May 2014, according to the latest data released by Pakistan Telecommunications Authority. Increasing use of the Internet is now being put to good use to deal with the tragic aftermath of the the earthquake in Pakistan.  Facebook and Google have set up special pages to help people find each other.  Demand for smartphones is also accelerating in Pakistan along with the rise in mobile broadband subscriptions. Forecasters estimate the number of smartphone sales to increase to 40 million by next year. Overall, 3G and 4G subscriptions in Pakistan jumped 14.43 % during September 2015, the highest sequential monthly increase in the past six months. Among the carriers, Mobilink topped with 878,107 new mobile broadband customers, followed by Ufone with 637,131 new 3G users during September 2015. Telenor is number 3 with 393,969 new 3G users during the month. Coming on the heels of data indicating 72% jump in car sales and 17% rise in cement consumption, this data on 2.22 million new mobile broadband subscriptions in September is yet another confirmation of Pakistan's ongoing economic recovery.

Why has world trade been so weak in recent years? -  Before the crisis world trade tended to grow around twice as quickly as world GDP, but since 2012 trade growth has simply matched that of GDP.  So what explains this weakness?  Contrary to some other economists, this post finds no evidence that factors such as slowing growth of supply chains or the expenditure split of demand can explain the weakness relative to GDP.  Instead, it is due to the changing composition of global activity: over time a greater share of world activity has been accounted for by countries whose imports grow more slowly relative to GDP.  These trends are likely to continue, such that world trade is likely to grow more slowly relative to GDP than in the past.  Prior to the crisis, world trade tended to grow at around twice the rate of world GDP on average, meaning that the world trade to GDP ratio trended up over time (Chart 1).  But during the crisis, the decline in trade far exceeded the fall in world GDP.  And over the past four years trade growth has only matched that of world GDP, such that the world trade to GDP ratio has remained flat.  This has raised questions over whether the world trade to GDP ratio has peaked and if the factors driving global integration of production have run their course.  A number of economists have investigated the possible reasons for this apparent breakdown in the relationship between world trade and GDP growth.  While there is a consensus that part of the decline is likely to reflect cyclical factors, structural factors are also likely to have been important.   Constaniscu et al, suggest the relationship between world trade and GDP may have broken down because of slowing growth of global supply chains, and a recent ECB piece points to the expenditure split of global growth.   But this post challenges these explanations.  It first looks at what has driven movements in world trade up to the end of 2014 before going on to consider the implications for future trade growth.

The Trade Facilitation Agenda - The most common way of talking about "barriers to trade" between countries has often involved measuring taxes on imports ("tariffs") or quantitative limits on imports ("quotas"). But import tariffs and quotas have been reduced over time, and the focus of many new trade agreements--along with the World Trade Organization-- is "trade facilitation," which means taking steps to reduce the costs of international trade. Some of of these costs involve transportation and communications infrastructure, but a number of the changes also involve administrative practices like the paperwork and time lags needed to get through customs.  Back in December 2013, the trade negotiators at the  World Trade Organization signed off on the Trade Facilitation Agreement, the first multilateral trade agreement concluded since the establishment of the World Trade Organization in 1995. The agreement legally comes into force if or when two-thirds of the WTO member countries formally accept it. So far, 18 have done so, so there's some distance to go. In its World Trade Report 2015, subtitled "Speeding up trade: benefits and challenges of implementing the WTO Trade Facilitation Agreement," the WTO lays out the potential gains and challenges.  The WTO writes: While trade agreements in the past were about “negative” integration – countries lowering tariff and non-tariff barriers – the WTO Trade Facilitation Agreement (TFA) is about positive integration – countries working together to simplify processes, share information, and cooperate on regulatory and policy goals. ... The TFA represents a landmark achievement for the WTO, with the potential to increase world trade by up to US$ 1 trillion per annum. Here's a figure showing how these trade costs vary across types of countries. The report has discussion of variation by sector of industry as well.

Original Sin and Global Stagnation - Krugman - For countries, getting trendy on Wall Street, and worse yet becoming part of a catchy acronym, is like finding yourself on the cover of BusinessWeek or Fortune: it’s a sure sign of big trouble ahead. So we should have known that the BRICs were heading for a nasty fall; and sure enough, emerging markets have gone from heroes to dogs in practically no time.But what are the implications for the world economy? Emerging markets are out, but advanced countries are in again, so isn’t it a wash? Unfortunately not, because there is an important asymmetry here.  What is true is that all commodity exporters are being hit:   But Canada has kept interest rates low; it might even do some fiscal stimulus if the economy continues to weaken. But Brazilian policy is reinforcing the slump, with interest rates going up and fiscal tightening in prospect.  This is not because the Brazilians are stupid. It’s partly because they came in with a relatively high inflation rate, so that they aren’t as relaxed about currency depreciation as the Canadians can afford to be. But it’s also because emerging markets still suffer to some extent from original sin — underdeveloped capital markets and a tendency to borrow in foreign currency. This sin isn’t nearly as strong as it was 15 years ago, when Barry Eichengreen and Ricardo Haussman coined the term, but corporate dollar-denominated borrowing after 2008 brought it partially back.  The result is that as markets lose faith in emerging economies, these economies are pushed into contractionary policies; meanwhile, the advanced economies receiving the capital inflows aren’t responding with expansionary policies. So the overall effect of the new emerging markets disillusion is a global turn toward contraction. I still think it’s not enough to produce a global recession, but am less sure than I was a few months ago.

Brazil sees deficit of at least $13 bln this year (Reuters) - The Brazilian government expects a primary budget deficit of 51.8 billion reais ($13.3 billion) for this year but the shortfall could be bigger, the planning and finance ministries said in a joint statement on Tuesday. The deficit could grow if the government decides to pay debt it owes to state-controlled lenders before year end, as a crippling recession and political gridlock drag down revenues in Latin America's biggest economy. The statement did not detail the size of that debt. Analysts estimate it could be between 35 billion and 40 billion reais. Federal Congressman Hugo Leal, the rapporteur of a bill that seeks to change the 2015 fiscal target, said this year's budget will provide for the payment of government debts held by state banks, though the final amount to be paid is still being calculated. President Dilma Rousseff has been accused of systematically delaying repayments to state banks that had advanced money for social programs. Opposition lawmakers have called for her impeachment over the accounting practice, known as "backpedaling." The government is waiting for a decision by the country's Federal Accounts Court on whether it needs to pay that debt immediately or in installments.

Brazil central govt posts deficit of 6.932 bln reais in September -- Brazil's central government posted a primary budget deficit of 6.932 billion reais ($1.78 billion) in September, according to Treasury data released on Thursday, the fifth straight monthly gap that widens what is expected to be the biggest annual shortfall on record. The central government account, which covers federal ministries, the central bank and social security, was expected to post a deficit of 14.6 billion reais, according to a Reuters poll of 9 economists. The government posted a primary deficit of 5.08 billion reais in August.

Brazil's 2015 Budget Deficit Could Hit BRL100 Billion, Lawmaker Says - Brazil's budget may end the year looking even worse than it does now, a lawmaker involved in the matter said Wednesday. Congressman Ricardo Barros said that the 2015 primary budget deficit, or the government balance before interest payments, could reach 100 billion Brazilian reais ($25.8 billion), almost double the 51.8 billion-reais deficit projected by the government, an amount equal to 0.9% of gross domestic product. That will happen, he said, if some spending is accounted for immediately, instead of being deferred until next year, and some expected revenue doesn't materialize. Last year, the government chose not to make some transfers to banks it controls. The money was needed to cover for social programs and other payments the banks made to third parties on behalf of the administration. Brazil's government-accounting watchdog has ruled that the 2014 bookkeeping was unlawful. Finance Minister Joaquim Levy, who took the job this year, has said the 2014 payments should be spread out over several years. The government is struggling to balance its books amid a deep recession that curbed tax revenue. Mr. Barros, who is in charge of writing the version of the 2016 budget bill that will be sent to vote, said that deferring these payments could cause more harm than good. "If you push it to next year, then you'll need revenue next year to cover" the payments, he said.

Alberta expected to unveil largest deficit budget in its history - The Alberta NDP is expected to reveal what could be the largest deficit budget in the province's history when the fall legislative session kicks off on Tuesday. Rachel Notley and the NDP swept to power last May, taking over the reins of a province that is dealing with the economic fallout of slumping oil prices. The government was initially aiming for a $5.5-billion deficit this year and balanced books by 2019-2020 in its platform, but it looks as though those promises will be unattainable.Alberta's finance minister, Joe Ceci, hinted earlier this week that the deficit could stand just shy of $6.5 billion for 2015-16 and its books will remain in the red for another year. "It's going to take a little longer to reach balance than outlined earlier," Ceci said Wednesday. A budget released by the former Progressive Conservative government in March was defeated when the NDP took power in the May 5 election. That document called for a $5-billion deficit, but aimed to put the province back in the black by 2018. Duane Bratt, the chair of department of policy studies at Calgary’s Mount Royal University, told CTV News Channel that economic situation in the province is "ugly" and said that the NDP's budget reflects those struggles. "It will be largest deficit in Alberta history, and to put this in context, there was a $1-billion surplus (in 2014-15), so that's a pretty big swing," said Bratt.

Ruble falls further on central bank rate cut bets, weak oil - The Russian rouble traded at a three-week low against the dollar early on Wednesday, falling victim to a further decline in oil prices and expectations among some in the market that the central bank will cut rates later this week. At 0740 GMT, the rouble was 0.9 percent weaker against the dollar at 65.46 and lost 1 percent to trade at 72.35 versus the euro. The central bank meets on Friday to decide on its main interest rate, which now stands at 11 percent. It must decide whether to ease policy to help the economy or keep the rate on hold as inflation remains high. A Reuters poll on the rates meeting showed a slim majority of economists believe the bank will hold rates, but a significant minority expect a cut. Konstantin Chernyshev, a Moscow-based analyst at Uralsib bank, wrote in a morning note that expectations of a rate cut had added pressure to the rouble on Tuesday, when the currency fell by more than 2 percent against both the dollar and euro. "Some market participants expect a 100 basis points rate cut (on Friday), but we see a 50 bps reduction as more likely," Chernyshev said. "Weaker oil prices only added to the negative sentiment in the market."

US escalates Deutsche Bank probe into Russian trades: Deutsche Bank is facing a major escalation of a U.S. probe into its activities in Russia, as a money laundering investigation of its Moscow unit widens to examine possible sanctions violations, said people familiar with the case. The U.S. Department of Justice and New York's Department of Financial Services are expanding the scope of their probe into the bank because some of the scrutinized transactions allegedly involved U.S. dollars and a former banker who is a U.S. citizen. The probe is one of the first known US investigations of a Wall Street company tied to potential breaches of western sanctions against Russia since the measures were first imposed in the wake of Russia's 2014 annexation of Crimea. At issue is a series of so-called "mirror trades", in which Russian clients bought securities in roubles through Deutsche Bank's Moscow office and then sold identical ones for foreign currency, including US dollars, through the bank's London office. Some of the transactions also involved US dollar clearing. The DoJ and DFS are investigating $6 billion-worth of such trades, people familiar with the case said.

Russia: key reserve fund to run dry by end of next year - US News: Russia says it will likely deplete one of its two rainy day funds by the end of next year as it tries to plug the state deficit amid the economic downturn. The economy fell into recession this year for the first time since 2009 due to Western sanctions and a drop in prices for the country's crucial energy exports. Personal incomes have fallen for the first time since President Vladimir Putin came to power 15 years ago. Finance Minister Anton Siluanov told the parliament on Tuesday that the Reserve Fund, which holds 4.7 trillion rubles ($74 billion), is likely to halve by the end of the year with oil prices as low as they are. "This means that 2016 could be the last year when we have these reserves to spend," Siluanov said. "From then on, we will have no resources like this." As oil prices began to climb in the mid-2000s, Russia decided to set aside some profits from oil exports into two rainy day funds. The second one, the National Welfare Fund, now holds $4.9 trillion rubles and is largely used to support infrastructure projects. Unlike in the 1990s, Russia is much better prepared for a recession as its debt levels are low and the currency, the ruble, trades freely on markets. The Russian economy is forecast to contract by 3.9 percent this year and grow by 0.7 percent next year.

Official: Next four months critical for TTIP completion – The European Union and United States are now on equal footing when it comes to tariff offers in the Transatlantic Trade and Investment Partnership talks, but officials made clear that the next four months will be critical for getting a deal done by the end of President Barack Obama’s second term. “We believe that it is important to try to finish these negotiations during President Obama’s presidency,” Dan Mullaney, the U.S. chief negotiator, said during a press call marking the end of the 11th round of trade talks this week in Miami. “To do that, we’ll need to use our time with maximum efficiency.” Mullaney said the two sides will meet more frequently on the range of issues between formal negotiating rounds, including the next round, which is scheduled for February. The Miami round saw intensive work on revising goods tariff offers covering 97 percent of products. The EU’s chief negotiator, Ignacio Garcia Bercero, said negotiations on the remaining 3 percent, which are the most sensitive items, won’t occur until the “endgame” of the talks. “When that time would be would be a little bit early to say at this point,” Garcia-Bercero said. But even as officials reported progress on tariffs, they described some controversial areas that are shaping up to be issues that may only be resolved in the final stage of negotiations. The two sides discussed services offers made at the previous round of talks in July, in Brussels, but did not move forward on the thorny issue of financial services, officials said. Mullaney said discussions on financial services market access will occur in the next week or two. The EU has so far refused to make any serious offers on the area — a response to the White House’s reluctance to address financial service regulatory cooperation.

Migrant crisis: Balkan states threaten border closures - Balkan countries at the front line of the migrant crisis say they could close their borders to avoid becoming buffer zones for new arrivals. Bulgaria said that it, Romania and Serbia would act if states further north, which migrants hope to reach, close their doors. The threat comes ahead of talks between Balkan states and EU members. Slovenia's president said his country would "act on its own before it is too late" if no solution was reached. Prime Minister Miro Cerar had previously refused to rule out building a fence along its border with Croatia. The International Organization for Migration said that more than 9,000 migrants arrived in Greece every day last week  - the highest rate so far this year. Most of the migrants - including many refugees from the conflicts in Syria, Iraq and Afghanistan - want to reach Germany to claim asylum. Germany says it expects to take in 800,000 asylum seekers this year. The procession of those seeking a route north is leading to bottlenecks in parts of southern and eastern Europe, where many countries say they lack the resources to look after new arrivals. Bottlenecks have also been exacerbated in part by Hungary closing its borders with Serbia and Croatia, forcing migrants to seek alternative routes north. Slovenia saw 58,000 arrivals in the week leading up to Saturday, and many people are waiting in wet and cold conditions. While Germany has not indicated it would refuse more migrants, Bulgaria's prime minister said on Saturday that his country, Romania and Serbia would respond immediately if it did so.

Migrant crisis: Thousands of new reception places agreed - BBC News: Another 100,000 spaces in refugee reception centres will be created under a deal agreed by European leaders at an emergency summit in Brussels. The heads of 11 EU states and three non-EU countries met to discuss how to handle growing numbers of migrants. More than 9,000 migrants arrived in Greece every day last week, the highest rate so far this year. Under the deal, Greece will open reception centres with enough room for 30,000 migrants by the end of the year. The UN's refugee body, the UNHCR, will provide another 20,000 spaces in the same time. It will also add reception centres with another 50,000 spaces in Balkan countries, which are the most popular routes for migrants looking to travel north to Germany and Scandinavia. Also as part of the deal, leaders agreed to:

  • within a week, send 400 police officers to Slovenia, which has struggled with arrival numbers
  • "discourage" the movement of migrants to neighbouring countries' borders "without informing neighbouring countries"
  • appoint contact officers who can submit information on migrant numbers to other countries and authorities

Sweden's Migrant Projection Doubled  - Sweden will receive as many as 190,000 refugees this year, according to official estimates, more than double the projected number envisaged just three months ago, placing unprecedented strains on the country’s immigration services as politicians struggle to agree a way forward.  “It’s as if we have a land border with Turkey,” said Anders Danielsson, head of the Migration Board, as he announced the figures on Thursday.  “The current refugee situation is unprecedented in modern times, and the housing situation is critical.” At the end of July, the Migration Board said the rate of new arrivals was falling and it expected a total of just 74,000 in 2015. The previous peak number of asylum seekers in Sweden was in 1992, when 84,000 fled the Balkan wars. The numbers are “not sustainable for Sweden”, said migration minister Morgan Johansson, adding that EU countries must share asylum seekers. With a total population of under 10m, Sweden is receiving by far the highest number of refugees in Europe as a proportion of its population, equivalent to about 6m people flooding into the US, and third only to Germany and Hungary in absolute terms.

Sweden to Request EU’s Help Handling Asylum-Seekers - Sweden will request to join the EU’s controversial refugee relocation scheme in a move that could see up to 54,000 asylum-seekers arriving in Sweden shared out among other EU member states. The Scandinavian country is expected to receive up to 190,000 asylum applications this year as one of the most popular destinations for people fleeing countries such as Syria.  Stockholm is one of many governments across Europe scrambling to keep control of the refugee crisis and temper an anti-immigration backlash. In Berlin, the German government rushed through tougher asylum laws in an attempt to stem the huge inflows of refugees and reassure the public and its EU partners that Germany is in control of its borders.    Key elements of the legislation will now come into force on Saturday, eight days earlier than previously planned and just ahead of Sunday’s European leaders’ emergency summit on the western Balkans refugee transit route. The new measures are aimed at accelerating the removal of failed asylum-seekers, including most applicants from the west Balkan states, which are seen by Berlin as countries to which migrants can safely be moved.

"If We Don't Find A Solution Today, It's The End Of The European Union" - Refugee Crisis Hits Tipping Point --After escalating for months, Europe's refugee crisis hit its most serious tipping point yet, when when earlier today European Union leaders held a mini-summit on Sunday debating whether to send hundreds of guards to its borders with the western Balkans, as well as deploying more ships off Greece, as the bloc seeks to balance Germany's welcome for refugees with tougher security measures. So far, over 680,000 migrants and refugees have crossed to Europe by sea so far this year, fleeing war and poverty in the Middle East, Africa and Asia, according to the International Organization for Migration. Their goal has been Germany, which has promised sanctuary, however as a result of a populist backlash and concerns over the economy, Merkel's popularity has taken a major hit, sliding to the lowest level in four years. And while Europe dithers, the lack of a common policy is straining ties between European leaders, raising questions about the EU's future. It was just a few days ago that Hungary warned that Europe's future is at stake, when it announced it would seal its border with Croatia.  Yesterday, it was the turn of Austrian Chancellor Werner Faymann who told the Austrian Kronen Zeitung that “now the speech is about either a common Europe or about a quiet collapse of the European Union. One path is burdensome, difficult and supposedly long and the other one would lead to the chaos." Then moments ago, Slovenia Prime Minister was quoted by Reuters during his arrival at the latest mini-summit, as saying "if European leaders fail to agree a plan to counter the sudden inflows of refugees, it could mean the end of the European Union."  "If we don't find a solution today, if we don't do everything we can today, then it is the end of the European Union as such," Prime Minister Miro Cerar said. "If we don't deliver concrete action, I believe Europe will start falling apart," he told reporters.

Warning Shot: Poland Elects Rightwing Eurosceptic, Anti-Immigration Government A direct consequence of rising anti-immigration sentiment, Poland Elects Rightwing Eurosceptic, Anti-Immigration Government by an outright, albeit slim majority according to exit polls.  Outright majority or not, this election will complicate matters for Brussels on immigration, clean energy, climate control, and relations with Russia.  Mistrustful of Brussels, suspicious of foreign capital and espousing a social agenda rooted in conservative Catholicism, the Law and Justice party (PiS) won back control of the EU’s sixth-largest economy after eight years of centrist rule.  The return of Mr Kaczynski’s party, which ran Poland between 2005 and 2007, poses a number of difficulties for Brussels, already struggling to handle nationalist governments in Hungary and Slovakia over how to tackle the continent’s migrant crisis.  Mr Kaczynski, who has condemned Warsaw’s decision to accept refugees and said that they could bring diseases to Europe, is an outspoken admirer of Viktor Orban, Hungary’s antagonistic prime minister. He has a chequered history with German chancellor Angela Merkel, and is a fierce critic of Donald Tusk, European Council president and a former Polish prime minister.  “[PiS] wants Poland to be more sovereign in Europe, more independent in its politics, but also more effective, more successful” “PiS will like to appear more hawkish towards Brussels, and is keen on an early and spectacular victory, such as a strong No to a common EU climate policy, for example.”   Official results are due on Tuesday. But exit polls forecast PiS will win 38 per cent of the vote, enough for a slim majority, which would be the first for any party in democratic Poland. It can also rely on a number of smaller rightwing parties to help it push through legislation, and possibly make mooted changes to the constitution. Andrzej Duda, Poland’s president, was also a member of the party before his election in May.

EU Agrees To Tighten Border Controls And Slow Migrant Arrival: (AP) -- European and Balkan leaders agreed on measures early Monday to slow the movement of tens of thousands whose flight from war and poverty has overwhelmed border guards and reception centers and heightened tension among nations along the route to the European Union's heartland. In a statement to paper over deep divisions about how to handle the crisis, the leaders committed to bolster the borders of Greece as it struggles to cope with the wave of refugees from Syria and beyond that cross over through Turkey. The leaders decided that reception capacities should be boosted in Greece and along the Balkans migration route to shelter 100,000 more people as winter looms. They also agreed to expand border operations and make full use of biometric data like fingerprints as they register and screen migrants, before deciding whether to grant them asylum or send them home. "The immediate imperative is to provide shelter," European Commission President Jean-Claude Juncker said after chairing the mini-summit of 11 regional leaders in Brussels. "It cannot be that in the Europe of 2015 people are left to fend for themselves, sleeping in fields." Nearly 250,000 people have passed through the Balkans since mid-September. Croatia said 11,500 people entered its territory on Saturday, the highest tally in a single day since Hungary put up a fence and refugees started moving sideways into Croatia a month ago. Many are headed northwest to Austria, Germany and Scandinavia where they hope to find a home.

Violence in Syria Spurs a Huge Surge in Civilian Flight - — A tenuous truce in the Syrian countryside north of the city of Homs was shattered this month when Russian warplanes attacked the village of Ter Ma’aleh, killing at least a dozen people and sending most of the residents into hurried exile.  The assault on the village was part of a wider escalation of violence across the country that has displaced tens of thousands of people in just weeks and led relief workers to warn that Syria is facing one of its most serious humanitarian crises of the civil war. The intensity of the fighting, they say, is fueling increased desperation as a growing number of Syrians are fleeing to neighboring countries and, especially, to Europe. More than 9,000 migrants a day crossed into Greece last week, according to the International Organization for Migration, the most since the beginning of the year. The influx has overwhelmed the authorities in Greece and the northern European countries where most asylum seekers aim to settle. The leaders of those countries moved late Sunday to deal with the increasing flow of tens of thousands of people escaping the war in Syria and elsewhere. European Union leaders in Brussels agreed to establish reception centers in Greece and along the so-called Balkan route in Europe to process and hold up to 100,000 asylum seekers.

Greece Says Refugees Are Not Enemies, Refuses to Protect Borders From Them Greece’s migration minister has rejected accusations by Germany and other European countries that Greece is failing to defend its borders against mass migration, insisting that the refugees and other migrants trekking to Europe constitute a humanitarian crisis, not a defense threat. “Greece can guard its borders perfectly and has been doing so for thousands of years, but against its enemies. The refugees are not our enemies,” Yiannis Mouzalas said in an interview.   Greece is under pressure from other European governments to use its coast guard and navy to control the huge influx of migrants who are making their way, via the Aegean Sea and Greece’s territory, from the Middle East to Northern Europe, especially Germany. [..] leaders from Greece and other countries on the latest migration route through the Balkans are facing allegations from Germany, Hungary and others that they are passively allowing migrants to pass through.  “In practice what lies behind the accusation is the desire to repel the migrants,” said Mr. Mouzalas. “Our job when they are in our territorial sea is to rescue them, not [let them] drown or repel them.”

EU Scrambles to Shelter Migrants as Winter Looms - Europe is scrambling for ideas on how to detain and process the hundreds of thousands of migrants winding through the continent, yet after months of effort officials are still struggling to make headway before the onset of winter. Heads of government agreed to come up with 100,000 places in shelters along the so-called western Balkans route after European Commission president Jean-Claude Juncker warned that refugee families could “perish miserably” during the journey from Greece through former Yugoslavia and into Austria and Germany without help. At the moment, officials are suffering from a dearth of information on the ground as Greece and countries in former Yugoslavia — which often have strained diplomatic relations — either do not collect or fail to pass on information. “I cannot tell you how many are on the move as we speak,” said one EU official.  Berlin has heaped pressure on its neighbours to deal with incoming asylum seekers before they reach German borders, as chancellor Angela Merkel attempts to quell a domestic backlash — among both voters and her own party — against the influx of refugees. Under the proposals agreed on Sunday, Greece will become a temporary de facto refugee camp for the rest of the EU, with 30,000 places set up by the end of the year — despite vociferous opposition from Greek officials in the past.

Slovenia Considers Calling for EU Military Aid -- Slovenia, the tiny Balkan state struggling to cope with the migration crisis, has raised the idea of invoking a never-before-used “solidarity clause” in the EU treaties to formally request European aid and military support. Ljubljana [Slovenia's capital] recently floated the option of triggering Article 222, which enables military aid to EU nations overwhelmed by disasters, according to two officials familiar with the talks. It indicates the drastic steps under consideration to deal with a tide of asylum seekers arriving in Europe. One Slovenian government official said invoking Article 222 was a “viable option” as a last resort. Alarmed by the potential for Slovenia pulling the bloc’s emergency cord, EU officials have sought to head off a request, in part by arranging for EU countries to provide 400 police to help Ljubljana manage the crisis. Miro Cerar, Slovenia’s prime minister, had warned the EU would “fall apart” unless the “unbearable” pressure was not eased promptly. His foreign minister Karl Erjavec hinted at the potential for a fence, saying “impediments” could be considered to stem the cross-border flows. The solidarity clause states that EU member states “shall mobilise all the instruments at its disposal, including the military resources” in the event the requesting country is subject to a terrorist attack or is the victim or a man-made or natural disaster. It has never been invoked. Some EU officials are keen for the principle not to be tested. Barbed exchanges between the leaders of Croatia, Serbia and Slovenia have raised concerns in Brussels that tensions could open old wounds from the bloody break-up of Yugoslavia and rekindle various territorial disputes.

Europe's On A Road To A Very Bleak Nowhere - On the day after a bunch of European countries headed into yet another -emergency- meeting, and as the refugee situation in Greece and the Balkans was more out of hand than ever before, not in the least because the numbers of refugees arriving from -in particular- Turkey are larger than ever, let’s reiterate what should always be the guiding principle driving the response to issues like this. That is, the only way to approach a crisis such as this one is to put the people first. To say that whatever happens, we will do what we can, first and foremost, to not allow for people to drown, or go hungry or cold, or contract diseases. Because that contradicts our basic morals. The loss of lives and prevention of misery should be the most important thing for everyone involved, all the time, from politicians to citizens. If we cannot approach both the issue and the people with decency and humanity, we are as lost as they are. If only because we have no claim to being treated better than we ourselves treat others. After all, if someone else’s life is neither sacred nor valuable, why should yours be? Looking through the response across Europe to the growing numbers and the growing crisis, what’s remarkable is the difference between individual citizens and the governments that are supposed to represent them. Apart from outliers like Hungary PM Victor Urban and the ubiquitous fascist groups from Greece through Germany, citizens win hands-down and across the board when it comes to humanity.

Life in Lesbos: "The Children's Feet Are Rotting - You Guys Have One Month and Then All These People Will Be Dead" - Lliana Bird  "There are thousands of children here and their feet are literally rotting, they can't keep dry, they have high fevers and they're standing in the pouring rain for days on end. You have one month guys, and then all these people will be dead". Those were the final words of Dr Linda on the phone, a doctor that our volunteer organisations (Help Refugees and CalAid) had asked to fly out to Lesbos in response to an emergency cry for help from an overwhelmed volunteer on the ground. The weight of those words and the responsibility that comes with them felt crippling. But why are we, a film maker, a radio presenter, and a music assistant being tasked with this responsibility? Shouldn't, as we had presumed, the large charities and governments be taking the charge of care for the precious lives arriving on Europe shores? Another call came in - this time from volunteers in Serbia - the refugees are burning plastic bags to keep warm, they have nothing else, they are freezing to death, and the fumes from the bags are slowly poisoning them, please send help. Then another - this time from volunteers on Lesbos trying to find out how to order body bags en masse... will they have to resort this? Time will tell, but certainly people there have already started to die. We wished we could pick up the phone and call someone... who? A charity? An emergency team? The government? The army? How could we sit by and watch whilst these people die, and the handfuls of volunteers struggle and suffer too. But who is there to call? The charities are acting slowly, they have protocols to follow, political considerations, red tape, hierarchy and procedures. Our government's policy is not to help in Europe, and only to send aid to places like Syria, Lebanon in Jordan. So... it's left to everyday people, untrained, unprepared, and overwhelmed, to deal with this crisis.

The endless humanitarian disaster in the Mediterranean sea grave - Another ten refugees, including five children, were found dead on Thursday in the sea area north of Lesvos. A little girl, one year old, was hospitalized in intensive and died on Thursday night. It is still unclear the number of people missing since the shipwreck on Wednesday. Some sources speak for more than thirty people. The total number of victims of the shipwrecks in October 28th in Lesbos, Samos and Agathonisi is eighteen, of which twelve are children. The lurid list is constantly growing, while the images of children who are struggling to stay alive haunt the divided Europe, which still discuss the quotas of the number of refugees for each country. On Wednesday, the Greek coast guard managed to rescue more than 240 refugees from the shipwreck off coast Molyvos, Lesvos. The authorities identified two children who were unconscious and transported in critical condition to the hospital. The boy, aged six years, died immediately, while the girl, one year old, ultimately died on Thursday night, although doctors were able initially to keep her alive . Another two children and a man were lost in a shipwreck at the Gatos headland in Samos. An infant still missing. A five year old girl found dead in Karlovasi, Samos. Two more men missing. In Agathonisi, two children and one woman died, while a child still missing. In 48 hours, from Tuesday morning to Thursday morning, a total 925 refugees have been rescued in 20 separate incidents in Lesvos, Chios, Samos and Kos. More than 5,000 immigrants and refugees arrived in Mytilene in the last 24 hours, despite the adverse weather, while executives of the recording and certification center estimate that this figure may even reach 6,000. Sources from the police station on the island say that in the port of Mytilene remain 8,763 people who are expected to leave in the coming hours to Piraeus and Kavala.

Paul Craig Roberts Slams Western Press-titution - The Western media has only two tools. One is the outrageous lie. This overused tool no longer works, except on dumbshit Americans. The pinpoint accuracy of the Russian cruise missiles and air attacks has the Pentagon shaking in its boots. But according to the Western presstitutes the Russian missiles fell out of the sky over Iran and never made it to their ISIS targets. According to the presstitute reports, the Russia air attacks have only killed civilians and blew up a hospital. The presstitutes fool only themselves and dumbshit Americans. The other tool used by presstitutes is to discuss a problem with no reference to its causes. Yesterday I heard a long discussion on NPR, a corporate and Israeli owned propaganda organ, about the migrant problem in Europe. Yes, migrants, not refugees. These migrants have appeared out of nowhere. They have decided to seek a better life in Europe, where capitalism, which provides jobs, freedom, democracy, and women’s rights guarantee a fulfilling life. Only the West provides a fulfilling life, because it doesn’t yet bomb itself. The hordes overrunning Europe just suddenly decided to go there. It has nothing to do with Washington’s 14 years of destruction of seven countries, enabled by the dumbshit Europeans themselves, who provided cover for the war crimes under such monikers as the “coalition of the willing,” a “NATO operation,” “bringing freedom and democracy.” From the Western presstitute media you would never know that the millions fleeing into Europe are fleeing American and European bombs that have indiscriminately slaughtered and dislocated millions of Muslim peoples.

ECB and Fed reverse their traditional roles - Mario Draghi surprised markets last week with an aggressively easy policy statement, even by his recent standards. No longer shackled, it seems, by the restraining force of the Bundesbank, the European Central Bank Governing Council became the first of the major central banks to react forcibly to the severe downturn now underway in many of the emerging markets. With the US Federal Reserve stillexpected to raise interest rates in December, the “divergence trade” in the foreign exchange markets (ie long dollar, short euro and yen) seems back in vogue.  This trade has worked well at times in the past 12 months, mainly because of the unexpectedly large programme of quantitative easing by the ECB. Up to now, the Federal Reserve has contributed very little to the policy divergence, essentially doing nothing since tapering ended a year ago this week. This would change markedly if the Fed now implements its “expectation” to tighten monetary policy in December.  Greater policy divergence is likely because the two leading central banks in the developed world are reacting quite differently to the risks posed by the shock in the emerging markets.  This EM shock has led to another year of disappointment for global GDP growth, with consensus forecasts for 2015 being revised downwards by a full percentage point since the start of the year. This replicates the experience of the previous three years almost exactly: economists have persistently been too optimistic about the ability of the world economy to accelerate out of recession. This year, most of the disappointment has stemmed from downgrades to growth projections in Brazil and Russia, and to a lesser extent China. But there has also been repeated disappointment about the failure of the developed economies to sustain a period of healthy, above trend growth of the type that has often been seen at equivalent stages of previous economic cycles. Instead, productivity growth has been extremely anaemic, and estimates of potential GDP have been persistently revised downwards.

Debt Totaling $345 Billion Says ECB to Cut Deposit Rate to -0.3% -  The $345 billion of euro-area government debt that yields less than minus 0.3 percent shows where investors think the European Central Bank deposit rate will go. As bonds advanced across the euro zone on Tuesday, the case strengthened for the ECB cutting the rate to minus 0.3 percent from minus 0.2 percent. That prediction was made by Deutsche Bank AG and BNP Paribas SA after ECB President Mario Draghi last week said central-bank policy makers had discussed an unspecified reduction, and that in December the officials would reexamine the scope of their quantitative-easing plan -- also a yield-crusher. The ECB has ruled out buying bonds with yields below its deposit rate, which officials cut to its current level September 2014. Yet the prospect of a further reduction has helped push yields on short-dated debt still lower. That’s because a lower deposit rate would increase the number of bonds available for the ECB to buy under QE, and traders seem to be jumping ahead of the central bank. Yields on German two-year notes dropped below minus 0.3 percent as Draghi spoke on Oct. 22. “We’ve come a long way and now are priced about 50 percent or more for a 10 basis-point cut in December,”

The Central Bankers’ Death Wish - David Stockman - This is getting just plain ridiculous. The robo-traders were raging to the tune of 300 Dow points Thursday after Mario Draghi confirmed that he actually is a complete monetary lunatic. And now that the People Printing Press of China has followed suit overnight, they are piling on for more. In fact, Europe is stranded in economic stagnation because statist dirigisme and the massive crush of welfare state taxation and finance have ground enterprise and productivity to a halt. But Draghi says it’s all China’s fault, and that he will fix their dereliction with even more monetary madness: In a news conference, Mr. Draghi stressed the “downside risks” to both economic growth and inflation arising from slowing growth in China and other large developing economies, as well as weak commodity prices. These are the words of a slow-witted man who was born yesterday. That is, they evince an economic model that says every single year, month and day of prior history is irrelevant; and that regardless of how we got to the present moment the answer is always more heavy-handed central bank intrusion in the financial system in order to achieve an utterly bogus 2% inflation target. In fact, the so-called slowdown in China is the best thing that ever happened to Europe, as is the present spot of unusually low consumer inflation. And there is no mystery as to why these things are happening. China and the rest of the world have just come through a mind-pending credit binge which took global debt from $40 trillion in 1994 to $225 trillion at present. China was in the forefront of that binge, sporting a 56X gain in outstanding credit during the same two decade period (from $500 billion in 1995 to $28 trillion at present).

This Is What Happens After Three Years Of Negative Interest Rates -- It may seem extraordinary that in the aftermath of the infamous Kocherlakota "dots" the Fed is actively contemplating negative interest rates, but some may have forgotten that Europe has had NIRP since last June. In fact, the reason for today's global risk-on rally, was Draghi's hint - remember: Draghi did absolutely nothing, just suggested he may do more -  that in addition to extending the ECB's QE program, the ECB may cut its deposit rate, already at -0.20%, to -0.30% or more.  But when it comes to negative rates, the ECB is merely a late adopter. For the real pioneer one has to look further north in Denmark, where the central bank first adopted negative rates in the middle of 2012 to defend the krone's peg to the Euro. And, as documented here before, Denmark cut rates not once, not twice, but three times in early 2015 in anticipation of the EUR collapse, pushing its interest rate to a record negative -0.75%. Denmark's descent into NIRPdom is shown in the Bloomberg chart below.So what happens after 3 years of NIRP? Well, according to Bloomberg, you get the mother of all "under the radar" housing bubbles: "Property prices in Copenhagen have risen 40-60 percent since the middle of 2012, when the central bank first resorted to negative interest rates to defend the krone’s peg to the euro."

Nervous investors pay to lend to Italy -  FT - Italy sold two-year debt at a negative yield for the first time on Tuesday, as concerns over the health of the global economy and expectations of further central bank stimulus reignited a rally in bond markets. The sale gains Italy entry to a select group of countries including Germany, France and Switzerland whose borrowing rates have turned negative as investors prove willing to buy their debt at any price. “This is an Alice in Wonderland situation,” said Andrew Milligan, head of global strategy at Standard Life Investments. “Negative rates are highly strange. What is underpinning them is not so much a desire to own a particular country’s debt but the broader issue of slow global growth and what central banks are going to do to address it.” Investors accepted a yield of minus 0.023 per cent to buy €1.75bn of Italian debt paying no coupon after Mario Draghi, European Central Bank president, hinted that eurozone policymakers would unleash a fresh round of monetary easing at their December 3 vote. Mr Draghi said last Thursday the ECB would “re-examine” its policy stance at its final meeting of 2016 amid signs of a slowdown in emerging markets. Investors quickly interpreted that to mean the ECB would expand its quantitative easing programme. The negative yield for Italian debt means investors are now paying to lend to a country which has one of the highest debt-to-GDP ratios in the world and has long been a byword for fiscal profligacy. It marks a dramatic turnround for Italy’s short-dated borrowing rate which hit 8.12 per cent at the height of the eurozone debt crisis.

NIRP Panic: Over Half Of European 2-Year Bonds Trade At Record Negative Yields; Italy Paid To Issue Debt -- Last week it was Mario Draghi's promise that he would push European deposit rates even further into NIRP territory from their current -0.20% level, something which market not only believed but has already priced in and then some, pushing German 2Y yields to a record -0.35%... ... but then earlier today, as predicted here previously, in a panic response Sweden's Riksbank did the only thing it can do to halt the "money tsunami" that Draghi is unleashing as he makes money even more unwanted, by expanding its QE for the 4th time this year since it was unveiled in February in hopes of making the SEK even more worthless than the Euro. In short, Europe has unleashed yet another monetary panic, and nowhere is it more visible than in what happened today across the short end of Europe's government curve. As the table below shows, more than half of European sovereign issuers just saw the yield on their 2 Year Notes trade not only below zero, but hit never before seen negative yields!

Barcelona Threatens to Print Parrallel Currency, Madrid Seethes -- naked capitalism - Yves here, Notice how this Barcelona plan uses the principles of Modern Monetary Theory. The currency is given value because it can be used to pay local taxes. Now the interesting question will be how well it “trades”. California, during a budget crisis, issued short-term IOUs. They bore interest (3.75%) and they traded at a discount to their fact value. But they could not be redeemed prior to a budget deal being cinched, so they are not a direct parallel to the Barcelona plan. In addition, because the Barcelona scrip is intended for local use, it does not raise the payment systems issue that we flagged for Greece had it tried to reintroduce the drachma (as in it is not to be used for international commerce and therefore on-the-fly approaches like local ledgers and off-line systems should prove to be adequate). By Don Quijones

Left Parties In Portugal Vow to Topple New Center-Right Government (interview & transcript) A political leadership crisis is brewing in Portugal. For the last four years Portugal has been led by an alliance between the social democratic party, PSD, and the democratic and social center People's Party, PP. Together they ran under the banner Forward Portugal Alliance, PAF, in the October 4 elections. They are the pro-austerity, pro-eurozone parties. Together they garnered only 38.4 percent of the vote, which translated to only 107 seats in the 230 seat parliament. But President Anibal Cavaco Silva asked them to form the government and appointed Pedro Passos Coelho as prime minister amid protest by the main opposition socialists and their allies. Now joining me to discuss all of this is Catarina Principe. She's just back from Portugal. She is a social activist from there. And she's an organizer with Left Bloc in Portugal and Die Linke in Germany, which means The Left. She's written for Jacobin magazine and contributed to an anthology titled Portugal 40 Years After the Revolution. She's currently studying and living in Germany. Thank you so much for joining us today.

Greece unveils bank recapitalisation bill, vote on Saturday | Reuters: Greece on Friday unveiled a bank recapitalisation bill that outlines how fresh funds will be pumped into its ailing banks to shore up their capital base. The legislation was submitted to parliament a day before the European Central Bank releases the results of its health check on the country's four big lenders. The bill is expected to be voted on Saturday. The bill states that bank rescue fund HFSF will have full voting rights on any shares it acquires from banks in the recapitalisation. Under the bill the bank rescue fund will have a more active role, assessing bank managements. The exact mix of shares and contingent convertible bonds the HFSF will buy from banks in exchange for providing state aid will be decided by the cabinet.

Starving Irish people pleading for food from soup kitchen as last resort - Catriona Twomey, who runs soup kitchen Penny Dinners in Cork, said that people are calling as a last resort after going hungry for a few days. "We've never had calls like this before. People saying they are hungry and crying at the end of the phone. It stopped me dead in my tracks. We're averaging five or more calls a week," she told the Sunday World. "We took food to two women this week who were in a pretty bad way. They hadn't eaten anything in two days and we met them on day three. This just shouldn't be happening." "People are ringing us because they can't afford to get to us and they are too far away. This week we had to get volunteers to drive to places to meet people and give them hot meals. You can see the look of desperation." The volunteer-run kitchen provides more than 1,800 meals a week for people in need. In addition, people in need get sandwiches and fruit to take away as an evening meal. Last week, a volunteer brought food to a desperate mother who had spent all her money on food for her baby, leaving nothing for herself. The mother hadn't eaten in days and said she was starving. She had to move from her home due to circumstances out of her control.

Is sterling overvalued? - One of the reasons that steel plants have been closing in the UK rather than Germany or France, and that UK manufacturing output has fallen for the last two quarters, is the strength of sterling and the weakness of the Euro. The weakness of the euro relative to the dollar could be explained (at least qualitatively) by interest rate expectations: whenever interest rates do rise in the US, they will surely rise well before they do in the Eurozone.  If the UK looks like the US, you would expect on these grounds for the pound relative to the dollar to be roughly stable, but sterling to follow the dollar in appreciating against the Euro. To a first approximation that is what has happened.    The only problem comes if you look at the UK’s external performance. The current account deficit as a percentage of GDP has wobbled around 2% for most of this century, but in the last few years it has increased sharply, coming in at over 5% of GDP in 2014. All these deficits are taking their toll on the UK’s net financial position: twenty years ago we owned about as many overseas assets as there were UK assets owned overseas, but we are now a net debtor by an amount that will just get larger if we continue to run large current account deficits. (For more on this, see Felix Martin in the FT.)  When I calculated an equilibrium sterling euro rate in 2003, my estimate was 1.365 E/£. As current rates are close to that, and given the point about expected interest rates, what is the problem? Unfortunately there are three. First, that calculation was based on an assumption that the sustainable UK current account was balance. In other words, if the rate had stayed at 1.365 E/£, then over time and on average the current account should have been in balance. Instead we have had persistent deficits. In the early 2000s that might have been partly explicable because sterling was a little stronger than my estimate, but since the beginning of 2008 quite the reverse has been true, but we have still run deficits. That either suggests my estimate was wrong (the equilibrium E/£ rate should have been lower), or the equilibrium rate has depreciated since 2003.

TTIP: Jeremy Corbyn, Nigel Farage, Nicola Sturgeon and Natalie Bennett sign appeal to exempt NHS from trade deal  -- Leaders of almost every major political party in the United Kingdom have signed an appeal not to allow a transatlantic trade deal known as TTIP become the Trojan horse that allows American business interests to take over the NHS. The appeal, organised by the trade union Unite, has achieved the rare feat of bringing together all of Northern Ireland’s main political parties. TTIP, or the Transatlantic Trade and Investment Partnership, would free up trade between the US and the EU, by allowing companies from either side of the Atlantic to operate under the same rules.  One of its most controversial elements would be the creation of a new supranational court, the Investor State Dispute Settlement (ISDS) through which foreign investors could sue governments, or the EU, over any action or legislation that hurt their businesses.It is feared that an American private healthcare firm which was prevented from buying up part of the NHS would be able to go to the ISDS and claim millions of pounds in compensation from the British government for lost business.  The appeal drafted by Unite says: “TTIP must not restrict the scope for decisions by any level of government, public authority or NHS organisation relating to public healthcare [and] must not give US investors new rights that they could use to sue any level of government, public authority or NHS organisation because of policies relating to healthcare.”

US Threatens UK With Trade Barriers If It Leaves The European Union -- One of the most important decisions Brits have to make before the end of 2017 (most likely some time next year) is whether or not to remain in the European Union, and while recent polls have those willing to stay in as the majority, there has been a spike in support for leaving the bloc... ... which coupled with Europe's refugee crisis has made a Brexit an all too possible outcome. Which probably explains why the U.S., confident it sill has veto power over democracies anywhere in the world, has just made it quite clear to UK's citizens which way they should vote. According to the Guardian, the US trade representative, Michael Froman, in the first public comments from a senior US official on the matter, said that "the United States is not keen on pursuing a separate free trade deal with Britain if it leaves the European Union." Just like in the case of Scotland's vote last year, trade is being used a key bargaining chip, or rather ultimatum: vote the way we want, or else. Guardian adds that Froman’s comments on Wednesday undermine a key economic argument deployed by proponents of exit, who say Britain would prosper on its own and be able to secure bilateral free trade agreements (FTAs) with trading partners. The US is Britain’s biggest export market after the EU, buying more than $54bn (£35bn) in goods from the UK in 2014. “I think it’s absolutely clear that Britain has a greater voice at the trade table being part of the EU, being part of a larger economic entity,” Froman told Reuters, adding that EU membership gives Britain more leverage in negotiations.

Global economic downturn fears prompt high street gloom --  Worries about a global downturn have knocked consumer confidence with retail sales losing momentum over recent weeks, according to the latest reports signalling a slowdown in the UK economy. October marked a five-month low on a barometer of consumer mood from the market research group GfK, while a separate survey of retailers by the business group CBI showed sales had undershot expectations following a strong September. GfK’s headline consumer confidence measure dipped to +2 in October from +3 in September. Consumers were gloomier about the economic situation over the last 12 months and over the coming year, according to the poll of 2,000 people, conducted for the EU. The survey also found people were less certain over whether now was a good time to make major purchases such as furniture or electrical goods. The news follows reports that businesses are being hit by weaker demand as the global economy loses steam and UK consumers worry about interest rate rises and more government spending cuts. Official figures this week showed UK GDP growth eased in the July-September quarter. The CBI’s indicator of retail sales volumes signalled the slowest growth for six months in October. Its survey of 112 firms, which assesses the sector based on a balance of companies’ responses, showed 38% said volumes were up on a year ago, and 20% said they were down. That gave a balance of +19%, compared with +49% in September. Retailers had expected a reading of +51%.

Private Eye News: Home is where the tax haven is… ONE in every six homes sold in Westminster and Kensington & Chelsea over the last three years for which data is available was bought by a company in an offshore tax haven, the Eye has established. The market for homes is now so skewed by sales to overseas companies that a quarter of all cash spent on residential property in just these two London boroughs came via companies from Belize to Anguilla, Jersey to the South Pacific Cook Islands. The figures, based on data acquired by the Eye for property transactions in 2012, 2013 and 2014 and analysed alongside market statistics by data-savvy London estate agency YOUhome, reveal the extent to which the top end of the British property market is dominated by secret buyers hiding behind offshore companies.  In Britain’s two most expensive boroughs 3,520 homes were bought using offshore companies, out of a total of 21,373 sales, or 16.5 percent. The value of those using offshore companies was £8.25bn, or 23.8 percent of the total value and giving an average price of £2.34m. The most popular location for the shell company used was the British Virgin Islands, followed by Jersey, Guernsey and Panama. The figures do mask a downward trend, almost certainly linked to higher stamp duty for corporate-owned residential property plus an annual “enveloped dwellings” tax announced by chancellor George Osborne in his 2012 budget. The proportion of properties bought using an offshore company fell from 20.3 percent in 2012 to 12.4 percent in 2014 – still a large number given that there is no need for such structures other than tax avoidance or secrecy.

The paranoid world of London's super-rich: DNA-laced security mist and superyacht getaway submarines -- Just as boutique finance houses, family offices, lawyers, private tutors, butlers and nanny services have sprung up to cater for the ‘needs’ of London’s super-rich, an army of James Bond-type ‘Qs’ now develop and sell the kind of safety systems and gadgets that 007 could only dream of. Some of their tricks are easy to understand and relatively easy to install. Former Israeli Major-General Aharon Ze’evi Farkash, one-time head of the Israeli Military Intelligence Directorate, runs a company called FST21 that merges facial, voice and behavioural recognition technology into an unhackable and secure keyless entry system for London’s newest fortress homes.To protect the exterior of their homes, some townhouse owners add a blast film to their window panes, which means they don’t shatter in an explosion and are all but impenetrable. Inside their mansions or lateral living apartments, most of the super-rich have two codes that open their safe(s) — one if everything is normal and another if they are what security folk call ‘under duress’. Key in the duress code and armed private security guards will arrive at the house in less than three minutes. Ultra-high net worth households also demand that their telephone and internet communications are encrypted. ‘I’ve been to some houses that look more like the NSA [America’s National Security Agency just outside Washington DC] than a family home,’  Other tricks of the trade are sneakier — and almost impossible to detect. In many homes, CCTV cameras are not just mounted discreetly on the ceiling or the wall, miniature cameras are also hidden in the eyes of sculptures, picture frames and light switches. Some are so sophisticated that they learn behavioural traits and alert monitoring services to unusual or suspicious movements.

Icelandic Bankers Are Not Too Big To Jail: Face 74 Years In Prison As US Bankers Bask In Bailouts - As TheAntiMedia's Claire Bernish exclaims, you could ice skate in Hell sooner than see the United States follow in Iceland’s footsteps with this move: the 26th banker was just sentenced to prison for a combined 74 years between them — each of them jailed for their roles in the 2008 economic collapse.  Five top bankers from Iceland’s two largest banks — Landsbankinn and Kaupþing — were found guilty of embezzlement, market manipulation, and breach of fiduciary duties. Though the country’s maximum penalty for financial crimes currently stands at six years, the Supreme Court is currently hearing arguments to extend the limit. Most of those convicted have so far been sentenced to between two and five years.  Do those sentences sound light to you? Perhaps. Until you consider the curious method of punishment the U.S. employed for its thieving bankers. While Iceland allowed its government to take total financial control when the 2008 crisis took hold, American bankers — in likely the only bail handout given to criminals of mass destruction — received $700 billion in Troubled Asset Relief Program (TARP) funds.