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

Saturday, October 29, 2016

week ending Oct 29

Janet Yellen could be on the verge of starting a 'civil war' at the Fed: Fed Chair Janet Yellen's interest in running a "high-pressure economy" threatens to add to an increasingly divisive climate at the U.S. central bank. In remarks last week that jarred the market, Yellen ruminated about the benefits of letting inflation run a little hotter than normal while allowing the unemployment rate to drop below the point that historically would trigger Fed tightening action. To many observers, the comments were a clearly dovish signal that she favors a lower-for-longer approach when it comes to interest rates. But that kind of attitude could exacerbate tensions among Federal Open Market Committee members, in particular those who have been clamoring for rate hikes. "Despite the fact that rates were not raised at the September FOMC meeting as we predicted, the truce at Federal Reserve has never been more tenuous and appears to be on the verge of an outright civil war," Doug Roberts, chief investment strategist at Channel Capital Research, said in a note. "The truce between hawks and doves is now being renegotiated." Right now there are just three hawkish members of the 10 FOMC voters. They are Esther George, who often breaks from the dovish pack, along with Loretta Mester and Eric Rosengren, a recent addition to those pushing for higher rates. The dissenters worry that keeping interest rates too low could hasten a recession if the Fed is forced to act quickly on rates after inflation picks up, according to minutes from the September meeting..

Fed’s Task Ahead: How Best to Signal Year-End Rate Move - Hilsenrath:  Federal Reserve officials, wary of raising short-term interest rates amid the uncertainty surrounding the U.S. presidential election, are likely to stand pat at their November policy meeting and remain focused on lifting them in December. Their challenge will be deciding how strongly to signal their expectation of a move at their last scheduled meeting of the year, Dec. 13-14. Market expectations suggest officials may not need to fire strong new warning shots: Traders in futures markets already place a 74% probability on a Fed rate increase by then, according to CME Group. That could leave their November policy statement little changed from September, when officials said the case for an increase in their benchmark federal-funds rate had strengthened, but they wanted to wait “for the time being” for more evidence of a strengthening economy. Investors have long been skeptical about a move at the Fed’s meeting Nov. 1-2, just a week before Election Day, putting a 9% probability on an increase then. Officials, in public remarks and recent interviews, have made clear they expect to raise rates before the end of the year. But with the jobless rate holding steady around 5% and inflation below their 2% target, they aren’t in a rush. “There isn’t this tremendous urgency to act on monetary policy right now,” New York Fed President William Dudley told The Wall Street Journal in an interview Oct. 14. “It’s not like if we wait a meeting or don’t wait a meeting that it has huge consequences for the trajectory of the economy.” Mr. Dudley said he expects the Fed will raise interest rates this year, “subject to the economy continuing to evolve in line with my expectation.” Some regional Fed bank presidents are eager to move and growing impatient. Three of them—Boston Fed President Eric Rosengren, Cleveland Fed President Loretta Mester and Kansas City Fed President Esther George—voted against the committee’s decision in September to hold the fed-funds rate in a range between 0.25% and 0.5%. The dissenters wanted to raise it then by a quarter percentage point. Nine of the Fed’s 12 regional banks wanted to raise the interest rate on short-term loans offered to banks through the Fed’s discount window ahead of the September meeting, a possible reflection of growing support for lifting the fed-funds rate. Still, Mr. Rosengren suggested last week he would be comfortable leaving rates unchanged right before the election and waiting until the end of the year to move. 

Fed Inclined to Lift Rates If New President Adds Budget Bump - Bloomberg: The Federal Reserve is inclined to raise interest rates higher than otherwise if the next president pursues a more stimulative fiscal policy. U.S. central bankers say they would welcome such a step as shifting some onus for supporting the economy away from the Fed. But they suggest they would offset the extra demand that a bigger budget deficit would spur by making monetary policy less stimulative. The reason: With the economy already operating close to capacity, it’s not in need of an added boost right now. “If we have more expansionary fiscal policy, we don’t need as expansionary a monetary policy,” Federal Reserve Bank of Boston President Eric Rosengren said in an Oct. 15 interview. That sort of hand-off from monetary to fiscal policy could prove troublesome for financial markets that “have been both sedated and seduced by the prospect of low rates for longer,” said Joachim Fels, global economic adviser at Pacific Investment Management Co. It also could pose some political problems for the Fed if it was perceived by lawmakers as working at cross-purposes with their efforts to spur economic growth.

 Why Low Interest Rates Are Ineffective  -- It is becoming increasingly apparent that the Federal Reserve will have to be even more creative during the next economic slowdown since the effectiveness of its monetary policies since the Great Recession seem to be wearing off as the economy, both domestically and globally, seems to be weakening. As well, there are factors at play that have, over the past three decades, resulted in subdued economic growth as you can see on this graphic: As you can see from the red line, the trend in real GDP growth has dropped rather significantly since 1980. Since 1980, the average annual real GDP growth rate was 2.61 percent when both contractions and expansions are included; by comparison, the average annual real GDP growth rate since the Great Recession was only 1.3 percent when both contractions and expansions are included. Why is this? A recent article by Frank Shostak and Peter Stellios on the Mises website looks at why the Fed's current low interest rate policy is not creating economic growth. First, they look at how productivity has declined over the past three decades as shown here, focusing on how the curve has flattened since 2009: Even worse, the year-over-year growth in real output per hour since the end of the Great Recession (excluding 2009 and early 2010) is the lowest it has been during an economic expansion since 1980: As well, the year-over-year growth in real private non-residential fixed investment has dropped substantially since 2012 as shown here: It is important to keep in mind that the Federal Reserve has actively been propping up the American economy over the past three years while the growth in investment has dropped. One would think that the continued policy of low interest rates would be encouraging growth in private investment not the other way around. Obviously, there is another mechanism at work. Please bear with me, some of this theory is rather abstract and flies directly in the face of traditional monetary theory which believes that interest rates drive consumption and that more aggressive monetary polices result in greater levels of economic growth.

Paul Volcker Explains Why The Fed Can't Raise Rates -- In an op-ed posted by Paul Volcker and Peter Peterson in the NYT, the two financial titans start off by pointing out just how "strange" the current presidential campaign is in its historical context...Together, the two of us have 179 years of life experience and 13 grandchildren. We have served presidents of both parties. We have seen more campaign seasons than we care to count — but none as strange as this one. Insults, invective and pandering have been poor substitutes for serious debate about the direction in which this country is going — or should be going. And a sound and sustainable fiscal structure is a key ingredient of any viable economic policy. ... but the main issue that troubles the two financial titans, is the lack of any practical discussion of the soaring US debt during the entire bizarre campaign - the one issue both agree is the biggest challenge facing the US economy today:Yes, this country can handle the nearly $600 billion federal deficit estimated for 2016. But the deficit has grown sharply this year, and will keep the national debt at about 75 percent of the gross domestic product, a ratio not seen since 1950, after the budget ballooned during World War II. Long-term, that continued growth, driven by our tax and spending policies, will create the most significant fiscal challenge facing our country. The widely respected Congressional Budget Office has estimated that by midcentury our debt will rise to 140 percent of G.D.P., far above that in any previous era, even in times of war.  That staggering number has been ignored by most, and certainly the Obama administration, which has been glad to take credit for a sputtering "recovery" while ignore what caused it. While the reality of the recovery was set to emerge sooner or later, the US debt continues to grow, and as of Friday hit an all time high of 19,785,585,189,878.12, just $214 billion away from a nice, round $30 trillion, nearly doubling under President Obama, and worse: starting to accelerate again, despite the lack of any apparent economic crisis that demand a surge in debt issuance.

The Fed is Literally Broadcasting That It's Going to Let Inflation Run Wild -- The biggest moves… the ones that make the MOST money in the markets are the ones no one is talking about for months. With that in mind, you NEED to know that the Fed is going to let inflation run wild in the US. That is not a hypothesis. In the last month we’ve had THREE different Fed officials state that they WANT inflation and that the Fed will let it run BEYOND the Fed’s target 2% rate.First up was Chicago Fed President Charles Evans on October 11. The U.S. Federal Reserve should engineer monetary policy to spur inflation to rise above its two-percent target because the costs of doing so are less than in past decades, Chicago Federal Reserve Bank President Charles Evans said on Tuesday.Then came NY Fed President William Dudley on October 12. "Inflation is a little below our target, rather than above our target, so I think we can be quite gentle as we go in terms of gradually removing monetary policy accommodation," said Dudley, a close ally of Yellen and a permanent voter on policy.  Then came Fed Chair Janet Yellen stating on October 14th. In a further indication that the Federal Reserve will be inclined to let inflation run hot for a while, Chair Janet Yellen on Friday said it's useful to consider the benefits of a "high-pressure economy."That’s THREE different Fed officials all offering implicit reasons NOT to hike rates but to let inflation run wild.Scratch that… make it FOUR Fed officials…St. Louis Federal Reserve President James Bullard said on Monday that a single U.S. interest rate rise would be all that was necessary for the time being, repeating comments he had made recently.Folks, the Fed is LITERALLY broadcasting that it’s going to let a MAJOR monetary event happen.

Should We Believe The Bond Market’s Rising Inflation Forecast? - The Federal Reserve has been trying to raise inflation for eight years with, so far, muted results. But some analysts think we’re at an inflection point and pricing pressures will continue to strengthen. The Treasury market’s implied inflation estimate seems to agree, supported by moderately firmer numbers in the official inflation statistics. We’ve heard this forecast before, of course. But forecasts of higher inflation in the years since the 2008 financial crisis have come to naught as disinflationary forces held firm in the wake of the Great Recession. Is that about to change? There’s still a compelling case for thinking that the renewed forecasts for higher inflation will again fall flat. In a world where demand is still weak and the appetite for safe havens strong, the argument that inflation is set to break higher tends to fall on deaf ears. But the Treasury market appears to be pricing in the possibility that moderately higher inflation in the near term is no longer a low-probability event. The implied inflation forecast via the yield spread for the nominal 10-year Note less its inflation-indexed counterpart climbed to a six-month high of 1.71% yesterday (Oct. 26), based on daily data from That’s still a low rate relative to the last several years, but the upward bias since the summer is conspicuous. The market’s modest repricing of inflation expectations could be noise, but Martin Hegarty, head of inflation-linked bond portfolios at BlackRock, thinks there’s a deeper transition underway that’s driving the crowd’s attitude adjustment. “The underlying fundamentals for inflation are better than they’ve been for a long time,” he told the FT last week. Stephen Stanley, chief economist at Amherst Pierpont Securities, advises that the Fed is inclined to agree. “The rising tide of inflation is the main reason that I believe the [Fed] will actually follow through and raise rates in December, even as it has lost its nerve a handful of times over the past 18 months,”

It’s the demography, stupid! - Gavyn Davies - Central bankers, like investors, have usually tended to ignore or underplay the influence of demographic factors over the short and medium term. The size and age distribution of the population changes very gradually, and in a fairly predictable manner, so sizable shocks to asset prices from demographic changes do not happen very often. That does not mean that demography is unimportant. The cumulative effects can be very large over long periods of time. Apart from technology, there is a case for arguing that demography is the only thing that matters in the very long run. But demographic changes usually emerge very slowly, so they do not trigger sudden fluctuations in the determinants of asset prices, notably the economic cycle and monetary policy. However, there are exceptions to this rule, and we may be living through an important exception at the present time. It seems that the Federal Reserve is starting to recognise that the decline in the equilibrium interest rate in the US (r*) has been driven not by temporary economic “headwinds” that will reverse quickly over the next few years, but instead has been caused by longer term factors, including demographic change. Because these demographic forces are unlikely to reverse direction very rapidly, the conclusion is that equilibrium and actual interest rates will stay lower for longer than the Fed has previously recognised. Of course, the market has already reached this conclusion, but it is important that the Fed is no longer fighting the market to anything like the same extent as it did in 2014-15. This considerably reduces the risk of a sudden hawkish shift in Fed policy settings in coming years. Furthermore, greater recognition of the permanent effects of demography on the equilibrium real interest rate has important implications for inflation targets, the fiscal stance and supply side economic policy. These considerations are now entering the centre of the debate about macro-economic policy.

Macro Musings Podcast: Narayana Kocherlakota -- My latest Macro Musings podcast is with Narayana Kocherlakota. Narayana is a professor of economics at the University of Rochester. He has published widely in economics, including in the areas of money and the payment system, business cycles, financial economics, public finance, and dynamic contracts. He also writes regularly for Bloomberg View. Formerly, Narayana was the president of the Minneapolis Federal Reserve bank, where he served between 2009 and 2015.  He joined me to talk about his time at the Fed and his current views on Fed policy. This was a fascinating conversation throughout and a must-listen episode for all Fed watchers. The first part of our conversation covered what it was like being a regional Fed president. This included, among other things, how he stayed informed, how he managed the Minneapolis Fed, and how he prepared for FOMC meetings. We then moved onto the the FOMC and the dynamics of the meeting itself. The preparation, the room, the seating, the order of business, and the rules of engagement are all important part of the FOMC decision-making process, but also are little known to outsiders. Narayana fills us in on the details as we discuss these and other issues--including whether FOMC members are more guarded in what they say because transcripts will be released--surrounding the FOMC meeting.  Our conversation next turned to the actual conduct of monetary policy since the crisis. What role did the Fed policy play in the recovery? Could it have done more? If so, was a more aggressive monetary policy even possible? Also, to what extent did public pressure play on shaping Fed policy versus the internal thinking of FOMC members themselves. Finally, we discuss ways to improve Fed policy and whether the supply side of the economy is endogenous, in  part, to demand pressures. This was a great conversation.

 Inflows from Private Bond Investors Into the U.S. -- Brad Setser  - The global capital flows story these days is complex. I wanted to build on Landon Thomas’ article with a set of charts drawing out how I think large surpluses in Asia and Europe are now influencing the TIC data. Obviously, this is a more technical post. Asia’s surplus is big. In dollar terms, the combined current account surplus of China, Japan, and the NIEs (South Korea, Taiwan, Hong Kong, and Singapore) is back at its pre-crisis levels. China’s surplus is a bit smaller in 2007, but Korea and Taiwan are clearly running bigger surpluses. Yet unlike in the past, very little of Asia’s surplus is going into a reserve buildup. China is obviously selling, and its selling overwhelms intermittent purchases by Korea (Korea sold in q1 2016, but bought in q3) and Taiwan. The outflow of savings from Asia is currently overwhelmingly a private flow. That is a change. And frankly it makes the impact of Asia’s surplus on global markets harder to trace. The Bank for International Settlement (BIS) data shows that much (I would say most) of the “capital outflow” from China over the last four quarters has actually gone to paying down China’s external bank debt, not to build up assets. It thus just becomes a new source of liquidity for the global banking system (once a dollar loan is repaid, the bank is left with a dollar—which has to be parked somewhere else). And of course the eurozone and northern Europe also run substantial surpluses. Negative rates and ECB asset purchases in effect work to push investors out of super low-yielding assets in Europe, and into somewhat higher yielding assets outside the eurozone.*  The combined surplus of China, Japan, the NIEs, the eurozone, Sweden, Denmark, and Switzerland was close to $1.2 trillion in 2015. That is a big sum; one that has to leave traces in the global flow data. The U.S. current account deficit isn’t as big as it was prior to the crisis (and it is smaller than the UK’s current account deficit), but it is still financed, in part, by inflows from abroad into the U.S. bond market.

Chicago Fed: Economic Growth Picked Up in September"Index shows economic growth picked up in September " This is the headline for today's release of the Chicago Fed's National Activity Index, and here are the opening paragraphs from the report: Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to –0.14 in September from –0.72 in August. All four broad categories of indicators that make up the index increased from August, but in September, all four categories made negative contributions to the index for the second straight month. The index’s three-month moving average, CFNAI-MA3, edged down to –0.21 in September from –0.14 in August. September’s CFNAI-MA3 suggests that growth in national economic activity was somewhat below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year. The CFNAI Diffusion Index, which is also a three-month moving average, moved down to –0.12 in September from –0.03 in August. Forty-one of the 85 individual indicators made positive contributions to the CFNAI in September, while 44 made negative contributions. Sixty-seven indicators improved from August to September, while 17 indicators deteriorated and one was unchanged. Of the indicators that improved, 29 made negative contributions [ Link to News Release] The previous month's CFNAI was revised downward from -0.55 to -0.72. The first chart below shows the recent behavior of the index since 2007. The red dots show the indicator itself, which is quite noisy, together with the 3-month moving average (CFNAI-MA3), which is more useful as an indicator of the actual trend for coincident economic activity.

Chicago Fed "Economic Growth Picked Up in September" -From the Chicago Fed: Economic Growth Picked Up in September  Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to –0.14 in September from –0.72 in August. All four broad categories of indicators that make up the index increased from August, but in September, all four categories made negative contributions to the index for the second straight month. The index’s three-month moving average, CFNAI-MA3, edged down to –0.21 in September from –0.14 in August. September’s CFNAI-MA3 suggests that growth in national economic activity was somewhat below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year. This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.  This suggests economic activity was below the historical trend in September (using the three-month average).  According to the Chicago Fed: The index is a weighted average of 85 indicators of national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories. A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

Chicago Fed: US Growth Trend Dips To 4-Month Low In September - The broad US economic trend decelerated in September for a second month in a row, according to today’s update of the three-month average of the Chicago Fed National Activity Index (CFNAI-MA3). The benchmark dipped to -0.21 last month, the lowest reading since May. The below-zero data indicates that economic activity remains moderately below the historical trend rate, although the rebound in the macro trend since the spring has stumbled in the last two months of the third quarter. On a positive note, the current three-month average is still well above the tipping point of -0.70 that marks the start of recessions. In addition, the monthly data for the index rebounded in September after slumping to the lowest reading in more than two years in August. Nonetheless, all four of the broad categories that comprise the Chicago Fed National Activity Index posted negative contributions last month for the second time in a row. The good news: the declines were relatively shallow compared with the across-the-board tumble in August. The main takeaway in today’s report: CFNAI-MA3 shows that US economic growth rate has weakened, raising questions about this Friday’s “advance” GDP report for the third quarter. Economists, however, are still looking for an encouraging revival in growth.’s consensus forecast sees Q3 GDP rebounding to 2.5% from 1.4% in Q2. If the projection is accurate, quarterly growth will pickup to its strongest pace in more than a year. But today’s CFNAI-MA3 update hints at the possibility that the improvement in Friday’s report may be softer than the crowd’s expecting.

N.Y. Fed lowers U.S. third and fourth quarter GDP outlook | Reuters: The New York Federal Reserve on Friday downgraded its forecasts on U.S. economic growth in the second half of 2016 following data on regional business activities in October and a steep drop in housing starts last month. The regional central bank said its "Nowcast" model projected gross domestic product in the third quarter growing at 2.22 percent versus 2.30 percent a week ago. It downgraded its fourth-quarter GDP outlook to 1.40 percent from 1.56 percent a week ago.

 Economists Expect A Moderate Rebound For US Q3 GDP Growth - The US economy is on track to expand at the fastest rate in more than a year in the third quarter, according to projections for this Friday’s “advance” GDP report from the Bureau of Economic Analysis. A range of estimates anticipate that quarterly output will top 2% (seasonally adjusted annual rate). If the prediction holds up, output is set to break free of the sluggish pace of roughly 1.0% that’s prevailed in each of the previous three quarters. The average Q3 prediction in The Wall Street Journal’s October survey of economists is 2.6%, nearly twice as strong as Q2’s 1.4% pace. The forecast marks the strongest quarterly rise since 2015’s Q2.  Econometric estimates from two regional Fed banks, however, anticipate moderately lower but-still-encouraging gains in Friday’s release. The Atlanta Fed’s Q3 GDPNow model is projecting a 2.0% increase (as of Oct. 19); the New York Fed’s nowcast is a bit firmer at 2.2% (Oct. 21). But some analysts see storm clouds gathering, in part because the Fed appears to be laying the groundwork for a year-end rate hike. “We are seeing a serious deterioration [in liquidity] on a monthly basis,” Michael Howell at CrossBorder Capital said last week. As a result, “we think the US is heading for recession by the Spring of 2017. It is absolutely bonkers for the Fed to even think about raising rates right now,” he opined via The Telegraph. Misguided or not, it’s clear that the monetary trend is skewing negative these days. As reported by The Capital Spectator last week, real (inflation-adjusted) M0 money supply contracted by nearly 9% in September–the biggest year-over-year slide in nearly seven decades. But while trouble may be brewing, recession risk remains low at the moment, based on the data published through September. As discussed in last week’s review of macro risk, the probability is virtually nil that the NBER, the official arbiter of the US business cycle, will declare September as the start of a new recession. Near-term projections through next month also reflect low business-cycle risk, and Friday’s GDP report is expected to reaffirm that view.

BEA: Real GDP increased at 2.9% Annualized Rate in Q3 - From the BEA: Gross Domestic Product: Third Quarter 2016 (Advance Estimate) Real gross domestic product increased at an annual rate of 2.9 percent in the third quarter of 2016, according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.4 percent.  The increase in real GDP in the third quarter reflected positive contributions from personal consumption expenditures (PCE), exports, private inventory investment, federal government spending, and nonresidential fixed investment that were partly offset by negative contributions from residential fixed investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.The acceleration in real GDP growth in the third quarter reflected an upturn in private inventory investment, an acceleration in exports, a smaller decrease in state and local government spending, and an upturn in federal government spending. These were partly offset by a smaller increase in PCE, and a larger increase in imports.  The advance Q1 GDP report, with 2.9% annualized growth, was above expectations of a 2.5% increase.  Personal consumption expenditures (PCE) increased at a 2.1% annualized rate in Q3, down from 4.3% in Q2.   Residential investment (RI) decreased at a 6.2% pace. Equipment investment decreased at a 2.7% annualized rate, and investment in non-residential structures increased at a 5.4% pace.

Q3 GDP Advance Estimate: A Surprisingly Strong 2.9% -  The Advance Estimate for Q3 GDP, to one decimal, came in at 2.9%, a surprisingly large increase over the 1.4% Third Estimate of Q2. The latest number exceeded mainstream estimates. The Atlanta Fed's GDPNow™ forecast, as of October 27th, was 2.1%. had posted a more optimistic consensus of 2.5%. Here is the slightly abbreviated opening text from the Bureau of Economic Analysis news release: Real gross domestic product increased at an annual rate of 2.9 percent in the third quarter of 2016, according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.4 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.... The "second" estimate for the third quarter, based on more complete data, will be released on November 29, 2016.  The increase in real GDP in the third quarter reflected positive contributions from personal consumption expenditures (PCE), exports, private inventory investment, federal government spending, and nonresidential fixed investment that were partly offset by negative contributions from residential fixed investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.  The acceleration in real GDP growth in the third quarter reflected an upturn in private inventory investment, an acceleration in exports, a smaller decrease in state and local government spending, and an upturn in federal government spending. These were partly offset by a smaller increase in PCE, and a larger increase in imports. [
Full Release]  Here is a look at Quarterly GDP since Q2 1947. Prior to 1947, GDP was calculated annually. To be more precise, the chart shows is the annualized% change from the preceding quarter in Real (inflation-adjusted) Gross Domestic Product. We've also included recessions, which are determined by the National Bureau of Economic Research (NBER). Also illustrated are the 3.22% average (arithmetic mean) and the 10-year moving average, currently at 1.39%.

The U.S. Economy Grew at Strongest Rate in 2 Years Last Quarter — The U.S. economy grew at a 2.9 percent rate in the July-September quarter, the strongest pace in two years, as the battered export sector rebounded and businesses finally began restocking their shelves at a faster clip. The third-quarter gross domestic product, the broadest measure of economic health, was double the 1.4 percent pace in the second quarter, the Commerce Department reported Friday. GDP growth went into a pronounced slowdown late last year. Exporters were constrained by a rising dollar, which made their products more expensive on overseas markets, and businesses cut back on their inventory rebuilding in the face of weaker sales. With the dollar stabilizing, export sales rebounded in the summer and businesses picked up the pace of inventory building. Solid growth is also expected this quarter. The latest growth figure was stronger than the 2.5 percent gain many analysts had been expecting. The GDP report was one of the last major economic reports the government will issue before voters go to the polls on Nov. 8. Republican presidential candidate Donald Trump has cited anemic GDP growth rates as evidence that Democratic economic policies have not worked. Even with the acceleration in the third quarter, economists believe growth for the entire year will be a lackluster 1.6 percent, reflecting the weak start to the year. The economy grew 2.6 percent for all of 2015. This recovery from the deep 2007-2009 recession has been the weakest in the post-World War II period, with growth averaging just 2.1 percent over the past seven years. The GDP growth rate in the third quarter was the economy’s best showing since it expanded at a 5 percent rate in the third quarter of 2014. In the final three months of last year, growth slowed to a 0.9 percent rate, followed by weak gains of 0.8 percent in the first quarter this year and 1.4 percent in the second quarter. Economists expect growth to remain solid in the current October-December quarter, but at a slightly slower pace of around 2 percent. For the third quarter, much of the rebound reflected growth in exports, which rose at a 10 percent rate. That was the fastest pace since late 2013. A narrowing trade deficit added 0.8 percentage points to growth. Another major contributor was stronger inventory building, which added 0.6 percentage point to growth after trimming it by 1.2 percentage points in the second quarter. Consumer spending, which accounts for two-thirds of economic activity grew at a solid 2.1 percent rate but slower than the 4.1 percent spending burst in the second quarter. Economists believe consumers will continue to support growth in the current quarter and into 2017.

Third-Quarter U.S. GDP – At A Glance -- The U.S. economy expanded at a seasonally adjusted annual rate of 2.9% in the third quarter of 2016, the Commerce Department said Friday. Economists surveyed by The Wall Street Journal had expected a somewhat lower growth rate of 2.5%. It was a pickup from the second quarter’s 1.4% growth pace and marked the strongest quarter of growth in two years. Here are some of the key details from Friday’s report, released less than two weeks before the U.S. presidential election on Nov. 8.    Household outlays account for the majority of U.S. economic output. But in the third quarter, consumer spending slowed to a 2.1% annual growth rate from the second quarter’s robust 4.3% reading. Spending on durable goods remained strong but growth in services spending slowed and purchases of nondurable goods declined at the steepest rate since the tail end of the 2007-09 recession. In all, personal-consumption expenditures added 1.47 percentage points to the quarter’s 2.9% growth rate for total GDP. Business spending rose modestly for the second consecutive quarter, with fixed nonresidential investment advancing at a 1.2% pace and contributing 0.15 percentage point to the GDP growth rate. Spending on structures and intellectual property products increased, but equipment purchases declined for the fourth consecutive quarter. The Federal Reserve has flagged soft business investment in recent quarters as a concern, attributing some but not all of the weakness to the energy sector’s woes, though investment in R&D and other intellectual-property products remained solid during and after the recession. Inventories offered a tailwind for third-quarter growth, with change in private stockpiles contributing 0.61 percentage point to the quarter’s 2.9% growth rate. Inventories had been a drag on overall growth for the prior five quarters. An expected turnaround in inventories was one reason many economists have predicted stronger economic growth in the second half of the year.  Exports jumped in the third quarter at a 10.0% annual pace, boosted by a summer surge in soybean exports that economists had predicted would bolster overall GDP growth for the third quarter. Imports rose at a more modest 2.3% rate last quarter. Overall, net exports contributed 0.83 percentage point to last quarter’s GDP growth rate.  The housing sector remained a soft spot in the third quarter. Residential fixed investment declined for the second straight quarter, falling at a 6.2% annual rate over the summer following a 7.7% drop in the spring, and subtracted 0.24 percentage point from the overall GDP growth rate in the third quarter.  The fiscal picture was mixed last quarter, with a rise in federal-government spending contributing to growth but offset in part by a decline in state and municipal spending. State and local governments in particular have pulled back this year on infrastructure spending and major capital projects. In all, total government spending added a modest 0.09 percentage point to the quarter’s GDP growth rate.

Advance Estimate 3Q2016 GDP Quarter-over-Quarter Growth at 2.9 Percent.: The advance estimate of third quarter 2016 Real Gross Domestic Product (GDP) is a positive 2.9 %. This is a significant improvement from the previous quarter's 1.4 % if one looks at quarter-over-quarter headline growth.Year-over-year growth improved modestly so one could say economic growth was better. Yes of course, this is an improvement. But the consumer went limp, and GDP is gamed with inventory hocus-pocus and export-import adjustments. I am not a fan of quarter-over-quarter exaggerated method of measuring GDP - but my year-over-year preferred method showed moderate improvement from last quarter.•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 3Q2016, the year-over-year growth is 1.5 % - moderately up from 2Q2016's 1.3 % year-over-year growth. So one might say that the rate of GDP growth accelerated 0.2 % from the previous quarter.The same report also provides Gross Domestic Income which in theory should equal Gross Domestic Product. Some have argued the discrepancy is due to misclassification of capital gains as ordinary income - but whatever the reason, there are differences. Real GDP is inflation adjusted and annualized - and Real GDP per capita remains on a general upward trend. The table below compares the previous quarter estimate of GDP (Table 1.1.2) with the advance estimate this quarter which shows:

  • consumption for goods and services significantly decelerated..
  • trade balance improved and added 0.83% to GDP
  • there was significant inventory change adding 0.61% to GDP
  • except for inventory growth,there was little change in fixed investment growth
  • there was less government spending

The following is Table 1.1.2 before the annual revision: [click to enlarge]

Jump in Inventories Leads to Stronger than Expected GDP Growth -- Dean Baker -  The economy grew at a 2.9 percent annual rate in the third quarter, the strongest growth rate since the third quarter of 2014. Most forecasts had put growth for the quarter at just over 2.0 percent. While the growth is better than expected, a big factor was an increase in inventory accumulation, which added 0.61 percentage points to growth. Accumulation was actually negative in the second quarter, so the rate of accumulation is likely to be even higher in the fourth quarter, again adding to growth. Final demand growth in the quarter was just 2.3 percent. Most categories of final demand were relatively weak... One striking figure in this report is the slower pace of inflation shown in the core personal consumption expenditure deflator (PCE). This rose at just a 1.7 percent annual rate in the third quarter. The rate of inflation shown in the core PCE has been trailing off throughout the year, rising at a 2.1 percent annual pace in the first quarter and a 1.8 percent rate in the second quarter. While there are enough erratic movements in the quarterly data to avoid treating this as evidence of deceleration, it is certainly hard to make a case for acceleration with these data. In this respect it is also worth noting that the Employment Cost Index for the third quarter showed a year over year rise of just 2.3 percent, the same as for the second quarter. Wage growth continues to outpace benefit growth in the private sector, with wages rising 2.4 percent, compared to 1.8 percent for benefits.   On the whole, this report indicates that the economy continues to grow at a modest pace. With the weak first half, it will take another quarter of 2.9 percent growth to just reach 2.0 percent for the full year. That is at or below most estimates of potential GDP. The price data also show zero evidence of accelerating inflation, indicating the economy is not reaching any limits.

Third Quarter GDP Jumps 2.9% On Rise In Inventory And Exports, Offset By Weak Consumption And Investment -- For once it appears that the Atlanta Fed, with its 2.1% Q3 GDP nowcast was overly pessimistic, and moments ago the BEA reported that in the third quarter, US GDP increased at an annual rate of 2.9% according to the first "advance" estimate released up more than double from the Q2 real GDP of 1.4%, and beating Wall Street consensus of a 2.6% rise in the quarter. The move higher was driven by a jump in inventory accumulation and exports, while consumption disappointed, as Real Consumer Spending rose 2.1% Q/Q, far below the 4.3% spike in Q2 and missing estimates of a 2.6% print. The rebound was driven by a jump in inventories which contributed 0.6% to the bottom line, while net trade added another 0.8%, up from just 0.1% in Q2. On the other hand, personal consumption which was a major outlier in Q2, contracted notably, and rose by just 1.47% in Q3, down nearly by half from 2.88% in Q2. Finally, th bleak capex picture remains, as Fixed Investment in the US has now declined for a fourth consecutive quarter, subtracting 0.1% from Q3 GDP. The details: The increase in real GDP partly reflected an increase in consumer spending on services, notably on housing and utilities and on health care, i.e., the tax known as Obamacare boosted the economy again. Spending on durable goods, notably on motor vehicles and parts, also increased. Exports of goods increased, notably in foods, feeds, and beverages and in industrial supplies and materials. Exports of services also increased. In addition, private inventory investment increased, as did federal government spending and business investment. Offsetting these contributions to growth, residential housing investment, consumer spending on nondurable goods, and state and local government spending declined.

Surge in soybean sales boosted better-than-expected GDP data: Friday's report showing surprising strength in the U.S. economy was full of beans. Soybeans, that is. A bigger than expected 2.9 percent annual growth rate in the third quarter was cheered by analysts and investors as a sign that a moribund economy is finally picking up speed. The report, the last read on the U.S. economy's pace of growth before the election, was also seen as giving Democrats a solid talking point about the Obama administration's economic policies. But a closer look at the numbers show that the economy may not be as strong as the headlines indicate. Some nine-tenths of a percentage point of the gain came from a surge in soybean exports, much of which was shipped to China, an event that won't be repeated in coming quarters. That may not sound like a lot. But nine-tenths of a percent of an $18.6 trillion economy works out to $167 billion. That's roughly the size of Iowa's annual economic output.U.S. farmers are on track for a record soybean harvest of more than four billion bushels. At the same time, a poor harvest in Brazil boosted demand for the U.S. crop from big importers like China. That's good news for U.S. farmers. But the resulting surge in net exports is a one-time boost that's unlikely to be repeated, according to economist Paul Ashworth at Capital Economics. "It is still a welcome sign that the dollar appreciation in 2014 and 2015 is no longer weighing on exporters," he wrote in a note to clients. "Nevertheless, while overall exports added 1.2 percentage points to GDP growth, without the spike in soybean exports it would have added only 0.3 percentage points." There were other signs that the economy remain weak. Consumer spending slowed, and investment in housing fell. And the growth of final sales — a measure of the overall strength in demand — rose by 1.4 percent in the third quarter after gaining 2.4 percent in the previous three months. All of which points to an economy that is growing, but remains stuck in low gear.

Soybeans? -- Wonders will never cease. After the Atlanta Fed forecast 3rd quarter GDP at 2.1%, and the New York Fed forecast it at 2.2%, the Commerce Department, which is entirely free of political influence and always has been, announced that GDP grew at an astounding 2.9% in the third quarter. It was merely a coincidence that the White House gets to crow about this phenomenal growth 11 days before the election. But what did those Fed GDP watchers miss? MarketWatch has the answer. The driving force behind the improved third-quarter performance was a 10% spike in exports, helped by a temporary boom in U.S. soybean shipments after a poor harvest in South America.Soybeans may have accounted for one-third of GDP growth in the fall, estimates Ian Shepherdson, chief economist at Pantheon Macroeconomics. In fact, according to the Commerce Department, exports boosted 3rd quarter GDP by 0.83% on an annual basis as reported by Bloomberg.Net exports added 0.83 percentage points to GDP growth. Trade and inventories are two of the most volatile components in GDP calculations. The Commerce Department said that the acceleration in overseas shipments was mostly attributable to an increase in exports of soybeans, indicating the pickup was probably temporary. As Bloomberg notes, the GDP increase is "probably temporary" due to this one-time soybeans export boom. But temporary is good enough when you are 11 days out from an election which everyone in government and the media agrees must go one way and not the other. Now, DOTE is not a conspiracy website, never has been and never will be. I just wanted to note that wonders never cease when there's so much at stake. Purely a coincidence, I'd say. Have a nice weekend.

Q3 GDP: Indian Summer now, but a darkening sky on the horizon: Real GDP for Q3 was reported this morning, and as I am sure you already know, it was the best in four quarters: This is, as I have said frequently over the last few months, Indian Summer. The economy accelerated to a very decent, if not spectacular, rate of growth. That's the good news. The bad news is in those metrics that help tell us where the economy will be a year or more from now: business profitability and housing investment. Real private residential investment is so important that Prof. Edward Leamer of UCLA considers it the single best long leading indicator for the economy. It tends to tip over about 6 quarters before the onset of a recession. Well, for the last 2 Quarters it has declined: Turrning to the business side, corporate profits will not be reported for Q3 until the next estimate. But in the meantime, we have a pretty decent proxy: proprietors income. Proprietors income usually, but not always, turns within one Quarter of corporate profits. And proprietors income (blue in the graph below), even without adjusting for inflation, was slightly down in the Third quarter: Note that corporate profits (red above) peaked several years ago, and may (or may not) have made a trough at the end of 2015. Another long indicator that tends to turn well before the onset of a recession is corporate tax receipts. These were also not reported for Q3 in this preliminary release, but they have been wobbly for the last year: So we have a reasonably good economy at the moment. But preliminary GDP is showing increasingly darkening skies on the horizon, as the Gales of November must inevitably follow Indian Summer.

Q3 Real GDP Per Capita: 2.18% Versus the 2.9% Headline Real GDP - The Advance Estimate for Q3 GDP came in at 2.9%, up from 1.4% in the Third Estimate of Q2 GDP. With a per-capita adjustment, the headline number is lower at 2.18%. 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 10.1% below the pre-recession trend.

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) decreased at a 6.2% annual rate in Q3.  Equipment investment decreased at a 2.7% annual rate, and investment in non-residential structures increased at a 5.4% annual rate. On a 3 quarter trailing average basis, RI (red) is unchanged,  equipment (green) is slightly negative, and nonresidential structures (blue) is slightly positive. I'll post more on the components of non-residential investment once the supplemental data is released. I expect investment to pick up going forward, and for the economy to grow at a steady pace. The second graph shows residential investment as a percent of GDP. Residential Investment as a percent of GDP has generally been increasing, but is only just above the bottom of the previous recessions - and I expect RI to continue to increase for the next few years. Note: Residential investment (RI) includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.

Long-term over-investment -  In theory, investment should multiply growth. But it's not. Not since the early 1980s. The US Sharemarket has outperformed Gross Domestic Product for way too long. The result has been slower growth. (graph)

 Bill Black: Debt Derangement Syndrome – Saving Our Grandkids from Wall Street -Pete Peterson is back, and his message and rhetoric are always the same. The federal budget deficit is a disaster and – any day now – will produce massive inflation. Peterson has written his 20,000th version of this fantasy in the NYT with Paul Volcker. The first rhetorical game that Paulson plays is to assert that it is bad for a sovereign nation to run budgetary deficits because they are not “sound and sustainable.” Except that the U.S. has run deficits for most of its existence without ever suffering hyper-inflation. For a nation like the U.S. with a sovereign currency, a federal budgetary deficit is not unsound and it is not unsustainable. Federal budget deficits can, depending on the circumstances, be the very definition of “sound” fiscal policy – a policy that is often essential for “sustainable” recovery and growth of the economy. Peterson asserts that his latest warning of fiscal disaster might, for the first time in his career be correct. Peterson claims that this time his warnings are real because the “widely respected” Congressional Budget Office (CBO) says its model predicts a growing deficit. The CBO is not “widely respected” by economists. It uses macroeconomic models that produce nonsense results. Economists know that the CBO models cannot predict reality because they were constructed out of ideological nostrums that have repeatedly been proven false by reality. The CBO has gotten credit in the past from Democrats because it declined to use even more flawed “dynamic scoring” models favored by many Republicans that falsely predict that tax cuts lead to magical, spectacular growth. The ultra-right-wing Republicans that control Congress chose an ultra-right-wing fanatic to run the CBO who has a track record of being spectacularly wrong. He is the opposite of “widely respected.” Even before his appointment, the CBO functioned as a barrier to the vigorous stimulus policies that we have known for over a half-century to be essential to respond to a Great Recession. The result was a much slower and weaker recovery. The financial markets price the risk of Peterson’s repeatedly promised, imminent hyper-inflation. They price that purported risk as essentially zero. Peterson knows he cannot win the economic argument because he is zero for 20,000 in his predictions of hyper-inflation in the United States. Instead, his second rhetorical game is to infuse parents with guilt about the fate of our grandchildren. Here is one problem with the G3 – and it comes from Peterson’s own attempt to induce grandkid guilt.

USA Actually Bankrupt Now: Laurence Kotlikoff -- Renowned Boston University Economics Professor Laurence Kotlikoff is running for President with a write-in campaign. He says we need an economic expert, not a politician, to fix our severe financial problems. Dr. Kotlikoff explains, “Our democracy is in trouble. We have 14% of the electorate who have chosen Hillary Clinton for us to vote for, and a different 14% have chosen Trump to vote for. The vast majority of the population realizes neither Clinton nor Trump are qualified. Just on the economic front, these folks have no idea how fiscally sick our country is. The fact that we have off-the-book liabilities that make our true debt roughly 15 times larger than the amount the government is actually reporting, so, our true debt is about $206 trillion. The debt the Congressional Budget Office is telling us about is about $13.5 trillion. . . . We’re short $206 trillion. The country is 53% underfinanced. So, the country is actually bankrupt right this minute. It’s not $206 trillion in the future that we owe, it’s $206 trillion today. It’s our credit card bill, and we’re broke.” Kotlikoff goes on to say, “So, if you put everything on the books, we’re broke, and we’ve been printing money out the wazoo since 2007 to pay Congress’s bills. That’s the truth about quantitative easing. We need to have somebody who knows what’s going on in the big picture here and has a game plan to get rid of this fiscal gap, and do it without total chaos. If we leave things the way they are, people will view the country as leaderless fundamentally and printing money to pay its bills. Then, the expectation will occur, and that’s going to raise rates, and that’s going to drop bond prices, and that will sink the banks, and, yes, you can have another great recession like Bill Gross is referencing (bond super nova). I’ve been saying this for decades. The time for the last straw to drop on the camel’s back, and when it’s going to drop that camel is hard to say. If you look at the fundamentals, and the fundamentals look like that of an emerging country, we are the most indebted developed country relative to GDP of any country around. We are in worse shape, I believe, than Russia or Greece, and far worse shape than Italy.”

The Geniuses Who Brought You the Iraq War Are at It Again -- The “Blob”—the epithet Obama speechwriter Ben Rhodes used to scorn Washington’s inbred, vainglorious, bipartisan foreign-policy elite—is striking back. In a series of foreign policy reports designed to influence the incoming administration, Greg Jaffe of The Washington Post reveals, the Blob will publicly criticize Obama’s “reluctance” to exercise America’s military prowess and call for a more “muscular,” “interventionist,” assertive policy, from the South China Sea to the Russian border, but particularly in the Middle East. They are pumping for more war. The names are familiar—former secretary of state Madeline Albright and former Bush national security adviser Stephen Hadley lead the Atlantic Council task force. Former Bill Clinton NSC adviser Brian Katulis and former Bush deputy secretary of defense Rudy deLeon are senior fellows at the Center for American Progress. The inescapable Martin Indyk heads a Brookings group of former top officials from Obama, Bush, and Clinton administrations. These are the apostles of American exceptionalism, from the neoconservatives who promoted the invasion of Iraq to the “indispensable nation” liberal interventionists who championed regime change in Libya. Virtually without exception, all supported Bush’s invasion of Iraq, the most catastrophic foreign policy debacle since Vietnam. Virtually without exception, none were held accountable for that folly.  The reports—and the Blob—share two conclusions. They censure Obama for excessive timidity. “There’s a widespread perception that not being active enough or recognizing the limits of American power has costs,” the Post quotes Philip Gordon, a senior foreign-policy adviser to Obama until 2015. “So the normal swing is to be more interventionist.” And all favor ramping up US military activity—on the Russian borders, in the South China Sea, and particularly in the Middle East, promoting no-fly and safe zones in Syria, more special forces, more aggressive use of air power, more military aid, and a more integrated security partnership. The objective is not only to defeat ISIS and Al Qaeda and its offshoots militarily, but to create order in war torn Iraq, Syria, Yemen, Libya, and Somalia, as well as to counter Iran and Russia in the region.

Hillary Clinton Promises A More Muscular Foreign Policy As President -- In the lead-up to the 2008 presidential election, Hillary Clinton’s vote to authorize the Iraq War six years before haunted her on the campaign trail. It put her in stark contrast with then-Senator Barack Obama, who touted his foresight in opposing the ill-fated war. But if Clinton was scarred by the perception that her foreign policy agenda is too hawkish for the Democratic Party, she showed no signs of it Wednesday morning in a speech detailing her plan to counter Iran after the implementation of the nuclear deal. While Clinton was instrumental in paving the road for the nuclear negotiations with Iran in 2012 and supports the accord reached between Iran, the U.S., and five world powers in July, she made clear on Wednesday at the Brookings Institution that she does not view the agreement as marking a shift in U.S.-Iranian relations. “I don’t believe Iran is our partner in this agreement. Iran is the subject of the agreement,” Clinton said, using rhetoric that notably contrasts with that of the Obama administration, which has been consistently cautious about not upsetting Iran. Obama was hesitant to condemn the Iranian crackdown on protesters during the 2009 Green Revolution. The unrest erupted just as the Obama administration was quietly mulling outreach to the Iranians on the nuclear issue, and the president was mindful of the way a condemnation would sound in a country that views the U.S. as an arrogant superpower intent on regime change. The administration’s failure to take a more proactive role on behalf of the protesters was a mistake Clinton regrets, as she wrote in her memoirs and repeated in her speech Wednesday. “That won’t happen again,” she vowed.Clinton’s message to the Iranians was clear: “The U.S. will never allow you to acquire a nuclear weapon,” she said Wednesday. “I will not hesitate to take military action if Iran attempts to obtain a nuclear weapon.

Paul Craig Roberts: "Putin's Nukes Could Wipe Out Entire American East Coast" In Minutes - Suffice to say, though children are at play, this is not a game. Those who have been toying with outright war against Russia, and an escalation of the conflict in Syria, are putting the lives of all Americans at risk. Of course, the threat of nuclear annihilation has been with us since the earliest days of the Cold War, but Russia has now positioned itself with the largest and most destructive nuclear arsenal of any country in the world. Economist and political critic Dr. Paul Craig Roberts explains how diplomatic relations have broken between Russia and the United States, after the U.S. knowingly attacked pro-Assad Syria forces… that, of course, was the cherry on top of a host of insults, deliberate antagonism and a strategy that could only result in further chaos and war. The end of negotiations is unfortunately, given that fighting it out could mean thermonuclear war that would make Hiroshima and Nagasaki look trivial in comparison. After a period of some patience, Russia is now warning that the United States is dangerously close to turning a proxy war into a direct world war – and they are deadly serious about defending the motherland and their sworn allies – namely Assad. Any further attack could result in immediate destruction. Putin is a formidable opponent and Russia a powerful enemy. At present time, they have the capability of wiping the entire East Coast of the United States off the map – where more than 100 million people live. Will the ranking misleaders in Washington continue to gamble with all of our lives?

Next US President Must Abandon Futile Effort to Isolate Russia - The next US administration should forego useless attempts at isolating Russia and instead look to cooperate in areas of mutual interest, former Special Assistant to the US President and Senior Director for Russian Affairs Thomas Graham said in a speech at the McCain Institute. WASHINGTON (Sputnik) — Russia will remain a great power, Graham explained, with such assets as a world class diplomatic corps, its conventional military forces and great resources as well as its enormous territory and strategic location across Eurasia. Besides, Graham pointed out, the United States has benefited from cooperation with Russia in many fields including non-proliferation efforts, fighting international terrorism and toppling the Taliban. “We cannot contain or isolate Russia nor is it our interest to do so,” Graham stated on Thursday. “The task is to construct a balance of competition and cooperation.” It is beyond US ability, Graham claimed, even with its allies, to isolate another major power like Russia.

Trump’s Foreign Policy Is Sane While Clinton’s Is Belligerent -- Some highlights of a recent Donald Trump interview with Reuters: Trump said defeating Islamic State is a higher priority than persuading Syrian President Bashar al-Assad to step down,.. Trump questioned how Clinton would negotiate with Russian President Vladimir Putin after demonizing him; blamed President Barack Obama for a downturn in U.S. relations with the Philippines under its new president, Rodrigo Duterte;... Trump's foreign policy talk is far more sane than Clinton's and her camp's. It is ludicrous to event think about openly attacking Russian (or Syrian) troops in Syria with an al-Qaeda supporting "no-Fly-Zone". Russia would respond by taking down U.S. planes over Syria. The Russian government would have to do so to uphold its authority internationally as well as at home. The U.S. could respond by destroying all Russian assets in and around Syria. It has the capabilities. But then what? If I were Putin my next step would be a nuclear test shoot in Siberia - a big one - to make a point and to wake up the rest of the world.  China would support Russia as its first line of self defense."What we should do is focus on ISIS. We should not be focusing on Syria," said Trump. "You’re going to end up in World War Three over Syria if we listen to Hillary Clinton. "You’re not fighting Syria any more, you’re fighting Syria, Russia and Iran, all right? Russia is a nuclear country, but a country where the nukes work as opposed to other countries that talk," he said. ..On Russia, Trump again knocked Clinton's handling of U.S.-Russian relations while secretary of state and said her harsh criticism of Putin raised questions about "how she is going to go back and negotiate with this man who she has made to be so evil," if she wins the presidency. On the deterioration of ties with the Philippines, Trump aimed his criticism at Obama, saying the president "wants to focus on his golf game" rather than engage with world leaders. The last two points are important. Trump, despite all his bluster, knows about decency. What is the point of arrogantly scolding negotiation partner who have the power to block agreements you want or need? Why blame Russia for hacking wide open email servers when no Russian speakers were involved? Why blame Duterte? It is the U.S. that has a long history of violent racism in the Philippines and FBI agents committed false flag "terrorism" is Duterte's home town Davao. Bluster may paper over such history for a moment but it does not change the facts or helps solving problems. Trump's economic policies would be catastrophic for many people in the U.S. and elsewhere. But Hillary Clinton would put her husband, the man who deregulated Wall Street, back in charge of the economy. What do people expect the results would be?

Dennis Kucinich's Extraordinary Warning On Washington's Think Tank Warmongers - Former Congressman Dennis Kucinich has just penned an extremely powerful warning about the warmongers in Washington D.C. Who funds them, what their motives are, and why it is imperative for the American people to stop them. The piece was published at The Nation and is titled:  Why Is the Foreign Policy Establishment Spoiling for More War? Look at Their Donors. Read it and share it with everyone you know. Washington, DC, may be the only place in the world where people openly flaunt their pseudo-intellectuality by banding together, declaring themselves “think tanks,” and raising money from external interests, including foreign governments, to compile reports that advance policies inimical to the real-life concerns of the American people.As a former member of the House of Representatives, I remember 16 years of congressional hearings where pedigreed experts came to advocate wars in testimony based on circular, rococo thinking devoid of depth, reality, and truth. I remember other hearings where the Pentagon was unable to reconcile over $1 trillion in accounts, lost track of $12 billion in cash sent to Iraq, and rigged a missile-defense test so that an interceptor could easily home in on a target. War is first and foremost a profitable racket.How else to explain that in the past 15 years this city’s so called bipartisan foreign policy elite has promoted wars in Iraq and Libya, and interventions in Syria and Yemen, which have opened Pandora’s box to a trusting world, to the tune of trillions of dollars, a windfall for military contractors. DC’s think “tanks” should rightly be included in the taxonomy of armored war vehicles and not as gathering places for refugees from academia. According to the front page of this past Friday’s Washington Post, the bipartisan foreign-policy elite recommends the next president show less restraint than President Obama. Acting at the urging of “liberal” hawks brandishing humanitarian intervention, read war, the Obama administration attacked Libya along with allied powers working through NATO.

The USA Is An Oligarchy, Study Concludes - The US government does not represent the interests of the majority of the country's citizens, but is instead ruled by those of the rich and powerful, a new study from Princeton and Northwestern Universities has concluded. The report, entitled Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens, used extensive policy data collected from between the years of 1981 and 2002 to empirically determine the state of the US political system. After sifting through nearly 1,800 US policies enacted in that period and comparing them to the expressed preferences of average Americans (50th percentile of income), affluent Americans (90th percentile) and large special interests groups, researchers concluded that the United States is dominated by its economic elite. The peer-reviewed study, which will be taught at these universities in September, says: "The central point that emerges from our research is that economic elites and organised groups representing business interests have substantial independent impacts on US government policy, while mass-based interest groups and average citizens have little or no independent influence."  Researchers concluded that US government policies rarely align with the the preferences of the majority of Americans, but do favour special interests and lobbying organisations: "When a majority of citizens disagrees with economic elites and/or with organised interests, they generally lose. Moreover, because of the strong status quo bias built into the US political system, even when fairly large majorities of Americans favour policy change, they generally do not get it."

Hillary Clinton’s Plan to Squeeze the Ultra-Rich - Clinton has proposed a series of tax hikes on the ultra-rich. If all these tax increases were enacted, her economic plan may still increase the national debt, but only by about twenty billion dollars a year—a small fraction of the over-all level of debt, which is about $19.7 trillion. Where Clinton’s plan would have a big impact is on the after-tax incomes of many of the richest people in the country. Here are some numbers from a new analysis by the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute:

  • •   About ninety-two per cent of the Clinton tax increase would fall on the richest one per cent of the population—people who earn at least $699,000 a year.
  • •   These high earners would face, on average, a tax increase of $117,760. They would see their after-tax incomes reduced by 7.4 per cent.
  • •   Nearly two-thirds of the Clinton tax increase would fall on the richest 0.1 per cent of the population—people with annual incomes greater than $3.75 million.
  • •   These ultra-high earners would face, on average, a tax increase of about $800,000. They would see their after-tax incomes reduced by 10.8 per cent.

Clinton has made no secret of her intention to raise taxes on the rich. Understandably, she has spent little time laying out the details of the increases she is proposing. If she spelled out how much more money the wealthy would be paying to the U.S. Treasury under a Clinton Administration, some of her well-heeled donors might have second thoughts. In any case, there are five main ways in which the Clinton tax plan would hit the very rich:

  • 1. It would limit the amount of tax relief that high-income taxpayers can get from itemized deductions, such as mortgage-interest payments, state and local taxes, and contributions to pension plans.
  • 2. It would enact a version of the “Buffett Rule,” named for Warren Buffett, which states that no household making more than a million dollars a year should pay a smaller share of its income in taxes than middle-class families do.
  • 3. It would impose a new four-per-cent tax surcharge on all households with taxable incomes of more than five million dollars (or $2.5 million for married couples who file separate returns). For many ultra-rich households, this would make their top marginal tax rate 47.4 per cent. The current top rate of income tax is 39.6 per cent.
  • 4. It would broaden the base for the Obamacare tax on investment income, which applies to taxpayers with over-all incomes of more than $200,000 a year. At the moment, some so-called pass-through income, which rich people earn from investment partnerships and other sources, escapes the Obamacare tax.
  • 5. It would expand the estate tax in three significant ways. First, the tax would apply to all bequests larger than $3.5 million ($7 million for married couples), whereas the current system exempts bequests up to $5.45 million ($10.9 million per married couple). In addition, Clinton would eliminate the “step-up in basis” loophole, which allows heirs to avoid paying capital gains tax on assets that have appreciated in value under the ownership of the deceased. And, third, Clinton recently adopted a proposal from Bernie Sanders to impose higher tax rates on very large bequests.

 The Progressive Tax Reform You’ve Never Heard Of -- “PROFIT SHIFTING” IS THE biggest lawful tax avoidance strategy in the United States and the world. Tax professor Kimberly Clausing of Reed College estimates that 31 percent of corporate tax revenue was lost due to profit shifting in 2012. In other words, the IRS collected $242 billion in corporate tax revenue that year, but should have collected another $111 billion if profit shifting to foreign jurisdictions did not exist. The problem rapidly accelerated from 2004 to 2012, and continues to increase dramatically. In 2016, it is possible that more than 40 percent of potential corporate tax revenue will be lost. Some reformers on the Democratic side may be missing the mark when focusing on tax loopholes, tax breaks, and statutory rates while preserving the taxation of U.S. corporations’ worldwide income. Most developed countries tax income generated in their country; this is called a “territorial” income tax system. While the worldwide taxation system we have may, at first, seem like a good idea to progressives who want U.S. multinationals to be taxed properly, our system is having the opposite effect, and it can’t be corrected through tinkering. Professor Clausing of Reed College puts it this way: Unlike most trading partners, the U.S. system purports to tax the worldwide income of multinational companies at the statutory rate of 35 percent, granting a tax credit for taxes paid to other countries. Yet, because U.S. taxation is not triggered unless income is repatriated, multinationals can avoid residual tax by indefinitely holding income abroad. … As a result, the U.S. “worldwide” system of taxation is substantially more generous to foreign income than many alternative systems of taxation. There is a remedy that fixes profit shifting, adopts a territorial tax, and solidifies tax revenue, by adapting a variation of the corporate tax system already used at the state level. This approach is called “sales factor apportionment” (SFA). Here’s how it works. SFA would apportion U.S. corporate tax on worldwide company income based upon the ratio of U.S. sales to worldwide sales. Despite the complex name, the principle is very simple. SFA disregards all internal corporate transfer pricing between subsidiaries, so a “sale” to a true customer outside the company is all that matters.

 The TPP and Free Trade: Time to Retake the English Language -  Dean Baker - The proponents of the Trans-Pacific Partnership (TPP) are planning to do a full court press in the lame duck session of Congress following the election. We will be bombarded with speeches and columns from President Obama and other illustrious figures telling us how it is important to approve the TPP for a variety of reasons. We can be certain that one of the reasons will be the inherent virtues of free trade. They will not be telling the truth. The TPP is not about free trade. It does little to reduce tariffs and quotas for the simple reason that these barriers are already very low. In fact, the United States already has trade deals with six of the other 11 countries in the TPP. This is why the non-partisan United States International Trade Commission (ITC) estimated that when the full gains from the TPP are realized in 2032, they will come to just 0.23 percent of GDP. This is a bit more than a normal month's growth. In fact, the TPP goes far in the opposite direction, increasing protectionism in the form of stronger and longer patent and copyright protection. These forms of protection for prescription drugs, software and other products, often raise the price by a factor of a hundred or more above the free market price. This makes them equivalent to tariffs of several thousand percent. These forms of protection do serve a purpose in promoting innovation and creative work, but we have other more efficient mechanisms to accomplish this goal. Furthermore, the fact that they serve a purpose doesn't mean they are not protectionist. After all, protectionism always serves some purpose. A quota to protect the US sugar industry doesn't stop being protectionism because it ensures the survival of a domestic sugar industry. It is likely the case that the strengthening of patent and copyright related protections in the TPP does more to impede free trade than the modest reductions in tariffs do to promote free trade. Unfortunately, neither the ITC nor anyone else has attempted to quantify the cost of the protectionist measures in the TPP so we don't have a good basis for comparison at this point.

Financial Services Industry Urges Congress to Get On With TPP - Eight major financial services industry associations made an appeal to congressional leaders to support passage of the TPP this year, arguing that the deal is “vital to ensuring that the U.S. financial services sector remains a vibrant engine for domestic and global growth.” “A failure to act on TPP this year will have real consequences and it is entirely possible that the other parties to the agreement will move ahead without us,” says a letter to lawmakers. “Should this happen, the United States could lose the benefits of rules that will ensure the U.S. financial services sector remains the world leader and be forced to forgo the multiple economic opportunities afforded by a high quality, 21st-century trade agreement that covers almost 40 percent of global GDP.” The business groups highlight the administration’s successful efforts at addressing the TPP’s shortcomings related to data storage prohibitions that did not apply to financial data, which allowed the industry to “stand squarely behind” the deal. The letter says it supports “the administration’s commitment to reach a binding and enforceable obligation with TPP parties with respect to this issue, such as through ongoing Trade in Service Agreement negotiations and other avenues.”

Inequality As Policy: Selective Trade Protectionism Favors Higher Earners - Dean Baker - Globalization and technology are routinely cited as drivers of inequality over the last four decades. While the relative importance of these causes is disputed, both are often viewed as natural and inevitable products of the working of the economy, rather than as the outcomes of deliberate policy. In fact, both the course of globalization and the distribution of rewards from technological innovation are very much the result of policy. Insofar as they have led to greater inequality, this has been the result of conscious policy choices. Starting with globalization, there was nothing pre-determined about a pattern of trade liberalization that put U.S. manufacturing workers in direct competition with their much lower paid counterparts in the developing world. Instead, that competition was the result of trade pacts written to make it as easy as possible for U.S. corporations to invest in the developing world to take advantage of lower labor costs, and then ship their products back to the United States. The predicted and actual result of this pattern of trade has been to lower wages for manufacturing workers and non-college educated workers more generally, as displaced manufacturing workers crowd into other sectors of the economy.  Instead of only putting manufacturing workers into competition with lower-paid workers in other countries, our trade deals could have been crafted to subject doctors, dentists, lawyers and other highly-paid professionals to international competition. As it stands, almost nothing has been done to remove the protectionist barriers that allow highly-educated professionals in the United States to earn far more than their counterparts in other wealthy countries. This is clearest in the case of doctors. For the most part, it is impossible for foreign-trained physicians to practice in the United States unless they have completed a residency program in the United States. The number of residency slots, in turn, is strictly limited, as is the number of slots open for foreign medical students. While this is a quite blatantly protectionist restriction, it has persisted largely unquestioned through a long process of trade liberalization that has radically reduced or eliminated most of the barriers on trade in goods. The result is that doctors in the United States earn an average of more than $250,000 a year, more than twice as much as their counterparts in other wealthy countries. This costs the country roughly $100 billion a year in higher medical bills compared to a situation in which U.S. doctors received the same pay as doctors elsewhere. Economists, including trade economists, have largely chosen to ignore the barriers that sustain high professional pay at enormous economic cost.

TRIPS: The Story of How Intellectual Property Became Linked to Trade - naked capitalism - Yves here. This Real News Network segment continues its discussion of yet another acronym, TRIPS, that has much to do with how the economic playing field has been tilted against ordinary workers.   This is part 5 of a series with Peter Drahos who is explaining the story of intellectual property linked to trade.  Joining us from Australia, Peter Drahos is a Professor at the Australian National University, in the School of Regulation and Global Governance. (video interview & transcript)

Feds seized 50TB of data from NSA contractor suspected of theft - In a new Thursday court filing, federal prosecutors expanded their accusations against a former National Security Agency contractor. Federal investigators seized at least 50 terabytes of data from Harold Thomas Martin III, at least some of which was "national defense information." If all of this data was indeed classified, it would be the largest such heist from the NSA, far larger than what former contractor Edward Snowden took. Prosecutors also said that Martin should remain locked up and noted that he will soon be charged with violations of the Espionage Act. That law, which dates back nearly a century, is the same law that was used to charge Chelsea Manning and Snowden, among others. If convicted, violators can face the death penalty.  United States Attorney Rod Rosenstein and two other prosecutors laid out new details in the case against Martin, whose arrest only became public earlier this month. Martin had been a contractor with Booz Allen Hamilton and possessed a top-secret clearance. The new filing states that Martin also took “six full bankers’ boxes” worth of paper documents, many which were marked “Secret” or “Top Secret.” The documents date from between 1996 through 2016. “The weight of the evidence against the Defendant is overwhelming,” court document plainly state.

 It probably wasn’t Russia who attacked the Internet today. That’s what’s scary -- NBC reported that a senior intelligence official told the network that the hack “does not appear at this point to be any kind of state-sponsored or directed attack.”   Friday’s attack targeted a key aspect of the Internet — the domain name system. Every time your desktop or phone browser asks to load the Web page for, say,, specialized servers need to turn the Web address into a series of numbers — the IP address — to figure out where the request ought to be sent. The company that was hacked Friday runs part of the domain name system. The hackers sent so many requests to the domain name servers that they were overwhelmed. This kind of attack is called a distributed denial of service attack, or DDoS attack. It used to be thought of as a relatively unsophisticated instrument, and many forms of DDoS can be easily repelled, once the target of the attack realizes what is going on. Both activists (such as members of the loose Anonymous collective) and state actors (looking to silence inconvenient dissidents offshore) have used DDoS attacks in the past. Such attacks led Google to create Project Shield, which was intended to deploy Google’s massive resources to protect actors who might otherwise be effectively silenced by nefarious actors. Unfortunately, such attacks have escalated dramatically over time. The problem started with unsecured computers. Many people (almost certainly including readers of this article) are bad at keeping their computer operating systems updated, with the result that their computers have been quietly subverted and made part of ‘botnets’ made up of thousands of enslaved machines. Recently, however, the stakes have escalated. What’s called the “Internet of Things” — the many consumer products connected to the Internet — has created opportunities for botnet herders because these products tend to be badly secured and are usually never updated. Brian Krebs was hit by a massive attack mounted by a botnet of compromised devices. Friday’s attack used the same ‘Mirai’ system, which was recently released into the wild so that anyone with moderate technical skills could use it to compromise and set up their own network of devices.

Dyn DNS DDoS likely the work of script kiddies, says FlashPoint -- Business risk intelligence firm FlashPoint has put out a preliminary analysis of last week’s massive denial of service attack against Dyn DNS, and its conclusion is it was likely the work of amateur hackers — rather than, as some had posited, state-sponsored actors perhaps funded by the Russian government. The DDoS attack against Dyn’s domain name system impacted access to a range of sites in parts of the U.S. last Friday, including PayPal, Twitter, Reddit, GitHub, Amazon, Netflix, Spotify and RuneScape. Its reasoning is based on a few factors, including a detail it unearthed during its investigation of the attack: namely that the infrastructure used in the attack also targeted a well-known video game company. “While there does not appear to have been any disruption of service, the targeting of a video game company is less indicative of hacktivists, state-actors, or social justice communities, and aligns more with the hackers that frequent online hacking forums,” writes FlashPoint’s Allison Nixon, John Costello and Zach Wikholm in their analysis. The attack on Dyn DNS was powered in part by a botnet of hacked DVRs and webcams known as Mirai. The source code for the malware that controls this botnet was put on Github earlier this month. And FlashPoint also notes that the hacker who released Mirai is known to frequent a hacking forum called hackforums[.]net. That circumstantial evidence points to a link between the attack and users and readers of the English-language hacking community, with FlashPoint also noting the forum has been known to target video games companies.

Wikileaks Releases Part 15 Of The Podesta Files, Bringing Total To 26,095 Emails -- With just over 2 weeks to go until the election, today Wikileaks finally crossed the halfway point of its ongoing Podesta files dump when it unveiled Part 15, which included some 1,095 emails bringing the total to 26,095 total emails, or more than half of the 50,000 email set for release.RELEASE: The Podesta Emails Part 15 #PodestaEmails#PodestaEmails15 #imWithHer #HillaryClinton — WikiLeaks (@wikileaks) October 22, 2016

Wikileaks Releases Part 16 Of The Podesta Files: Total Is Now 26,803 Emails -- With just over 2 weeks to go until the election, today Wikileaks continued its ongoing Podesta files dump when it unveiled another 708 emails  in Part 16, bringing the total emails released to 26,803 total emails, or more than half of the 50,000 email set for release.  While this latest release was expected, Wikileaks made a more surprising announcement overnight when it said on Twitter that it would "release a statement tomorrow about Assange. Our editor is safe and still in full command despite reduced communications with staff." We will release a statement tomorrow about Assange. Our editor is safe and still in full command despite reduced communications with staff.  — WikiLeaks (@wikileaks) October 23, 2016

Podesta Files Part 17: Wikileaks Releases Another 3,400 Emails, Bringing Total To Over 30,000 --With just 2 weeks to go until the election, today Wikileaks continued its ongoing Podesta files release when it unveiled another 3,432 emails in the latest Part 17 of its release, bringing the total emails released so far to 30,235 total emails, over 60% of the total set for publication ahead of the elections.

Podesta Part 18: Wikileaks Releases Another 1,300 Emails; Total Is Now 31,500 - With exactly 2 weeks left until the November 8 presidential election, Wikileaks continues its ongoing Podesta dump by unveiling another 1,299 emails in the latest Part 18 of its release, bringing the total emails released so far to exactly 31,534, with just under 40% of the total dump left to go. RELEASE: The Podesta Emails Part 18 #PodestaEmails #PodestaEmails18#HillaryClinton — WikiLeaks (@wikileaks) October 25, 2016

Wikileaks Celebrates Hillary Clinton's Birthday By Releasing Another 1,500 Podesta Emails; Total Is Now 33,042 --With less than 2 weeks left until the November 8 presidential election, and perhaps to celebrate Hillary Clinton's birthday, Wikileaks continued its ongoing Podesta dump by unveiling another 1,508 emails in the latest Part 19 of its release, bringing the total emails released so far to exactly 33,042. RELEASE: The Podesta Emails Part 19 #PodestaEmails #PodestaEmails19#HillaryClinton

Podesta Part 21: Wikileaks Releases Another 1,400 Emails; Total Is Now 35,594 - With just days to go until the November 8 presidential election, the final countdown is now on, and Wikileaks continues its ongoing Podesta dump by unveiling another 1400+ emails in the latest Part 21 of its Podesta release, bringing the total emails released so far to exactly 35,594, leaving just 30% of the total dump left to go. RELEASE: The Podesta Emails Part 21 #PodestaEmails #PodestaEmails21#HillaryClinton

"Executive Orders For Sale": Leaked Email Shows Hillary Auctioning Off 'Laws' To The Highest Bidder - Unaccountable power multiplies, but this is astounding. This is a very good example of the reasons that the founders sought to limit and check power. But of course, over the years, those protections have been whittled down, and the loopholes are big enough drive tanks through. Corruption doesn’t even begin to cover it if wealthy donors – and even foreign powers – can just write checks, contribute to the Clinton Foundation, etc. – and just buy a law in return. Why is no one standing up to this tyranny? Critics have taken George W. Bush and Barack Obama to task for abusing their power to write executive orders – and legislate with a pen when they have no constitutional power to make law at all. But Hillary, before she even takes power, is already leaving these two in the dust. So everyone is just going to take it, along with the ‘first female’ t-shirts they will be sending out as promos in the mail? As MLK famously wrote from his Birmingham jail cell: “At first glance it may seem rather paradoxical for us consciously to break laws. One may well ask: “How can you advocate breaking some laws and obeying others?” The answer lies in the fact that there are two types of laws: just and unjust. I would be the first to advocate obeying just laws. One has not only a legal but a moral responsibility to obey just laws. Conversely, one has a moral responsibility to disobey unjust laws. I would agree with St. Augustine that “an unjust law is no law at all.” If you already thought the Executive Order system falls somewhere between problematic and completely unconstitutional, this takes it to a whole new, never before seen level of corruption. Thanks to all the leaks, America now knows our government is essentially one giant pay-for-play operation. That’s how it works. That’s how the DNC works. That’s how the Clinton Foundation works. This leaked email chain hints at something that kind of makes votes and lobbyists and, well, all of it rather pointless. If someone’s wealthy enough, can they straight up buy an executive order? In a leaked email thread between Podesta and Mary Pat Bonner, a “donor adviser” who  gets millions for her elite connections in bringing in donors and for being what The New York Times describes as a “master of making donors happy,” it’s all but admitted that Executive Orders are another pay-for-play item on the corrupt American political menu. Read this from the bottom up:

Validating Wikileaks Emails [Just The Facts] -- A factual basis for reporting on alleged “doctored” or “falsified” emails from Wikileaks has emerged. Now to see if the organizations and individuals responsible for repeating those allegations, some 260,000 times, will put their doubts to the test. If you want to verify the Podesta emails or other email leaks from Wikileaks, consult the following resources. Yes, we can validate the Wikileaks emails by Robert Graham From the post: Recently, WikiLeaks has released emails from Democrats. Many have repeatedly claimed that some of these emails are fake or have been modified, that there’s no way to validate each and every one of them as being true. Actually, there is, using a mechanism called DKIM.  DKIM is a system designed to stop spam. It works by verifying the sender of the email. Moreover, as a side effect, it verifies that the email has not been altered.  Hillary’s team uses “”, which as DKIM enabled. Thus, we can verify whether some of these emails are true. Recently, in response to a leaked email suggesting Donna Brazile gave Hillary’s team early access to debate questions, she defended herself by suggesting the email had been “doctored” or “falsified”. That’s not true. We can use DKIM to verify it.…Bob walks you through validating a raw email from Wikileaks with the DKIM verifier plugin for Thunderbird. And demonstrating the same process can detect “doctored” or “falsified” emails.  Bob concludes:  I was just listening to ABC News about this story. It repeated Democrat talking points that the WikiLeaks emails weren’t validated. That’s a lie. This email in particular has been validated. I just did it, and shown you how you can validate it, too.  Btw, if you can forge an email that validates correctly as I’ve shown, I’ll give you 1-bitcoin. It’s the easiest way of solving arguments whether this really validates the email — if somebody tells you this blogpost is invalid, then tell them they can earn about $600 (current value of BTC) proving it. Otherwise, no. BTW, Bob also points to:  Here’s Cryptographic Proof That Donna Brazile Is Wrong, WikiLeaks Emails Are Real by Luke Rosiak, which includes this Python code to verify the emails:

Clinton Foundation’s Fundraisers Pressed Donors to Steer Business to Former President - WSJ: Two chief fundraisers for the Clinton Foundation pressed corporate donors to steer business opportunities to former President Bill Clinton as well, according to a hacked memo published Wednesday by WikiLeaks. The November 2011 memo from Douglas Band, at the time a top aide to Mr. Clinton, outlines extensive fundraising efforts that Mr. Band and a partner deployed on behalf of the Clinton Foundation and how that work sometimes translated into large speaking fees and other paid work for Mr. Clinton. The memo, part of a cache of emails stolen from Democratic presidential nominee Hillary Clinton’s campaign manager, resurfaces an issue that she has had a hard time shaking: questions over the relationship between the Clintons’ charity work and their personal business. Mr. Band and an associate introduced top corporate executives to the former president, on the golf course and elsewhere, and then asked them to contribute money to the Clinton Foundation or attend the Clinton Global Initiative, an annual foundation event.Mr. Band wrote the memo to lawyers at Simpson Thacher & Bartlett LLP who were reviewing the Clinton Foundation’s activities and links to Mr. Band. The Clintons’ daughter, Chelsea, had sought the review because she worried that Mr. Band was “hustling business” for his consulting firm, Teneo Holdings, at the Clinton Global Initiative, according to a 2011 email by Ms. Clinton. In the memo, Mr. Band explained how he helped the foundation and former president, and found donors among his own firm’s clients. Mr. Band responded to the review by writing: “We appreciate the unorthodox nature of our roles, and the goal of seeking ways to ensure we are implementing best practices to protect the 501(c)3 status of the Foundation.” The Clinton campaign has refused to confirm or deny the authenticity of any of the hacked emails and, along with top U.S. intelligence officials, blamed Russia for stealing them from the account of Mrs. Clinton campaign manager John Podesta.

Bill Clinton, Inc. The Original Pay to Play Clinton - When top Bill Clinton aide Douglas Band wrote the memo, he was a central player at the Clinton Foundation and president of his own corporate consulting firm. Over the course of 13 pages, he made a case that his multiple roles had served the interests of the Clinton family and its charity.In doing so, Band also detailed a circle of enrichment in which he raised money for the Clinton Foundation from top-tier corporations such as Dow Chemical and Coca-Cola that were clients of his firm, Teneo, while pressing many of those same donors to provide personal income to the former president. The system has drawn scrutiny from Republicans, who say it allowed corporations and other wealthy supporters to pay for entree to a popular former president and a onetime secretary of state who is now the Democratic presidential nominee.Band wrote the memo in 2011 to foundation lawyers conducting a review of the organization amid a brewing feud with the Clintons’ daughter, Chelsea Clinton, who was taking a stronger role in leading the foundation and had expressed concerns about Teneo’s operations. The memo, made public Wednesday by the anti-secrecy group WikiLeaks, lays out the aggressive strategy behind lining up the consulting contracts and paid speaking engagements for Bill Clinton that added tens of millions of dollars to the family’s fortune, including during the years that Hillary Clinton led the State Department. It describes how Band helped run what he called “Bill Clinton Inc.,” obtaining “in-kind services for the President and his family — for personal travel, hospitality, vacation and the like.”

Bill and Chelsea Respond To Clinton Foundation Scandal - After coming under intense criticism for alleged pay-to-play activities, Bill and Chelsea Clinton recently sat down with Billboard to defend the Clinton Foundation and all of the great work it does...apparently like hosting concerts with Elton John, Usher, Bon Jovi and Sting.  Of course, the attempts to repair the Foundation's tarnished image come as it has suffered in recent weeks from the relentless daily flow of damaging emails leaked by WikiLeaks showing numerous internal conflicts of interest, donations from questionable foreign leaders and seemingly blatant "pay-to-play" activities involving the Clintons' work in Haiti and elsewhere. Bill Clinton, vibrant and trim at 70, in a tailored navy suit and a bright red tie, strolls into Billboard’s makeshift photo studio at the New York Hilton Midtown in late September, during the 12th and final meeting of his charitable foundation, the Clinton Global Initiative (CGI), which has long tapped musicians to give voice to causes. “It’s astonishing the impact they’re ­having,” says the president about the artists he has worked with through the years, from Elton John to Usher. Right now, rock legends Jon Bon Jovi and Sting trail him quietly like starstruck roadies. Their family name is getting dragged through the mud along with the reputation of the foundation to which Clinton has ­dedicated his post-White House life. While Hillary remains the clear frontrunner in the election, with just days to go, a steady drip of embarrassing-at-best hacked emails, released by WikiLeaks, has dampened spirits during her ­campaign’s stretch run. Of course, Bill and Chelsea would suggest that we all simply ignore their internal emails and understand that "First and foremost the Clinton Foundation is a charity, and somehow that has gotten lost."  As Chelsea points out, everyone would surely be proud of the Clinton Foundation if they could just look beyond the "clickbait headlines" that keep trying to spread the malicious truth.

Computer seized in Weiner probe prompts FBI to take new steps in Clinton email inquiry -  Newly discovered emails found on a computer seized during an investigation of disgraced former congressman Anthony Weiner thrust the controversy over Hillary Clinton’s use of a private server back into the presidential campaign less than two weeks before the election. Officials said the discovery prompted a surprise announcement Friday by FBI Director James B. Comey that the agency would once again be examining emails related to Clinton’s time as secretary of state. In a letter to lawmakers, Comey said the FBI would take “appropriate investigative steps” to determine whether the newly discovered emails contain classified information and to assess whether they are relevant to the Clinton server probe. The emails, numbering more than 1,000, were found on a computer used by both Weiner (D-N.Y.) and his wife, top Clinton aide Huma Abedin, according to law enforcement officials with knowledge of the inquiry who spoke on the condition of anonymity. The correspondence included emails between Abedin and Clinton, according to a law enforcement official.  Federal officials have been examining sexually suggestive online messages that Weiner allegedly exchanged with a teenage girl. The link to the Weiner investigation was first reported by the New York Times. Comey’s announcement appears to resume the FBI’s probe of Clinton’s server, which previously ended in July with no charges.

Democrats turn on Comey after he reopens Clinton email wound - Democrats have soured on James Comey. In July, they praised the FBI director's decision not to recommend charges against Hillary Clinton over her use of a private email server while serving as secretary of state. But on Friday, top party officials turned on Comey — ripping him not only for taking new steps into an investigation they hoped was over, but also for the way he announced them. Story Continued Below ..Comey sent a letter to several congressional leaders to inform them that the FBI had come across new emails pertinent to its Clinton investigation and would take additional steps to look into them, adding that the FBI did not yet know if the emails were significant and that he did not yet know when the additional review would be finished. The letter set off a political firestorm. And while Republicans pounced, Democrats fumed. “Already, we have seen characterizations that the FBI is 'reopening' an investigation but Comey's words do not match that characterization,” Clinton campaign manager John Podesta wrote in a statement. “Director Comey's letter refers to emails that have come to light in an unrelated case, but we have no idea what those emails are and the Director himself notes they may not even be significant.” FBI reviewing new evidence in Clinton email probe By Josh Gerstein and Madeline Conway Podesta also expressed frustration at the timing of the letter from Comey to lawmakers, informing them of the new evidence. "It is extraordinary that we would see something like this just 11 days out from a presidential election,” he wrote. “The Director owes it to the American people to immediately provide the full details of what he is now examining. We are confident this will not produce any conclusions different from the one the FBI reached in July."

Watergate's Carl Bernstein: FBI Wouldn't Reopen A Probe Unless It Is "A Real Bombshell" --In the aftermath of the so-called Cocktober surprise unveiled this afternoon by the FBI when the bureau announced it was reopening a probe into Hillary Clinton's email server because "new evidence has come to light" after "materials" were found on equipment belonging to Anthony Weiner and Huma Abedin, the question on everyone's lips - and certainly Hillary Clinton's and most democrats - is why did the FBI do this now, 11 days before the election, in a way that did not even coordinate with the White House? One opinion belongs to Watergate journalist Carl Bernstein, who just days after his infamous peer Bob Woodward said that the "Clinton foundation is corrupt, it's a scandal" said that "her conduct in regard to the e-mails is really indefensible and if there was going to be more information that came out, it was the one thing, as I said on the air last night, actually that could really perhaps affect this election.  We don't know what this means yet except that it's a real bombshell. And it is unthinkable that the Director of the FBI would take this action lightly, that he would put this letter forth to the Congress of the United States saying there is more information out there about classified e-mails and call it to the attention of congress unless it was something requiring serious investigation. So that's where we are..." Courtesy of Real Clear Politics is the full transcript:  BERNSTEIN: Well, there's no question that the e-mails have always been the greatest threat to her candidacy for president, that her conduct in regard to the e-mails is really indefensible and if there was going to be more information that came out, it was the one thing, as I said on the air last night, actually that could really perhaps affect this election.We don't know what this means yet except that it's a real bombshell. And it is unthinkable that the Director of the FBI would take this action lightly, that he would put this letter forth to the Congress of the United States saying there is more information out there about classified e-mails and call it to the attention of congress unless it was something requiring serious investigation. So that's where we are...Is it a certainty that we won't learn before the election? I'm not sure it's a certainty we won't learn before the election.

Banker Deaths and WikiLeaks Deaths Have a Common Thread -  Pam Martens -- Julian Assange, founder and Editor-in-Chief of WikiLeaks, is the man responsible for the daily release of emails showing the Hillary Clinton presidential campaign to be an unprecedented machine whose tentacles and snitches reach into Wall Street, big corporations and big media. Earlier this year, WikiLeaks released emails showing that the Democratic National Committee had maliciously conspired to undermine the presidential campaign of Clinton challenger, Senator Bernie Sanders, in order to elevate Hillary Clinton to the top of the ticket.Now it has emerged that two of the top lawyers representing Assange, John Jones in London and Michael Ratner in New York, died within less than a month of each other this year. And, Assange’s closest confidant in London and a Director of WikiLeaks, Gavin Macfadyen, died just yesterday.Wall Street On Parade has carefully investigated the similarly unprecedented banker deaths over the past two and one half years. What is noteworthy about the banker deaths is that at the time of the deaths, Wall Street banks and their global brethren were under the largest investigations for criminal rigging of markets to occur in the past century. Even during the Senate investigations of the early 1930s when crooked business journalists touting fraudulent Wall Street stocks and crooked Wall Street bank execs manipulating stock prices were regularly revealed through subpoenaed documents, there was no similar rash of deaths or series of alleged suicides. (See related articles below.)Now there is WikiLeaks leaking emails and documents that show that the same kind of cartel-like behavior that has corrupted Wall Street to its core has also infested the top of the Democratic Party. And, amazingly, three key members of the Assange/WikiLeaks support network have died within six months of each other this year. The statistical probability of this being a natural occurrence is slim.

Waking Up In Hillary Clinton's America - Nomi Prins -  As this endless election limps toward its last days, while spiraling into a bizarre duel over vote-rigging accusations, a deep sigh is undoubtedly in order. The entire process has been an emotionally draining, frustration-inducing, rage-inflaming spectacle of repellent form over shallow substance. For many, the third debate evoked fatigue. More worrying, there was again no discussion of how to prevent another financial crisis, an ominous possibility in the next presidency, whether Donald Trump or Hillary Clinton enters the Oval Office -- given that nothing fundamental has been altered when it comes to Wall Street’s practices and predation.At the heart of American political consciousness right now lies a soul-crushing reality for millions of distraught Americans: the choices for president couldn’t be feebler or more disappointing. On the one hand, we have a petulant, vocabulary-challenged man-boar of a billionaire, who hasn’t paid his taxes, has regularly left those supporting him holding the bag, and seems like a ludicrous composite of every bad trait in every bad date any woman has ever had. On the other hand, we’re offered a walking photo-op for and well-paid speechmaker to Wall-Street CEOs, a one-woman money-raising machine from the 1% of the 1%, who, despite a folksiness that couldn’t look more rehearsed, has methodically outplayed her opponent.  When we awaken on November 9th, it will undoubtedly be dawn in Hillary Clinton’s America and that potentially means four years of an economic dystopia that will (as would Donald Trump’s version of the same) leave many Americans rightfully anxious about their economic futures. None of the three presidential debates suggested that either candidate would have the ability (or desire) to confront Wall Street from the Oval Office. In the second and third debates, in case you missed them, Hillary didn’t even mention the Glass-Steagall Act, too big to fail, or Wall Street. Under the presidency of Bill Clinton, Glass-Steagall, the Depression-era act that once separated people’s bank deposits and loans from any kind of risky bets or other similar actions in which banks might engage, was repealed under the Financial Modernization Act of 1999. In addition, the Commodity Futures Modernization Act was passed, which allowed Wall Street to concoct devastating unregulated side bets on what became the subprime crisis. Given that the people involved with those choices are still around and some are still advising (or in the case of one former president living with) Hillary Clinton, it’s reasonable to imagine that, in January 2017, she’ll launch the third term of Bill Clinton when it comes to financial policy, banks, and the economy. Only now, the stakes are even higher, the banks larger, and their impunity still remarkably unchallenged.

 Nomi Prins: Hillary Clinton Will Continue the Big Bank Protection Racket – Naked Capitalism - Yves here. It’s hardly a secret that the Clintons are deeply loyal to Wall Street. Bob Rubin and his numerous well-heeled followers are a powerful, arguably dominant, faction in the Democratic party, and they are tightly aligned with the Clintons.  Nomi Prins gives a useful overview of how Hillary has attempted to blame the financial crisis on everything but the deregulation that her husband supported and the reckless behavior that resulted and how her anti-bank noises, like her criticism of Wells Fargo, is tepid and late in coming. However, I quibble with some of her article. It’s surprising to see her single out Gary Gensler, former head of the CFTC, as a bank crony. Gensler is widely seen as pushing for much tougher oversight and enforcement despite being in the disadvantaged position of being at a secondary regulator. Recall that he was up against Bernanke and Geithner, a weak Mary Shapiro at the SEC, and an indifferent-to-captured Obama at the helm.  It’s also surprising to see Prins fail to mention the cronies rumored to be Clinton’s top picks for Treasury Secretary: Larry Fink of BlackRock and Tony James of Blackstone. Both firms would profit ginormously if the Wall Street looting plan that Hillary supports and James is promoting, that of having all workers pay 3% of their pay into mandatory retirement accounts, were to become law.  As we’ve indicated, the cost of this “fix” is greater than any of the ideas proposed to shore up Social Security (as opposed to cut it by stealth). I hate to say it, but I believe Prins’ failure to flag this risk is due to her still hewing to orthodox financial views and thus believing that Federal deficits are a problem, as opposed to desirable, most of the time, and regarding senior members of the asset management heavyweights as less dangerous than executives of TBTF banks. Since even the modest re-regulation that has taken place since the crisis has increased shadow banking, and firms like Blackrock and Blackstone are major players, it would be naive to depict them as problem-free and disinterested.

 It Takes a Village to Maintain a Dangerous Financial System: Q&A with Anat Admati: Stanford professor Anat Admati discusses her new paper, in which she explains how a mix of distorted incentives, ignorance, confusion, and lack of accountability contributes to the persistence of a dangerous and poorly regulated financial system.

Ratings Inflation Is Back, Subprime Style  --A decade after the triple-A failures of the subprime era, grade inflation is back on Wall Street.This time, Moody’s Investors Service and S&P Global Ratings Inc. are cutting companies slack on mergers and acquisitions, an analysis of credit-ratings data by Bloomberg News found.Over the past year and a half, both have bumped up their ratings by two, three or even six levels on a majority of the biggest deals, the analysis found.Moody’s and S&P don’t dispute those findings, which are based on ratings guidelines posted on their websites. But the firms say a by-the-numbers approach overlooks one of their most valuable assets: human judgment. Both make clear that their analysts have leeway to nudge ratings up or down, based on a company’s track record and their confidence in management’s commitment to reduce indebtedness.“We want our analysts and committees to get behind the story and make their judgments about what they think the organization will look like in the next couple of years,” says Mark Puccia, a chief credit officer at S&P. Says Stephanie Leavitt, a spokeswoman for Moody’s: “The evaluation of financial metrics alone provides an incomplete view of credit risk to investors.”Some investors warn the approach has encouraged an epic debt binge that could pose dangers as years of near-zero interest rates come to an end. AT&T’s plan to borrow about $40 billion to buy Time Warner Inc., in addition to its $120 billion of debt already outstanding, is just the latest example. In 2015 alone, U.S. companies borrowed a record $1.6 trillion in the bond markets, with $258 billion of that going to finance acquisitions by investment-grade companies, Barclays Plc says. According to Morgan Stanley, corporate America is now more leveraged than ever.

AT&T Cheerleading Squad for Merger: Nearly 100 Lobbyists — From the political right and the left, AT&T’s $85 billion bid for Time Warner has provoked pushback. But AT&T, in addition to its billions of dollars of capital, has another arsenal at its disposal: one of the most formidable lobbying operations in Washington. The company’s list of nearly 100 registered lobbyists already on retainer in 2016 includes former members of Congress. AT&T is the biggest donor to federal lawmakers and their causes among cable and cellular telecommunications companies, with its employees and political action committee sending money to 374 of the House’s 435 members and 85 of the Senate’s 100 members this election cycle. That adds up to more than $11.3 million in donations since 2015, four times as much as Verizon Communications, according to a tally by the Center for Responsive Politics, a nonprofit research group. AT&T has also spent decades building a national alliance of local government officials and nonprofit groups — particularly from black and Hispanic communities — that it will certainly be asking to weigh in again in Washington, as it tries to get the merger approved. “We have seen our fair share of deals,” AT&T’s general counsel, David R. McAtee II, said in an interview. “Our job is informing consumers what a good development this is for them.” But navigating this transaction will be a test of just how much influence AT&T has in Washington these days, especially as it tries to persuade antitrust officials at the United States Department of Justice, who will be crucial in approving the deal.

Bill Clinton Era SEC Chair Tells Elizabeth Warren to Muzzle Herself --Yesterday, former SEC Chair Arthur Levitt penned an OpEd for the Wall Street Journal, effectively telling Senator Elizabeth Warren to stop criticizing Mary Jo White in public. White is the current Chair of the SEC that Senator Warren publicly asked President Obama to fire this month for her bad leadership. Levitt is part of the Bill Clinton machine that de-regulated Wall Street and turned it into a massive looting racket in the 1990s through today. It’s important to take note of Levitt’s effort to muzzle Warren in the pages of the Wall Street Journal. Expect to see more of this coming from a lot more of Wall Street’s cronies. Arthur Levitt was appointed as SEC Chair by President Bill Clinton in 1993. Levitt served until 2001, making him the longest serving SEC Chair. Levitt had previously been Sandy Weill’s business partner in a Wall Street brokerage firm. In 1998, when Weill wanted to create Citigroup by merging his Travelers Group, which owned an insurance company, brokerage firm and investment bank, with Citibank, an insured depository bank – an illegal merger at the time under the Glass-Steagall Act — Levitt and his other cronies in the Bill Clinton administration eagerly got the ball rolling. During his long tenure, Levitt presided over the serial looting of the public by Wall Street. Levitt was in charge when two university professors discovered that the Nasdaq stock market had been fleecing investors for more than a decade in an illegal price-fixing scheme. Levitt was in charge when Wall Street’s fraudulent research and IPO pump and dump schemes led to the great tech bubble crash, wiping away $4 trillion in market value. Levitt was there when JPMorgan and Citigroup helped Enron cook its books. So when Levitt tells readers of the Wall Street Journal that “Mary Jo White has been a firm, thoughtful SEC chairman who, through speeches and a carefully chosen agenda, has made herself a capable steward of an essential agency,” one should take it with a grain of salt.

“Hilariously Corrupt”: Former SEC Chairman Arthur Levitt Attacks Elizabeth Warren for Criticizing SEC Inaction; He Did Just That in 2015 -- by Yves Smith - Earlier this week, the Wall Street Journal published an op ed by Clinton-era SEC chairman Arthur Levitt, attacking Elizabeth Warren for allegedly undermining the SEC in doing its job by criticizing its chairman, Mary Jo White. Since Warren has been shellacking the agency for repeatedly failing to get out of bed, it’s hard to see her criticism as interfering with the SEC’s performance, since the agency appears to be getting not very much done to begin with. But you’d never get a clue as to how derelict in its duty the SEC has been from the wounded tone of Levitt’s piece. Now here is the priceless part: As you can clearly see from the letter embedded at the end of this post, Levitt himself engaged in precisely the same sort of behavior that he has now deemed to be utterly unacceptable when the likes of that pesky Elizabeth Warren dares engage in it. You’ll see Arthur Levitt signed the missive that takes Mary Jo White to task for failing to implement a rule on public company disclosure on use of corporate resources for political activities, as was mandated as part of the Citizens United decision in 2010, along with another former SEC chairman, Bill Donaldson, and a former commissioner, Bevis Longstreth.  levitt-et-al-2015-sec-letter

‘We're Not Wells Fargo' Won't Cut It with Regulators -- In the wake of the Wells Fargo scandal, many inside and outside the industry are asking a very simple question: "Are the unethical sales practices unique to Wells Fargo or do they have broader industry implications?"Those who believe opening phony accounts is restricted to Wells Fargo note that the bank has touted its cross-sell success as a core component of its overall performance and valuation for years. Others, mostly industry critics, claim that the Wells Fargo situation is symptomatic of just another industrywide practice designed to maximize profitability at the expense of customers.While the "is this unique?" question is an important one, the answer won't change the ripple effect. The regulatory, management, reputational and risk oversight implications of the Wells Fargo action will be (and already are) significant for the industry as a whole.It is doubtful that many CEOs or boards of directors are taking pleasure in the humiliation, public shaming and outright ridicule of one of the nation's largest banks. They understand, from firsthand experience, that the industry's reputation remains fragile: when a large bank sneezes, the rest of the industry catches a cold.If there is one thing that is virtually certain, it is that regulatory actions are rarely one-off events. To respond quickly and credibly to regulatory inquiries and examination requests, get the data and programs in place now. While it is likely that the CEO and board have been exposed to retail banking and sales performance metrics, it is also likely that most of them do not know how those metrics are calculated, reported, monitored or achieved. Expect this to change and change quickly.

Warren targets KPMG, accounting law in wake of Wells Fargo scandal - Senator Elizabeth Warren on Thursday expanded her campaign to shake up the financial world in the aftermath of revelations that Wells Fargo (WFC) employees set up as many as two million unauthorized customer accounts, this time focusing her criticism on the mega-bank's auditor, KPMG, and the post-Enron Sarbanes-Oxley Act. "KPMG conducted audits assessing Wells Fargo's internal control over its financial statements...But none of KPMG's audits identified any concerns with illegal behavior that resulted in the creation of over two million unauthorized accounts by thousands of employees ....," said a letter to KPMG written by Warren and three other Democratic senators. "In fact, in each of your audits, your firm concluded that Wells Fargo 'maintained ... effective internal control over financial reporting.'" Warren's effort comes after Wells Fargo in September was fined $185 million by state and federal regulators for setting up phony consumer credit card and savings accounts. The accounts led to the dismissal of about 5,000 employees over a five-year period and set off a firestorm of criticism that ultimately led to the resignation of Wells Fargo CEO John Stumpf and the installation of an independent board chairman at the bank. Seeking to expand their investigation into Wells Fargo, Warren and the other senators asked KPMG if it was aware of any of the sales practices addressed in the regulatory settlement and whether any concerns were raised with top executives at the bank. The senators also asked whether Wells Fargo employees misled KPMG employees at any point about unauthorized accounts being created and whether the accounting firm conducted any re-assessment of its audits.

Here’s How Wall Street Is Ripping You Off, and What You Can Do About It By Pam Martens  - Members of Congress were absolutely shocked – shocked! – that the employees of the commercial bank of Wells Fargo had created several million accounts and credit cards that their customers had never asked for simply to meet sales quotas set by the bank and/or to obtain bonuses. But what is going on every single day at the brokerage firms owned by all of these banking giants is that the stock broker (variously called a financial consultant, financial adviser or Vice President of Investments) is able to triple the commission he collects on the bonds he sells you at his discretion. It’s been that way for 30 years, if not longer. Let’s say you are buying a $10,000 corporate bond which the firm is showing on their computer screen with a one point commission. One point means $10 per thousand or a total commission of $100 on a $10,000 bond trade. The honest broker who is truly looking out for the best interests of his client, will do the trade as it appears on the computer screen. But to placate its greedy brokers and its million-dollar producers who can readily jump ship to another firm, the brokerage firm will tolerate the broker tripling the commission to as much as three points or $300 on a $10,000 bond, and sometimes, even more. The broker actually has the ability to go into the computer and change the commission at will when he inputs his trade. The same thing happens on municipal bonds and Ginnie Maes. Over time, that money moving out of your pocket into the pocket of the broker and his firm (the broker gives a split of his commissions to his firm) can make a major difference in your wealth.  But you have the power to fight back. You can request, before authorizing the trade, for the broker to email you a verification of how much commission or markup he is taking on the trade. In other words, get it in writing.

Private Equity Consultant Hamilton Lane Trots Out New Excuse, “Evil Populists,” for Already-Flagging Private Equity Performance - Yves Smith - Private equity shills are readying the Blame Cannon for the industry’s widely forecast fall in returns.  Who are the allies of the private equity firms attempting to villianize as the cause of deteriorating performance? Not the 0.1% Masters of the Universe, who are always and every the sole cause of Good Things but never never to be found when Bad Things occur. No, it’s those evil “populists” interfering with the proper operation of the world according to private equity that is messing up returns.  We’re not making this up. From the Wall Street Journal: The rise of “populist” politicians in western nations could challenge the ability of private-equity firms to do business and make money, according to a report from Hamilton Lane, one of the largest advisers to investors in the industry. The backlash against globalization may cause higher taxes on private-equity firms, create more regulation, drive more volatility and restrict economic growth, Hamilton Lane’s annual review said.  This is utterly ludicrous if you’ve been paying attention. From the first half of 2015, the average EBITDA multiple for PE purchases was over 10X, higher than the peak of the last cycle, in 2007. Even limited partners who are leery of saying a bad word about private equity, like CIO Chris Ailman of CalSTRS, described PE acquisitions as “priced to perfection”. The trading prices of the private equity firms that are public shows that equity market investors believe that private equity firms will not earn any carry fees over the next couple of years.  And as we’ve pointed out repeatedly, since the second half of 2015, senior officers of prominent private equity firms have increasingly been warning that private equity returns going forward will be lower than levels of the past. And none of them used Putin, um, Trump, um populism as the excuse for why returns were going to decline.

Democratic Senators Call for Stricter Rules on Wall Street Pay: -- Fifteen Democratic senators urged federal regulators to strengthen proposed rules governing Wall Street pay practices, saying the recent scandal at Wells Fargo & Co. underscored the need to hold executives accountable for misconduct.The request comes as policy makers rush to complete the rules before President Barack Obama leaves office in January. The rules on pay represent one of the big remaining pieces of the Obama administration's regulatory overhaul of the financial industry. The senators laid out their ideas in a letter addressed to the heads of six federal agencies responsible for crafting the pay rules. The lawmakers who signed the letter include Sens. Robert Menendez of New Jersey; Sherrod Brown of Ohio, the top Democrat on the Senate Banking Committee; and Elizabeth Warren of Massachusetts, the leading congressional critic of Wall Street. If Democrats regain a majority in the Senate in the November elections, as many analysts forecast, these lawmakers would have stronger clout to influence policy debates at the powerful banking panel. The rules, proposed in April, are aimed at curbing what regulators see as excessive risk-taking. The rules would require the biggest financial firms to defer payment of at least half of executives' bonuses for four years, a year longer than common industry practice. The plan also would require a minimum period of seven years for the biggest firms to claw back bonuses if it turns out an executive's actions hurt the institution or if a firm has to restate financial results. In the letter, the lawmakers asked for bonus pay to be deferred longer than four years and for clawbacks and pay reductions to be mandatory rather than optional. The senators said four years is too short for clawbacks, considering that it might take much longer for the full scope of wrongdoing to become apparent. They also asked for failures in risk management and culpable negligence in employee oversight to be added to the conditions that could trigger clawbacks. The current proposal only cites malfeasance by an individual employee as such a condition.

No Hollywood Ending for Women on Wall Street – Amy Fox - When I was approached to write the screenplay for a film that would tell a story about women on Wall Street, I did my research. I started with the data that many of us have seen, showing, for example, how women in financial services fill a small fraction of executive positions despite comprising over half of the industry's workforce. A 2016 Wall Street Journal exploration of the wage gap found that of the 10 major occupation groups where women's earnings lagged most, five were in finance. But I am a storyteller, not a banker or sociologist. I don't study numbers; I study characters and why they do what they do. When you structure a story, you have to have a sense of your ending. Will your characters succeed or fail to get what they want, and what choices will they make under pressure? With our film, "Equity," this meant making fundamental decisions about the protagonist. Where would Naomi Bishop, an ambitious and accomplished managing director in investment banking, end up at the end of the film? Would she get the promotion she wanted? Would she still be working at the bank? And if not, would she be fired or leave of her own accord? In researching "Equity," we interviewed hundreds of women (and men) who work on Wall Street, and others who had either retired or changed careers. The women who had stayed, including some who have made it to the executive level, said they loved the work and they considered themselves survivors and warriors. Some of them described beginning their careers in the eighties in an environment that was openly hostile to women. One woman, for instance, was told she could not take on a job involving travel because she was too delicate. There were also frequent stories of men simulating sexual acts around women as they worked. The women who started their careers on Wall Street more recently had less shocking stories. But they still shared the experience that it was a daily struggle to thrive in a relentlessly male-driven environment.

The SEC’s Beef With Shadow Banks Could Be Bad for Some - Now the U.S. Securities and Exchange Commission is considering a rule that could make so-called shadow banking safer. Nonbanks argue the rule will make it tougher for them to lend to small and mid-size businesses. Small businesses account for more than six out of 10 new private-sector U.S. jobs. But the SEC is wary that business development companies, like the one run by Apollo, will get in trouble by using too much borrowed money to boost returns. Shadow banks have been picking up the slack since international regulators saddled traditional banks with stricter capital constraints following the 2008 financial crisis. Lending by nonbanks such as BDCs to small and middle-market businesses, which is considered riskier than loans to big corporations, has mushroomed to more than $70 billion, according to the Small Business Investor Alliance. Debate over the SEC rule, proposed in December, is reaching a crescendo. It could require BDCs, when calculating their level of indebtedness, to count the entire amount of revolving credit lines they offer to businesses, even if the borrowers have only used a fraction. As it stands now, BDCs count only what borrowers have already accessed from credit lines. Because the new rule adds to BDCs’ level of indebtedness, or leverage, they would have to maintain a bigger cushion against losses, making less money available to lend. The effect would be higher costs and smaller financing facilities that would harm domestic businesses, according to Brett Palmer, president of the Small Business Investor Alliance, an industry group that funds and advocates for small businesses.

Fed's Tarullo Favors Piecemeal Regulation for Shadow Banks | American Banker: Federal Reserve Gov. Daniel Tarullo defended regulators' item-by-item approach toward reining shadow banking activities, saying broader moves could be insufficiently tailored to the conditions of specific firms and activities."To date, the attempts I have seen along these lines look likely to entail substantial overinclusion, substantial under-inclusion, or regulatory consequences that are inappropriately uniform," Federal Reserve Gov. Daniel Tarullo said, referring to broad attempts to regulate shadow banking.

 Deutsche Bank Probing "Misstated" Derivative Valuations After Finding "Divergences" - Perhaps the single biggest reason why Deutsche Bank's stock has been drastically underperforming most of Europe's banks, in addition to its skyhigh leverage and lack of capital buffer, is the market's concern about what is hidden on its books, namely whether the bank's billions in loans and its trillions in derivatives have been marked correctly. Which is why a just released report from Bloomberg that Deutsche Bank is reviewing whether it "misstated" the value of derivatives in its interest-rate trading business, will hardly spark optimism in the bank's critical asset marking practices; the good news is that according to the report the biggest German lender is sharing its findings with U.S. authorities, according to people with knowledge of the situation. Zero-coupon inflation swaps are derivatives that help customers bet on, or hedge against, inflation. Two parties agree to exchange a payment in the future whose size is determined by how much an inflation index rose or fell. The issue, however, is not the underlying security, but the total notional involved, which based on the DB's latest public filings, could be in the hundreds of billions (or more), and how substantial the impact on DB's P&L any variation from true market values will be. Specifically, DB is looking at valuations on a type of derivative known as zero-coupon inflation swaps. The reason for the probe is that, as has been a recurring case with many of its peers of the last few years, the bank found valuations that "diverged from internal models" at which point it began questioning traders.The push to finally open its books comes after CEO John Cryan's vow in February to try to resolve his institution’s legal challenges swiftly. As Bloomberg sarcastically adds, "he is still working on it." The bank has been facing regulatory and enforcement pressure around the world, including a money-laundering investigation tied to its Russia operations, inquiries into mortgage-bond trading before and after the financial crisis and charges that the bank colluded to help falsify the accounts of Italy’s Banca Monte dei Paschi di Siena.

Measure U.S. Banks' Credit Exposure to Deutsche Now -- Deutsche Bank, which is interconnected with the world's largest financial institutions and corporations, continues to experience massive problems that have led to multiple fines and layoffs. It is incredible that the credit rating agencies have not downgraded the globally systemically important bank's debt ratings this month. Plenty of signals already exist for the rating agencies to act on an accident waiting to happen. Twice this year, the International Monetary Fund has stated that the almost $2 trillion-asset institution is of systemic importance and concern. The bank's market capitalization has declined a little more than 50% in twelve months, according to Bloomberg data. The credit default swap market, which is a highly watched indicator to determine the credit quality of an issue, shows that trading referencing "Deutsche Bank bonds" surged to a six-month high at the end of September. The market, as always, has been quicker than any rating agency to show that it believes that Deutsche is in trouble. The conundrum for Deutsche is very difficult to escape. The more that Deutsche's troubles increase, the more expensive it will be for it to borrow, further increasing its woes. It is also very important to remember that as a globally systemically important bank, Deutsche has significant flexibility in determining its risk-weighted assets. Under the Basel Committee for Banking Supervision's international uniform regulatory capital standards, Deutsche is allowed to use its own data and models to determine the probability of default of its assets. It can also design its own models to measure its market and operational risk exposures. No internal auditor or bank examiners are allowed a level of granularity to see how robust the models are or whether the ratios are correct.  As Deutsche is notorious for having old technological systems, it makes it hard to believe that its risk-data-aggregation processes are strong enough to make the bank's capital, liquidity and leverage ratios credible. Any investor in, or counterparty to, Deutsche should be seriously questioning the firm's ability to sustain unexpected losses.  Deutsche Bank legal entities in the U.S. failed the stress tests mandated by the Dodd-Frank Act's Title I. In other words, in the event of significant market or credit stress, Deutsche in the U.S. would be insufficiently capitalized to withstand unexpected losses. If Deutsche were to fail in the U.S., the Federal Deposit Insurance Corp. would be responsible for resolving Deutsche's U.S. legal entities. Neither the bank regulators nor banks' risk managers can afford to wait until rating agencies downgrade Deutsche before understanding the level of exposure to the bank giant. Let us not forget that Lehman Brothers was rated "A" on Sept.15, 2008.

Are Banks Being Roiled by Oil? - NY Fed - The oil and gas sector boomed as the United States emerged from the Great Recession, driven by high energy prices as well as the increased use of new extraction technologies such as hydraulic fracturing (“fracking”). Oil and gas prices have declined dramatically since 2014, however, causing losses, layoffs, and some bankruptcies among oil and gas firms. It is worth remembering that low oil prices in the late 1980s contributed to the failure of hundreds of banks in Texas and other parts of the Southwest. Could this happen again?  Profits and employment in the oil and natural gas extraction industry have fallen significantly since 2014, reflecting a sustained decline in energy prices. In this post, we look at how these tremors are affecting banks that operate in energy industry–intensive regions of the United States. We find that banks in the “oil patch” have experienced a significant rise in delinquencies on commercial and industrial loans. So far though, there appears to be limited evidence of spillovers to other types of loans and no evidence of widespread bank losses or failures in these regions.

Federal Reserve Secure Payments Task Force Identifies Key Priorities, Seeks Comments - The 160-member task force convened by the Federal Reserve to advance the safety, security and resiliency of the national payment system is asking the industry for comments on its efforts to enhance payment identity management, data protection, and information sharing related to payments risk and fraud.   The Secure Payments Task Force has been working across payment industry segments to define challenges and develop potential solutions. An online survey  has been created to gather comments on how the task force is addressing challenges related to the three focus areas. The goal is to help ensure that the solutions being pursued will meet industry needs. The survey will be open for comment through Tuesday, November 8. "Tackling today's security challenges will require the commitment of all payment system participants," said Gordon Werkema, who, as Payments Strategy Director for the Federal Reserve System, is overseeing initiatives to make the national payment system faster and more secure. "The Secure Payments Task Force is particularly interested in understanding any barriers that may exist to implementing the planned solutions." The work groups created by the Secure Payments Task Force to focus on the three priority areas are led by payment industry experts:

  • Nancy O'Malley, Executive Vice President, Mastercard, who heads the Payment Identity Management Work Group.
  • Reed Luhtanen, Senior Director Payments Strategy, Walmart, who heads the Data Protection Work Group.
  • Glen Ulrich, Operations Executive, US Bank, who heads the Information Sharing Work Group.

For each of these focus areas, work group members have been meeting to document the current environment, the attributes of a more effective environment, the desired outcomes in each area, and the barriers to implementation of recommended solutions. A team of standards experts was established to support the work groups.

Can Banks Protect Against the Threat of Everyday Devices? --There's a lesson for banks in the cyberattack that took down PayPal, Netflix, Facebook, and other sites for hours — and it's not just "have a backup domain name system provider." Hopefully every bank already has that part covered. The less obvious moral is: pay more attention to internet-connected devices like printers, security cameras and point-of-sale terminals. They're often lightly protected and can be easily broken into and harnessed in botnets like the one that brought down Dyn. They can also be used as backdoor for malware to access your entire network. Banks have particular reason to be concerned because of the value of the data they secure, including customers' personal data and account information. And a handful, including U.S. Bank and Citi, have been experimenting with the use of internet-connected beacons for payments and identification, which will be appealing targets for hackers. (Both of those banks declined requests for interviews.) In the cyberattack last week, 493,000 internet-connected devices were recruited by a botnet called Mirai to act as its cyber-army and flood Dyn's servers with data requests, causing hours-long outages. The devices were mostly webcams, printers and DVRs. Some were made by a Chinese manufacturer, Hangzhou Xiongmai, which announced on Monday that it will recall millions of cameras sold in the U.S. in response to the DDoS attack against Dyn. But the problem extends far beyond one manufacturer. Like a car thief trying to open a door on each vehicle in a parking lot, the Mirai source code scans the web for devices from manufacturers including Toshiba, Samsung, Panasonic, Xerox, and RealTek to see what it can break into. Any device can be targeted. "Anything that has an IP address assigned to it and is connected to internet can be used," said Austin Berglas, head of cyber defense at the consulting firm K2 Intelligence and former head of the FBI's New York cyber branch. Every internet-connected device expands a company's attack surface and should be protected at the same level as a desktop computer, Berglas said.

 Major banks mark first-ever international trade using blockchain tech | Reuters: The first cross-border transaction between banks using multiple blockchain applications has taken place, Commonwealth Bank of Australia and Wells Fargo & Co said on Monday, resulting in a shipment of cotton to China from the United States. Australian cotton trader Brighann Cotton Marketing bought the shipment bound for the port city Qingdao from U.S. division Brighann Cotton in Texas, the companies and their banks said in a joint statement. The blockchain trade, for 88 bales, totaled $35,000, Commonwealth Bank told Reuters. Blockchain is a web-based transaction-processing and settlement system whose efficiency banks say could slash costs. It creates a "golden record" of any given set of data that is automatically replicated for all parties in a secure network, eliminating any need for third-party verification. "Existing trade finance processes are ripe for disruption and this proof of concept demonstrates how companies around the world could benefit from these emerging technologies," Michael Eidel, Commonwealth Bank's executive general manager for cashflow and transaction services, said in the statement. The transaction is not the first involving the decentralized database, used since 2009 for the digital currency bitcoin. But it is a milestone for the traditional banking industry which at first shied away from the technology, partly because it makes money flows harder for law enforcement agencies to track.

 Blockchain Hype Takes Hit as Chain Releases Code for All to Use - Time to put the blockchain hype to the test. After a year of promises that the technology would revolutionize Wall Street, anyone can now download an entire blockchain specifically built for financial services.Chain, the San Francisco-based startup that’s working with Visa Inc. and has made a presentation on the benefits of blockchain to Federal Reserve Chair Janet Yellen, just released to the public the 30,000 lines of open-source code that make up its Core Developer Series. Software developers, engineers, traders and executives can now build and test any type of application they think will help improve efficiency in their business, said Adam Ludwin, Chain’s chief executive officer.“Before today, most blockchain projects existed in PowerPoint presentations,” Ludwin said in an interview. “We’re releasing the culmination of two-and-a-half years of work.”Industries from finance to health care to utilities are experimenting with blockchains with the goal of radically changing how payments are tracked, securities and derivatives trades are processed, and health records are stored, to name just a few of the potential uses. On Wall Street, blockchain is being hailed as a way to reduce payment times from days or weeks to real time, freeing up billions of dollars in capital that’s now tied up until accounts are verified. The same blockchain released today by Chain is powering the near real-time transaction system being developed by Visa. Known as Visa B2B Connect, it’s an attempt to overhaul and vastly speed up how global business payments are processed. The blockchains associated with the digital currencies bitcoin and ether are free and can be used by the public to build upon. Yet those weren’t made with financial applications in mind, which sets Chain apart, Ludwin said. Other companies such as Symbiont, Digital Asset Holdings and R3 are also working to develop blockchain. In the case of Ripple, its blockchain is moving money around the world on a daily basis. But access to those systems is restricted to partners or customers and isn’t free to the public.

OCC Unveils Fintech Framework in Advance of Charter Decision --The Office of the Comptroller of the Currency on Wednesday released a framework for how it would approach financial technology regulation, a preliminary step ahead of its decision on whether to issue a national charter for fintech firms. The blueprint, which comes as the OCC rolls out plans for a new innovation office to oversee fintech efforts, lays out recommendations for outreach, training and technical assistance. Because the effort is so new, the framework offers almost no indication of how regulators might police the fledgling industry.The OCC has said it plans to publish a paper later this year seeking comment on a potential charter as firms grapple with a changing regulatory landscape for their industry. Several fintech companies are calling for clarity in the form of a limited-purpose charter, and other small companies are partnering with established banks. OCC officials said the charter discussion is moving on a separate track from the framework published Wednesday. “We are still deliberating on whether it makes sense to grant a national bank charter to fintechs,” Comptroller Thomas Curry said on a conference call with reporters. “We have made no decisions yet.”The framework is the latest step in the OCC’s handling of fintech following a March white paper calling for comments on the topic, followed by a forum in June.“The development of the framework and the creation of the Office of Innovation are important next steps in enhancing the OCC’s ability to support responsible innovation,” Deputy Comptroller Kay Kowitt said on the conference call. The agency said it will establish the new innovation office in the first months of 2017, which will be headed by acting Chief Innovation Officer Beth Knickerbocker, and it plans to develop an optional pilot program that would allow banks to tinker with fintech products and services. However, Curry stressed that the pilot program would not exempt institutions from consumer protection laws. Kowitt noted that banks “have always piloted products and services and technology.”

OCC Sets Up Innovation Office; No Decision on Fintech Charter — The Office of the Comptroller of the Currency (OCC) will create a separate office within the agency to promote “responsible innovation” in the banking and financial services industries, the OCC announced Oct. 26. The announcement did not include a decision by the OCC on the possible issuance of national charters to nonbank fintech companies, a subject much discussed in the industry. The OCC said it continues to study the charters question and has not made a determination as of yet. The agency plans to publish a paper by the end of the year examining the topic and seeking comment (189 BBD, 9/29/16). “The OCC supports responsible innovation that enhances the safety and soundness of the federal banking system, treats customers fairly, and promotes financial inclusion,” Comptroller Thomas Curry said in a prepared statement. “By establishing an Office of Innovation, we are ensuring that institutions with federal charters have a regulatory framework that is receptive to responsible innovation and the supervision that supports it.” The office will get under way in the first three months of 2017 under the direction of a chief innovation officer in Washington, who will oversee staff there and in New York and San Francisco, the OCC said. Beth Knickerbocker, a counsel for legislative and regulatory activities at the OCC, has been named acting chief innovation officer. The office will work to provide technical assistance for banks and nonbanks, train OCC staff, establish a program of research on innovation and foster collaboration with other federal agencies.  It is designed for more informal exchanges with banks and other industry participants, outside the OCC's standard mode of supervision and examination, Curry said in a conference call coinciding with the announcement. Activities might include developing pilot projects for new products, though without waiving any regulations, or scheduling times for general discussions with innovators about OCC concerns and practices, agency officials said

MUFG Aims to Use Bitcoin to Improve Cross-Border Payments | American Banker: The world's third-largest bank has teamed up with the world's largest bitcoin company with a goal of devising a way to execute cross-border payments more quickly and efficiently. But that isn't all. "There are some areas where we compete with these newcomers, but I believe the space where we work with them is much larger," said Nobuyuki Hirano, president and chief executive of Mitsubishi UFJ Financial Group, the third-largest bank in the world.

The new boss looks awfully like the old boss, bitcoin edition - Remember the days when bitcoin was all about reclaiming control of your financial capital? A way of ensuring none of those pesky middlemen and brokers could get up to shenanigans with your money behind your back? Well, look what just landed in our inbox: Leading bitcoin asset manager, Global Advisors (Jersey) Limited has announced new custodians and extended trading powers for its flagship fund, Global Advisors Bitcoin Investment Fund PLC (“GABI”), that are detailed in the new prospectus, just released... In addition to meeting the capitalization, reserve, compliance, consumer protection and cyber-security requirements of the New York State Department of Financial Services, the custodians will provide secured IT storage systems and cold storage vault systems for GABI’s bitcoin holdings. The use of dual custodians adds further de-risking in the storage of the fund’s investments. In addition, the fund has added new powers allowing the manager to engage in cross-market arbitrage, futures-to-cash arbitrage, coin lending and leverage. The manager also maintains an account with leading prime broker, Interactive Brokers LLC in order to be able to supplement the portfolio with interests in certain non-bitcoin commodity futures contracts such as oil, metals and currency pairs, with the aim of protecting and where possible enhancing returns by creating pair-trading and hedging opportunities. No more than 25% of the NAV (Net Asset Value) will be allocated to non-bitcoin based commodities. Bitcoin lending is an emerging area. The added feature of coin lending with authenticated counterparties essentially allows the manager to enhance yield on bitcoin holdings in a similar manner to traditional stock and metal lending. The Manager has also added the ability to trade in Crypto Delta One securities (“CRYDO’s”). CRYDO’s are securities traded on an electronic trading platform that offer indirect or synthetic exposure to the underlying price of bitcoin while not conveying explicit ownership of bitcoin. In this way they work similarly to CFDs (Contracts for Difference) in the equity world and can offer the benefits of cost saving and leverage – both as risk management and yield enhancement tools. Mr. Masters says that the new powers could potentially allow the manager to add 6-10% in alpha return generation alongside the strong beta growth of bitcoin as a rising digital currency. Mr Masters, of course, is the former head of energy trading at JP Morgan. Before that he was an energy trading portfolio manager for Phibro Energy.

Ban Data Access, Limit Bank Innovation -- We are still in the early days of digital finance — but the heated tone of conversations surrounding approaches to data access threatens to keep us there.  The rapid growth in financial tools and services has enriched the lives of many people. This growth is powered by a set of underlying technologies that facilitate access to and exchange of personal financial data. It is this data — and the principle that people should control their own financial data — that forms the backbone of financial innovation. As an industry, we are jointly confronting questions about how to provide data access securely, efficiently and inclusively. However, one needs to look no further than these very pages to see that the debate around these topics has intensified. As the industry begins to embrace the notion that consumers should control and have access to their data, the focus has shifted to how —not if — financial institutions should permit this access. Unfortunately, discussions on how best to address these questions are often mired in fear, uncertainty and doubt — mischaracterizing the technologies used for data access and data transfer without regard for how they actually work. Granted, the sheer number of terms and concepts — including Open Financial Exchange (OFX), Durable Data API (DDA), screen scraping, and OAuth — doesn't help. The narratives surrounding technical details, competition and bank-controlled consumer data distracts from the objectives that all stakeholders share. These objectives are about building an inclusive and secure ecosystem that balances the needs of consumers, financial institutions and innovators. We all recognize that certain concepts are key to the success of this ecosystem. Financial institutions need flexibility in and visibility into how data is accessed. Different approaches work better for different institutions; each institution has its own set of preferences, priorities and technological systems. Allowing for this flexibility empowers financial institutions to enable access to personal financial data in a way that minimizes technical impact, cost and risk.

Cordray 'Gravely Concerned' by Attempts to Obstruct Screen Scraping | American Banker: In a statement of support for fintech companies that rely on screen scraping of bank websites, Consumer Financial Protection Bureau Director Richard Cordray said he was "gravely concerned" about the decision of certain banks to block third-party access to consumer data. "Let me state the matter as clearly as I can here," said Consumer Financial Protection Bureau Director Richard Cordray at the Money 2020 conference held in Las Vegas on Monday. "We believe consumers should be able to access this information and give their permission for third-party companies to access this information as well."

Standardize Consumer Financial Data - Adam Levitin, Credit Slips -This week CFPB Director Richard Cordray stated that he was “gravely concerned” by banks' attempts to prevent screen scraping of consumer data by fintechs authorized by consumers collect their financial data.  Cordray said, "We believe consumers should be able to access this information and give their permission for third-party companies to access this information as well."  The control over consumer financial data is hugely important in terms of optimizing competition within consumer financial services, as well as being able to monetize on such data through things like cross-selling, and predictive default analytics.   It's tempting to frame the issue in terms of who "owns" the data—is it the consumer's, to do with what s/he likes, or the bank's?  I don't think that sort of binary property ownership rubric is very helpful when thinking about jointly produced data--the consumer's inputs, but the bank's formatting and maintenance.  Instead, I think we should look at consumer financial data from another perspective—how can we maximize its value when viewed from a systemic perspective?  This means value maximization from the aggregate perspective of depositories, fintechs, consumers, and regulators.  It does not get into the distributional question about who gets what slice of that pie; I’ll leave that for Kaldor and Hicks (or at least another blog post that may or may not happen).   There's a very simple move that could do a lot to maximize the value of consumer financial data from a systemic perspective:  standardize it.  For different product categories, there should be universally defined data fields that would be the same for all institutions.  Data should also be readily exportable--that is it should be available to consumers and their authorized agents in a readily transportable format, such that if consumer X’s account moves from institution A to institution B there is no problem for institution B reading the account.  This matters for basically everyone involved: [...] So here’s what I’m thinking.  Have for different categories of product data fields A through Z pre-defined (perhaps by regulation, perhaps by industry agreement), and then allow institutions to add on their own customized fields AA through ZZ, etc.  It seems like a situation in which everyone wins.  Curious to hear thoughts.

CFPB’s Project Catalyst Relies on Financial Innovation Fairy to Rescue the Underbanked - Jerri-lynn Scofield - Whenever I read the words “financial innovation”, I tend to break out in hives. So imagine my distress when yesterday, the Consumer Financial Protection Bureau– which is supposed to be one of the good guys in the financial regulation story– yesterday issued its Project Catalyst report: Promoting consumer-friendly innovation. (I have embedded the full report below). I quote from CFPB director Richard Cordray’s message introducing the report: The Bureau’s Project Catalyst initiative, which we launched in 2012, is another example of our commitment to innovation. This office was a novelty at the time for a financial regulator, being solely dedicated to promoting consumer-friendly innovation in the marketplace. From the start, we viewed an emphasis on consumer-friendly innovation as a key component of the Bureau’s mission of making financial markets work for consumers. Through Project Catalyst, we engage with innovators in a number of ways. Project Catalyst’s Office Hours program brings us face-to-face with innovators to exchange information about how they are developing new products and services. Project Catalyst also has established policies and programs to collaborate with innovators to help advance consumer-friendly innovation…. (Project Catalyst report p. 2)  Because innovation in this context is almost always a synonym for looting, or for otherwise engaging in financial legerdemain. After all, the whole mortgage backed securities racket was a textbook example of financial innovation– and look where that got us. Or, as Lambert has written here:Readers will recall that I have often flagged “innovative,” along with “disruptive,” “startup,” “founder”, and (in the business context) “ecosystem” as bullshit tells, and recommended that if you hear such con artist’s patter in a crowd, you should put your hand on your wallet or clutch your purse more tightly.Financial innovation usually provides an excuse to skim off rich fees, which are particularly problematic in the consumer financial products sphere, where the consumers targeted for some of the sparkliest innovations are precisely those who can’t afford to pay such fees: the un- and under-banked. At this point, it’s worth reviewing just how many US households lack access to basic financial services. Take a look at this report, or, if you’re short of time, at least the executive summary.

CFPB Ruling May Shake Up Interagency Dynamics: An appeals court decision declaring that the director of the Consumer Financial Protection Bureau's must serve at the pleasure of the president might have more far-reaching implications than even the judge who wrote the opinion might want. The ruling in PHH v. CFPB found that a single clause in the Dodd-Frank Act establishing the agency — stipulating that its director could only be removed "for cause" — violates the constitutional separation of powers because it vests executive authority in a single person who is not accountable to the president. The ruling effectively set the precedent that federal agencies can be headed by an executive single director who answers to the president or can be an independent regulatory commission which does not. That is a new constitutional standard that may impact a host of other agencies run by a single director, said Richard Horn, former senior counsel at the CFPB. "There's not just two specific categories of agencies, executive and independent — it's more of a spectrum," Horn said. "This could affect agencies that typically one might think of as independent." Aaron Klein, an economist with the Brookings Institution and former Treasury official, said the bright line laid out by the ruling would have immediate implications for the Federal Housing Finance Agency, which was established in 2008 under President George W. Bush, and the Office of the Comptroller of the Currency, formed in 1863 under President Abraham Lincoln.

CFPB s Cordray Puts Servicers on Notice Ahead of New Rules: The Consumer Financial Protection Bureau will require underperforming servicers to document the technology and process changes used to implement the agency's recently released servicing regulations. Noting the investments some mortgage servicers are making to improve operations, CFPB Director Richard Cordray said technology deficiencies and inadequate processes that were exposed during the foreclosure crisis are still rampant at many organizations. "In certain circumstances, we will require specific and credible plans on how their information technology systems will be upgraded," Cordray said during a speech Tuesday at the Mortgage Bankers Association's Annual Convention in Boston. Cordray did not provide specifics about what criteria the bureau would use to determine which servicers will received added scrutiny. However, he said the CFPB considers the procedures servicers have in place to respond to complaints a "basic component of a compliance management system," and he cautioned servicers to take that responsibility seriously. The CFPB in August issued a final rule for mortgage servicers that provides greater protections to struggling borrowers, surviving family members and borrowers in bankruptcy.Cordray took a more conciliatory tone when addressing lenders' implementation of the "Know Before You Owe" disclosure rules, also known as TRID, which took effect a year ago, citing an overall reduction in the number of loans experiencing disclosure-related issues. He said the new forms have provided "more convenience and insight for consumers."

TRID Fixes Don’t Go Far Enough, Industry Says: The Consumer Financial Protection Bureau's proposed changes to new mortgage disclosure requirements do not go far enough, according to many in the industry. The agency issued a proposal in August that was designed to address industry concerns about its TILA-RESPA integrated disclosure rule, which took effect a year ago. By and large, banks, credit unions and other lenders say the proposed fixes make sense, including one that would allow institutions to issue a revised Closing Disclosure in situations where the borrower has to delay the settlement. That measure is meant to fix the so-called black hole problem that occurred when institutions were not able to accommodate additional costs after a delayed closing because it violated a provision of TRID that limited how much fees could change. CFPB is proposing to allow creditors to use a corrected Closing Disclosure to reset the applicable good-faith tolerances if it is delivered within three business days of receiving a valid reason for a delayed settlement. Both the American Bankers Association and the Consumer Bankers Association called it a "straightforward approach" to correcting the problem, though they wish the CFPB plan offered more guidelines on exactly what would be allowable. "The preamble to the proposed rule gave a rather short explanation to what is a significant industry concern,"

CFPB puts 44 mortgage lenders and brokers on notice over HMDA requirements | 2016-10-27 | HousingWire: The Consumer Financial Protection Bureau sent out a warning letter to 44 mortgage lenders and mortgage brokers on Thursday over issues surrounding compliance with the Home Mortgage Disclosure Act. The bureau stated that it has “information that appears to show they may be required to collect, record and report data about their housing-related lending activity, and that they may be in violation of those requirements.” Those requirements fall under HMDA, which was originally enacted in 1975, and requires many financial institutions to collect data about their housing-related lending activity. This includes home purchase loans, home improvement loans and refinancings that they originate or purchase, or for which they receive applications. HMDA also requires financial institutions to report to the appropriate federal agencies and make the data available to the public, which regulators can use for various oversight reasons. “Financial institutions that fail to report mortgage information as required make it harder to identify and address discriminatory lending,” said CFPB Director Richard Cordray. “No mortgage lender that is required to report their loan data can avoid this responsibility.”In October 2015, the CFPB published its changes to the Home Mortgage Disclosure Act. There are three major changes coming in 2017, according to Alice Alvey, Mortgage U senior vice president, who outlines the changes here. One of the three that Alvey notes concerns which companies must file. “I don’t know if lenders are really aware that more lenders will have to file than in the past,” Alvey said.  The CFPB identified these 44 companies by reviewing available bank and nonbank mortgage data.  A sample of the warning letter can be found here.

 DOJ planning to sue Moody's over crisis-era mortgage bond ratings -- In the fallout of the financial crisis, many argued that the credit ratings agencies’ competition for business led to ratings shopping among bond issuers and relaxed ratings standards for the ratings agencies themselves. Last year, Standard & Poor’s reached a settlement with the Department of Justice and nearly 20 states, which required S&P to pay $1.375 billion over claims that S&P knowingly misled mortgage bond investors by issuing trumped-up ratings for pre-crisis residential mortgage-backed securities. That same day reports emerged that the DOJ was planning to look into the mortgage bond ratings activities of Moody’s Investor Service during the run-up to the financial crisis as well. Now those chickens appear to be coming home to roost for Moody’s, as the company disclosed Friday that it is expecting a lawsuit from the DOJ over the ratings it issued for residential mortgage-backed securities and collateralized debt obligations before the crisis. Moody’s revealed the pending lawsuit in its third-quarter earnings release in a section entitled “Litigation Update.”  “In a letter dated September 29, 2016, the DOJ stated that it is preparing a civil complaint to be filed against Moody’s and MIS in the US District Court for the District of New Jersey alleging certain violations of the Financial Institutions Reform, Recovery, and Enforcement Act in connection with the ratings MIS assigned to residential mortgage-backed securities and collateralized debt obligations in the period leading up to the 2008 financial crisis,” Moody’s said in its earnings release.

Fannie Mae to Do Front-End Risk Sharing with Mortgage Insurers: Fannie Mae has come out with its own pilot program featuring front-end risk sharing with private mortgage insurers. Freddie Mac announced its pilot program on Sept. 26. Approximately $3.7 billion of newly originated mortgages will be included in the pilot, which will start with loans delivered during the fourth quarter and continuing for a six-month period, Fannie Mae said. Fannie Mae is retaining the first 35 basis points of loss, which is equal to $13 million. Then the private mortgage insurers will take on the next 2.65% of coverage, up to a maximum of $98 million. Mortgage insurance normally covers between 16% and 37% of the loan balance. Unlike Freddie Mac, Fannie Mae is including loans with as little as 3% down in its pilot. The Freddie Mac pilot is limited to mortgages with loan-to-value ratios between 80% and 95%. The Freddie Mac pilot also adds an additional 265 basis points of coverage by the MIs to low-down-payment mortgages. That program started on Sept. 1 and will run through Feb. 28. Freddie Mac estimates it will transfer more than $100 million of backing to the private insurers, on almost $4 billion of loans. These pilots represent the first front-end risk-sharing transactions where private mortgage insurers are the investors.

Fannie Provides Key Details on Relief from Loan Buybacks - — Fannie Mae is planning to provide relief to lenders from potential buybacks for loans in which the borrower's income, assets and employment information have been validated through automated underwriting.The government-sponsored enterprise will also provide relief on appraisals if the underlying property receives a qualifying score when reviewed by Collateral Underwriter, its program designed to evaluate the risk posed by an appraisal. Loans that receive a score of 2.5 or lower on the five-point scale will be eligible for relief.The changes to Fannie's representation and warranty measures are being made to provide greater assurances to lenders that the GSE will not seek to buyback the loan if it defaults."You can have much greater confidence that when you sell us a loan…it won't boomerang back," said Tim Mayopoulos, Fannie Mae's president and chief executive officer, at the Mortgage Bankers Association's annual convention on Monday.Additionally, Fannie is expanding access to a waiver from a property inspection requirement for refinance transactions that are automatically underwritten.Some rep and warranty relief takes effect immediately, including on income verification. Asset and employment verification for certain Collateral Underwriter scores is scheduled to start on Dec. 10, as is expanded property inspection waiver eligibility. Freddie Mac is also gearing up to offer rep and warranty relief in exchange for use of its Loan Advisor Suite tools. The GSE said its plans include expanding collateral rep and warrant relief currently being tested to sometime in early 2017.

Fannie Mae to Give Lenders Relief on Some Mortgage Penalties - Bloomberg: Lenders will get a reprieve from the threat of some mortgage-related penalties under a new program announced by housing-finance giant Fannie Mae on Monday. The program will shield lenders against penalties stemming from faulty appraisals as long as those evaluations pass muster under an automated tool designed by Fannie Mae to root out mistakes. Fannie Mae also said it will let lenders verify borrowers’ income and assets electronically in some cases. The changes, while expected in some cases, are the latest step by Washington-based Fannie Mae to allay lenders’ fears of sanctions for errors when issuing a mortgage. Fannie Mae and Freddie Mac, which have been under government control since 2008, forced some lenders to buy back loans in the wake of the financial crisis after finding they contained errors or didn’t meet the companies’ guidelines. In response, many lenders established stricter demands than what the two companies required. Those moves lowered the chance of defaults and repurchase demands, but they also made it harder for home buyers to get loans. Credit Overlays Over the past few years, Fannie Mae and Freddie Mac have made several changes to give lenders more certainty of the circumstances that will lead to penalties. Those changes, along with plummeting mortgage default rates, have led lenders to take off many of those so-called credit overlays. The changes announced Monday are designed to give mortgage lenders more certainty that they won’t be hit with penalties for appraisal mistakes. They also will allow lenders to verify borrowers’ income, assets and employment electronically in some cases, rather than by collecting pay stubs and bank statements, which could speed the mortgage process. Fannie Mae in some cases will also let borrowers who refinance skip the requirement to have the property inspected.

Pressure Building on FHA to Cut Premiums Again: A financial report due out soon could reignite a battle over whether the Federal Housing Administration should again reduce its annual premium. The FHA last cut premiums in January 2015, a move that unleashed a lot of pent-up demand for agency-insured mortgages. While many in the industry have been urging FHA to make another cut, the agency has resisted due to concerns about its reserve fund, which rebounded last year but is still being watched carefully by nervous lawmakers. But the agency is likely to come under more intense pressure to make another cut if independent auditors give the fund a positive review in a report due out in early November. Many analysts expect the agency to move quickly. The "odds favor FHA cutting premiums this fall," said Jaret Seiberg, a Washington policy analyst at Cowen & Company, in a recent report to clients. FHA may want to be "cautious" about a premium reduction, but it is "still hard for first-time buyers and — especially minorities — to get credit." Isaac Boltansky, a policy analyst at Compass Point, put the odds of a premium cut by yearend at 60%.

The Obama administration sees its own nose. -- Hey, look what the Obama administration discovered today! The impact of the financial crisis on current borrower access to mortgage credit is evident. (KE: The impact of borrower access to mortgage credit on the financial crisis is evident.  - FIFY) Today, the credit score of the typical new mortgage borrower is nearly 40 points higher than the typical borrower in the early 2000s. The average credit score for those obtaining a loan backed by Fannie Mae and Freddie Mac (collectively, the government sponsored enterprises, or GSEs) in conservatorship is nearly 750. The minimum credit score to qualify for a mortgage at the GSEs is 620, yet only 1 percent of all new mortgages originated across the industry are to borrowers with FICO scores below 665. While creditworthiness is certainly a critically important factor, this credit selectivity is especially sobering given the fact that more than 40 percent of all FICO scores nationally fall below 700. While a variety of factors contribute to these outcomes, it is clear that the GSEs and the secondary market can do more to reach a broader swathe of creditworthy households. Constraints on access to affordable credit have ripple effects across the owner-occupied housing market. When a large number of first time homeowners cannot buy a home, established homeowners may face a harder time relocating or moving up in the market.  Source  If only the Bush administration had figured that out in the last year of their term, or if Obama had noticed in the first year of his.  The GSEs were taken over in 2008.

Foreclosed Loans Are at a Nine-Year Low: Black Knight - The percentage of foreclosed mortgages reached its lowest point in nine years, according to Black Knight Financial Services' September First Look report.The presale foreclosure rate of 1% represents a 3.38% decline from August and a 31.23% year-over-year decline. There are 509,000 homes in the presale inventory, down 18,000 from the previous month and 228,000 from last September.There were 61,700 foreclosure starts for the month, a 10.32% reduction from the previous month and a drop of 22.78% from September 2015.There are 2.17 million properties which are more than 30 days late but not in foreclosure as of Sept. 30, an increase of 14,000, but down by 292,000 one year ago.The delinquency rate increased just 74 basis points from August, to 4.27%. This is down 12.24% from last September. Prepayment rates were down from August by 7.59% to 1.54%. This was the third highest in the past three years, as rates until recently continued to remain low and refinance volume high in the aftermath of the Brexit vote, Black Knight said.

Black Knight: Mortgage "Foreclosure Rate Falls to Nine-Year Low" in September -- From Black Knight: Black Knight’s First Look at September Mortgage Data: Post-‘Brexit’ Prepay Activity Remains Strong; Foreclosure Rate Falls to Nine-Year Low

• Despite declining from August, September saw the third highest prepayment rate in three years
  • September’s less-than-one-percent seasonal increase in the delinquency rate was relatively mild by historical standards
  • At one percent, the rate of all mortgages that are in active foreclosure fell to its lowest point in nine years
  • Non-current mortgage rates continue to struggle in oil states, with Alaska and Wyoming seeing the largest increases over the past six months
According to Black Knight's First Look report for September, the percent of loans delinquent increased slightly in September compared to August, and declined 12.2% year-over-year. The percent of loans in the foreclosure process declined 3.4% in September and were down 31.2% over the last year.  Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 4.27% in September, up from 4.24% in August.The percent of loans in the foreclosure process declined in September to 1.00%.  The number of delinquent properties, but not in foreclosure, is down 292,000 properties year-over-year, and the number of properties in the foreclosure process is down 228,000 properties year-over-year. Black Knight will release the complete mortgage monitor for September on November 7th.

Freddie Mac: Mortgage Serious Delinquency rate declined slightly in September, Lowest since July 2008 -- Freddie Mac reported that the Single-Family serious delinquency rate declined in September to 1.02%, down from 1.03% in August.  Freddie's rate is down from 1.41% in September 2015. This is the lowest rate since July 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 generally declining, the "normal" serious delinquency rate is under 1%.    The Freddie Mac serious delinquency rate has fallen 0.39 percentage points over the last year, and at that rate of improvement, the serious delinquency rate could be below 1% next month (October).

Fannie Mae: Mortgage Serious Delinquency rate unchanged in September--Fannie Mae reported today that the Single-Family Serious Delinquency rate was at 1.24% in September, unchanged from 1.24% in August. The serious delinquency rate is down from 1.59% in September 2015. These are mortgage loans that are "three monthly payments or more past due or in foreclosure".    The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%. Although the rate is generally declining, the "normal" serious delinquency rate is under 1%.   The Fannie Mae serious delinquency rate has fallen 0.35 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% for about 8 more months.

 Lawler: Table of Distressed Sales and All Cash Sales for Selected Cities in September - Economist Tom Lawler sent me the table below of short sales, foreclosures and all cash sales for selected cities in September. On distressed: Total "distressed" share is down year-over-year in most of these markets.   Short sales and foreclosures are down in most of these areas. The All Cash Share (last two columns) is mostly declining year-over-year. As investors continue to pull back, the share of all cash buyers continues to decline.

Why Credit Scores Are Improving for Previously Foreclosed Borrowers -- Millions of consumers' credit reports will no longer reflect past mortgage problems, which could open up borrowing opportunities for many of them. Foreclosures, short sales and bankruptcies are set to fall off credit files for 2.5 million consumers between June 2016 and June 2017, according to analysis from Experian. Of these consumers, 68% have credit scores in near-prime or higher credit segments, which should improve their ability to qualify for a mortgage.  Experian's study in particular looked at so-called boomerang borrowers who foreclosed or short-sold between 2007 and 2010 and have since opened a new mortgage. Roughly 29% of those who short-sold in that time frame have secured a new mortgage, as compared with just 12% of those who went through a foreclosure. "With millions of borrowers potentially coming back into the housing market, the trends that we're seeing are promising for both the mortgage seeker and the lender," Michele Raneri, vice president of analytics and new business development at Experian, said in a news release.  "In the coming years, boomerang borrowers will be a critical segment of the real estate market. While many of these borrowers have gone through a very difficult time, it is encouraging to see them taking control of their finances with better credit scores and all-around better credit management." Credit scores for these boomerang borrowers have improved, Experian found. Consumers who opened a mortgage following a foreclosure have an average VantageScore credit score of 680, representing a 20.8% increase from when they went through the negative credit event. And the average credit scores for consumers with a mortgage now who previously short-sold a property have risen 16.5% from the time of their short sale to 706.

Facebook Lets Advertisers Exclude Users By Race - ProPublica - Imagine if, during the Jim Crow era, a newspaper offered advertisers the option of placing ads only in copies that went to white readers. That's basically what Facebook is doing nowadays. The ubiquitous social network not only allows advertisers to target users by their interests or background, it also gives advertisers the ability to exclude specific groups it calls "Ethnic Affinities." Ads that exclude people based on race, gender and other sensitive factors are prohibited by federal law in housing and employment.  Here is a screenshot of a housing ad that we purchased from Facebook's self-service advertising portalScreenshot via ProPublica The ad we purchased was targeted to Facebook members who were house hunting and excluded anyone with an "affinity" for African-American, Asian-American or Hispanic people. (Here's the ad itself.) When we showed Facebook's racial exclusion options to a prominent civil rights lawyer John Relman, he gasped and said, "This is horrifying. This is massively illegal. This is about as blatant a violation of the federal Fair Housing Act as one can find." The Fair Housing Act of 1968 makes it illegal "to make, print, or publish, or cause to be made, printed, or published any notice, statement, or advertisement, with respect to the sale or rental of a dwelling that indicates any preference, limitation, or discrimination based on race, color, religion, sex, handicap, familial status, or national origin." Violators can face tens of thousands of dollars in fines. The Civil Rights Act of 1964 also prohibits the "printing or publication of notices or advertisements indicating prohibited preference, limitation, specification or discrimination" in employment recruitment.

 MBA: "Mortgage Applications Decrease in Latest MBA Weekly Survey" From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey Mortgage applications decreased 4.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 21, 2016. The prior week’s results included an adjustment for the Columbus Day holiday.... The Refinance Index decreased 2 percent from the previous week to its lowest level since June 2016. The seasonally adjusted Purchase Index decreased 7 percent from one week earlier to its lowest level since January 2016. The unadjusted Purchase Index increased 3 percent compared with the previous week and was 9 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) decreased to 3.71 percent from 3.73 percent, with points increasing to 0.37 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.The first graph shows the refinance index since 1990. Refinance activity increased this year since rates declined, however, since rates are up a little recently, refinance activity has declined a little. The second graph shows the MBA mortgage purchase index.  The purchase index was "9 percent higher than the same week one year ago".

Purchase App Activity at Lowest Point Since January: MBA - Mortgage applications decreased 4.1% on a seasonally adjusted basis from the previous week as purchase activity was at its lowest point since January, according to the Mortgage Bankers Association. The seasonally adjusted purchase index decreased 7% from one week earlier, while the unadjusted purchase index increased 3% compared with the previous week and was 9% higher than the same week one year ago, according to the MBA's Weekly Mortgage Applications Survey for the week ending Oct. 21. On an unadjusted basis, total application activity increased 7% over last week. The prior week's results included an adjustment for the Columbus Day holiday. Refinance application volume dropped 2% from the prior week to its lowest level since June. The market share of refi applications increased to 62.7% from 61.5% the previous week. The adjustable-rate mortgage share of activity increased to 4.2% while the Federal Housing Administration share decreased 2 basis points to 11.1%. The VA share decreased to 12.2% from 12.8% and the USDA share remained unchanged at 0.7%.The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.71% from 3.73%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) the average contract rate decreased 1 basis point to 3.71%.The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.56% from 3.54%, while for 15-year fixed-rate mortgages backed by the FHA, the average decreased to 3.01% from 3.03%. The average contract interest rate for 5/1 ARMs decreased 4 basis points to 2.93%.

Mortgage Rates Remain Stable, Close to Near Record Lows -- Mortgage rates slipped from last week's spike and the 30-year fixed-rate mortgage eased back to its summertime range below 3.5%, according to Freddie Mac. The 30-year fixed-rate mortgage averaged 3.47% for the week ending Oct. 27, down 5 basis points from last week. A year ago at this time, the 30-year fixed-rate mortgage averaged 3.76%. "Mortgage rates continue to be relatively stable and at near-record lows. At the same time, the 10-year Treasury yield ended the week relatively flat — up about 2 basis points," said Sean Becketti, chief economist at Freddie Mac. The 15-year fixed-rate mortgage 2.78%, down slightly from last week when it averaged 2.79%. A year ago at this time, the 15-year averaged 2.98%. The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.84%, down slightly from last week when it averaged 2.85%, while a year ago it averaged 2.89%.

FHFA House Price Index Up 0.7% in August The Federal Housing Finance Agency (FHFA) has released the U.S. House Price Index (HPI) for the most recent month. Here is the opening of the report: U.S. house prices rose in August, up 0.7 percent on a seasonally adjusted basis from the previous month, according to the Federal Housing Finance Agency (FHFA) monthly House Price Index (HPI). The previously reported 0.5 percent increase in July remained unchanged. [Link to report]  The chart below illustrates the HPI series, which is not adjusted for inflation, along with a real (inflation-adjusted) series using the Consumer Price Index: All Items Less Shelter.

Home Prices Rose 5.1% Year-over-Year, Continued Gains in August -- With today's release of the August S&P/Case-Shiller Home Price Index we learned that seasonally adjusted home prices for the benchmark 20-city index were up 0.2% month over month. The seasonally adjusted year-over-year change has hovered between 4.4% and 5.4% for the last twelve months.  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 0.2% 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.“Supported by continued moderate economic growth, home prices extended recent gains,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “All 20 cities saw prices higher than a year earlier with 10 enjoying larger annual gains than last month. The seasonally adjusted month-over-month data showed that home prices in 14 cities were higher in August than in July. Other housing data including sales of existing single family homes, measures of housing affordability, and permits for new construction also point to a reasonably healthy housing market.“With the national home price index almost surpassing the peak set 10 years ago, one question is how the housing recovery compares with the stock market recovery. Since the last recession ended in June 2009, the stock market as measured by the S&P 500 rose 136% to the end of August while home prices are up 23%. However, home prices did not reach bottom until February 2012, almost three years later. Using the 2012 date as the starting point, home prices are up 38% compared to 59% for stocks. While the stock market recovery has been greater than the rebound in home prices, the value of Americans’ homes at about $22.3 trillion is slightly larger than the value of stocks and mutual funds at $21.2 trillion.” [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.

Case-Shiller: National House Price Index increased 5.3% year-over-year in August -  Bill Mcbride - 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: Home Price Gains Continues in August According to the S&P CoreLogic Case-Shiller Indices The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.3% annual gain in August, up from 5.0% last month. The 10-City Composite posted a 4.3% annual increase, up from 4.1% the previous month. The 20-City Composite reported a year-over-year gain of 5.1%, up from 5.0% in July. .Before seasonal adjustment, the National Index posted a month-over-month gain of 0.5% in August. Both the 10-City Composite and the 20-City Composite posted a 0.4% increase in August. After seasonal adjustment, the National Index recorded a 0.6% month-over-month increase, and both the 10-City Composite and the 20-City Composite reported 0.2% month-over-month increases. After seasonal adjustment, 14 cities saw prices rise, two cities were unchanged, and four cities experienced negative monthly prices changes. The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000). The Composite 10 index is off 10.9% from the peak, and up 0.2% in August (SA). The Composite 20 index is off 8.9% from the peak, and up 0.2% (SA) in August. The National index is off 1.6% from the peak (SA), and up 0.6% (SA) in August. The National index is up 33.0% from the post-bubble low set in December 2011 (SA). The second graph shows the Year over year change in all three indices. The Composite 10 SA is up 4.3% compared to August 2015. The Composite 20 SA is up 5.1% year-over-year. The National index SA is up 5.3% year-over-year. According to the data, prices increased in 15 of 20 cities month-over-month seasonally adjusted.

Real Prices and Price-to-Rent Ratio in August --The year-over-year increase in prices is mostly moving sideways now around 5%. In August, the index was up 5.3% YoY.
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. 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 only 1.6% below the bubble peak (seasonally adjusted).   However, in real terms, the National index is still about 16.2% 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. In nominal terms, the Case-Shiller National index (SA) is back to December 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to June 2005 levels, and the CoreLogic index (NSA) is back to August 2005.  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.CPI less Shelter has declined over the last two years pushing up real house prices.In real terms, the National index is back to February 2004 levels, the Composite 20 index is back to October 2003, and the CoreLogic index back to January 2004.  In real terms, house prices are back to late 2003 / early 2004 levels. On a price-to-rent basis, the Case-Shiller National index is back to August 2003 levels, the Composite 20 index is back to April 2003 levels, and the CoreLogic index is back to July 2003.

Zillow Forecast: Expect "Modest Acceleration" in YoY Growth in September for the Case-Shiller Indexes –- The Case-Shiller house price indexes for August were released yesterday. 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: Modest Acceleration in Home Price Growth Will ContinueAccording to Zillow’s September Case-Shiller forecast, the national index and both smaller 10 and 20-city indices look set to continue the acceleration in home price growth they exhibited in August. And after more than two years of steady growth around 5 percent annually, the U.S. National Case-Shiller home price index is within striking distance of reaching its July 2006 peak levels, just 0.1 percent off those levels, according to today’s data.The September Case-Shiller National Index is expected to grow 5.4 percent year-over-year and 0.7 percent month-to-month (seasonally adjusted). We expect the 10-City Index to grow 4.3 percent year-over-year and 0.3 percent (SA) from July. The 20-City Index is expected to grow 5.1 percent between September 2015 and September 2016, and rise 0.4 percent (SA) from August.Zillow’s September Case-Shiller forecast is shown in the table below. These forecasts are based on today’s August Case-Shiller data release and the September 2016 Zillow Home Value Index (ZHVI). The September S&P CoreLogic Case-Shiller Indices will not be officially released until Tuesday, November 29. The year-over-year change for the 10-city and 20-city indexes will probably be about the same in the September report as in the August report.  The change for the National index will probably be slightly higher.

This Housing Bubble Is Different Than 2008, But Equally As Scary -- We are nearly a decade removed from the Great Recession that devastated the world economy and yet not too much has changed. Experts agree that some combination of subprime mortgages and mortgage backed securities played a role in the crisis. And now new fears are mounting that another housing bubble is forming comparable to the one seen in 2008. One of the biggest problems is that home prices have surged while mortgage rates and wage growth near record lows.This is glaringly evident in major cities around the world but none more than China. Fast rising prices coupled with increasing household debt levels are overheating the property market that could eventually threaten the global economic recovery. In a recent report, UBS highlighted 6 cities exposed to bubble risk which they so aptly named the UBS Global Real Estate Bubble Index. Naturally Hong Kong is featured on the index with Vancouver, London, Stockholm, Sydney and Munich rounding out the list.  Home prices in these at risk areas have jumped by an average of 50% since 2011, well above the standard increase across other major cities.  If you look at some of these cities, particularly London and Sydney, they have attracted a lot of foreign money from Asia. This has been a one of the leading drivers of rising home prices for cities even outside this list. Traditionally overvalued real estate markets like San Francisco have been flooded with Chinese investors in recent years, making the Bay Area the most unaffordable region in the United States. For reference, San Francisco was just below bubble territory according to UBS, but was still deemed as overvalued. Clearly, the surge in housing prices can’t solely be blamed on foreign investment. Housing prices have also been influenced by an imbalance of a basic economic concept; supply and demand. A severe lack of supply coupled with increasing demand has pushed prices higher since the turn of the decade. In fact, home prices in America today are 1% shy of their pre crisis levels with June of this year marking 50 straight months of home price appreciation. The recent uptick in housing starts has helped ease these fears, but not enough to put the problem to bed completely. Starts are running at an annualized rate of roughly 780,000 in 2016, nowhere near the 1.2 million unit per year historical norm.

Adjusted Home Prices Decreased 2.6% in August: First American: Home prices, when adjusted for income and interest rates, decreased in August by 2.6% on a year-over-year basis, according to First American Financial Corp. When compared with July, "real house prices" as First American terms this, increased in August by less than 1%. Real house prices are 41% below their peak in July 2006. "Contrary to popular opinion, housing isn't getting more expensive. In fact, on a purchasing-power adjusted basis, housing is becoming more affordable," said First American chief economist Mark Fleming. The growth in consumer house-buying power is outpacing the increase in actual home prices driven by tight inventories, he said. Michigan had the largest increase in First American's Real House Price Index compared with August 2015, up 5.9%, while Iowa had the largest decrease, down 5.9%. A decline in the RHPI means housing is more affordable. Jacksonville, Fla., was the city with the largest increase, at 8.1%, while Virginia Beach, Va., had a 5.5% decrease. "At the moment, affordability is actually increasing in more markets than it is decreasing, including San Francisco (where the RHPI is down 4.6% year over year), San Jose (down 3.1%), New York (down 2.7%), Washington (down 2.8%) and Boston (down 2.4%). The conventional wisdom that these markets are overvalued does not account for the meaningful growth in consumer house-buying power across the majority of major metropolitan markets," said Fleming.

New Home Sales at 593,000 Annual Rate in September  The Census Bureau reports New Home Sales in September were at a seasonally adjusted annual rate (SAAR) of 593 thousand. The previous three months were revised down by a total of 85 thousand (SAAR). "Sales of new single-family houses in September 2016 were at a seasonally adjusted annual rate of 593,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.1 percent above the revised August rate of 575,000 and is 29.8 percent above the September 2015 estimate of 457,000. "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 decreased in September to 4.8 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). "The seasonally adjusted estimate of new houses for sale at the end of September was 235,000. This represents a supply of 4.8 months at the current sales rate." 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.

September New Home Sales Up to 3.1% Month-over-Month, New Median Price at 313.5K - This morning's release of the September New Home Sales from the Census Bureau came in at 593K, up 3.1% month-over-month from a revised 575K in July. Seasonally adjusted estimates for June, July, and August were revised. The forecast was for 600K. Here is the opening from the report: Sales of new single-family houses in September 2016 were at a seasonally adjusted annual rate of 593,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.1 percent (±16.2%)* above the revised August rate of 575,000 and is 29.8 percent (±23.4%) above the September 2015 estimate of 457,000. The median sales price of new houses sold in September 2016 was $313,500; the average sales price was $377,700. The seasonally adjusted estimate of new houses for sale at the end of September was 235,000. This represents a supply of 4.8 months at the current sales rate. [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. We've included a six-month moving average to highlight the trend in this highly volatile series.

September 2016 New Home Sales Improve.: The headlines say new home sales improved. The median sales price for homes slightly improved - and inventory was stable. This data series is suffering from methodology issues which manifest as significant backward revision - and this month the revisions were moderately downward. Home sales move in spurts and jumps - so this is why we view this series using a three month rolling average (rolling averages improved). Overall I view this as a good report, which was slightly below market expectations. Dispite the fact the data jumps around, the three month rolling averages are solidly improving. Econintersect analysis:

  • unadjusted sales growth accelerated 16.8 % month-over-month.
  • unadjusted year-over-year sales up 31.4 %.. Year-over-year growth rate this month was well above the range of growth seen last 12 months.
  • three month unadjusted trend rate of growth accelerated 5.6 % month-over-month - is up 24.4 % year-over-year.
US Census Headlines:
  • seasonally adjusted sales up 3.1 % month-over-month
  • seasonally adjusted year-over-year sales up 29.8 % (last month was reported at 31.3 %)
  • market expected (from Bloomberg) seasonally adjusted annualized sales of 570 K to 635 K (consensus 601 K) versus the actual at 593 K.

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

New Home Sales Rise But Miss After Dramatic Downward Revision --Thanks to a dramatic downward revision for August (from 609k to 575k), September's 593k new home sales rose more than expected (but was below expectations of 600k). The pickup in September demand was helped by an 8.6% gain in the Midwest and a 3.4% increase in the South, but sales fell 4.5% in the West.But there were dramatic downward revisions for June, July, and August...The supply of homes fell to 4.8 months, from 4.9 months in August. There were 235,000 new houses on the market at the end of September, little changed from the previous two months. The median sales price of a new house rose 1.9 percent from September 2015 to $313,500, Wednesday’s report showed.

A few Comments on September New Home Sales  - Bill Mcbride - New home sales for September were reported below the consensus forecast at 593,000 on a seasonally adjusted annual rate basis (SAAR). And the three previous months were all revised down significantly. However, sales were up 29.8% year-over-year in September, and this is the best month for September (NSA) since 2007. And sales are up 13.0% year-to-date compared to the same period in 2015. The glass is more than half full. This is very solid year-over-year growth.This graph shows new home sales for 2015 and 2016 by month (Seasonally Adjusted Annual Rate). Sales to date are up 13.0% year-over-year, because of very strong year-over-year growth over the last six months. Overall I expected lower growth this year, in the 4% to 8% range. Slower growth seemed likely this year because Houston (and other oil producing areas) will have a problem this year. It looks like I was too pessimistic on new home sales this year. 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 several years. The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through September 2016. This graph starts in 1994, but the relationship had been fairly steady back to the '60s. Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales. I expect existing home sales to move more sideways, 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. If not, then the gap will persist.In general the ratio has been trending down, and this ratio will probably continue to trend down over the next several years. Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

More mixed signals in the housing market: The picture of the housing market go a little bit less murky this week, and a little bit brighter. First of all, new home sales, while down from the July peak, continued with the upward trend. This is best shwon by comparing the more noisy monthly data (blue) with the quarterly average (red): The quarter over quarter trend has been relentlessly positive this year. In fact, the 3 best months in the last 8 years have been #1 July, #2 September, and #3 August. This is, needless to say, a significant positive. What remains murky is the relationship between this series and single family housing permits, released last week Typically these two move in the same direction, but for the last 18 months they have diverged: A second positive comes from the state-by-state breakdown for September permits that was released this morning. This enables us to subtract New York, which caused the distortions in 2015. This showed a marked improvement, not to a new record, but only surpassed twice in the last 18 months: So far, so good. But the picture remains murky, as purchase mortgage applications made a 9 month low (h/t Calculated Risk): If their present level continues for about another 6 weeks, they will be negative YoY. Bottom line: at the moment, housing -- the best long leading indicator on the consumer side of the ledger -- remains decidedly mixed.

NAR: Pending Home Sales Index increased 1.5% in September, up 2.4% year-over-year -- From the NAR: Pending Home Sales Edge Up in September Pending home sales shifted higher in September following August's notable dip and are now at their fifth highest level over the past year, according to the National Association of Realtors®. Increases in the South and West outgained declines in the Northeast and Midwest. The Pending Home Sales Index, a forward-looking indicator based on contract signings, grew 1.5 percent to 110.0 in September from a slight downward revision of 108.4 in August. With last month's gain, the index is now 2.4 percent higher than last September (107.4) and has now risen year-over-year for 22 of the last 25 months. The PHSI in the Northeast fell 1.6 percent to 96.5 in September, but is still 7.7 percent above a year ago. In the Midwest the index declined modestly (0.2 percent) to 104.6 in September, and is now 1.0 percent lower than September 2015.Pending home sales in the South rose 1.9 percent to an index of 122.1 in September and are now 1.7 percent higher than last September. The index in the West jumped 4.7 percent in September to 107.3, and is now 4.0 percent above a year ago. This was above expectations of a 1.0% 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. ‘

 HVS: Q3 2016 Homeownership and Vacancy Rates --  The Census Bureau released the Residential Vacancies and Homeownership report for Q3 2016.  This report is frequently mentioned by analysts and the media to track household formation, the homeownership rate, and the homeowner and rental vacancy rates.  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 63.5% in Q3, from 62.9% 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 was unchanged at 1.8% in Q2. Once again - this probably shows the general trend, but I wouldn't rely on the absolute numbers. The rental vacancy rate increased to 6.8% in Q2. I think the Reis quarterly survey (large apartment owners only in selected cities) is a much better measure of the rental vacancy rate - and the Reis survey is showing rental vacancy rates have started to increase slightly.

Credit Card Delinquencies Creep Up To Highest Levels Since 2012 As Subprime Issuance Soars --As Obama's "recovery" rolls along, the Wall Street Journal points out that the delinquency rates of subprime credit cards has surged to the highest levels recorded since 2012.  Moreover, per TransUnion data, delinquency rates on cards issued in 2015 are close to 3%, or roughly double the overall rate, indicating that consumers have grown increasingly dependent on credit cards over the past couple of years to fund daily expenses.Credit-card lending to subprime borrowers is starting to backfire.Missed payments on credit cards that lenders issued recently are higher than on older cards, according to new data from credit bureau TransUnion. Nearly 3% of outstanding balances on credit cards issued in 2015 were at least 90 days behind on payments six months after they were originated. That compares with 2.2% for cards that were given out in 2014 and 1.5% for cards in 2013.The poorer performance on newer cards pushed up the 90-day or more delinquency rate for all credit cards to 1.53% on average nationwide in the third quarter. That’s the highest level since 2012.Meanwhile, FRED data reveals that while overall credit card delinquency rates remain at 10-year lows, the trends has been higher over the past several quarters.

Consumer Confidence Declines in October After Back-to-Back Gains - The latest Conference Board Consumer Confidence Index was released this morning based on data collected through October 13. The headline number of 98.6 was a decrease from the final reading of 103.5 for September, a downward revision from 104.1. Today's number was below the consensus of 101.0. Here is an excerpt from the Conference Board press release.“Consumer confidence retreated in October, after back-to-back monthly gains,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current business and employment conditions softened, while optimism regarding the short-term outlook retreated somewhat. However, consumers’ expectations regarding their income prospects in the coming months were relatively unchanged. Overall, sentiment is that the economy will continue to expand in the near-term, but at a moderate pace.” 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 'Bounce' Dies, Plunges Most In 11 Months - For the first time since June, The Conference Board's Consumer Confidence index declined YoY, plunging from near cycle highs at 104.1 (revised lower to 103.5) to 98.6 (missing 101.5 expectations), this is the biggest monthly plunge since Nov 2015, catching down to UMich and Bloomberg surveys. Employment and Business Conditions sentiment declined notably as did 'plans to buy' a home or appliance. Confidence bounce dies...

  • Present situation confidence fell to 120.6 vs. 127.9 last month.
  • Consumer confidence expectations fell to 83.9 vs. 87.2 last month.

“Consumer confidence retreated in October, after back-to-back monthly gains,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current business and employment conditions softened, while optimism regarding the short-term outlook retreated somewhat. However, consumers’ expectations regarding their income prospects in the coming months were relatively unchanged. Overall, sentiment is that the economy will continue to expand in the near-term, but at a moderate pace.” Consumers’ outlook for the labor market was also less optimistic than in September. The proportion expecting more jobs in the months ahead decreased from 15.7 percent to 13.1 percent. However, those anticipating fewer jobs declined from 18.1 percent to 17.0 percent. The percentage of consumers expecting their incomes to increase was unchanged at 17.5 percent, while the proportion expecting a decline decreased from 10.4 percent to 9.8 percent.

October Consumer Sentiment declines to 87.2 - The final University of Michigan consumer sentiment index for October was at 87.2, down from the preliminary estimate of 87.9, and down from 91.2 in September. The Sentiment Index slipped in October to the same low recorded last September and to the lowest level since October 2014. The October decline was due to less favorable prospects for the national economy, with half of all consumers anticipating an economic downturn sometime in the next five years for the first time since October 2014. Objectively, the probability of a downturn during the next five years is far from zero-this would be the longest expansion in 150 years if it lasted just over half of the five year horizon. Nonetheless, the October rise may simply reflect a temporary bout of uncertainty caused by the election.  graph added

Michigan Consumer Sentiment: October Final Declines -- The University of Michigan Final Consumer Sentiment for October came in at 87.2, down from the September Final reading and matching last September's low. had forecast 88.1. Surveys of Consumers chief economist, Richard Curtin, makes the following comments: The Sentiment Index slipped in October to the same low recorded last September and to the lowest level since October 2014. The October decline was due to less favorable prospects for the national economy, with half of all consumers anticipating an economic downturn sometime in the next five years for the first time since October 2014. Objectively, the probability of a downturn during the next five years is far from zero-this would be the longest expansion in 150 years if it lasted just over half of the five year horizon. Nonetheless, the October rise may simply reflect a temporary bout of uncertainty caused by the election. Prospects for renewed spending gains will depend on continued growth in jobs and wages as well as low inflation and interest rates. The small rise in interest rates now expected in December will have a minimal impact on spending. Along with small increases in interest rates, consumers also anticipate a mild slowdown in job creation that is likely to prevent any further declines in the national unemployment rate. To be sure, these changes are all anticipated to be small during the year ahead. Overall, real personal consumption expenditures can be expected to increase by 2.5% through mid 2017. [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.

 BofA Explains Why US Consumers Are Spending Less, Saving More -- One of larger banks to have undergone a substantial downshift in its outlook on the market and the economy, is Bank of America, which continued the dour mood this morning when in note by its economist Ethan Harris it again pointed out that US consumer spending has "settled at a lower trend." Here are the details: Consumer spending has settled on a lower trend: Consider these three facts: (1) household wealth is nearly back to peaks during the housing bubble as a percentage of disposable income; (2) interest rates are at historical lows; and (3) initial jobless claims have touched the lowest level since 1973. That looks like a recipe for spectacular consumer spending. But, yet, real consumer spending has only averaged a 2.0% annual rate since the recovery started, which is nearly half the pace of the prior 10-year average. What happened? The recovery in wages has been slow and the savings rate has increased. The 4-quarter moving average of the personal savings rate (derived as disposable income less outlays) has reached 5.9% over the last two quarters. An alternative measure of the savings rate, which is measured from household net worth, has seen even more impressive gains. As we argue, the savings rate is likely to remain elevated, limiting the potential upside to consumer spending due to a variety of cyclical and structural reasons.

Retailers Rushed to Hire for Holidays, a Sign of Tight Labor Market -- Retailers geared up to hire holiday-season workers in August this year, an unusually early start showing how competition has intensified for temporary help in a tight labor market. Data from job-search site shows retailers, and the warehouse and logistics firms they compete with for seasonal labor, started searching for temporary workers a month earlier than in recent years. This suggests retailers and other firms “anticipate stronger consumer demand and expect that it will be harder to find the people they want to hire,” said Indeed economist Jed Kolko. Last year, more than one in four retail workers hired in the fourth quarter of 2015 started their jobs in October, the highest share on records back to the 1930s. Companies and analysts say a number of trends are converging. The holiday-shopping season is starting before Halloween for many consumers, rather than the traditional day after Thanksgiving. There are fewer workers available, due to unemployment holding around 5% for the past year. And retailers are competing for the same employees as logistics firms, distribution centers and restaurants during the final months of the year. BevMo, a California spirit seller, began posting for seasonal jobs just after Labor Day this year, rather than early October, in part because it noticed other companies doing the same. “Five years ago we could find a lot of professional-level people that didn’t have a job,” “Now there’s a lot less people in that position.” J.C. Penney Co. began posting holiday positions earlier this year because it plans to add 20% more seasonal staff to its stores after year-round employees were reluctant to take on more overtime. United Parcel Service said it typically starts recruiting in September to stay ahead of labor competition and this year made its hiring website mobile friendly.

Vehicle Sales Forecasts: Sales Over 17 Million SAAR Again in October -- The automakers will report October vehicle sales on Tuesday, November 1st.
Note:  There were 26 selling days in October 2016, down from 28 in October 2015.  From WardsAuto: Forecast: October Daily Sales to Reach 15-Year High A WardsAuto forecast calls for October U.S. light-vehicle sales to reach a 17.8 million-unit seasonally adjusted annual rate, making it the seventh month this year to surpass 17 million. A 17.8 million SAAR is greatly higher than the 17.3 million recorded year-to-date through September, but does not beat the 18.1 million result recorded in the same month last year. From J.D. Power: New-Vehicle Retail Sales in October Slip; Sixth Monthly Decline of 2016  The SAAR for total sales is projected at 17.7 million units in October 2016, down from 18.1 million units a year ago.  This graph shows light vehicle sales since the BEA started keeping data in 1967.

DOT: Vehicle Miles Driven increased 3.4% year-over-year in August -- The Department of Transportation (DOT) reported: Travel on all roads and streets changed by 3.4% (9.3 billion vehicle miles) for August 2016 as compared with August 2015. Travel for the month is estimated to be 284.9 billion vehicle miles. The seasonally adjusted vehicle miles traveled for August 2016 is 268.6 billion miles, a 2.5% (6.5 billion vehicle miles) increase over August 2015. It also represents a 0.8% decrease (-2.2 billion vehicle miles) compared with July 2016. The following graph shows the rolling 12 month total vehicle miles driven to remove the seasonal factors.  The rolling 12 month total is moving up - mostly due to lower gasoline prices - after moving sideways for several years. In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.  Miles driven (rolling 12) had been below the previous peak for 85 months - an all time record - before reaching a new high for miles driven in January 2015. The second graph shows the year-over-year change from the same month in the previous year.  Miles driven are up 3.4% year-over-year. In August 2016, gasoline averaged $2.28 per gallon according to the EIA.  That was down from August 2015 when prices averaged $2.73 per gallon. Gasoline prices aren't the only factor - demographics are also important. However, with lower gasoline prices, miles driven on a rolling 12 month basis, is setting a new high each month.

 The autoignition temperature of manual cars is much higher than Fahrenheit 451 - Izabella Kaminska - According to Bloomberg’s Chris Martin and Joe RyanMass transit, the lifeblood of cities worldwide, is under threat from the biggest innovation in automotive technology since Henry Ford’s assembly line first flooded streets with cars. They also note: The self-driving vehicles being pioneered by Tesla Motors Inc., Alphabet Inc.’s Google and others are poised to dramatically lower the cost of taxis, potentially making them cheaper than buses or subways, according to a joint report by Bloomberg New Energy Finance and McKinsey & Co. Having no driver to pay could reduce taxi prices to 67 cents a mile by 2025, less than a quarter of the cost in Manhattan today, the report found. Which, quite frankly, is amazing stuff from the likes of McKinsey — since at some point in their illustrious history they must have done some public transport consulting work, no? We’ll spare you the exhaustive repetition of what actual public transport experts have repeatedly told us on that front. Suffice to say they don’t believe SD cars will pose much of a threat to public transport because costs in this space are determined by geometrical constraints, not human labour availability. As to the idea they’ll be cheaper than human-driven cars, we’ve covered the reasons why that might not be the case at all here and here. What we will note is that the above is typical of the poor quality research coming out in this space — focussed as it is on fanning enthusiasm for the new tech (and related consulting contracts no doubt) rather than alerting investors to the practical realities and challenges. As a rule, we’ve found most of the reports that grab the headlines are sparse on figures and big on assumptions, while those that cite actual figures and facts get crowded out entirely.

Caterpillar Retail Sales Decline For 46 Consecutive Months; Worst Month For North America Since 2010 -- While Caterpillar's CEO may have resigned recently, the woes at the heavy industrial manufacturer continue, with yet another month of declining global sales, the company's 46th in a row. According to the latest monthly release of global retail sales which traditionally presages the company's earnings release due out tomorrow, the company reported that North American sales dipped by 23%, the steepest monthly decline since February 2010, confirming recent speculation that demand for original equipment is simply not there. The rest of the world did not fare much better, with EAME down 17%, Latin America sliding 23% and only Asia posting a rare rebound in sales, up 3%, the best print in the series since October 2012.

October 2016 Chemical Activity Barometer Continues to Signal Improving Economic Growth - The Chemical Activity Barometer (CAB) notched another solid gain of 0.3 percent in October, following an upwardly revised gain of 0.4 percent in September.  Accounting for adjustments, the CAB is up 4.2 percent over this time last year, a marked increase over earlier comparisons and the greatest year-over-year gain since August 2014. All data is measured on a three-month moving average (3MMA). On an unadjusted basis the CAB climbed 0.3 percent in October, following a 0.4 percent gain in September. The Chemical Activity Barometer has four primary components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators. In October, three of the four core categories for the CAB improved. Production-related indicators, product prices, and inventory were positive, while equity prices remained flat.

Chemical Activity Barometer indicated Solid Growth in October - Here is an indicator that I'm following that appears to be a leading indicator for industrial production.
From the American Chemistry Council: Chemical Activity Barometer Enters Third Quarter with Strong PerformanceThe Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), notched another solid gain of 0.3 percent in October, following an upwardly revised gain of 0.4 percent in September. Accounting for adjustments, the CAB is up 4.2 percent over this time last year, a marked increase over earlier comparisons and the greatest year-over-year gain since August 2014. All data is measured on a three-month moving average (3MMA). On an unadjusted basis the CAB climbed 0.3 percent in October, following a 0.4 percent gain in September...Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production.  It does appear that CAB (red) generally leads Industrial Production (blue).  Currently CAB has increased solidly over the last several months, and this suggests an increase in Industrial Production over the next year

Durable Goods New Orders Marginally Declined in September 2016: The headlines say the durable goods new orders declined. The unadjusted three month rolling average improved this month but remains in contraction. Defense spending was the big drag this month. This series has wide swings monthly so our primary metric is the three month rolling average which improved but remains in contracton. The real issue here is that inflation is starting to grab in this sector making real growth much less than appears at face value. Econintersect Analysis:

  • unadjusted new orders growth decelerated 1.5 % (after accelerating a revised 9.2 % the previous month) month-over-month , and is up 1.0 % year-over-year.
  • the three month rolling average for unadjusted new orders accelerated 2.6 % month-over-month, and down 1.1 % year-over-year.
  • Inflation adjusted but otherwise unadjusted new orders are down 2.6 % year-over-year.
  • Backlog (unfilled orders) decelerated 0.3 % month-over-month, but is contracting 1.7 % year-over-year.
  • The Federal Reserve's Durable Goods Industrial Production Index (seasonally adjusted) growth unchanged month-over-month, up 0.3 % year-over-year [note that this is a series with moderate backward revision - and it uses production as a pulse point (not new orders or shipments)] - three month trend is decelerating, but the trend over the last year is relatively flat.

September Durable Goods Orders Disappoint, Core Capital Goods Even More So -  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 $0.3 billion or 0.1 percent to $227.3 billion, the U.S. Census Bureau announced today. This decrease, down following two consecutive monthly increases, followed a 0.3 percent August increase. Excluding transportation, new orders increased 0.2 percent. Excluding defense, new orders increased 0.7 percent.  Transportation equipment, also down following two consecutive monthly increases, drove the decrease, $0.6 billion or 0.8 percent to $77.5 billion. Download full PDF The latest new orders number at -0.1% (-0.12% to two decimal places) month-over-month (MoM) was below the consensus of 0.1%. However, the series is up 1.6% year-over-year (YoY). If we exclude transportation, "core" durable goods came in at 2.0% MoM, which matched the consensus of 0.2%. The core measure is flat at (-0.04% to two decimal places) YoY. If we exclude both transportation and defense for an even more fundamental "core", the latest number is up 1.6% MoM but down 3.4% 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 loss of -1.2% MoM and -4.1% YoY. The consensus was for a 0.2% MoM increase. 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.

Rail Week Ending 22 October 2016 Better Than The Previous Week: Week 42 of 2016 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. The weekly data was better than last week. If coal and grain are removed from the analysis, rail has recently been declining around 5% - but this week was -4.6%. This week the one year rolling average did not worsen - but it remains in contraction. It does appear that the downward slide in the one year rolling average is in the processes of stopping its decline. But this movement is like watching snails race. Based on the current trends - rail year-over-year rate of contraction should start improving by year end. The contraction in rail counts began over one year ago, and now rail movements are being compared against weaker 2015 data - and this is the cause periodic acceleration in the short term rolling averages. Still, rail is weak to very week compared to previous years.A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 544,092 carloads and intermodal units, down 1.7 percent compared with the same week last year. Total carloads for the week ending October 22 were 268,551 carloads, down 5.8 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 275,541 containers and trailers, up 2.6 percent compared to 2015. Three of the 10 carload commodity groups posted an increase compared with the same week in 2015. They were miscellaneous carloads, up 16.5 percent to 10,852 carloads; grain, up 4.6 percent to 26,442 carloads; and nonmetallic minerals, up 0.1 percent to 37,324 carloads. Commodity groups that posted decreases compared with the same week in 2015 included petroleum and petroleum products, down 24.4 percent to 10,037 carloads; metallic ores and metals, down 12.3 percent to 19,115 carloads; and coal, down 10.5 percent to 90,272 carloads. For the first 42 weeks of 2016, U.S. railroads reported cumulative volume of 10,532,634 carloads, down 10.2 percent from the same point last year; and 10,886,011 intermodal units, down 3.1 percent from last year. Total combined U.S. traffic for the first 42 weeks of 2016 was 21,418,645 carloads and intermodal units, a decrease of 6.7 percent compared to last year.

Richmond Fed Manufacturing: Activity Sluggish in October  --Today the Richmond Fed Manufacturing Composite Index increased 4 points to -4 from last month's -8. had forecast -5. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at -7.7, indicates 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.

Richmond Fed Manufacturing Survey Remains In Contraction In October 2016.: Of the three regional Federal Reserve surveys released to date, one is in expansion and two are in contraction. We have a mixed picture of manufacturing across the fed districts. This report shows extremely low employment - and new orders and backlog improved but are also in contraction. At this point it seems the surveys are forecasting flat growth for September. Fifth District manufacturing activity remained sluggish in October, according to the most recent survey by the Federal Reserve Bank of Richmond. New orders and backlogs decreased this month, while shipments flattened. Hiring activity strengthened mildly across firms and wage increases were more widespread. Prices of raw materials and finished goods rose more quickly in October, compared to last month. Firms looked for better business conditions during the next six months. Manufacturers expected positive growth in shipments and in the volume of new orders. In addition, manufacturers looked for rising backlogs of new orders. Producers anticipated increased capacity utilization and looked for slightly longer vendor lead times. Survey participants' outlook for the months ahead included moderate growth in hiring, while future wage increases outweighed declines in the October expectations index. Producers anticipated somewhat longer average workweeks. Firms expected faster growth in prices paid and prices received. Overall manufacturing conditions remained sluggish this month. The composite index for manufacturing remained negative; however, the index added four points to end at a reading of −4. The new orders indicator also remained negative this month, ending at a reading of −12, while the shipments index flattened to a reading of 2. The manufacturing employment index moved up to a positive reading, adding 16 points to end at 3.

Kansas City Fed: Regional Manufacturing Activity "Expanded Moderately" in October -- From the Kansas City Fed: Tenth District Manufacturing Activity Expanded Moderately: The Federal Reserve Bank of Kansas City released the October Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity expanded again at a moderate pace.“This was the second consecutive month of rising factory activity in the Tenth District, the first time that has happened in nearly two years,” said Wilkerson. “Much of the improvement recently has been in machinery and fabricated metals manufacturing.”..The month-over-month composite index was 6 in October, equal to 6 in September and up from -4 in August ... Most month-over-month indexes improved further in October.  The production index edged higher from 15 to 18, and the shipments, new orders, and order backlog also rose moderately.  The employment index climbed from -3 to 7, its highest level in almost two years.  ...  The Kansas City region was hit hard by the decline in oil prices, and it appears activity is starting to expand again.

Kansas City Fed Survey: October Activity Continues Expansion - The Kansas City Fed Manufacturing Survey business conditions indicator measures activity in the following states: Colorado, Kansas, Nebraska, Oklahoma, Wyoming, western Missouri, and northern New Mexico Quarterly data for this indicator dates back to 1995, but monthly data is only available from 2001.  Here is an excerpt from the latest report:–The Federal Reserve Bank of Kansas City released the October Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity expanded again at a moderate pace.  “This was the second consecutive month of rising factory activity in the Tenth District, the first time that has happened in nearly two years,” said Wilkerson. “Much of the improvement recently has been in machinery and fabricated metals manufacturing.” [Full PDF release here] Here is a snapshot of the complete Kansas City Fed Manufacturing Survey.

 October 2016 Kansas City Fed Manufacturing Remains In Expansion: Of the four regional manufacturing surveys released for October, two are in expansion and two are in contraction.. Analyst Opinion of Kansas City Fed Manufacturing Kansas City Fed manufacturing has been one of the more stable districts. As Kansas City remained at the same moderate level as last month - it is a good sign for this manufacturing survey - and does balance out some of the more negative districts.Tenth District manufacturing activity expanded again at a moderate pace, and producers' expectations for future activity increased further. The price indexes were mixed, but mostly little changed. The month-over-month composite index was 6 in October, equal to 6 in September and up from -4 in August (Tables 1 & 2, Chart). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The increase was mostly attributable to continued strength in metals, machinery, and chemical production. Most month-over-month indexes improved further in October. The production index edged higher from 15 to 18, and the shipments, new orders, and order backlog also rose moderately. The employment index climbed from -3 to 7, its highest level in almost two years. The raw materials inventory index dropped from 8 to -11, and the finished goods inventory index also fell substantially. Most year-over-year factory indexes remained below zero. The composite year-over-year index inched lower from -9 to -11, and the production, shipments, and new orders for exports indexes also fell. The new orders, order backlog, and employment indexes were slightly higher but still in negative territory. The capital expenditures index decreased modestly from -4 to -7, after rising last month. The raw materials inventory index fell from -4 to -19, and the finished goods inventory index also moved lower.

Markit Manufacturing PMI Rebounds in October - The preliminary October US Manufacturing Purchasing Managers' Index conducted by Markit came in at 53.2, up from the 51.5 Setpember final. Today's headline number came in above the consensus of 51.5. Markit's Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Here is the opening from the latest press release:  October data signalled that U.S. manufacturers started the fourth quarter in a strong fashion, with output and new order volumes rising at markedly faster rates than in September. A rebound in business conditions contributed to greater input buying among manufacturing firms and renewed pressures on capacity. At the same time, manufacturers sought to boost their stocks of inputs, with pre-production inventories rising for the first time since November 2015. [Press Release] Here is a snapshot of the series since mid-2012.

 US Manufacturing PMI Rises To Highest In 12 Months -- When 2016 started off poorly for the US manufacturing sector as a result of the pounding in the E&P sector, with rising concerns about a recessionary impulse among US manufacturing industries, the latest Markit manufacturing report for October has allayed much of the slowdown concerns with a headline print of 53.2, higher than the 51.5 expected, and up 1.7 points from September - the highest print since October of 2015. Notably, the new orders index also rebounded to 54.7 from 51.1 previously, and also the highest in 12 months.Manufacturing production has now increased for five months running, following a slight dip in May. Survey respondents cited an accelerated pace of new business growth and, in some cases, efforts to boost production in anticipation of stronger client demand in the months ahead. According to the report, October data signalled that U.S. manufacturers started the fourth quarter in a strong fashion, with output and new order volumes rising at markedly faster rates than in September. A rebound in business conditions contributed to greater input buying among manufacturing firms and renewed pressures on capacity. At the same time, manufacturers sought to boost their stocks of inputs, with pre-production inventories rising for the first time since November 2015. Manufacturers reported that supportive domestic economic conditions remained a key growth driver, helping to offset sluggish export sales in October. Survey respondents also noted that increased production and greater purchasing activity reflected hopes of a post-election upturn in client demand

 Markit Services PMI Up 2.5% Month-over-Month, Bounces Back - The preliminary October US Services Purchasing Managers' Index conducted by Markit came in at 54.8 percent, up 2.5 percent from the final September estimate. The consensus was for 52.3 percent. Markit's Services PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Here is the opening from the latest press release: October data pointed to a marked improvement in growth momentum across the U.S. service sector. Business activity and incoming new work both expanded at the fastest pace for 11 months. The latest survey also revealed an upturn in confidence towards the year-ahead business outlook, with service providers

The Surprising Divergence Of Employment And Capacity Utilization - Two measures commonly used to gauge the country’s economic activity have started to move in opposite directions, according to an Economic Synopses essay. Economist Ana Maria Santacreu examined these two measures:

  • The capacity utilization rate, which is the percentage of resources used by corporations and factories to produce finished goods
  • The fraction of the labor force currently employed, which is measured as 100 percent minus the unemployment rate

Santacreu noted that companies typically use around 80 percent of their available productive capacity (measured by the capacity utilization rate). This number is higher during economic expansions and lower during recessions. She noted: “Indeed, during the most recent recession, U.S. capacity utilization dropped below 67 percent, the lowest point since the late 1960s."  Santacreu noted that companies typically use around 80 percent of their available productive capacity (measured by the capacity utilization rate). This number is higher during economic expansions and lower during recessions. She noted: “Indeed, during the most recent recession, U.S. capacity utilization dropped below 67 percent, the lowest point since the late 1960s." The figure below plots the two measures at quarterly intervals from 1967 through the first quarter of 2016.  As the figure shows, employment as a fraction of the labor force tends to move in a similar fashion to the capacity utilization rate. Santacreu noted that the correlation between the two measures was 0.90 for the period 1967:Q1 through 1990:Q1.  However, the correlation became less pronounced during the early 1990s economic crisis and the early 2000s dot-com bubble. Santacreu wrote: “During both episodes, capacity utilization dropped before employment did and began recovering earlier. That is, industrial activity was booming while employment was still low. This phenomenon is known as a jobless recovery."  Following the Great Recession, these two measures didn’t follow the same pattern as in the previous two recessions. Both measures dropped initially, but employment has been recovering quickly since 2009, while capacity utilization recovered initially but began falling again in 2015.  Santacreu noted that there are several potential reasons why unemployment took longer to recover following the recessions of the early 1990s and early 2000s:

  • Firms may have postponed hiring to be sure the recovery was strong.
  • Firms may have purchased new equipment instead of hiring additional workers.
  • Workers may have had to switch industries, which may have lengthened the time it took to fill positions.

Analyst: Ugly Year for Tech Layoffs, and It’s Going to Get Worse - Early this year, analyst Trip Chowdhry from Global Equities Research predicted that the tech world was going to see big layoffs in 2016—some 330,000 in all at major tech companies. At the time, these numbers seemed way over the top. Then IBM started slashing jobs in March—and continued to wield the ax over and over as the year progressed. Yahoo began layoffs of some 15 percent of its employees in February. Intel announced in April that it would lay off 12,000 this year. So, was Chowdhry right? “Yes,” he told me when I asked him this week. “The layoffs I predicted have been occurring.” And worse, he says, these laid-off workers are never again going to find tech jobs: “They will always remain unemployed,” at least in tech, he said. “Their skills will be obsolete.”  Some of these layoffs are due to a sea change in the industry, as it transforms to the world of mobile and cloud. But some are signs of a bubble about to pop. It’s all going to get worse in 2017, he predicts, because that’s when the tech bubble will burst. Chowdhry, someone who has never been reluctant to go out on a limb, is predicting that’ll happen in March. Before I turn to Chowdhry’s scenario for future gloom, take a look at the table below. These are his predictions for layoffs this year, based on an upward revision of his original estimate (to 369,000 in total), along with a few big ones that he missed. Not all have been announced to date, but he still stands by his overall numbers, and notes that many companies are trying to hide layoff activity. Microsoft, he pointed out in an October report, is “letting go of 200 to 250 people every week, and none of these are announced.” And IBM has been laying off wave after wave of people this year, according to anecdotal evidence being collected by the group Watching IBM.

  The U.S. Job Recovery Is a Global Laggard - Narayana Kocherlakota - It’s often said that the U.S. has recovered more strongly from the last recession than most other developed nations. Data on jobs, though, suggest that’s not quite true. One simple measure of labor market performance is the fraction of people in their prime working years (ages 25 to 54) who have a job. Focusing on this age group helps strip out the varying effects of aging populations and retirement trends in different countries. In late 2007, before the recession started, the prime-age employment-to-population ratio in the U.S. was about the same as in other Group of Seven developed nations (which also include Canada, France, Germany, Italy, Japan and the U.K.). The U.S., however, experienced a much larger decline during the recession, and remains much farther from undoing the damage. As of June, the G-7 as a whole had recovered almost completely, while the U.S. was only 60 percent back from its lowest point: Of course, the G-7 includes seven countries with different experiences. Here’s how the U.S. ranks within the group:Only in France and Italy has the prime-age employment rate fallen by as much as in the United States. And these are two countries where, thanks to the common euro currency, central banks cannot conduct independent monetary policy aimed at addressing unemployment. Some have attributed the poor U.S. job-market performance to the relatively high cost of higher education, including college and community college. Yet if one looks at people with at least some college education, the comparison to other G7 countries makes the U.S. look even worse. As of 2015 -- and excluding Japan, for which data were not available -- the employment rate for those with a post-high-school degree was lower than in any other G-7 country except Italy, and the decline since the beginning of the recession was the largest of all (note that the data in this case are for people aged 25 to 64):

Weekly Initial Unemployment Claims decrease to 258,000 - The DOL reported: In the week ending October 22, the advance figure for seasonally adjusted initial claims was 258,000, a decrease of 3,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 260,000 to 261,000. The 4-week moving average was 253,000, an increase of 1,000 from the previous week's revised average. The previous week's average was revised up by 250 from 251,750 to 252,000. There were no special factors impacting this week's initial claims. This marks 86 consecutive weeks of initial claims below 300,000, the longest streak since 1970.  The previous week was revised up. The following graph shows the 4-week moving average of weekly claims since 1971.

Is the data "rigged"? - We live in an age where everything official seems to be distrusted. Trump has suggested that the government's unemployment data is incorrect, and that the actual rate may be as high as 40%. Some economists on the left also question the data. While progressives may not see a conspiracy, they claim that there is much more slack in the economy than suggested by the (U-3) unemployment rate.  I'm skeptical of the rigged claim. The government produces 6 different unemployment rates, some of which include discouraged workers and part-timers who'd prefer to work full time. In addition, the data is produced by non-partisan bureaucrats, and does not seem affected by a change in who's in the White House. The biggest problem with conspiracy theories is that they'd have to cover too much ground. It would not be enough to fake one of two data points; you'd have to recreate all of reality in an almost "Matrix-like" fashion. For instance, suppose China wanted to falsely pretend that it's been a fast growing economy since 2000. It wouldn't be enough to fake GDP data, they'd also have to pressure Western companies like GM and VW to fake auto sales data; to falsely claim skyrocketing cars sales to the Chinese public. That sort of all encompassing conspiracy is very hard to pull off. And if something like that were being done, it would be odd for the Chinese government leadership to itself question the accuracy of the data---they'd want to loudly insist it was accurate.  I believe the current unemployment rate of 5% does accurately reflect the state of the US labor market. One piece of evidence for this is that the public currently seems pretty upbeat about the economy. If the data were falsely creating an upbeat picture, you'd expect the Michigan Survey of Consumer Confidence to show a much more pessimistic picture: In fact, the level of consumer confidence is about the same as in 2005-06, 1995-96, and the late 1980s, which were also periods when unemployment was close to the natural rate.

Most states inch closer to full employment, although energy-dependent states continue to struggle - This September state jobs data, released by the Bureau of Labor Statistics, show state labor markets largely unchanged from August conditions. Most states continue to add jobs, although a number of states—primarily those heavily dependent on the energy sector—are still showing losses over the past several months and past year. Unemployment rates have been relatively stable, although more significant changes, both positive and negative, can be seen in a handful of states. From June to September, 38 states and the District of Columbia added jobs, with the largest percentage job gains occurring in Florida (1.2 percent), Nevada (1.1 percent), and Tennessee (1.0 percent). Over the same period, 12 states lost jobs. New Mexico (-1.2 percent), Alaska (-0.9 percent), Louisiana (-0.6 percent), and Oklahoma (-0.6 percent) experienced the largest losses. These four states—along with Kansas, North Dakota, and Wyoming—had fewer jobs in September of this year than they did in September of 2015. Much of these losses can be traced to the continued decline in energy prices. The unemployment rate declined in 19 states from June to September. The largest declines occurred in Illinois (-0.7 percentage points), Alabama (-0.6 percentage points), Massachusetts (-0.6 percentage points), Nevada (-0.6 percentage points), and Utah (-0.6 percentage points). Unemployment rose in 28 states over the same period, although most of the increases were modest. Missouri (+0.7 percentage points), Oregon (+0.7 percentage points), and Kansas (+0.6 percentage points) had more sizeable increases in unemployment. Job growth in Oregon and Missouri over the past six months suggests that some of this increase could be the result of previously discouraged jobseekers restarting the job search. The same cannot be said for Kansas, where job numbers have fallen over the past year.

Philly Fed: State Coincident Indexes increased in 36 states in September == From the Philly FedThe Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for September 2016. In the past month, the indexes increased in 36 states, decreased in 11, and remained stable in three, for a one-month diffusion index of 50. Over the past three months, the indexes increased in 40 states, decreased in nine, and remained stable in one, for a three-month diffusion index of 62. Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:  The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average).This is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged). In September, 39 states had increasing activity (including minor increases). Eight states have seen declines over the last 6 months, in order the five worst are Wyoming (worst), Alaska, Louisiana, Kansas, Oklahoma - mostly due to the decline in oil prices. Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and is mostly green now.

Economic Breadth Is Significantly Deteriorating in the US | Chris Puplava - Philly Fed state coincident data came out today and more states across the country are starting to contract (shown in red). Looking at the snapshot below, positively growing states still dominate the map (and don't give much of an alarming picture), but a different story emerges when we look at the trend. Here's a look at how this data has trended over the past 36 years compared to the S&P 500. As you can see, states showing positive growth tend to rollover prior to economic recessions (red bars) with corresponding declines in the S&P 500. The latest data puts us near the weakest levels during this entire economic cycle and matches prior market tops. There was a strong increase in the number of states with negative monthly changes this year. As shown below, this data typically leads US initial unemployment claims and suggests we could see a pickup in jobless claims (layoffs) in the near future. M&A deal activity (shown inverted below) tends to exhibit a euphoric peak and mark the end of an economic/bull market cycle. In terms of transaction values, M&A activity peaked earlier this year and also argues for a pickup in layoffs ahead.

 Productivity measures productivity ... that's it -- Justin Fox at Bloomberg put up a few articles (here, here) recently digging into trends in productivity in the US manufacturing sector. The overarching theme of the two articles is that claims regarding the success of the manufacturing sector in the US (he cites Binyamin Applebaum’s article specifically) are overstated. Fox’s first article is titled “No, U.S. Manufacturing isn’t Really Booming”. I’m not going to tell you that manufacturing is booming. I’m also not going to tell you that Fox is right about it not booming. I am going to tell you that making claims about the business or financial success of manufacturing based on things like multi-factor productivity (MFP) or labor productivity, as Fox does, is using these measures incorrectly. The “health” or “success” or “boominess” of manufacturing are not things one can infer from productivity statistics. I’ll pick on Fox’s articles here because they were recent, not because he’s done something especially egregious. They are two of many examples of how measures like MFP and labor productivity get misused to make points about financial or business performance. The message is that you all need to just let productivity be productivity, you know? ... It measures value-added - not profits, not sales, not cash flow - relative to inputs, and therefore tells us how effectively the economy - not businesses - turns inputs into value-added. Slower MFP growth means slower MFP growth, not anything about competitiveness or the future business success/failure of US manufacturing. Heck, it doesn’t even tell us anything about the past business success or failures of US manufacturing.

How Does Diversity Affect Economic Growth?  A Look at Data on Immigration, Tax Rates and Real GDP per Capita – Mike Kimel - In this post, I will explain the annualized growth rate in real GDP per capita using tax rates and the percentage of the population that is foreign born using data for the United States.  The data shows the following:
A. the tax rate that maximizes economic growth is higher than you think
B. immigration from countries with advanced economies whose population resembles the US correlates with faster economic growth over subsequent years
C. increasing rates of immigration from countries with diverse populations does not correlate with faster future economic growth.
You can skip ahead to the results of the regression if you want.  Otherwise, if you care about the details, here goes…

Economic Outcomes of Immigrants v. Their Stay at Home Counterparts: What the Data Shows - by Mike Kimel  - In this post, I will test whether people from countries with relatively poor economies also tend to do poorly when they relocate to the United States. As an example, GDP per capita for Haiti is much lower than GDP per capita for Hong Kong. Does the available data also say Haitian immigrants to the US generate lower income per capita than immigrants from Hong Kong? In general, as we will see below, the answer is yes. Data used in this post comes from two sources. The first is GDP per capita, by country, obtained from the World Bank. The post also uses information obtained from the Census Department’s 2014 American Community Survey. In particular, the post uses the 2014 per capita income of immigrants to the US by nation of origin. It also uses the percentage of the immigrants from a given country that have arrived in the US prior to the year 2000. That data is kind of unwieldy to find, but the starting point is here. To be clear, immigrants in this source are foreign born, which is to say first generation only. Only immigrants alive at the time of the survey are included. There are 72 countries for which there is data on per capita income for that country’s immigrants to the US (from the Census) and for which 2014 GDP per capita is available (from the World Bank). The graph below shows per capita income for those immigrants along the X axis, and GDP per capita along the Y axis.

 What is the gender pay gap and is it real?: The complete guide to how women are paid less than men and why it can’t be explained away | Economic Policy Institute: The complete guide to how women are paid less than men and why it can’t be explained away. Working women are paid less than working men. A large body of research accounts for, diagnoses, and investigates this “gender pay gap.” But this literature often becomes unwieldy for lay readers, and because pay gaps are political topics, ideological agendas often seep quickly into discussions. This primer examines the evidence surrounding the gender pay gap, both in the literature and through our own data analyses. We will begin by explaining the different ways the gap is measured, and then go deeper into the data using hourly wages for our analyses,1 culling from extensive national and regional surveys of wages, educational attainment, and occupational employment.

Real Median Household Income: Weak Momentum in 2016 - The Sentier Research median household income data for September, released this morning, came in at $57,616. The nominal median was up $237 month-over-month but only $1,306 year-over-year. In percentages, the September number is up 0.4% MoM and 2.3% YoY. Adjusted for inflation, the latest income was up $70 MoM but only $474 YoY. The real numbers equate to changes of 0.1% MoM and 0.8% YoY. In real dollar terms, the median annual income is 1.5% lower (-$884) than its interim high in January 2008 but well off its low in August 2011. The first chart below is an overlay of the nominal values and real monthly values chained in the dollar value as of the latest month. The red line illustrates the history of nominal median household, and the blue line shows the real (inflation-adjusted value). Callouts show specific nominal and real monthly values for the January 2000 start date and the peak and post-peak troughs.

 Hillary: The “Good News” is That China is “Forcing Down Wages”  - William K. Black - The general media has been treating the WikiLeaks disclosures of the Clinton campaign documents, particularly the transcripts of her lucrative talks with Goldman Sachs as much ado about nothing.  I have not found any article about the disclosures, however, that reported on the extraordinary statements she made in her talk with Goldman Sachs on June 4, 2013. Hillary told the Vampire Squid that the “good news” was that China was removing workers’ (meager) legal protections so that their employers could “forc[e] down wages” in order to increase corporate profits.  She used China’s (pathetically weak) legal protections for workers as her exemplar of China’s “structural economic problems.” Clinton’s support for “forcing down wages” by removing China’s meager protections for workers reveals that her (leaked) admission that she is increasingly “far removed from the struggles of” the working and middle-class is a grave understatement.  She is not simply “far removed” from their “struggles” – she continues when speaking secretly to Wall Street to attack workers’ interests. The purported urgency for China to aid its corporations in “forcing down wages” was that it would enable the corporations located in China to win the global “competiti[on]” by forcing down wages.  American workers would have their wages forced down as the companies they worked for threatened to move their production to China to take advantage of the lower wages extorted from Chinese workers shorn of their legal protections.  When Hillary says it is “good news” that China is “forcing down wages” for Chinese workers she knows that the inevitable result will be “forcing down wages” for U.S. workers. This is where Hillary Clinton’s rapturous support in her Goldman talks for global “free trade” fits in.  She wants American workers to have no protections against the global assault on wages that she says China’s government is leading.  She applauds that assault as the “good news” coming from China.  The Trans-Pacific Partnership (TPP) was crafted by corporate lobbyists to allow corporations to go to kangaroo tribunals to try to obtain massive fines against governments for laws and rules that create “structural economic” “limits” on the ability of corporations to “forc[e] down wages.”  The purpose of the TPP is to permit corporations to extort governments through the fear of these ruinous penalties not to adopt new, and remove already adopted, legal limits that protect wages and protect the environment.  Clinton revealed to Wall Street in her lucrative and secretive talks that universal trade deals of this nature were her “dream.”

Consequences Of Rising Income Inequality: San Francisco Fed -- The increase in U.S. income inequality since 1970 largely reflects gains made by households in the top 20% of the income distribution. Estimates suggest that households outside this group have suffered significant losses from foregone consumption, measured relative to a scenario that holds inequality constant. A substantial mitigating factor for the losses has been the dramatic rise in government redistributive transfers, which have doubled as a share of U.S. output over the same period. Income inequality in the United States has increased dramatically in recent decades. Most of the increase can be traced to gains going to those near the top of the income distribution. As emphasized by Piketty (2014, p. 297), from 1977 to 2007 three-fourths of the income growth in the U.S. economy went to the top 10% of households. This Economic Letter summarizes the results of research by Lansing and Markiewicz (2016) that gauges the welfare consequences - that is, the economic gains or losses for households - of this pattern of rising U.S. income inequality. We use an economic model designed to exactly replicate the observed paths of numerous U.S. macroeconomic variables from 1970 to 2014, focusing on shifts in the income distribution.

Why I am increasing skeptical of a universal basic income - Tyler Cowen  - As it stands, most U.S. welfare programs are tied to the institution of work. That leaves gaps in the safety net, and frequently analysts will decry this imperfect coverage. I take this criticism seriously, but I see merit in tying welfare to work as a symbolic commitment to certain American ideals. It’s as if we are putting up a big sign saying, “America is about coming here to work and get ahead!” Over time, that changes the mix of immigrants the U.S. attracts and shapes the culture for the better. I wonder whether this cultural and symbolic commitment to work might do greater humanitarian good than a transfer policy that is on the surface more generous. If you think of the U.S. as the major source of innovation for the world, prioritizing a work ethic over comprehensive welfare coverage might prove beneficial.And this: If the kinds of jobs created by the modern service economy can be made more attractive, I think much (not all) of the work problem will take care of itself. Most people do wish to work in jobs they enjoy, as a source of pride, money, and social connection. Unfortunately, I don’t have a good answer for how to get there, but I worry that permanent subsidies for those who don’t work wouldn’t lead toward solutions. That means effective safety-net policies will continue to be messy and complex. Although the universal basic income idea sounds like a good direct fix, it probably leads in the wrong direction. There is much more at the link.

Thousands of California soldiers forced to repay enlistment bonuses a decade after going to war - Short of troops to fight in Iraq and Afghanistan a decade ago, the California National Guard enticed thousands of soldiers with bonuses of $15,000 or more to reenlist and go to war. Now the Pentagon is demanding the money back. Nearly 10,000 soldiers, many of whom served multiple combat tours, have been ordered to repay large enlistment bonuses — and slapped with interest charges, wage garnishments and tax liens if they refuse — after audits revealed widespread overpayments by the California Guard at the height of the wars last decade. Investigations have determined that lack of oversight allowed for widespread fraud and mismanagement by California Guard officials under pressure to meet enlistment targets. Lawmakers condemn Pentagon effort to recover enlistment bonuses from California veterans » But soldiers say the military is reneging on 10-year-old agreements and imposing severe financial hardship on veterans whose only mistake was to accept bonuses offered when the Pentagon needed to fill the ranks. “These bonuses were used to keep people in,” said Christopher Van Meter, a 42-year-old former Army captain and Iraq veteran from Manteca, Calif., who says he refinanced his home mortgage to repay $25,000 in reenlistment bonuses and $21,000 in student loan repayments that the Army says he should not have received. “People like me just got screwed.” In Iraq, Van Meter was thrown from an armored vehicle turret — and later awarded a Purple Heart for his combat injuries — after the vehicle detonated a buried roadside bomb.

The US Military Lied To Thousands Of Soldiers (And Now Veterans Are Paying for It) -  Ten years after promising $15,000 bonuses to soldiers willing to re-enlist in 2006 and 2007, the Pentagon is now forcing California veterans to pay the bonuses back.In California, the Los Angeles Times reports, “officials signed up soldiers in assembly-line fashion” in 2006 and 2007, outlining the “generous terms available for six-year reenlistments” to those willing to sacrifice their safety, leaving their homes, once again, to fight abroad in exchange for a large bonus. Now, the Pentagon wants their money back.   Sometimes, these soldiers’ term duties were extended forcefully via the government’s controversial stop-loss policy, which allows the government to extend the period a soldier must spend on active duty involuntarily.In California, the state’s National Guard began promising thousands of soldiers that they would receive $15,000 bonuses for going back to war.Now, nearly 10,000 soldiers who took the National Guard’s promise at face value are being ordered to pay the bonuses back plus interest charges. In some cases, their wages are being garnished to fund the payments.This issue was first brought up when veterans “whose only mistake was to accept bonuses offered when the Pentagon needed to fill the ranks” were the target of an investigation launched in 2010.After receiving reports of improper payments, a federal probe foundthousands of bonuses and student loan payments were given to California Guard soldiers who did not qualify for them, or were approved despite paperwork errors.”As a result of the investigation, Army Master Sgt. Toni Jaffe, who also served as the California Guard’s incentive manager, pleaded guilty to filing false claims totaling $15.2 million in 2011. He was sentenced to spend 30 months in federal prison, and three other officers who also pleaded guilty to fraud were put on probation.

Congress knew for at least two years about Pentagon efforts to take back bonuses from veterans - The California National Guard told the state’s members of Congress two years ago that the Pentagon was trying to claw back reenlistment bonuses from thousands of soldiers, and even offered a proposal to mitigate the problem, but Congress took no action, according to a senior National Guard official. The official added that improper bonuses had been paid to National Guard members in every state, raising the possibility that many more soldiers may owe large debts to the Pentagon. “This is a national issue and affects all states,” Andreas Mueller, the chief of federal policy for the California Guard, wrote in an email to the state’s congressional delegation Monday. Attention had focused on California because it was “the only state that audited” bonus payments at the height of the wars in Iraq and Afghanistan, he added. In the email, Mueller reminded members of Congress that the Guard had informed them about the issue two years ago. Whether members of Congress understood the scope of the problem at the time is unclear. The Times reported Saturday that the Pentagon has been demanding repayment of enlistment bonuses — which often reached $15,000 or more — from thousands of California Guard soldiers, many of whom had served multiple combat tours in Iraq and Afghanistan. Audits completed last month concluded that 9,700 California Guard members were not entitled to the payments or that there had been errors in their paperwork. Pentagon officials acknowledged Monday that the problem probably extends beyond California. “We know that the majority [of cases] is out of California. However, there may be other states involved,” said Laura Ochoa, a Pentagon spokeswoman. “We do not have a list of those states at this time.”

Slowdown in State, Local Investment Dents U.S. Economy - WSJ: A sharp pullback in spending by cities and states on infrastructure—from highways to sewage systems to police stations—is weighing on U.S. economic growth. Such government austerity is unusual in the eighth year of an economic expansion, and it is acting as a headwind just as the worst effects of the energy-industry bust, a strong dollar and inventory drawdown are fading. State and local governments spent an annualized $248.47 billion on construction in August—the least since March 2014 and down nearly 11% from its recent peak in mid-2015. The decline depressed gross domestic product growth this spring and was on track to weigh on growth again in the third quarter. “We’re seeing anemic [government] revenue growth and consistent austerity-oriented budgets,” said Gabe Petek, managing director for state ratings at S&P Global Ratings. States are trimming investments in infrastructure and higher education, “areas of the budget helpful for generating economic growth going forward,” he said.In Kansas, officials this spring delayed 24 road-construction projects to help balance the state budget. The more than $500 million in work had been slated to start between this year and the end of 2018, including expanding U.S. 50 into a four-lane expressway near Dodge City.   Instead, the state will spend money to maintain existing roads. “We want to make sure the roadways we currently have are in the best condition as possible,” said Joel Skelley, director of policy at the Kansas Department of Transportation. ​ Total state and local government spending last year accounted for roughly 11% of U.S. economic output, four times as large as federal nondefense spending, and swings in public investment can have outsize effects on the growth rate.

The Reason: The Police State, Drug War, and Prison Complex -- According to the tenets of the cult of electoralism, the voters enforce their will at each election and get the policy they voted for. Therefore, as we’ve previously discussed, the overwhelming majority of American voters are pro-war, want to poison their own children’s food and water and escalate the control of all agriculture and food by agribusiness, want to , want to push the climate crisis to its worst possible extremes, and want a health care system which delivers awful care at horrendous prices as long as this is profitable for the health insurance companies. Their votes for, just to name a few of the most recent, Bush, Clinton, Dole, Bush, Gore, Kerry, Obama, McCain, Romney, Trump, Clinton, consistently prove they want all these, since a vote for any of these criminals is a vote for all these crimes. The same would be true for any alleged “dissident” or “alternative” within the Corporate One-Party. Today we’ll add four more which go together.

  • 1. If everyone who claimed to oppose police brutality and militarization and the surveillance state would refuse to vote for any police totalitarian, America would not be threatened with such an anti-American, anti-freedom internal enemy. The reason the US government has enshrined police militarization, the surveillance state, and systematic racist and classist brutality is not because of those who are openly fascist. It’s primarily because almost all who claim to oppose police totalitarianism and systemic brutality are frauds who really support these. Their vote proves it.
  • 2. If everyone who claimed to oppose the Drug War would refuse to vote for any Drug Warrior, America would abolish this idiotic, irrational, immoral campaign which worsens all the phenomena of the police and prison state and benefits no one but corporations and thug bureaucracies.The reason the US government continues to wage this war of aggression against the people and the environment is not because of those who are openly bigoted against a few arbitrarily selected “illegal” drugs (of course almost all of these bigots get loaded on various kinds of legal dope, and many on the illegal as well). It’s primarily because almost all who claim to oppose the Drug War are frauds who really support it. Their vote proves it.
  • 3. If everyone who claimed to oppose the prison-industrial complex and privatization of prisons would refuse to vote for anyone with a gutter jailor mentality, America wouldn’t have by far the most imprisoned population in human history, a pure totalitarian metric and an absolute obscenity against any notion of human freedom.The reason the US government continues this obscene imprisonment offensive and escalates the enshrinement of prison and the corporate enslavement of prisoners as a profit-generating system isn’t because of those who openly worship the prison system and shriek “Lock ’em up!” the second they hear of a jaywalker. It’s primarily because almost all who claim to find the prison system inhumane, cruel and unusual, and who deplore the privatization of the system, are really frauds who support all this and want it to continue. Their vote proves it.
  • 4. If everyone who claimed to oppose the accelerating destruction of civil liberties would refuse to vote for anyone who holds these liberties in contempt, America would be strongly committed to cherishing, protecting, and exercising these liberties.The reason the US government continues to destroy all civil liberties isn’t because of those who openly despise them. It’s primarily because almost all who claim to value civil liberties, including almost all who pose as civil liberties activists, are really frauds happy to see these wiped out. Their vote proves it.

 Taser Explores Concept of Drone Armed With Stun Gun for Police Use - WSJ: The day when police zap suspects from the sky with drones carrying stun guns may be nearing. Taser International Inc., TASR 0.39 % known for its stun guns and body cameras, is exploring the concept of a drone armed with a stun gun for use by police. This week, the company held discussions with police officials about such a device during a law-enforcement conference here. Taser spokesman Steve Tuttle said the company’s advanced research team met with law enforcement customers “to discuss various future concepts” to get feedback. “Following recent events, including the use of a robot to deploy lethal force in Dallas to eliminate a highly dangerous threat, we’ve received questions about whether it would be feasible to similarly deploy a TASER from an autonomous vehicle,” said Mr. Tuttle, referring to the Dallas police department’s use of a bomb-disposal robot armed with C-4 explosive to take out a gunman who had targeted and killed five officers in July. “One can certainly imagine high-risk scenarios such as terrorist barricades where such a capability could allow public safety officers to more rapidly incapacitate a threat and save many lives,” Mr. Tuttle said, adding these “remain conceptual discussions” at this time. “We’re also considering the potential misuses of such a technology in our discussions and before we would make any decisions,” he said. “The public is going to initially be alarmed by this,”

Baby Bonds: A Plan for Black/White Wealth Equality Conservatives Could Love?  - Lynn Parramore - Imagine that a black child from a family of modest resources gets the opportunity to attend an elite college preparatory school. Motivated by a love of learning and strong desire to achieve, he excels in school and goes on to attend highly regarded universities, earning advanced degrees. Surely that child is well positioned to ascend the ladder of economic prosperity in America, right?  The reality is a little different. Darrick Hamilton knows this from personal experience. Despite his family’s modest means — not poor but hardly affluent — he attended the Brooklyn Friends School, an elite private institution where teachers emphasized social justice. Hamilton started college at Oberlin excited to seek out his path to the American Dream. But he soon found out that the path was smoother for some than for others. All around him, white kids from affluent families were getting checks in the mail from their parents — money that could be spent on tuition, extracurricular activities, and the kind of socializing that builds professional networks. Black students of more modest means, on the other hand, were often at a disadvantage even when their parents were able to help financially. If they received money from home, things besides books demanded financial attention. The same was true if they had a job. Even when black students worked hard and saved diligently, the money was often spoken for before it was time to pay the tuition bill for the semester. The reason has to do with the cumulative effects of centuries of gross economic disadvantages that black families have endured, from slavery to Jim Crow and beyond.  Rather than enjoying resources from parents and grandparents, they often had to provide money for cousins, nieces, uncles, and siblings.  Baby Bonds, in Hamilton’s formulation, would be funded directly out of Treasury and held in an account by the federal government, similar to Social Security. The amount a child receives would depend on the wealth position into which she is born. If she’s the offspring of Oprah Winfrey and Bill Gates, she might get $500, but upwards of $50,000 if she is born at the lowest rungs of the economic ladder. The average amount for a child would be around $20,000. Accounts would be guaranteed a nominal one and a half rate of return, and the payout would not take place until the child becomes an adult. At that time, you get to spend the money — but not just on anything. The funds would have to be used for a “clearly defined asset enhancing activity,” like financing a debt-free education, purchasing a business, or buying a home. (The program would need to be coupled with financial reform and regulation to mitigate predatory effects, including extraordinary tuition increases aimed at exploiting better-resourced young adult baby bond recipients)

America’s Deserving and Undeserving Dead Children - Every day, on average, seven kids and teens are shot dead in America. Election 2016 will undoubtedly prove consequential in many ways, but lowering that death count won’t be one of them. To grapple with fatalities on that scale -- 2,500 dead children annually -- a candidate would need a thoroughgoing plan for dealing with America's gun culture that goes well beyond background checks. In addition, he or she would need to engage with the inequality, segregation, poverty, and lack of mental health resources that add up to the environment in which this level of violence becomes possible.  Think of it as the huge pile of dry tinder for which the easy availability of firearms is the combustible spark. In America in 2016, to advocate for anything like the kind of policies that might engage with such issues would instantly render a candidacy implausible, if not inconceivable -- not least with the wealthy folks who now fund elections. So the kids keep dying and, in the absence of any serious political or legislative attempt to tackle the causes of their deaths, the media and the political class move on to excuses. From claims of bad parenting to lack of personal responsibility, they regularly shift the blame from the societal to the individual level. Only one organized group at present takes the blame for such deaths.  The problem, it is suggested, isn’t American culture, but gang culture. Researching my new book, Another Day in the Death of America, about all the children and teens shot dead on a single random Saturday in 2013, it became clear how often the presence of gangs in neighborhoods where so many of these kids die is used as a way to dismiss serious thinking about why this is happening. If a shooting can be described as “gang related,” then it can also be discounted as part of the “pathology” of urban life, particularly for people of color. In reality, the main cause, pathologically speaking, is a legislative system that refuses to control the distribution of firearms, making America the only country in the world in which such a book would have been possible.

 Wall Street ‘Influence’? Teachers Unions Request Probe Of Donations To Charter School Measure -- The two largest teachers unions in Massachusetts asked federal and state law enforcement officials to investigate whether large donations to a charter school ballot measure backed by Republican Gov. Charlie Baker violated anti-corruption rules. The request Thursday from the unions was prompted by an International Business Times/MapLight report showing that the state pension board — which Gov. Baker appoints members to — gave lucrative contracts to manage teachers’ pensions to Wall Street firms whose executives then bankrolled the Baker-backed ballot initiative. “This is about the integrity of our pension investments and the integrity of our elections,” said Massachusetts Teachers Association President Barbara Madeloni. “We need an investigation to find out whether these firms are wielding inappropriate influence in state government.”Baker’s office did not respond to IBT’s questions. An official at the Massachusetts Pension Reserves Investment Management Board (MassPRIM) declined to comment.The request by the unions — who represent 135,000 public school personnel in Massachusetts — revolves around federal pay-to-play rules that went into effect in 2011. Those rules are designed to prevent financial firms that manage state pension investments from donating to public officials who can influence investment decisions. Baker is covered by those rules because he appoints three members to the board of the Massachusetts Pension Reserves Investment Management Board (MassPRIM). IBT/MapLight’s report showed that eight firms delivered more than $778,000 to groups supporting Question 2, which would expand the number of charter schools in Massachusetts. Baker has led the fight for the ballot measure, and a group that received money from MassPRIM money managers is now airing television ads promoting Baker.

LAUSD teachers earn too much to live in the affordable housing apartments built for them -  the mid-2000s, in the midst of a housing boom, the Los Angeles Unified School District realized that skyrocketing rents were fueling teacher turnover.   Nearly half of all new teachers in some neighborhoods were leaving the district after three years. L.A. Unified was pouring millions of dollars into training new hires, only to watch them pick up and go. Two below-market apartment complexes were built on unused district land and a third is under construction. Today, both are fully occupied. But not one L.A. Unified teacher lives in them. That fact alone doesn’t mean L.A. Unified’s affordable housing experiment is a failure. The projects have created 156 affordable units in Gardena and Hollywood — 121 of which have been rented by L.A. Unified service workers. The apartments designed primarily for middle-class teachers have been an unintentional boon for the cafeteria workers, bus drivers and special education assistants who make up the lowest-paid group in the school system. The problem for teachers, as district officials learned after they had signed the lease agreements and developers had secured funding, was that even the newest hires earned too much to qualify for the units. Although the district had used its available land before to build affordable housing in Glassell Park, it had never tried to tailor units to teachers. In attempting to do so, it ran headlong into federal rules that forced developers to set strict income requirements for the apartments. The starting salary of a new L.A. Unified teacher is a little over $50,300 a year. But the federal subsidies used to build the apartments in Gardena, Hollywood and University Park restricted the units to households that earned 30% to 60% of area median income. In Hollywood, a single person applying for a one-bedroom apartment couldn’t earn more than $34,860.

Universities Ban Politically-Incorrect Halloween Costumes - In a latest measure to create a “safe space” for students, a number of universities have issued “costume protocol,” banning such un-PC Halloween costumes as Arab turbans, feathered Indian headdresses, Japanese Geisha outfits, and Caitlyn Jenner costumes. As Breitbart's Thomas Williams reports, Brock University in Ontario, Canada, for instance, has set up a website laying out its “Halloween Costume Vetting Protocol,” complete with a list of offending costumes and pictures of inappropriate wear. In a twisted bit of illogic, the university stated, “In order to create an inclusive and diverse environment, some costumes may be denied.”Apparently, inclusive and diverse here means “if your costume is too diverse, you will not be included.”

Harvard Called ‘Lazy, Fat, Stupid’ in Endowment Report Last Year - Bloomberg: Harvard University’s money managers collected tens of millions in bonuses by exceeding “easy-to-beat” investment goals even as the college’s endowment languished, employees complained in an internal review. The consulting firm McKinsey & Co., in a wide-ranging examination, zeroed in on the endowment’s benchmarks, or investment targets. Some of those surveyed said Harvard allowed a kind of grade inflation when it came to evaluating its money managers. “This is the only place I’ve seen where people can negotiate the benchmark they get compensated on,” read a “representative quote" in the McKinsey report. The McKinsey assessment offered an explanation of what it called the “performance paradox” at Harvard’s $35.7 billion endowment, the largest in higher education. Year after year, Harvard would report benchmark-beating performance while falling further behind rivals such as Yale, Princeton, Columbia and the Massachusetts Institute of Technology. The April 2015 report, which has never been made public, spells out why the fund paid more than peers for lagging performance, as well as its management’s strategy for shifting course. Harvard said it has since revamped its compensation. McKinsey’s review took a rare, unvarnished look into the culture of a secretive organization, where employees and others complained to McKinsey of an inattentive board and complacent culture -- in their words, “stable, rather than smart, capital” or, less charitably, “lazy, fat and stupid.”

The Limits of Liberalism at Harvard -- One of the claims you hear a lot these days is that the new progressive coalition of the liberal left will consist of women, people of color, and urban professionals of the sorts you find at universities or in the media or Google or places like that. This coalition was first mooted by the McGovern campaign, and a lot of breathless commentary now sees the Democratic Party, particularly in its Clintonite wing, as the fruition of that vision. But the recent, successful strike of Harvard’s dining hall workers, many of whom are women and people of color, is a useful demonstration of the limits of that vision. While Harvard’s liberal scholars get $10 million grants to study poverty, Harvard workers like Rosa Ines Rivera are forced to manage realities like this: I can’t live on what Harvard pays me. I take home between $430 and $480 a week, and this August, I fell behind on my $1,150 rent and lost my apartment. Now my two kids and I are staying with my mother in public housing, with all four of us sharing a single bedroom. I grew up in the projects and on welfare. I want my 8-year-old daughter and 2-year-old son to climb out of the cycle of poverty. But for most of my time at Harvard it’s been hard. As Rivera explains, the strike brought out into the open all the issues that are so dear to the contemporary liberal imagination: spiraling health care costs, stagnating wages, and the invisibility and disrespect generally shown toward the poor, immigrants, and people of color. The dining hall strike seems like a natural cause for the liberal Harvard professor, no? While the union and its supporters did a heroic job of mobilizing support on the Harvard campus and its surroundings, the fact remains that only 130 to 150 of Harvard’s instructional staff even signed a petition in support of the strike. And of those, many seem to be instructors, lecturers, visiting faculty, and the like. According to one count, Harvard has nearly 1000 tenure-track or tenured faculty, of whom only  65 signed. Less than 10%, in other words. I can think, off the top of my head, of a lot of big names on the Harvard faculty who are prominently associated with contemporary liberalism, who think Trump and all that he represents is a shanda, who love the multicultural coalition that is the Democratic Party, and who are nowhere to be seen on that petition.

U.S. doesnt crack top 10 in list of countries ranked by youth development opportunities | McClatchy DC: The United States is supposed to be a land of opportunity where young people can expect their quality of life will be better than their parents’. But the U.S. isn’t even in the top 20 countries when it comes to opportunities for young people. The U.S. ranks 23 on a list of 183 countries based on 18 indicators that measure progress for youth ages 15 to 29. Eight of the top 10 countries are in Europe, plus Australia and Japan. The index from the Commonwealth Secretariat defines youth development as “Enhancing the status of young people, empowering them to build on their competencies and capabilities for life. It will enable them to contribute to and benefit from a politically stable, economically viable, and legally supportive environment, ensuring their full participation as active citizens in their countries.” Youth development was assessed by measuring different factors under five themes: education, employment and opportunity, health and well-being, political participation and civic participation. Broken down into those categories, the U.S. is only in the top 10 in civic participation, where it ranks second. Three-quarters of the world’s 1.8 billion young people live in countries where their development opportunities are categorized as low or medium. In low development countries, the youth mortality rate is five times higher. Youth development tends to be higher in places where young people are a smaller part of the population, and high youth development correlates with high national income. Low income countries tend to have younger populations, but overall the global population is aging.The 10 countries ranked lowest were all in sub-Saharan Africa, with the Central African Republic fairing the worst in the world. However, the region showed the greatest relative improvement in youth development between 2010 and 2015. ;

On-line education increases total enrollment and reaches new groups -Though online technology has generated excitement about its potential to increase access to education, most research has focused on comparing student performance across online and in-person formats. We provide the first evidence that online education affects the number of people pursuing formal education. We study the Georgia Institute of Technology’s Online M.S. in Computer Science, the earliest model to combine the inexpensive nature of online education with a highly-ranked degree program. Regression discontinuity estimates exploiting an admissions threshold unknown to applicants show that access to this online option substantially increases overall enrollment in formal education, expanding the pool of students rather than substituting for existing educational options. Demand for the online option is driven by mid-career Americans. By satisfying large, previously unmet demand for mid-career training, this single program will boost annual production of American computer science master’s degrees by about seven percent. More generally, these results suggest that low-cost, high-quality online options may open opportunities for populations who would not otherwise pursue education. That is from a new NBER paper by Joshua Goodman, Julia Melkers, and Amanda Pallais.  And here is a new NBER paper by Deming, Lovenheim, and Patterson: “Our results suggest that by increasing competitive pressure on local schools, online education can be an important driver of innovation and productivity in U.S. higher education.”

A Whistle Was Blown on ITT; 17 Years Later, It Collapsed - As a former employee who had blown the whistle on ITT, an operator of some 140 for-profit schools, Mr. Graves was happy that the government had finally taken action to protect students from the company’s aggressive sales tactics, which lured them into debilitating debt and provided little in the way of an education. Still, he wondered what had taken the government so long. After all, it has been 17 years since Mr. Graves and another former ITT employee brought a suit alleging that the company had systematically violated the law governing compensation of sales representatives. The two former employees shared extensive documentation with a half-dozen federal prosecutors and regulators. These officials expressed keen interest, Mr. Graves said, and estimated that the government could recover $400 million in damages from the case. But by 2004, the lawsuit was dead and Mr. Graves’s effort to provide the government with damning evidence had come to naught.Now that ITT is in bankruptcy, Mr. Graves’s whistle-blower experience is instructive. It spotlights a costly regulatory failure that allowed ITT to stay in business far longer than it otherwise might have, Mr. Graves said. And that meant taxpayers were liable for billions of dollars in defaulted loans made over the period while thousands of students were left with a mountain of undischargeable debt and few job prospects. “It was an institutional failure by the government and a complete abdication of responsibility to enforce the Higher Education Act,” Not everybody was a loser in this tale, of course. Going through ITT’s financial filings from 2000 to 2016, I found that the company generated over $12 billion in revenue, roughly 70 percent of it in government-backed student aid. ITT’s top five executives received princely compensation over the period — $117 million in total, regulatory records show. Lobbyists for ITT Educational Services also benefited. The company has spent almost $1 million on lobbying since 1998, according to the Center for Responsive Politics.

Obamacare rates will rise by 25% in 2017, US government says - BBC News: The cost of healthcare insurance in the US under the Affordable Care Act is expected to rise by an average of 25% in 2017, according to the government. About one in five consumers will also only be able to pick plans from a single insurer, it said. But it said federal subsidies will also rise, and about 70% of people will find plans for less than $75 (£61) a month. Republican nominee Donald Trump vowed on Tuesday to repeal the law, which is known as Obamacare. It is a major part of President Barack Obama's legacy, and his signature piece of legislation. "Obamacare is just blowing up," said Mr Trump, who has promised his own plan would deliver "great healthcare at a fraction of the cost". The enactment of the Affordable Care Act (ACA) in 2010 mandated that every American had to purchase private insurance, and prohibited insurers from turning away the sick. It also provided subsidies. But Republicans want to repeal it. According to the report from the Department of Health and Human Services, for a 27-year-old consumer, in the prime age group sought by insurers, the average monthly premium for a benchmark plan would be $302 next year, up from $242 this year. The average increase of 25% in benchmark premiums on the federal exchange compares with increases of 2% in 2015 and 7% this year. Democratic presidential nominee Hillary Clinton has said she supports the Affordable Care Act, but has denounced "skyrocketing out-of-pocket health costs", saying the federal government should have the power to block or modify unreasonable rate increases..

Obama Administration Confirms Obamacare Premiums Will Surge By 25% In 2017 -- Remember when Obama toured around the country telling everyone that Obamacare was going to increase competition and lower healthcare premiums? As it turns out, pretty much nothing that Obama and his healthcare "experts" predicted about Obamacare actually came true.  With 2017 rates now finalized across the country, in fact,Obamacare premiums are expected to increase an average of 25% nationallyaccording to data from the Kaiser Foundation.  Meanwhile, the 10 hardest hit states will see premiums increase an average of 62% while Arizona is officially the biggest loser with rates in Phoenix soaring 145%. Of course, as we've pointed out before, these skyrocketing rates could inevitably toss the entire Obamacare system into a death spiral from which it may never recover.  In order to function properly, Obamacare required a substantial number of young/healthy people to sign up on the exchanges...we call it the "Young & Healthy Tax."  Unfortunately, many young/healthy people decided that they would rather not pay their "Young & Healthy Tax" and decided instead to pay the penalties associated with just not having healthcare at all.  These shortfalls in new participants, of course, resulted in hundreds of millions of dollars in losses for health insurers who, in hindsight, miscalculated their risk pool.  These losses have now resulted in the massive premium spikes we're currently seeing which will likely just result in even lower sign ups until the entire system eventually just collapses. As we pointed out before, the following two maps below beautifully illustrate the epic collapse of Obamacare coverage in just 1 year.  Notice that, despite Obama's promises of increased competition, in reality, the majority of the country will go from having 3+ options for healthcare in 2016 to just 1 option in 2017 (charts per the New York Times).

Obamacare's double-digit rate hike, explained in 400 words --The Obama administration released data Monday showing that premiums for midlevel plans will rise, on average, 22 percent between 2016 and 2017. Yes, that is a huge increase. Last year premiums went up by 7.5 percent. Premiums are rising on the Obamacare marketplaces largely because the people who signed up for coverage were sicker than the insurance companies expected. This led some health insurers (like Aetna and UnitedHealth) to leave the marketplace. The insurance companies that stayed behind realized they’d have to charge higher premiums in order to cover their members’ medical bills. What does this mean for Obamacare customers? Most Obamacare enrollees (83 percent) receive subsidies that limit the amount they have to spend on premiums. They only have to spend a certain percent of their income, and then the government will cover the rest. These people will likely be somewhat insulated from the premium increases. But the premium hike could still be disruptive. These people might have to switch to a new plan if another insurer is offering a lower premium than the one they currently use.But another 17 percent of Obamacare enrollees don’t receive premium subsidies. And these people are going to be in a really tough spot. They’ll need to decide whether they want to continue spending more to buy their same coverage — or if the insurance doesn’t provide enough value at the higher price.  What does this mean for the future of the law more generally? That’s really hard to tell right now — but there seems to be two plausible interpretations of the data.One is that this is a one-time course correction. When Obamacare launched, premiums were much lower than analysts had expected. Insurance plans are now bringing their premiums more in line with expectations, and after they do that, they won’t have to make these big rate increases again. The other is that this is the start of a series of higher rate increases for the health care law — that these new, high premiums might encourage some healthy people (especially those without subsidies) to leave the individual market. Subsides act as a powerful counter-balance to this second scenario, though, by capping enrollees’ contributions.  In either case, these numbers are bad news for Obamacare — we just don’t know how bad, exactly, the news is at this point.

Increases leave some questioning if Obamacare headed for 'death spiral' - The hefty increases Pennsylvania has approved for next year's individual health plans provide new fodder for Obamacare critics who say the federal law's insurance marketplace is bound to fail. The state's Insurance Department last week approved increases averaging 32.5 percent for the 2017 plans, making Pennsylvania one of 14 states so far to increase individual rates by an average of more than 30 percent, according to data on, a site that tracks enrollment and pricing. The increases have renewed debate about whether the market is heading toward what experts call a “death spiral,” a scenario in which high premiums cause all but the sickest people to leave the market, necessitating even larger increases to cover insurers' costs until insurance becomes unaffordable. “I think we're in it. I just think it's slow,” said Jeffrey Anderson, a senior fellow at the Hudson Institute, a conservative Washington, D.C.-based think tank. To remain stable, the market needs enough healthy people — often the youngest — paying premiums to offset the costs of the sickest, who are usually older. The penalty for going without insurance is $695 per year or 2.5 percent of income, whichever is greater. Anderson said he doubts the $695 penalty, which equates to about $58 per month, is enough to spur young people to buy health insurance. President Obama touched on the need for young people to balance the risk pool during a speech Thursday in Florida, suggesting the government should increase tax credits that subsidize the plans and take other steps to improve the market's viability, including selling a government or “public” plan in areas without insurer competition.Obama referred to the premium increases as growing pains of the law. He said insurers, who had little population-specific information upon which to base prices, set premiums too low in some states and are catching up to market realities.

"Obama Calls Obamacare Disaster 'A Starter Home', Republicans Should Be The Bulldozer" - ObamaCare has suddenly been injected back into the 2016 election debate, on the news of the law’s 25%-plus average premium increase for 2017. Even Donald Trump is talking about it. With only two weeks to go, this is a moment for voters to hold accountable the Democrats who imposed this debacle on the country over voter objections. Next year’s enormous price increases are merely the latest expression of ObamaCare’s underlying problems, and the dysfunction is undermining the health security of Americans who lack employer coverage. A wave of major insurers have quit the exchanges, and those that are left have raised deductibles and copays and restricted choices of doctors and hospitals. The public is witnessing—and the unlucky are experiencing—the collapse of one progressive promise after another.At every stage of the ObamaCare saga, liberals said not to worry. Sure, the law was unpopular when Democrats rammed it through Congress on a partisan vote in 2009-10, but voters would learn to love it once the subsidies started rolling. That didn’t happen, and in 2014 President Obama tried to buck up Democrats by saying that “five years from now” people will look back on the law as “a monumental achievement.” Two years later it’s worse.Nothing could shake the liberal faith in their supposed landmark: Not the website fiasco of 2013, or the millions of individual health plans that were cancelled despite President Obama’s promise about keeping them. The left kept the faith as the entitlement subtracted from economic growth, hurt incomes and killed jobs. MIT economist Jonathan Gruber called the critics stupid, and Mr. Obama denigrates anyone who disagrees with him as illegitimate or politically motivated.  Now reality is confirming what the critics predicted. ObamaCare’s regulatory mix—benefit mandates, requiring insurers to sell coverage to all comers, and narrow ratings bands that limit how much premiums can vary by health status—was tried by several states in the 1980s and ’90s. Every one saw the same results that are now unspooling nationally: high and rising costs, low and declining enrollment, and less insurer and provider competition.

 Here’s how much Obamacare premiums are going up in every state  - The Department of Health and Human Services announced Monday that the cost for a health-insurance plan obtained through the exchanges set up by the Affordable Care Act, the healthcare law better known as Obamacare, would increase by 25% on average for the 2017 coverage year. The report also broke down the expected changes in cost by state. To create its estimates, the agency looked specifically at data in each state for a 27-year-old nonsmoker buying the second-lowest-cost silver plan (the middle tier of the gold, silver, and bronze exchange options). The increases vary heavily by state, with Indiana and Massachusetts seeing an average 3% decline in costs while Arizona tops out with a 116% average increase. Many of the states seeing serious increases share similar traits: They have not expanded Medicaid, they have a low number of insurers active in the state, and they have larger rural populations, which are more expensive to cover.  The price changes have gained a lot of attention as some major insurers have pulled out of the exchanges because of large losses. Critics of Obamacare say the price increases show the law is in a "death spiral." Supporters, however, contend that 77% of those on the exchanges can get tax credits that would keep monthly payments under $100 and that the recent increases bring premium payments only up to levels projected before the law passed.

Woman Awarded $70 Million in Suit Claiming Baby Powder Caused Her Cancer -- A St. Louis jury on Thursday awarded a California woman more than $70 million in her lawsuit alleging that years of using Johnson & Johnson’s baby powder caused her cancer, the latest case raising concerns about the health ramifications of extended talcum powder use. The jury ruling ended the trial that began Sept. 26 in the case brought by Deborah Giannecchini of Modesto, California. She was diagnosed with ovarian cancer in 2012. The suit accused Johnson & Johnson of “negligent conduct” in making and marketing its baby powder.“We are pleased the jury did the right thing. They once again reaffirmed the need for Johnson & Johnson to warn the public of the ovarian cancer risk associated with its product,” Jim Onder, an attorney for the plaintiff, told The Associated Press.“We deeply sympathize with the women and families impacted by ovarian cancer,” Carol Goodrich, a spokeswoman with Johnson & Johnson, said in a statement. “We will appeal today’s verdict because we are guided by the science, which supports the safety of Johnson’s Baby Powder.” Earlier this year, two other lawsuits in St. Louis ended in jury verdicts worth a combined $127 million. But two others in New Jersey were thrown out by a judge who said there wasn’t reliable evidence that talc leads to ovarian cancer, an often fatal but relatively rare form of cancer. Ovarian cancer accounts for about 22,000 of the 1.7 million new cases of cancer expected to be diagnosed in the U.S. this year. About 2,000 women have filed similar suits, and lawyers are reviewing thousands of other potential cases, most generated by ads touting the two big verdicts out of St. Louis — a $72 million award in February to relatives of an Alabama woman who died of ovarian cancer, and a $55 million award in May to a South Dakota survivor of the disease.

How drugs intended for patients ended up in the hands of illegal users: ‘No one was doing their job’  - For 10 years, the government waged a behind-the-scenes war against pharmaceutical companies that hardly anyone knows: wholesale distributors of prescription narcotics that ship drugs from manufacturers to consumers. The Drug Enforcement Administration targeted these middlemen for a simple reason. If the agency could force the companies to police their own drug shipments, it could keep millions of pills out of the hands of abusers and dealers. That would be much more effective than fighting “diversion” of legal painkillers at each drugstore and pain clinic. Many companies held back drugs and alerted the DEA to signs of illegal activity, as required by law. But others did not. Collectively, 13 companies identified by The Washington Post knew or should have known that hundreds of millions of pills were ending up on the black market, according to court records, DEA documents and legal settlements in administrative ­cases, many of which are being reported here for the first time. Even when they were alerted to suspicious pain clinics or pharmacies by the DEA and their own employees, some distributors ignored the warnings and continued to send drugs. “Through the whole supply chain, I would venture to say no one was doing their job,” said Joseph T. Rannazzisi, former head of the DEA’s Office of Diversion Control, who led the effort against distributors from 2005 until shortly before his retirement in 2015. “And because no one was doing their job, it just perpetuated the problem. Corporate America let their profits get in the way of public health.” A review of the DEA’s campaign against distributors reveals the extent of the companies’ role in the diversion of opioids. It shows how drugs intended for millions of legitimate pain patients ended up feeding illegal users’ appetites for prescription narcotics. And it helps explain why there has been little progress in the U.S. opioid epidemic, despite the efforts of public-health and enforcement agencies to stop it.

 New England’s 900% Increase in Organ Donation Tied to Depth of Opioid Epidemic - On June 30, 2015, Colin LePage found his thirty-year-old son, Chris, unresponsive after an apparent drug overdose. Over the next 24 hours, medical personnel from one of Boston’s largest medical centers revived Chris’s heart but struggled to stabilize his blood pressure and temperature. After two rounds of tests displayed no sign of brain activity, LePage listened to his son’s beating heart one last time before Chris was wheeled away. Although Chris died that day, his liver continues to function in a new body, that of a 62-year-old pastor. The liver represents just one of the almost 900 percent increase in New England organ donations since 2010, according to the New England Organ Bank, the organization responsible for gathering the organs in the six New England states. The expansion is due to the growing number of organ donors who fell victims to the growing epidemic of opioid abuse. Since the beginning of the year, more than one in four organ transplants in the New England area originated from people suffering a drug overdose. Nationwide, organs from deceased drug users accounted for 12 percent of all donations this year. Traffic accidents used to be the fourth-largest source of organ donation, behind deaths from strokes, blunt injuries, and cardiovascular disease, but drug overdoses, now the fastest growing category of organ donor, eclipsed them in 2014.

Americans Are Dying Faster. Millennials, Too - --Death awaits all of us, but how patiently? To unlock the mystery of when we’re going to die, start with an actuary. Members of this 200-year-old profession who study risk and uncertainty pore over the data of death to estimate length of life. Putting aside the spiritual, that’s crucial information for insurance companies and pension plans, and it’s also helpful for planning retirement, since we need our money to last as long we do. The latest, best guesses for U.S. lifespans come from a study (PDF) released this month by the Society of Actuaries: The average 65-year-old American man should die a few months short of his 86th birthday, while the average 65-year-old woman gets an additional two years, barely missing age 88. This new data turns out to be a disappointment. Over the past several years, the health of Americans has deteriorated—particularly that of middle-aged non-Hispanic whites. Among the culprits are drug overdoses, suicide, alcohol poisoning, and liver disease, according to a Princeton University study issued in December.  Partly as a result, the life expectancy for 65-year-olds is now six months shorter than in last year’s actuarial study. Longevity for younger Americans was also affected: A 25-year-old woman last year had a 50/50 chance of reaching age 90. This year, she is projected to fall about six months short. (The average 25-year-old man is expected to live to 86 years and 11 months, down from 87 years and 8 months in last year's estimates.) Baby boomers, Generation X, and yes, millennials, are all doing worse.

Genetically engineered humans will arrive sooner than you think. And we're not ready.  - Artificial intelligence has become the pet anxiety of luminaries like Elon Musk, Bill Gates, and Stephen Hawking. They have all expressed concerns about our Promethean quest to develop machine intelligence, and those concerns seem to be spreading every day. But there’s another dimension of technological change that ought to worry us every bit as much as AI, if not more so.Bioengineering has already allowed human beings to take control of their own evolution. Whether it’s emergent cloning technologies or advanced gene therapy, we’re quickly approaching a world in which humans can — and will — change the way they live and die.Michael Bess is a historian of science at Vanderbilt University and the author of a fascinating new book, Our Grandchildren Redesigned: Life in a Bioengineered Society. Bess’s book offers a sweeping look at our genetically modified future, a future as terrifying as it is promising.“We’re going to give ourselves a power that we may not have the wisdom to control very well,” he told me. But that won’t stop us from developing it, and Bess’s book is an attempt to wrestle with the implications of this. I spoke with Bess last week about his new book and about the technological challenges that lie ahead. Our conversation, edited for length and clarity, follows.

Climate change is shifting areas of skin disease concern | Reuters: Climate change is bringing certain skin diseases and other illnesses to regions where they were rarely seen before, according to a recent research review. Dermatologists should keep these changing patterns of skin diseases in mind when making diagnoses, say the authors, who analyzed specific disease shifts in North America. As the planet warms, many bacteria, viruses, fungi and parasites can survive in areas where they haven’t been found before, the review team writes. In the U.S., for example, the incidence of the tick-borne Lyme disease increased from an estimated 10,000 cases in 1995 to 30,000 in 2013, and the area where it occurs keeps expanding from New England north into Canada as the ticks find their preferred habitat expanding. “In places like Canada, now there are ticks that carry Lyme disease farther north than doctors would ever expect to see that,” Dr. Misha Rosenbach of the University of Pennsylvania in Philadelphia told Reuters Health said in a phone interview. The range of Valley Fever in the southwest U.S. is spreading in a similar way, he said. Viruses like dengue, chikungunya and Zika are transmitted by mosquitoes originally from Africa and Asia, which have now spread widely throughout North America as the mosquitoes can survive further and further north. “We are seeing a much wider spread northward for some of these formerly tropical diseases that are now in Texas and Florida,”

Zika virus: CDC Director Tom Frieden says Zika uncontrollable, will become endemic | Miami Herald: The nation’s highest ranking infectious disease expert delivered some sobering news on Zika to a Miami audience on Tuesday, telling them that the mosquito-borne virus is more widespread than Florida health officials have reported and that the rapid spread of pathogens such as Zika represents “the new normal” in an age of global travel and trade, booming cities and climate change.“Here’s the plain truth: that Zika and other diseases spread by Aedes aegypti [mosquito species] are really not controllable with current technologies. So we will see this become endemic,” Tom Frieden, a physician and director of the Centers for Disease Control and Prevention told a group of about 100 people gathered at the InterContinental Miami hotel for The Atlantic magazine’s CityLab conference. Frieden’s takeaway advice for public officials tasked with protecting the public from disease outbreaks: “Invest in public health,” he said. “It pays off.” Unprecedented in its ability to spread by sexual contact as well as mosquito bites, and to cause birth defects — most notably microcephaly in children born to mothers infected while pregnant — Zika took health officials by surprise this year, Frieden said, noting that there’s still a lot that scientists do not know about the virus’s effects. “Zika has surprised us,” he said. “It’s been difficult to predict. It’s had characteristics that we have not seen with other diseases before. What we anticipate will happen is that this season will calm down within the continental United States. We hope that Miami-Dade will stop having cases, but we can't promise that. ... We will see parts of the hemisphere where it will be endemic. It will come back every year.”And though Florida has reported 1,064 Zika cases, including 190 mosquito-borne infections, Frieden said the real number likely is much higher. “A rule of thumb,” he said, “is for every case you diagnose you’ve probably got 10 more.”

Believe It or Not, You Don't Actually Want Mosquitoes Eradicated -  Mosquitoes have few fans. At best they are annoying, at worst they spread diseases like the Zika virus. There has been a long history of efforts to control mosquitoes, some more successful than others. But what would happen if we actually succeeded, and eliminated mosquitoes? It can be hard to say exactly what role a species plays in an ecosystem. Bats, for example, are voracious mosquito consumers, but they have other food options as well. However, half of a mosquito’s life cycle is not as flying pest but as aquatic predator—their larvae can live in almost any amount of water. Entire aquatic ecosystems can be contained in the bowl of a pitcher plant, or a tin can. Some organisms would suffer without mosquitoes. In a Michigan forest, ecologists experimentally removed mosquito larvae from water-filled tree holes. After the removal, the tiny ecosystem almost immediately fell out of whack. Small flagellant protists (propelled by a flagella, or tail-like appendage) rapidly increased. Shortly thereafter, larger ciliate protists (propelled by hair-like cilia) rapidly increased in response. Both protists feed on certain bacteria, which promptly declined. This kind of ecosystem response, where the effect is felt a few links removed in the food chain from the source of the disturbance, is called a trophic cascade and is frequently observed in ecosystems at all scales when top predators are removed. The world can probably survive without puddle food webs, but it’s impossible be certain. However, some organisms would suffer without mosquitoes. Only female mosquitoes suck blood and that phase only lasts while they are breeding. Most of the time, mosquitoes of both sexes eat plant nectar, making them important pollinators as they move from plant to plant. Some orchids, for example, rely heavily on mosquitoes, and these rare plants would be at risk without their buzzing partners. Plus, there is the very real problem that far more damage is done by the pesticides used to eradicate mosquitoes than by mosquitoes themselves.

Air pollution more deadly in Africa than malnutrition or dirty water, study warns - Africa’s air pollution is causing more premature deaths than unsafe water or childhood malnutrition, and could develop into a health and climate crisis reminiscent of those seen in China and India, a study by a global policy forum has found. The first major attempt to calculate both the human and financial cost of the continent’s pollution suggests dirty air could be killing 712,000 people a year prematurely, compared with approximately 542,000 from unsafe water, 275,000 from malnutrition and 391,000 from unsafe sanitation.  While most major environmental hazards have been improving with development gains and industrialisation, outdoor (or “ambient particulate”) air pollution from traffic, power generation and industries is increasing rapidly, especially in fast-developing countries such as Egypt, South Africa, Ethiopia and Nigeria. “Annual deaths from ambient [outdoor] particulate matter pollution across the African continent increased by 36% from 1990 to 2013. Over the same period, deaths from household air pollution also continued to increase, but only by 18%”, said a researcher at the Paris-based Organisation for Economic Co-operation and Development development centre. The OECD is funded by the world’s richest 35 countries. For Africa as a whole, the estimated economic cost of premature air pollution deaths in 2013 was roughly $215bn (£175bn) a year for outdoor air pollution, and $232bn for household, or indoor, air pollution. The study’s author, Rana Roy, is concerned by the pace at which outdoor air pollution is growing in Africa, bucking the downward trend in most countries. Used cars and trucks imported from rich countries are adding to urban pollution caused by household cooking on open fires.

 Shocking level of pollution in India and China: Kelly - Astronaut Scott Kelly, who has the distinction of having spent a year in the space, has said that the level of pollution in China and India is shocking.  "Seeing places like China and India, and the pollution that exists there almost all the time is quite shocking," Kelly said in a brief media appearance with US President Barack Obama in the Oval Office of the White House yesterday.   "There was one day last summer, the summer of 2015, when I was in space I saw the eastern side of China was perfectly clear. And I'd never seen that before in all of my time in space, and I'd spent well over a year in space, total, at that point," he said.  "I could see all these cities that are - there's like over 200 cities in that part of China, with over a million people. And it was at dusk, and I could just, for the very first time, I was able to see them, and it was quite shocking," he added.  "I didn't really understand it until the next day I heard that the Chinese government had turned off a lot of the coal-producing power plants, stopped the cars from running in that part of the country for this national holiday, and the sky had completely cleared," Kelly said.  "So it's interesting to see just how much of a negative impact we have on the environment, but also how quickly we can have a positive impact on it if we decide not to mention the atmosphere is very, very thin and scary-looking when you see it from space," he said.

Act on Air Pollution, the Silent Killer -- What causes as many or more deaths in Malaysia as road accidents but has not been known to be such a dangerous killer? Air pollution. This “killer” is not as dramatic or visible as car crashes, but is even more dangerous as it penetrates and contaminates our vital organs, leading to serious diseases and thousands of death. Outdoor air pollution caused 6,251 deaths in Malaysia in 2012, according to a recent report by the World Health Organisation. The deaths were due to heart disease (3,630), stroke (1773), lung cancer (670), pulmonary disease (148) and lower respiratory disease (29). In 2013, road accidents killed 7,129 people in Malaysia, slightly more than the outdoor air pollution figure for 2012. But the WHO study does not include indoor or household air pollution, which may have harmed many more people. If the deaths from this were known and added, the total deaths caused by air pollution overall would almost certainly be higher than those caused by road accidents. It is timely to get these new details on the serious health effects of air pollution. Malaysians have been enduring the effects of the annual “haze” caused by burning in forest and agriculture areas in Indonesia. Memories of the misery this caused in 2015 are still fresh. Fortunately, the haze has been largely absent so far this year. WHO estimates that 4.3 million die prematurely each year from indoor pollution, and 3.7 million from outdoor pollution. And 92% of people in the world live in places that do not meet the WHO health standard for outdoor air quality. The WHO report, Ambient air pollution: A global assessment for exposure and burden of disease, is based on satellite data and ground station monitors for more than 3,000 rural and urban locations. The figures for Malaysia show that the country has a PM2.5 annual median concentration of 15 (ranging from 9 to 24) micrograms per cubic metre. This is 50% above the WHO’s guideline limit of 10. By comparison, other Asian countries had the following air pollution levels: China (54), India (62), Thailand (25), Singapore (17) and Indonesia (14).

New York’s air is more harmful to kids who exercise -- Children who exercise in New York City face greater exposure to toxic black carbon than their less active peers — diminishing the benefits of physical activity, according to a new Columbia University study. Regular exercise in children has long been associated with good health. Exercise helps control weight, strengthens bones and muscles, and even boosts mental health. Physical activity has also been found to reduce airway inflammation, which makes breathing difficult and is associated with asthma. But according to the study published Wednesday, black carbon exposure may be offsetting the benefits exercise has on children’s respiratory systems. “Physical activity could be good for the lungs and may reduce inflammation in the lungs. However, children that have very high pollution exposure might not see that benefit,” lead author Stephanie Lovinsky-Desir, said in an email to ThinkProgress.  Black carbon is a greenhouse gas, and a form of particulate matter pollution formed by the incomplete combustion of fossil fuels and biomass, according to the Environmental Protection Agency. Like all particulate matter pollution, black carbon is associated with a broad range of human health effects, including respiratory and cardiovascular harms, as well as premature death. According to the American Academy of Pediatrics and other groups, children are particularly vulnerable to the effects of air pollution — and climate change. Not only are they still developing, children are also poised to be exposed longer to the cumulative damage that the deteriorating environment brings.

Fewer polluters criminally prosecuted as EPA cowers from GOP attacks - Fewer polluters were criminally prosecuted based on referrals from the Environmental Protection Agency this year than in any year in the past two decades, including during the George W. Bush administration.  Justice Department data collected by Syracuse University’s Transactional Records Access Clearinghouse (TRAC) show that the feds are on pace to prosecute 88 cases that came from EPA referrals this year, compared to 182 in 2011.The reason, former insiders say, is obvious. “The EPA is a piñata,” said Doug Parker, who left a position as head of the agency’s Criminal Investigation Division in April after working more than two decades as a special agent for the agency. “There was a material effort to downplay criminal enforcement, because they thought it would exacerbate tensions.”For Republicans and their donor base, the need to reduce the size and scope of the EPA, if not kill it altogether, has become a top priority. The party’s 2016 platform promised to “transform the EPA into an independent bipartisan commission,” shifting responsibility for environmental regulation to the states. The political pressure has meant stagnation and reductions in the EPA’s budget, causing the agency to bleed nearly 2,000 people over the last five years. The workforce hasn’t been so small since 1989. EPA spokesperson Nick Conger said it’s a matter of money. “The reality of budget cuts means we must be strategic in how we use our resources, which may result in doing fewer lower priority cases. This does not reflect a lessening of our commitment to enforcement, but our decision to continue to do what’s necessary to tackle the largest, highest impact cases.”  “We’ve had to close cases, because we didn’t have resources to take them,” Parker said.

As long as we have Citizens United, the polluters are going to be in charge of our country - Robert F Kennedy Jr - The first Waterkeeper organization was founded on the Hudson River in 1966 by a blue collar coalition of commercial and recreational fishermen who mobilized to reclaim the river from its polluters. Many of the people I represent come from families that have been fishing the river continuously since Dutch colonial times. These were people who had little expectation that they’d ever see Yosemite or Yellowstone or the Everglades. They didn’t have the resources to take those kinds of vacations. For them, like for most Americans, the environment was their backyard. One of the things I’ve recognized in my 30 years of doing this work is that wherever you see large scale environmental injury, you’ll also see the subversion of democracy. You’ll see the corruption of public officials, and the capture of the agencies that are supposed to protect Americans from pollution – they become sock puppets for the industries they’re supposed to regulate. You’ll see the disappearance of transparency in government, the corruption of the press and the diminishment of local control. I’ll give you an example: in the town where I live, Bedford, New York, somebody tried to build a quarry. We passed a zoning law to say, “Hey, you can’t do that” because it’s going to diminish everyone else’s property values. So yeah, you’re going to make that one guy rich, but all the rest of us are going to pay for it.  In Kentucky and West Virginia, where I do a lot of my work, they don’t have those laws. Those laws have been abolished constitutionally so that there is no way for localities to object to mountaintop removal mining, for example. In North Carolina, laws have been abolished that would allow localities to object to factory farms in their backyard. And the agencies in these states are really just mouthpieces for the industries which they’re supposed to regulate.

Valuing a Ton of Particulate Matter – RegBlog - When it comes to regulatory policy, we rarely encounter simple answers. For example, what is the cost of emitting carbon dioxide into the atmosphere? Depending on the underlying assumptions, the answer to that question can vary from $11 per ton to an extreme of $105 per ton. And that answer may change over time with additional data and analysis. Measuring the cost of particulate matter—the tiny particles or soot floating in the air from auto exhaust and other sources of combustion that cause respiratory illness—yields a similarly wide expense range. Yet the monetary value assigned to particulate matter reductions and other clean air benefits plays an important role in policymaking because agencies often rely on these estimates to justify new regulations.Indeed, the Supreme Court weighed in on the issue last year in a case that challenged environmental regulations to lower emissions of particulate matter and other toxins from power plants. Litigants sparred over the U.S. Environmental Protection Agency’s (EPA) calculation, which translated to $1 billion in clean air benefits per 912 tons of reduced particulate matter. But this ratio, $1 billion in benefits for a 912-ton decline in particulate matter emissions, is not standard across major rulemakings by EPA or other federal agencies. Consider automobile fuel efficiency standards set by EPA and the U.S. Department of Transportation in effect through 2025. The agencies estimated improved fuel economy would reduce particulate matter exposure by 1,254 tons, which agency officials equated to $1.6 billion in benefits. The fuel standards for 2012 to 2016 rulemakings, on the other hand, cut more than three times as much particulate matter, yet generated just $850 million in benefits. The final phase of recent greenhouse gas standards for heavy-duty trucks offers an even starker example of the disparate values assigned to particulate matter reduction. The new standards for trucks cut particulate matter and nitrogen oxide by more than 576,000 tons combined. Yet regulators equated these particulate matter and nitrogen oxide reductions—which are commonly combined to measure tonnage reductions—to just $15.3 billion in benefits. This means the agencies treated emissions reductions from trucks as 41 times less valuable than the pollution reductions from power plants discussed before the Supreme Court.

EPA Succumbs to Pressure From Monsanto, Delays Glyphosate Cancer Review --The U.S. Environmental Protection Agency (EPA) was slated to hold four days of public meetings, Oct. 18-21, focused on essentially one question: Is glyphosate, the world's most widely used herbicide, safe?  However, the EPA Scientific Advisory Panel (SAP) meetings were "postponed," just four days before they were suppose to meet, after intense lobbying by the agrichemical industry, including Monsanto. The industry first fought to keep the meetings from being held at all, and argued that if they were held, several leading international experts should be excluded from participating, including "any person who has publicly expressed an opinion regarding the carcinogenicity of glyphosate."  As the meetings drew near, CropLife America, which represents the interests of Monsanto and other agribusinesses, specifically took issue with at least two scientists chosen for the panel, alleging the experts might be unfavorably biased against industry interests. On Oct. 12, the group sent a letter to the EPA calling for Dr. Kenneth Portier of the American Cancer Society to be more deeply scrutinized for any "pre-formed conclusions" about glyphosate. More notably, CropLife called for leading epidemiologist Dr. Peter Infante to be completely disqualified from panel participation. "EPA should replace Dr. Infante with an epidemiologist without such patent bias," CropLife told the EPA. The chemical industry group said Infante was unlikely to give industry-sponsored research studies the credibility the industry believes they deserve. CropLife said Infante has testified in the past for plaintiffs in chemical exposure cases against Monsanto.  Infante spent 24 years working for the Occupational Safety and Health Administration helping determine cancer risks to workers during the development of standards for toxic substances, including asbestos, arsenic and formaldehyde. His resume includes a stint at the National Institute for Occupational Safety and Health where he conducted epidemiological studies related to carcinogens, and he has served as an expert consultant in epidemiology for several world bodies, including the EPA and the World Trade Organization.

Exclusive: WHO cancer agency asked experts to withhold weedkiller documents | Reuters: The World Health Organization's cancer agency - which is facing criticism over how it classifies carcinogens - advised academic experts on one of its review panels not to disclose documents they were asked to release under United States freedom of information laws. In a letter and an email seen by Reuters, officials from the International Agency for Research on Cancer (IARC) cautioned scientists who worked on a review in 2015 of the weedkiller glyphosate against releasing requested material. The review, published in March 2015, concluded glyphosate is "probably carcinogenic," putting IARC at odds with regulators around the world. Critics say they want the documents to find out more about how IARC reached its conclusion. "IARC is the sole owner of such materials," IARC told the experts. "IARC requests you and your institute not to release any (such) documents." Asked about its actions, the agency told Reuters on Tuesday it was seeking to protect its work from external interference and defending its panels' freedom to debate evidence openly and critically. In recent years IARC, a semi-autonomous unit of the WHO based in Lyon, France, has caused controversy over whether such things as coffee, mobile phones, red and processed meat, and chemicals like glyphosate cause cancer.Its critics, including in industry, say the way IARC evaluates whether substances might be carcinogenic can cause unnecessary health scares. IARC assesses the risk of a substance being carcinogenic without taking account of typical human exposure to it.IARC defends its methods as scientifically sound and says its monographs - the name it gives to its classifications of carcinogens - are "widely respected for their scientific rigor, standardized and transparent process and . . . freedom from conflicts of interest."

Poison-Based Agriculture Can’t Endure Capitalism Where They Don’t Control It --Dannon says it will expand its purchase of dairy products from suppliers who use non-GM feed. One of the most crucial campaigns of the Food Sovereignty movement for the near future is to expand the economic space for non-GM animal feed. Therefore such programs on the part of food manufacturers are helpful, and this is obviously a promising line of action for campaigners, to pressure and encourage manufacturers to help themselves by breaking free of Monsanto’s stranglehold. Along with retailers, manufacturers are more directly affected by citizen and consumer pressure than the agribusiness sector. Everyone, including the food manufacturers, knows that GMOs benefit literally no one but Monsanto and the biotech sector. They do nothing but impose a massive tax and vast harms on everyone else and society as a whole. Monsanto is orchestrating a campaign of pressure and propaganda. Its captive industrial “farm” groups led by the so-called “US Farmers and Ranchers Alliance”, and including industrial lobby groups for non-food commodity corn, soy, and sugar beets, sent a letter to Dannon trying to intimidate it into reversing its policy. None of these groups has anything to do with farming, rather they are front groups orchestrating propaganda, lobbying, and pressure on farmers to comply with corporate directives. Ironically the letter lays out clearly what these lackeys fear and the rest of the world wants, that such manufacturer programs will lead to a “tipping point” away from GM cultivation and toward non-GM conventional and organic. The usual bottom-feeders in the corporate media, such as the article included in the link above, are boosting the letter. As always, the hacks have literally nothing but the most tawdry, shallow, thousand-times-disproven lies.

International Monsanto Tribunal in the Hague – October 2016 -- The Monsanto Tribunal is an international civil society initiative to hold Monsanto accountable for human rights violations, for crimes against humanity, and for ecocide. Eminent judges heard testimonies from victims, and will deliver an advisory opinion following procedures of the International Court of Justice. A distinct and parallel event, the People’s Assembly, has the opportunity for social movements to rally and plan for the future we want. The Tribunal and People’s Assembly took place between 14 and 16 October 2016 in The Hague, Netherlands. The Monsanto Tribunal has been livestreamed so that people everywhere in the world could watch and listen to the Judges, the lawyers and the witnesses.  We will share with you all the testimonies from witnesses and experts and pleas from the lawyers. As a start, we invite you to watch or rewatch the following key moments (in French, the videos in English will be available very soon).

 Dow-DuPont's Modified Corn Fails to Control Pest, Scientists Say – AgWeb - A type of corn marketed by Dow Chemical Co. and DuPont Co. is failing to live up to promises that it prevents a damaging worm from feeding on the crop, according to a group of insect experts. Corn containing the Herculex trait isn’t controlling the western bean cutworm, six entomologists from Michigan, Indiana, Ohio, New York and Pennsylvania wrote in an "open letter to the seed industry" posted last week on the website of Purdue University. The scientists urged seed companies to stop labeling Herculex for control of the pest so farmers won’t be lulled into a false sense of security. "People are frustrated and angry and, more importantly, yield was lost," they wrote in Purdue’s Pest & Crop Newsletter. Other genetically modified crops have lost some effectiveness after years of use. The root-chomping western corn rootworm has been showing signs of resistance to Monsanto Co.’s YieldGard corn for years. It’s one of five major crop pests known to have overcome insecticides produced by engineered corn and cotton. These crops produce insecticidal proteins derived from Bacillus thuringiensis, or Bt, a soil bacterium, that can replace chemical insecticides. The problematic Bt protein in Herculex is called Cry1F. "Cry1F has failed in our states," the entomologists wrote. "For growers in our states, the costs of scouting and spraying Cry1F corn negates a major reason they purchased and planted a hybrid with the trait in the first place." The scientists investigated the efficacy of the trait amid “dozens of phone calls and e-mails,” they said. Western bean cutworms feed on corn kernels. Untreated, they can lead to the growth of fungus and elevated levels of hazardous mycotoxins. Herculex is marketed for protection against eight other insects. Also failing are Monsanto’s Roundup Ready crops, engineered to tolerate sprays of Roundup weedkiller. To combat an increasing number of weeds no longer killed by Roundup, the company has developed crops that also tolerate dicamba herbicide, while Dow has created competing technology based on the weedkiller 2,4-D.

US grain exports increase in 2015/16, ethanol exports to China grow 1227% | Biofuels International - US exports of feed grains in all forms in 2015/2016 increased by more than 300,000 tonnes from the previous marketing year, US Department of Agriculture data shows. Totalling at 100.5 million tonnes, the export products include US corn, sorghum, barley, distillers’ dried grains with solubles (DDGS), corn gluten feed (CGF), corn gluten meal (CGM), ethanol as measured in corn equivalents, meat and poultry as measured in corn equivalents, and processed feed grain products. Ethanol exports in 2015/16 totalled at 868.3 million tonnes, marking a 1.3% increase from the 859.5 million tonnes in 2014/15, and valued at $1.8 billion (€1.6bn). Canada was the largest importer of US ethanol at 234.9 million tonnes, despite a 10% decrease from the 2014/15 levels of 262.9 million tonnes. Ethanol exports to China grew by a massive 1227% from 14.3 million tonnes in 2014/15 to 190.5 million tonnes in 2015/16, making China the second largest importer of US ethanol. The top two are followed by Brazil at 122.2 million tonnes, India at 66.9 million tonnes, and the Philippines at 63.1 million tonnes. US DDGS imports also increased by 0.84%, growing to 11.7 million tonnes from 11.6 million tonnes in 2014/15. China is the leading importer of DDGS at 3.3 million tonnes despite a 37.1% decrease from the last marketing year, followed by Mexico at 1.9 million tonnes and Vietnam at 1.0 million tonnes.

Changing Climate Threatens World’s Smallholder Farmers - Farmers are already experiencing the effects of climate change but can also help to fight it, according to a new report released by the UN Food and Agriculture Organization (FAO). “All farmers have to both adapt to climate change and will have to make a contributions to mitigate the emissions coming from agriculture,” Rob Vos, Director of Agricultural Development Economics at FAO told IPS. The 2016 State of Food and Agriculture report focuses on the links between climate change, agriculture and food security. The agriculture sector, including forestry, fisheries and livestock production, is responsible for producing around one fifth of the world’s greenhouse gas emissions. Some of the biggest effects come from deforestation, including land that is being cleared to feed the world’s increasing demand for meat products. However while farming contributes to climate change, the world’s 500 million smallholder farming households, who often only produce enough food for their families to survive, will be among the worst hit by a changing climate. Weather, including rainfall is becoming “much less predictable,” said Vos, “effecting farmers quite dramatically so they don’t know what to expect.”

Which Nation Exports the Most Beef? -- Big Picture Agriculture  - India is the world's largest beef exporter, followed by Brazil, the U.S., Australia, and New Zealand. This explains the situation further, from the USDA:  Since the late 2000s, India has rapidly increased its beef exports—specifically water buffalo meat, also known as carabeef—narrowly overtaking Brazil as the world’s largest beef exporter in 2014. Recent ERS research shows that India’s beef exports grew from an average of 0.31 million tons during 1999-2001 to an estimated 2.1 million tons during 2013-15, or about 12 percent annually. Over the same period, India increased its share of world beef exports from just 5 percent to about 21 percent. Although the U.S. share of global beef exports declined from 18 percent to 11 percent during this period, the decline does not appear to stem from increased competition from India, as Indian beef suppliers serve distinctly different market segments from those targeted by U.S. exporters. The rapid expansion in India’s beef exports has been driven by three main factors. First, global demand for India’s relatively low-cost water buffalo meat is strong, particularly among low- and middle-income countries in Asia and the Middle East. The United States and most other developed-country beef exporters primarily supply higher cost beef products that target higher income markets and consumers. The relatively low price of Indian beef reflects perceived quality differences: it is buffalo rather than cattle meat, it is produced primarily from culled dairy animals, and it cannot meet the stricter sanitary and phytosanitary standards common in more advanced markets.

The banana as we know it is in imminent danger - Virtually all the bananas sold across the western world belong to the so-called Cavendish subgroup of the species and are genetically nearly identical. These bananas are sterile and dependent on propagation via cloning, either by using suckers and cuttings taken from the underground stem or through modern tissue culture. The familiar bright yellow Cavendish banana is ubiquitous in supermarkets and fruit bowls, but it is in imminent danger. The vast worldwide monoculture of genetically identical plants leaves the Cavendish intensely vulnerable to disease outbreaks. Fungal diseases severely devastated the banana industry once in history and it could soon happen again if we do not resolve the cause of these problems. A fungal disease called Fusarium wilt or Panama disease nearly wiped out the Gros Michel during the 1950s and ‘60’s and brought the global banana export industry to the brink of collapse. A soil-borne pathogen was to blame: the fungus infected the plants’ root and vascular system. Unable to transport water and nutrients, the plants wilted and died. Cavendish bananas are resistant to those devastating Fusarium wilt strains, so were able to replace the Gros Michel when it fell to the disease. Despite being less rich in taste, and despite the logistical challenges involved with merchandising this fruit to international markets at an acceptable quality, Cavendish eventually replaced Gros Michel in commercial banana plantations. The entire banana industry was restructured, and to date, Cavendish accounts for 47% of the bananas grown worldwide and 99% of all bananas sold commercially for export to developed countries. But the Cavendish unfortunately has its own weaknesses – most prominently susceptibility to a disease called Black Sigatoka. The fungus Pseudocercospora fijiensis attacks the plants’ leaves, causing cell death that affects photosynthesis and leads to a reduction in fruit production and quality. If Black Sigatoka is left uncontrolled, banana yields can decline by 35-50%. Cavendish growers currently manage Black Sigatoka through a combination of pruning infected leaves and applying fungicides. Yearly, it can take 50 or more applications of chemicals to control the disease. Such heavy use of fungicides has negative impacts on the environment and the occupational health of the banana workers, and increases the costs of production. It also helps select for survival the strains of the fungus with higher levels of resistance to these chemicals: as the resistant strains become more prevalent, the disease gets harder to control over time.

Stop Irrigating Your Produce With Oil Wastewater --Wonderful Citrus, the U.S.'s largest citrus grower and the company behind the popular Halos mandarins and Bee Sweet Citrus, another huge citrus grower, are using leftover wastewater from oil companies to irrigate their citrus—while also using pink ribbons to sell them.   The use of oil wastewater for food irrigation is expanding rapidly in California—the U.S.'s third largest oil-extracting state, which also produces more than a third of the nation's veggies and two-thirds of its fruits and nuts. Oil corporations are increasingly supplying their wastewater to California-based agricultural companies like Bee Sweet and Wonderful to use for food irrigation during an historic drought . As this type of irrigation is set to expand, we believe this is an urgent public health issue because of the potentially hazardous chemicals associated with the oil extraction process. Companies use pink ribbons to gain customer loyalty and increase their sales. After all, pink ribbons are profitable.  Bee Sweet Citrus puts a pink ribbon on their Sweetheart Mandarin labels "to achieve prevention and find a cure for breast cancer in our lifetime." And Wonderful Citrus participates in an in-store cause-marketing promotion called Pink Ribbon Produce, aimed at "uniting the produce industry in the fight for breast cancer."   Both of these companies claim to care about women with breast cancer and are using pink ribbons to sell their products—all while failing to protect farm workers and the public from the potential health risks of using oil wastewater to irrigate their citrus. We call this pinkwashing.   Oil companies use hundreds of chemical additives during the oil extraction process—to drill, maintain and clean their wells. The U.S. Environmental Protection Agency's Maximum Contaminant Level Goal for benzene in drinking water is zero, which means "there is no dose below which the chemical is considered safe."

In California's methane-reduction crosshairs, dairy industry faces regulation for the first time - Despite heavy pushback from the state's livestock producers, California Gov. Jerry Brown last month signed a law aimed at cutting methane emissions from cattle operations, the largest source of heat-trapping methane in the country's biggest dairy-producing state.      More than half of California's methane emissions come from dairy and beef operations, specifically from cow manure and belching, mostly from dairy cows. But the state's powerful dairy industry has successfully blocked methane regulation for the past decade. Now, as the state works toward meeting the nation's most aggressive greenhouse gas emissions targets, the livestock sector and methane—with its potent atmospheric warming power—will contend with regulation for the first time."This is definitely a victory," said Brent Newell, an attorney with California's Center for Race, Poverty and the Environment. "It became painfully obvious that dairy absolutely had to do something. It could not remain exempt."  Nationally, the livestock industry and its allies in Congress have thwarted attempts to regulate greenhouse gas emissions from animal agriculture and have specifically blocked efforts to measure emissions from livestock operations. Since 2009, Congress has approved spending bills that prevent the Environmental Protection Agency from regulating air pollution from livestock facilities, largely aimed at Concentrated Animal Feeding Operations, or CAFOs.

World wildlife 'falls by 58% in 40 years' - BBC News: Global wildlife populations have fallen by 58% since 1970, a report says. The Living Planet assessment, by the Zoological Society of London (ZSL) and WWF, suggests that if the trend continues that decline could reach two-thirds among vertebrates by 2020. The figures suggest that animals living in lakes, rivers and wetlands are suffering the biggest losses. Human activity, including habitat loss, wildlife trade, pollution and climate change contributed to the declines. Dr Mike Barrett. head of science and policy at WWF, said: "It's pretty clear under 'business as usual' we will see continued declines in these wildlife populations. We know what the causes are and we know the scale of the impact that humans are having on nature and on wildlife populations - it really is now down to us to act." The Living Planet Report is published every two years and aims to provide an assessment of the state of the world's wildlife. For freshwater species alone, the decline stands at 81% since 1970Dr Mike Barrett, WWF This analysis looked at 3,700 different species of birds, fish, mammals, amphibians and reptiles - about 6% of the total number of vertebrate species in the world. The team collected data from peer-reviewed studies, government statistics and surveys collated by conservation groups and NGOs. Any species with population data going back to 1970, with two or more time points (to show trends) was included in the study. The researchers then analysed how the population sizes had changed over time. Some of this information was weighted to take into account the groups of animals that had a great deal of data (there are many records on Arctic and near Arctic birds, for example) or very little data (tropical amphibians, for example). The report authors said this was to make sure a surplus of information about declines in some animals did not skew the overall picture.

Massive Plunge in Wildlife Expected by 2020 –-  Every two years, the World Wildlife Fund and the Zoological Society of London report on the health of the planet with an updated index of wildlife populations. This year, the numbers are especially bleak: Populations have already declined on average by 58 percent between 1970 and 2012. And unless we act quickly, we risk a decline of 67 percent by 2020. That's more than two-thirds of wildlife on this planet lost in just one lifetime.  The Living Planet Report 2016 tells us that land-based populations have experienced a 38 percent decline. Ocean populations have declined by 36 percent. And freshwater populations have suffered a staggering 81 percent decline.  Despite all our efforts, the trend is moving in the wrong direction and we have only ourselves to blame. The pressures on wildlife are human-caused: Habitat loss and fragmentation due to climate change , land-use decisions and pollution are some of the most significant drivers of wildlife decline.  According to the report, the global population consumes each year the renewable resources of 1.6 Earths.   We know that in Canada, our ecological footprint is even greater: If all the world lived like Canadians, we would need 4.7 Earths.  We are consuming more than nature can deliver. And wildlife is paying the price. A mass migration has already begun as wildlife move in reaction to changing seasons, to find water, to escape wildfires , to go where sea ice once prevented them from going.  Clearly, something has to give. The Living Planet Report identifies key systems to target first, including fuel and finance. To limit warming to just 1.5 C (which could still mean 5 C warming in the Arctic ), we must accelerate the widespread transition to habitat-friendly renewable energy . And we must devise an economic measure that takes the environment into account.

Hungry Humans Are Eating Wild Mammals Into Extinction -- Hungry humans are in danger of eating nearly a quarter of all endangered land mammals into extinction, according to a study published this week in Royal Society Open Science. Quartz reports that 301 species of land mammals—from bats and primates to rodents and big cats—are being hunted into extinction. And for the vast majority—285 species—the reason is food, not poaching or sport hunting. Some estimates claims more than a million metric tons of wild animal meat is collected in Africa every year. And approximately $200 million worth of wild animal meat is harvested yearly in the Brazilian Amazon, according to the Telegraph. "These species will continue to decline unless there is major global action to save them," the study's lead author, Bill Ripple, says.  The 285 species are found in poorer countries where protein is hard to find, with the most living in Madagascar, Indonesia, the Philippines, and Brazil. Researchers say tens of millions of people around the world rely on wild animals for meat. They lay out a series of solutions for what they call a "global crisis," reports. Those include creating more protected land for wild animals, providing legal rights for sustainable hunting, swapping high-protein plants like soy and tubers for wild animal meat, and increasing access to education and family planning. Fifteen leading conservation scientists have signed on to the study.

Brazil’s greenhouse gas emissions rise on deforestation spike - Brazil’s greenhouse gas emissions grew 3.5% between 2014 and 2015, independent analysis showed on Thursday. Driven by a surge in forest clearance, the increase came as the economy contracted by 3.8%, in one of South America’s worst ever recessions. The figures come from a monitoring system set up by Climate Observatory, a network of 40 civil society groups. “The data show that Brazil had a very distinctive phase of emissions cutback between 2005 and 2010, and that we’ve been walking in circles ever since,” said Tasso Azevedo, who coordinates the initiative. While emissions from the energy sector dipped 5.2%, as fuel use fell and renewables advanced, destruction of valuable carbon-storing trees accelerated. The area of Amazon rainforest cleared jumped by nearly a quarter to the highest rate in four years, according to the National Institute for Space Research. “Deforestation spiked in 2015 and it’s probably going to rise again in 2016. Who benefits from that? Only those who destroy the forests illegally, while society and climate pay the price,”

Whaling nations block South Atlantic sanctuary plans - Japan and other pro-whaling nations have defeated a proposal to create an sanctuary for whales in the South Atlantic. The push to create the protected area during a biennial meeting of the International Whaling Commission (IWC) was defeated after 38 countries voted yes and 24 against, as proposals at the conference require 75% of votes to pass. Two abstained. Although the proposal has been defeated in previous years and was expected to fail this time around too because of opposition by Japan, Norway and Iceland, conservation groups were dismayed by the result. “There is an urgent need for us to better protect our whales, dolphins and porpoises. This sanctuary would have done just that and supported the growth of sustainable whale watching tourism and fostered much-needed research,” said Josh Coates, marine campaigner with the Australian Marine Conservation Society. “Once again whaling nations have stood in the way of progress, despite the IWC’s own scientific committee approving the plan for the sanctuary.” Greenpeace noted that the sanctuary was being blocked by countries far from the the South Atlantic aligning themselves with the whaling nations. John Frizell, a whales expert with the group, said: “What is the most disappointing is that all these efforts are ultimately being undermined by IWC member countries who are thousands of miles away, not even in the southern hemisphere and some even on the other side of the world. Conversely, all members with territory in the proposed sanctuary, fully support it.”

800,000 Haitians in "dire need" of food after Hurricane Matthew, UN warns -- Hurricane Matthew hit Haiti in early October, leaving more than 1,000 dead, causing widespread damage to property and, according to this week's statement from the U.N., destroying fruit trees and other sources of food. According to the U.N., in the Department of Grande-Anse, one of Haiti's 10 departments, 50% of the areas livestock was lost and "agriculture has been virtually wiped out." In the Department of Sud, 90% of fruit and forest trees were "severely damaged." All along Haiti's southern coast, the ability to fish for food "has been rendered impossible" since boats and fishing supplies were destroyed in the storm.  "There has been a massive loss of crops in some areas of Grand-Anse up to a 100% loss, just everything is gone," Alexis Masciarelli, a World Food Program worker in Haiti, told ABC News. "What's striking is that all the food trees are gone, a vast majority of them. The coconuts, the bananas, the mangoes. ... Bananas usually grow back in about a year, but coconut and mangoes take years to come back."  According to the U.N.'s statement, the country will require an "additional" $56 million in the next three months to assist with the food shortages.  "Local products on the markets will soon be depleted and we need more funding in order to continue food distributions to help 800,000 people in need of food aid which is more than urgent," Miguel Barreto, the World Food Programme's regional director in Latin America and the Caribbean, said in a press release on Monday. "The winter season crop is fast approaching. Agricultural producers have lost everything."

Northern Great Barrier Reef coral bleaching damage worse, surveys suggest - Fresh surveys of the Great Barrier Reef six months on from a mass coral bleaching have found large-scale damage north of Cairns, where a growing coral death rate due to heat stress is being exacerbated by disease and predators, scientists say. Researchers from the Australian Research Council Centre of Excellence for Coral Reef Studies have released a map with new pictures and video that show the aftermath of the extreme underwater heatwave last summer. New footage shows the bleak aftermath of the extreme underwater heatwave last summer on the northern region of the Great Barrier Reef, from Researchers at the ARC Centre of Excellence for Coral Reef Studies.The southern half of the reef is in good condition, but the scientists say ongoing surveys at the top end - stretching north of Cairns to Papua New Guinea - confirm it was the worst bleaching episode recorded. The Great Barrier Reef Marine Park Authority earlier this year estimated 22 per cent of coral died across the length of the reef due to heat stress.Greg Torda, from the Centre of Excellence, based at James Cook University in Townsville, said millions of corals died from heat stress in March and ongoing surveys showed many more had slowly died in the months since.  "On the reefs we surveyed close to Lizard Island [off the coast of Cooktown, in far-north Queensland], the amount of live coral covering the reef has fallen from around 40 per cent in March to under 5 per cent now," Dr Torda said.

The Great Barrier Reef Has Become A Coral Graveyard - Scientists studying the aftermath of one of the worst coral bleaching events in history along the Great Barrier Reef have returned with some bad, albeit expected news: Much of that ecosystem is now dead. A team of researchers from Australia’s ARC Centre of Excellence for Coral Reef Studies went back to check up on a swath of reefs that lie along the entire stretch of the Great Barrier, which saw some areas up to 95 percent bleached earlier this year. In total, 83 reefs were surveyed in March, many of which were profoundly impacted by a period of prolonged heat that turned once colorful coral formations ghostly white. Scientist anticipated mass casualties. And those predictions have come to fruition, according to Gergely Torda, a researcher with the National Coral Bleaching Taskforce that recently revisited many of those sites. “Basically we have seen the better [healthier] part of the reef so far,” said Torda, midway through a secondary survey of those initial reefs. “But it confirms what our predictions were for the portion of the reef that would eventually die.”

 Global warming continues; 2016 will be the hottest year ever recorded -  We know the world is warming – no factor can explain it aside from human emissions of greenhouse gases. Despite this, people who deny the basic facts of climate change have tried to argue that the Earth is either not warming or is only slowly heating. Well that just isn’t true anymore. The last three years are the nail in the coffin of the deniers of climate change. We have enough data this year to call 2016 as the hottest year ever record – and we have three more months left to go. So, just how hot is 2016? Well my early predictions are shown in the graph below. I have taken temperature data from NASA and superimposed my predictions for 2016 – it isn’t even close. And by the way, it doesn’t matter whose data you use (NASA, NOAA, JMA, Hadley Centre) the results are the same. 2016 is going to blow 2015 out of the water. A few things to note. First, these temperatures are surface temperatures that are taken across the globe. But, you can measure temperatures elsewhere and see the same result. Most importantly, measurements in the oceans, where 93% of the extra heat is stored are the best proof of global warming. I recently coauthored an open-access paper on this very topic which interested readers can get here.  You can measure sea level rise as the heated water expands, you can measure ice loss across the globe, you can measure temperatures in the lower part of the atmosphere. It doesn’t matter where; the story is the same. What is the big deal? Well first of all, 2016 blows away 2015 which was previously the hottest year ever and that had beaten 2014 as the hottest year ever – call this a three-peat. Three records in a row and the last two are by large margins. Does this mean global warming all of a sudden has gotten worse?  No, surface temperatures fluctuate a lot – you can see that in the figure. Temperatures will go up or down from year to year without apparent reason. This is why we are interested in the long term trends. This is also why we are interested in looking at other measures of warming (especially in the oceans). All of our measurements agree with each other – we know the Earth was warming long before this set of records began falling in 2014.

Stronger-than-expected La Niña may be brewing: Braun | Reuters: Many have doubted forecasts calling for the onset of the first La Niña in almost five years, believing that its failure to materialize in convincing fashion last summer - as originally predicted - means that it may be off the table for 2016-17. But in recent weeks, the oceans and atmosphere have been pulling everything into place to facilitate a potentially stronger La Niña than previously thought, so those who follow commodities markets may want to take a second look. Last Thursday, the U.S. Climate Prediction Center reissued the La Niña watch that was removed in early September. The watch indicates that conditions are favorable for the phenomenon’s development within the next six months. El Niño-Southern Oscillation, with its cool phase La Niña and warm phase El Niño, is one of the most reliable long-term indicators for global climate. The ENSO phases can have drastically different impacts on commodities worldwide - from energy use to grain yields. La Niña, characterized by cooler-than-normal surface waters in the equatorial Pacific Ocean, has not officially been in place since the first quarter of 2012. But recently, cooling sea surface temperatures in the key Niño 3.4 region have touched the levels of early 2012 ( CPC now says there is a 70 percent chance that La Niña will develop during the Northern Hemisphere autumn 2016 and there is a 55 percent chance it will persist during winter 2016-17. This is up from last month’s forecast of a 40 to 45 percent chance of development

Winter drought forecast for much of U.S. -- While the weather catchphrase of recent winters was the shiver-inducing polar vortex, the buzzword for this winter in the U.S. will be drought. Significant droughts are already in place over nearly 45 percent of the contiguous U.S., with hotspots in California — where the drought is in its sixth year — the Southeast and Northeast. With the renewed possibility of a La Niña emerging in the next couple months, little improvement is expected in most areas; the drought in the Southeast is expected to expand and drought could also emerge in the Southern Plains, according to the most recent seasonal forecasts from the National Oceanic and Atmospheric Administration. “The winter forecast doesn’t bode well for [California] and many other areas around the nation currently experiencing drought,” Mike Halpert, deputy director of NOAA’s Climate Prediction Center, said during a press teleconference. La Niña is the opposite end of the natural climate seesaw from El Niño; it is characterized by cooler-than-normal ocean waters in the tropical Pacific, while El Niño features warmer-than-normal. After an exceptionally strong El Niño, conditions in that area of the Pacific have cooled, moving into neutral territory and now “hovering near the La Niña threshold,” Halpert said. While an El Niño tends to bring wetter, cooler weather to the southern tier of the U.S., La Niña has an opposite effect, bringing drier and warmer weather to the same region. It is still uncertain whether a La Niña will actually materialize, and if it does, it is likely to be a weak one, but with the outlook trending in that direction, the forecast for already drought-stricken areas is for more of the same.

 Australia set for more heatwaves amid climate change: study: Australia is set to experience more heatwaves, with record-breaking hot weather becoming "normal" across the continent as climate change pushes up land and sea temperatures, a government report warned Thursday.The biannual State of the Climate report from the Bureau of Meteorology (BOM) and national science body CSIRO said Australia was already experiencing more extremely hot days and severe fire seasons, and projections showed temperatures would likely keep rising. "Australian temperatures will almost certainly continue to increase over the coming decades. Temperature projections suggest more extremely hot days and fewer extremely cool days," CSIRO senior scientist Helen Cleugh said. "As land temperatures increase, so do ocean temperatures and the report shows that the deep ocean is also impacted, with warming now recorded at least 2,000 metres (1.24 miles) below the sea surface." The country experienced its three warmest springs on record between 2013-15, the weather bureau said. Spring, between September to November, is the period when temperature and rainfall are critical to southern Australia's bushfire season. While there has been more rain in some areas, there has also been a "significant seasonal decline" in others, including an 11 percent drop during the April-October growing season in Australia's southeastern region since the mid-1990s, BOM added.

After Years Of Drought, A Starving Madagascar Teeters On The Brink Of ‘Catastrophe’ - Even in good years, hunger is rife in Madagascar. More than 90 percent of its population lives below the poverty line, and nearly half of the country’s children are chronically malnourished or stunted. But three consecutive years of severe drought, widespread crop failure and water shortages have driven Madagascar to the brink of utter “catastrophe,” United Nations agencies said last week. More than half of the population in southern Madagascar, or around 850,000 people, are now experiencing “alarming” levels of hunger, according to the agencies. At least 20 percent of households in the region are on the verge of famine. “These are people living on the very brink,” Chris Nikoi, regional director of the U.N.’s World Food Programme, said Thursday in a statement. “Many have nothing but wild fruits to eat. We must act together now to save lives.” The stories out of southern Madagascar are bleak: Children are being pulled out of school to look for food and water; 1 in 3 families has turned to “desperate measures” like begging and selling land to survive; and 4 in 10 households have eaten their vital seed stocks in desperation, leaving nothing for the upcoming planting season. “I met women who told me they had nothing to feed their babies except the fruit of the red cactus growing by the roadside,” Ertharin Cousin, WFP’s executive director, said last week after visiting some of the country’s worst-hit areas.Red cactus fruit is said to cause severe constipation, but the Inter Press Service reports that thousands of Malagasy children have been living off the wild fruit. “I have never experienced this kind of hunger,” “We are taking one day at a time because who knows what will happen if the rains do not return.”This is the third year in a row that Madagascar has struggled with failed crops and water scarcity. The next harvest is not expected until March, reports Al-Jazeera.

GOP senator on climate change: 'mankind has actually flourished in warmer temperatures'  - Sen. Ron Johnson (R-Wis.) on Monday said he doesn’t think people should worry about finding solutions to climate change ― because historically, “civilization thrives” in warmer temperatures.  “Climate has already changed, always will. I’m just not an alarmist. We will adapt,” Johnson told Wisconsin radio station WHBY. “How many people are moving up toward the Antarctica, or the Arctic? Most people move down to Texas or Florida, where it’s a little bit warmer.” Sen. Ron Johnson (R-Wis.) says we shouldn't worry about climate change because "mankind has actually flourished in warmer temperatures."  Climate change has been described as one of the most urgent issues facing mankind, and scientists say immediate policy action is necessary to mitigate its effects. But you wouldn’t know it from the tone of Johnson’s remarks on Monday. “Obviously, man affects the environment, and we should do everything we can to maintain a clean environment, but you need an affluent society. You need a strong economy,” the senator said. “Let’s not shoot ourselves in the foot with policies.” Johnson made a similarly dubious argument in an interview with the Milwaukee Journal Sentinel on Friday, when asked about his claim that sunspots cause climate change.“I’ve never denied climate change. It has always changed, always will,” he said. “The sun has the primary effect on weather and climate on planet Earth, so I’m just not a climate change alarmist.” “Mankind has actually flourished in warmer temperatures,” he continued. “I just think the question always is what is the cost versus the benefit of anything we do to try and clean up our environment ... I’m highly concerned about the climate alarmists that are going to spend a lot of money and have no impact whatsoever on the climate but have a great deal of harm on our economy.” 

The scientist who first warned of climate change says it's much worse than we thought -  The rewards of being right about climate change are bittersweet. James Hansen should know this better than most — he warned of this whole thing before Congress in 1988, when he was director of NASA’s Institute for Space Studies. At the time, the world was experiencing its warmest five-month run since we started recording temperatures 130 years earlier. Hansen said, “It is time to stop waffling so much and say that the evidence is pretty strong that the greenhouse effect is here.” Fast forward 28 years and, while we’re hardly out of the Waffle House yet, we know much more about climate change science. Hansen is still worried that the rest of us aren’t worried enough. Last summer, prior to countries’ United Nations negotiations in Paris, Hansen and 16 collaborators authored a draft paper that suggested we could see at least 10 feet of sea-level rise in as few as 50 years. If that sounds alarming to you, it is — 10 feet of sea-level rise is more than enough to effectively kick us out of even the most well-endowed coastal cities. Stitching together archaeological evidence of past climate change, current observations, and future-telling climate models, the authors suggested that even a small amount of global warming can rack up enormous consequences — and quickly.However the paper, publicized before it had been through peer review, elicited a mix of shock and skepticism, with some journalists calling the news a “bombshell” but a number of scientists urging deeper consideration.Now, the final version of the paper has been published in the journal Atmospheric Chemistry and Physics. It’s been reviewed and lightly edited, but its conclusions are still shocking — and still contentious.So what’s the deal? The authors highlight several of threats they believe we’ll face this century, including many feet of sea-level rise, a halting of major ocean circulatory currents, and an outbreak of super storms. These are the big threats we’ve been afraid of — and Hansen et al. say they could be here before we know it — well before the Intergovernmental Panel on Climate Change’s sanctioned climate models predict. Here we help you understand their new paper:

Strange pumping effect above Asia threatens the ozone layer  --A weird phenomenon is happening high above the Tibetan Plateau and the Himalayas that could prove to be an atmospheric nightmare. Pollutants that gather from India and China in the lowlands around the mountains can be boosted as high as 18 kilometers, reaching the stratosphere—the atmospheric layer directly above the troposphere that contains most of Earth’s ozone. That is far higher than aerosols from vehicles, power plants and fires usually reach. Once aerosols are that high they can spread globally, destroy the ozone layer that protects us from ultraviolet radiation and exacerbate global warming, researchers warn. Until a few years ago “we thought human activities had little impact on the stratosphere,” says Jean-Paul Vernier, a remote-sensing expert at the NASA Langley Research Center. Scientists had previously thought only volcanoes could eject aerosols—tiny particles or droplets—to such heights. And most models looking at future climate change scenarios did not account for aerosols in the stratosphere. Special tests reported in September confirm the aerosols continue to collect over India, and the work reveals fresh insights into their composition. The presence of aerosols was a big surprise when Vernier and his colleagues discovered them in 2009. Sieving through the data from CALIPSO—a satellite jointly launched by France and the U.S.—they found a thick layer of aerosols between 13 and 18 kilometers above sea level over a large area stretching across the eastern Mediterranean Sea, northern India and western China. The layer is most prominent in the summer and is unrelated to volcanic eruption, Vernier surmised then. He called it the Asian tropopause aerosol layer (ATAL) because it lies within the tropopause, a transitional zone spanning the upper troposphere and lower stratosphere. Last year the team reported in the Journal of Geophysical Research that the amount of aerosols in ATAL had tripled since 1996, the earliest time when they appeared in satellite observations.

Bolivian glaciers melt at alarming rate -- Between 1986 and 2014 – one human generation – the glaciers of Bolivia shrank by 43%, according to new research.  This presents a problem in the long term for more than 2 million people who rely on glacial meltwater supply in the dry season, and immediate danger in the short term for thousands who might live below precarious glacial lakes. Glaciers are in retreat as the world warms − a consequence of rising levels of carbon dioxide in the atmosphere in response to the increasing combustion of fossil fuels.They are dwindling almost everywhere in the Andean chain, in Greenland, in Alaska and Canada, the Himalayas, across the entire mass of Central Asia, and everywhere in the tropics. But a new study in The Cryosphere, the journal of the European Geosciences Union, is one of the first to examine in detail precisely what this retreat could mean for the human communities in Bolivia, home to one-fifth of the world’s tropical glaciers. Researchers from two British universities and a Bolivian colleague examined NASA satellite images of the region and found that the area of the Bolivia Cordillera Oriental normally covered by glaciers fell from 530 square kilometres in 1986 to about 300 sq km in 2014 − a shrinkage of more than two-fifths.They then turned to the glacial lakes − bodies of water left behind as a glacier retreats. Some are in natural dips in the bedrock, some are accidentally dammed behind walls of glacial debris. All such lakes are precarious: rockfalls, earthquakes and avalanches can breach them or tip water from them to create a dangerous downstream flow.  “Some lakes are very small and pose little risk. Others are very large, but there’s little or no possibility that they would drain catastrophically. Others are large enough to create a big flood, and sit beneath steep slopes or steep glaciers, and could be dangerous.”

A collapse in Arctic sea ice volume spells disaster for the rest of the planet - Joe Romm -- The sharp decline in Arctic sea ice area in recent decades has been matched by a harder-to-see, but equally sharp, drop in sea ice thickness. The combined result has been a warming-driven collapse in total sea ice volume — to about one quarter of its 1980 level. I first asked creative tech guru and programming analyst Andy Lee Robinson to make this ice cube volume chart (updated below) after the record-setting sea ice melt in 2012. The European Space Agency’s CryoSat-2 probe had just confirmed modeling by the University of Washington’s Polar Science Center that it wasn’t just ice area that had shrunk to a record low. Robinson wanted to improve the visualization of volume collapse through 3D animation, which requires serious programming chops and computing power (more details here). Here is his most recent version of the video—with piano music composed and played by Robinson himself. Unfortunately, what happens in the Arctic does not stay in the Arctic. The accelerated loss of Arctic sea ice drives more extreme weather in North America, while speeding up both Greenland ice sheet melt (which causes faster sea level rise) and the defrosting of carbon-rich permafrost. Our carbon pollution is the cause. And those climate science deniers who have blocked aggressive action to reduce emissions have made it all but inevitable that continued warming will drive the Arctic’s summer sea ice to near-total destruction.

Climate change in Arctic may contribute to extreme cold winters: study - (Xinhua) -- Warming in the Arctic appears to be exerting an influence on extreme cold winter weather in some parts of the world, according to a new study published online Wednesday in the journal Nature Climate Change. The study, conducted by an international team of researchers, found that the cause of recent severe cold winters in places such as the eastern part of the United States and Britain, could be traced back to natural changes to the jet stream's position, which was intensified by the warming in the Arctic. The jet stream consists of ribbons of very strong winds which move weather systems around the globe. Jet streams are found nine to 16 km above the surface of the Earth. The position of a jet stream varies within the natural fluctuations of the environment. They are caused by the temperature difference between tropical air masses and polar air masses. Previous studies have shown that more episodes of severe cold weather will plunge from the Arctic into the mid-latitudes, as the jet stream gets wavy. "We've always had years with wavy and not so wavy jet stream winds, but in the last one to two decades the warming Arctic could well have been amplifying the effects of the wavy patterns," said Professor Edward Hanna at University of Sheffield, in a press release from the university. Hanna is one of the authors of the study. "This may have contributed to some recent extreme cold winter spells along the eastern seaboard of the United States, in eastern Asia, and at times over the UK," Hanna said.

Extreme cold winters fueled by jet stream and climate change: Scientists have agreed for the first time that recent severe cold winter weather in the UK and US may have been influenced by climate change in the Arctic, according to a new study. The research, carried out by an international team of scientists including the University of Sheffield, has found that warming in the Arctic may be intensifying the effects of the jet stream's position, which in the winter can cause extreme cold weather, such as the winter of 2014/15 which saw record snowfall levels in New York. The researchers have found that the recent pattern of cold winters is primarily caused by natural changes to the jet stream's position; however, the warming of the Arctic appears to be exerting an influence on cold spells, but the location of these can vary from year to year. Previous studies have shown that when the jet stream is wavy there are more episodes of severe cold weather plunging south from the Arctic into the mid-latitudes, which persist for weeks at a time. But when the jet stream is flowing strongly from west to east and not very wavy, we tend to see more normal winter weather in countries within the mid-latitudes. "We've always had years with wavy and not so wavy jet stream winds, but in the last one to two decades the warming Arctic could well have been amplifying the effects of the wavy patterns," Professor Hanna said. He added: "This may have contributed to some recent extreme cold winter spells along the eastern seaboard of the United States, in eastern Asia, and at times over the UK.

Sea Ice Extent Is Near Record Lows–South as Well as North -  It’s been a banner year for global sea ice, and not in a good way. After a record-smashing mild winter, the Arctic’s summer sea-ice melt culminated in a tie with 2007 for the second-lowest extent since satellite measurements began in 1979. The drama intensified this month, with Arctic sea ice extent now at a clear record low for late October as calculated by the National Snow and Ice Data Center (see Figure 1 below). This behavior isn’t really such a shock, given that Arctic sea ice has been declining for decades in the midst of sharp high-latitude warming. What’s more startling is the huge extent loss this year in the Antarctic, where sea ice extent had actually been increasing in recent years. This year’s Antarctic extent peaked very early, on August 31, and it’s now at its second-lowest value on record for late October, beaten only by 1986 (see Figure 2 below). Together, these simultaneous drops have sent global sea ice extent--Arctic plus Antarctic--to its lowest level by far for this time of year since regular satellite monitoring began in 1979. The global extent as of October 25 was more than 1 million square kilometers below this date in 2011, the previous record-holder. In fact, it appears that the last few days are the first time we’ve seen a global departure from average in sea ice extent of more than 3 million sq km—which is more than four times the area occupied by Texas. We shouldn’t pin too much on this record, because global sea ice extent is a much-abused and somewhat artificial metric. The Arctic and Antarctic have vastly different climate regimes, and what happens at one pole is far more important to its own regional climate than what’s occurring at the other pole. Still, the dramatic dip in global ice extent is worth noting if only because climate-change skeptics and deniers have pointed to global sea ice for years, and especially the Antarctic’s unexpected evolution, in an attempt to discount other evidence of a planet being warmed by increasing amounts of human-produced greenhouse gases. As Jeff Masters put it in this blog in 2010: “Diminishing the importance of Arctic sea ice loss by calling attention to Antarctic sea ice gain is like telling someone to ignore the fire smoldering in their attic, and instead go appreciate the coolness of the basement, because there is no fire there.”

This Antarctic glacier is the biggest threat for rising sea levels. The race is on to understand it -- U.S. and British science agencies Thursday announced a multimillion-dollar research mission to study an enormous and exceedingly remote Antarctic glacier, one that they say could hold the potential for major sea level rise before the end of the century. The move suggests that even as world governments move to tackle greenhouse gas emissions, their polar research arms are racing to get a handle on perhaps the most sweeping potential consequence of a changing climate — a large increase in global sea level due to the loss of polar ice — and determine just how rapidly it could arrive. And they appear to have singled out the number one point of vulnerability. The glacier in question, named Thwaites, is a linchpin of the West Antarctic ice sheet. It is larger than Pennsylvania and presents a 75-mile-long front to the ocean, in this case the Amundsen Sea, where recent studies have suggested that warm waters at extreme depths are causing a major glacial retreat that could be “unstoppable,” in the words of NASA. The reason is that these Amundsen Sea glaciers are already sitting in deep water, but if they break away further, the terrain becomes even deeper behind them, threatening a runaway retreat. “Recent studies indicate the greatest risk for future rapid sea-level rise now arises from Thwaites Glacier due to the large changes already underway, the potential contribution to sea-level rise, and the societally relevant time scales of decades to centuries over which major, irreversible changes are possible in the system,” notes the joint research solicitation from the U.S. National Science Foundation and the British Natural Environment Research Council. In a press statement, the National Science Foundation suggested the cost of the research itself will be $20 million to $25 million but that “allocation of logistics support for field work would increase that commitment significantly.”

Scientists just showed what it truly means when a huge Antarctic glacier is unstable - If there is one story that, more than anything else, makes you wonder if global warming could cause very fast changes and hit planetary tipping points in our lifetimes, it was a moment in 2014.That was when two separate research papers said there was reason to think a frozen sector of West Antarctica, called the Amundsen Sea region, may have been destabilized. West Antarctica as a whole contains enough ice to raise sea levels more than 3 meters (10 feet), and the Amundsen Sea’s ocean-front glaciers themselves account for about 1.2 meters (4 feet). Two of the largest are Pine Island Glacier, about 25 miles wide at its front that faces the ocean, and capable of someday driving about 1.7 feet of sea level rise, and Thwaites glacier, the true monster, which is 75 miles wide where it hits the ocean. It contains about 2 feet of potential sea level rise but also, it is feared, could destabilize the ice in all of West Antarctica if it goes. On Thursday, the National Science Foundation and the U.K.’s Natural Environment Research Council made a joint announcement signaling how grave this really is — they will fund a multi-million dollar research initiative to the less-studied Thwaites, in order to determine just how much it is capable of contributing to sea level rise during our lifetimes, and by the end of the century. It will take years of preparation for scientists to even get to the glacier, however. And in the meantime, a new study of Pine Island Glacier, just released in Geophysical Research Letters, reaffirms why this region of Antarctica is so worrisome. The study finds that as the ice melts, the glacier that remains has retreated so far backwards in the face of warm ocean temperatures, exposing so much additional thickness to the ocean in the process, that even a recent bout of cooler water temperatures did little to slow the pace of its ice loss. The problem is that in this part of West Antarctica, you have everything you don’t want on a warming planet – a changing ocean up against glaciers that are both very wide and very deep. And scientists now know that warm ocean water is reaching these glaciers at depth, and melting them from below – causing them to shrink, leaving the remaining glacier to retreat backwards and inland. And as they retreat, the seafloor gets deeper the further back they go — what researchers refer to as a “retrograde” configuration. The deeper the water gets, the more ice that can be exposed to the ocean, and the more the glaciers are thereby capable of losing. So there is a fear that there is here something that is called a “marine ice sheet instability” in which, once you start this process, you can’t stop it — and that it has already been started.

 Warmer sea water causes Antarctica to melt faster - (Xinhua) -- Antarctica is melting faster than expected, which is blamed on warmer ocean water, says a new study. The study, published in the journal Nature Communications, focused on the Smith, Pope and Kohler glaciers, which are supported by the Dotson and Crosson ice shelves from beneath. A significant portion of Antarctica is now subject to "intense unbalanced melting," said the authors of the study. Scientists believe that rising water temperature may be helping to weaken ice shelves by seeping into the cavities beneath them and lapping up against the exposed ice, the Washington Post reported. Ice shelves are permanent floating sheets of ice that connect to a landmass, which are only found in Antarctica, Greenland, Canada and the Russian Arctic. If an ice shelf thins or breaks, the glacier behind it begins to pour ice into the ocean and retreat inland, it reported. The warm water circulating beneath the ice shelf has caused faster melting of ice in Antarctica, which is most pronounced from 2002 to 2009, a team from the NASA's Jet Propulsion Laboratory (JPL) said. The more the bottom of the shelves melt, the more ice is exposed to warm water, said Ala Khazendar, a geophysicist and polar expert at JPL. Scientists fear that at some point, the shelves will collapse and Antarctica's glaciers will flow into the sea, said a NPR report.

Antarctica’s Ice Shelves Melting Rapidly as Ocean Waters Warm - Three glaciers in West Antarctica have undergone "intense unbalanced melting," risking their stability and further acceleration of sea level rise New research published in Nature Communications found that the Smith, Pope and Kohler glaciers in the Amundsen Sea embayment collectively lost about 1,000 feet of ice from 2002 to 2009.  This rapid melt shows how glaciers are being eaten away from the bottom due to a large increase in ocean heat .  Runaway Glaciers in West Antarctica – YouTube For a deeper dive:  Wall Street Journal , Bloomberg , NPR , Climate Central , Mashable , Washington Post , TakePart , Xinhua , Gizmodo , Motherboard

CO2 levels mark ‘new era’ in the world’s changing climate -- Levels of CO2 in the atmosphere have surged past an important threshold and may not dip below it for "many generations". The 400 parts per million benchmark was broken globally for the first time in recorded history in 2015.But according to the World Meteorological Organisation (WMO), 2016 will likely be the first full year to exceed the mark.The high levels can be partly attributed to a strong El Niño event. While human emissions of CO2 remained fairly static between 2014 and 2015, the onset of a strong El Niño weather phenomenon caused a spike in levels of the gas in the atmosphere. That's because the drought conditions in tropical regions produced by El Niño meant that vegetation was less able to absorb CO2. There were also extra emissions from fires, sparked by the drier conditions.In its annual Greenhouse Gas Bulletin, the World Meteorological Organisation says the conditions helped push the growth in the levels of CO2 in the atmosphere above the average for the last ten years. At the atmospheric monitoring station in Mauna Loa, Hawaii, levels of CO2 broke through 400 parts per million (ppm), meaning 400 molecules of CO2 for every one million molecules in the atmosphere.The last time CO2 was regularly above 400ppm was three to five million years ago, say experts. Prior to 1800 atmospheric levels were around 280ppm, according to the US National Oceanic And Atmospheric Administration (Noaa). The WMO says that the rise through the 400ppm barrier has persisted and it's likely that 2016 will be the first full year when the measurements show CO2 above that benchmark, and "hence for many generations".While the El Niño factor has now disappeared, the human impact on climate change has not, the WMO argues.

Climate change could spark the world’s next financial crisis, former Bank of England executive warns - Climate change could spark the world’s next financial crisis, according to Paul Fisher, who retired this year as deputy head of the Bank of England body that supervises the country’s banks. “It is potentially a systemic risk,” Mr Fisher said Monday in an interview in Sydney. A sudden repricing of assets as a result of climate change “could be the trigger for the next financial crisis,” he added. Mr Fisher, a 26-year veteran of the UK central bank, pointed to the renewed fall in sterling earlier this month, after the Government set out a timetable for leaving the European Union, as an example of the way that prices can shift suddenly.“That is exactly the sort of event you might get with climate change,” said Mr Fisher, formerly deputy head of the UK’s Prudential Regulation Authority. Signs that governments are growing increasingly serious about tackling climate change suggest that businesses need to be ready for greater regulation, Mr Fisher said. China and the US agreed at the G20 meeting in Hangzhou last month to ratify the Paris accord designed to limit global warming, bringing two of the world’s largest emitters of carbon pollution on board with an agreement to control temperature increases.

Climate change could drive 122m more people into extreme poverty by 2030 -- The 2016 State of Food and Agriculture report, published by the Rome-based Food and Agriculture Organisation (FAO), calls for “deep transformations in agriculture and food systems” and for the world’s half-billion small-scale farms to receive particular support. The report warns that without “widespread adoption of sustainable land, water, fisheries and forestry practices, global poverty cannot be eradicated”.  It adds that action must also be taken to reduce farming’s own contributions to greenhouse gas emissions and global warming. The 194-page report looks at the future of farming and food security under different climate change scenarios. It also looks at possible responses to what it calls “an unprecedented double challenge” to eradicate hunger and poverty and stabilise the global climate. There is, it says, “no doubt that climate change will affect the agriculture sectors and food security and that its negative impact will become more severe as it accelerates. In some particularly vulnerable places, such as small islands or in areas affected by large-scale extreme weather and climate events, the impact could be catastrophic.”  Possible consequences include major declines in crop yields and increasingly high and volatile food prices, it says. “In the longer run, unless measures are put in place to halt and reverse climate change, food production could become impossible in large areas of the world.”The report cites diversifying crop production, better integration of farming with the natural habitat, agroecology and “sustainable intensification” as strategies to help small-scale farmers adapt to a warming world.It says some current policies, including subsidies for inputs such as synthetic fertilisers and pesticides, could hinder the adoption of more sustainable techniques.   Until 2030, says the FAO report, climate change impacts will produce both gains and losses, with crop yields increasing in colder places, for example. After 2030, negative impacts could threaten farming and food systems in every region of the world.

Climate change help should be in aid, not loan, Bangladesh parliamentary panel head says - As an 'innocent victim' of climate change, Bangladesh should receive aid, not loan, to fight the effects of climate change, the head of the parliamentary panel on environment and forest ministry has said.Hasan Mahmud, also former environment minister, spoke twice on the matter on Thursday - once at a seminar and later after the panel's meeting. He emphasised 'preventing commercialisation' of the Green Climate Fund, which was initiated with a promise by the developed countries to raise $100 billion annually by 2020 in order to help the countries vulnerable to climate change fight the effects. But as the most of the fund has not been cleared, Finance Minister AMA Muhith expressed his frustration over the matter during a ministerial conference at IMF-World Bank annual meetings in Washington DC earlier this month. Following Muhith's criticism of the World Bank for the lack of a climate change fund, its President Jim Yong Kim, during his recent visit to Dhaka, announced $2 billion loan to fight the effects of climate change in Bangladesh. But many of the environmental organisations have said Bangladesh should not take the loan as it has been demanding aid to fight climate change effects.

Watch Leonardo DiCaprio’s Climate Change Doc Online for Free -- By now, you have probably heard that Leonardo DiCaprio has a new documentary about climate change coming out. So how can you watch it?    The Fisher Stevens-directed documentary will make its television debut on National Geographic's channel in 171 countries and 45 languages on Sunday, Oct. 30. Additionally, in an unprecedented move, National Geographic also announced today that Before the Flood will premiere commercial free across digital and streaming platforms around the world as part of the network's commitment to covering climate change. That means not only can you catch the critically acclaimed film on cable, from Oct. 30 through Nov. 6, you can also watch it on just about any website or device where you regularly stream online videos. The exhaustive list includes: , YouTube, Facebook, Twitter, Amazon, iTunes, Hulu, Sony PlayStation, GooglePlay, VOD/Video On Demand (through MVPD set-top boxes), MVPD Sites and Apps, Nat Geo TV Apps (iPhone, iPad and Apple TV, Roku, Android phones, Xbox One and 360, Samsung Connected TVs) and more. Here's DiCaprio himself making the announcement:  Instagram video by Leonardo DiCaprio • Oct 24, 2016 at 5:39pm UTC

 U.S. judge approves $14.7 billion deal in VW diesel scandal | Reuters: A U.S. judge on Tuesday approved one of the biggest corporate settlements on record, Volkswagen AG's (VOWG_p.DE) $14.7 billion deal arising from its diesel emissions cheating scandal, and the German automaker said it would begin buying back polluting cars in mid-November. U.S. District Judge Charles Breyer in San Francisco signed off on VW's settlement with federal and California regulators and the owners of the 475,000 polluting diesel vehicles in a pivotal moment for the world's No. 2 automaker as it tries to move past a scandal that has engulfed it for more than a year. VW admitted in September 2015 to installing secret software in its diesel cars to cheat exhaust emissions tests and make them appear cleaner in testing than they really were. In reality, the vehicles emitted up to 40 times the legally allowable pollution levels. Volkswagen CEO Matthias Mueller told reporters in Berlin that Breyer's approval was "an important milestone for us on the way towards clearing up the problem that we caused some time ago." Hinrich Woebcken, president and CEO of Volkswagen Group of America, pledged to carry out the terms "as seamlessly as possible." Breyer turned away objections from car owners who thought the settlement did not provide enough money, saying it "adequately and fairly compensates" them. Owners will get the pre-scandal "trade in" value of the vehicle and $5,100 to $10,000 in additional compensation. "Given the risks of prolonged litigation, the immediate settlement of this matter is far preferable," Breyer wrote.

IEA raises five-year renewables forecast after record 2015 growth | Reuters: The International Energy Agency (IEA) raised its forecast for renewable energy growth over the next five years, saying on Tuesday it expects the share of renewables in the world to rise to 28 percent by 2021 from 23 percent generated in 2015. Growth in renewables is being driven by improved policy changes in countries such as the United States, China and Mexico; and a sharp fall in costs, the agency said in its medium-term market report. Global renewable electricity capacity is expected to rise by 42 percent or 825 gigawatts (GW) by 2021, the IEA said, 13 percent higher than an estimate last year. "We are witnessing a transformation of global power markets led by renewables," IEA executive director Fatih Birol said. The IEA, the West's leading energy forecaster, had been criticised by environment campaigners in recent years for underestimating the growth of renewables and over-emphasising the continued role of fossil fuel. On Tuesday, the IEA said the US alone represented close to half of its forecast revision due to the medium-term extension of federal tax credits, which are set to boost solar PV and onshore wind expansion. However, "China remains the undisputable global leader of renewable energy expansion, representing close to 40 percent of growth", the agency said, adding that China's air pollution concerns and a favourable policy environment are driving growth.

Government’s Push for Solar Power on Federal Lands Stirs Concerns - WSJ: Officials from the U.S. Bureau of Land Management and local leaders grappled recently with a big problem: the failure to attract solar energy companies to the San Luis Valley, whose elevation of over 7,000 feet should make for prime solar potential. For now, the only solar-power production in the valley, a scenic expanse a few hours south of Denver, is on private land—despite years of effort by local BLM officials to develop solar on federal lands here, including an auction in 2013 that attracted zero bids from renewable-energy companies.  “I’d pick a solar project on private lands over public lands. It’s going to be a lot quicker.” Local BLM officials admit that federal permitting, including longer environmental reviews, is holding back solar energy, along with limited capacity on the electric lines that run from the sunny valley to the Denver area, which would be the biggest market for power produced here. In Washington, BLM plans to issue within weeks a new rule that government officials hope will streamline the permitting and management process for renewable-energy companies’ operations on federal lands and create a competitive process for leases, much like current oil and gas leases. The goal is to sharply increase renewable energy generated on federal land.  Clean-power advocates say the millions of acres of federal lands, with their wide expanses and low population, are a natural home for wind and solar projects.  Yet many traditional allies are dividing over the rule. Environmentalists welcome renewable energy, but worry about how wind and solar projects on federal lands affect wildlife and other natural resources. Renewable-energy companies anticipate new opportunities, but say the rule could lead to higher costs. The administration is seeking to strike a balance between the two, while pursuing its goal of fighting climate change by doubling down on renewable energy.

Wind is the new corn for struggling farmers  - Wind energy, the fastest-growing source of electricity in the U.S., is transforming low-income rural areas in ways not seen since the federal government gave land to homesteaders 150 years ago. As commodity prices threaten to reach decade lows and farmers struggle to meet debt payments, wind has become the newest cash crop, saving family farms across a wide swath of the heartland.  The money Richard Wilson earns from leasing his land for about 35 turbines run by the Golden West Wind Energy Center outside Colorado Springs has kept him from having to sell off pieces of the 6,000-acre cattle and wheat ranch his family has owned since 1948.  “We weren’t making enough money to sustain ourselves,” he says. “Now we’re in a position where we can operate our farm for another generation at least.”  For others, turbines spin off six-figure incomes that have allowed them to retire from farming altogether.  “One turbine has changed my life,” says Ed Woolsey, a fifth-generation Iowa farmer and a principal with Crosswinds Energy Project, a community collective that manages 10 turbines and sells the power they generate to rural electric cooperatives.  “Before, I raised corn and soybeans and cattle. Now I don’t. I’m a wind farmer.” Woolsey leases his farm to others to cultivate. Neither he nor Wilson would disclose how much he earns, but landowners who sign lease agreements with wind companies typically get between $7,000 and $10,000 per turbine each year.

Germany votes against the internal combustion engine - Germany’s lower house of parliament, the Bundesrat, voted in October to ban the sale of cars with internal combustion engines by 2030. It is a resolution with no binding implications, but it did garner cross-party support. It is certainly a powerful statement of intent. Seen from the capitals of the major oil exporting countries, it should be viewed with alarm, not that it will necessarily be achieved, but as a reminder that in combination with the technologies to deliver them, environmental targets only ever seem to get more ambitious in scope and in timing. For oil producers, the idea that some oil will be left in the ground forever is a strong motivation to produce now. Revenue maximization no longer lies in controlling supply to support prices over time because time is running out. There is no point husbanding resources for future generations that reject their use. But, in the short-term, the opposite appears the case, and OPEC is again considering output controls. This is for two reasons: the financial pain caused by low prices for economies far too heavily reliant on oil; and because producers are near the limits of current output capacity. Iraq and Iran are close to full capacity, Russia is pumping at record post-Soviet levels and Saudi output remains elevated. They are willing to ‘freeze’ only because they cannot produce much more. Yet, just as OPEC edges towards an agreement, both Iran and Iraq are seeking billions of dollars of investment capital, which should result in millions of barrels of new oil production from relatively low-cost, conventional resources. Both already contest the limitations that an OPEC agreement would place upon their future development. One of the most lasting legacies of US shale oil will thus be the rejuvenation of conventional Middle Eastern oil production, and the world’s dependence upon it. This is because US shale forced Saudi Arabia into open market competition, because climate change concerns have speeded up the peak oil demand clock, and because protecting resources with closed markets hasn’t delivered the desired growth.

Plunging solar equipment prices fuel trade complaints (AP) -- Use of solar power is soaring, but Europe's biggest solar panel manufacturer, SolarWorld, took the surprise step last month of cutting 500 jobs from its workforce of 3,000. The reason? Global sales are on track for a record year but prices are plunging due to a glut of supply. That is encouraging the spread of clean energy but squeezing manufacturers, leading to politically sensitive job losses. ProSun, a group that represents European suppliers, blames China, which it says is flooding export markets and depressing prices by propping up money-losing manufacturers. Industry experts say the problem is global and reflects missteps by manufacturers and shifting energy policies in Europe and the United States. Solar panels are among many industries, from steel and cement to wind turbines, where Chinese production capacity soared during the past decade's economic boom until it vastly exceeded demand. ProSun is pressing European Union trade officials for action, making this the latest industry, along with steel and aluminum, to be hit by political tensions over a surge of low-cost Chinese exports. On average, global prices of solar cells have fallen 20 percent since July, according to Edurne Zoco, who follows the industry for IHS Markit.

Breaking: Protests Escalate as Flooding at Muskrat Falls Hydroelectric Project Imminent -- Renowned Inuk artist Billy Gauthier has not eaten since Oct. 13. He is on a hunger strike against the proposed flooding of the Muskrat Falls hydroelectric project reservoir.  The Muskrat Falls project , part of the $8.6 billion Lower Churchill hydroelectric project in Labrador , Canada, will flood the Lake Melville river valley, which has cultural and spiritual significance for the Innu and Inuit peoples.  Opposition to this project has been long-standing. Ossie Michelin, a freelance journalist living in Labrador, has been documenting the fight against the dam. He shared how the hydroelectric project "will cut through the unceded territory of the Nunatu Kavut Inuit, the only group of Inuit in Canada with an outstanding land claim," and "destroy hundreds of kilometers of forest and contaminate fish and seal stocks with methyl mercury.  According to Emerald Nash, an activist and concerned friend of Gauhier:  If they flood this reservoir without first clearing vegetation and topsoil, waters downstream will be poisoned with methylmercury . The people living there will not only face serious health risks but will also lose their source of food and a large part of their cultural identity. Contamination will undoubtedly threaten the traditions of the Innu and Inuit communities there. In Labrador hunting and fishing is a way of life, and for many it is a means of survival.  Despite pleas from the Nunatsiavut government and warnings from researchers at Harvard University , provincial energy company, Nalcor, has chosen to move forward with its plans to flood Lake Melville without any effort to remove the materials that will lead to contamination. In a final push to try and stop the flooding of the river valley until the debris is removed, a blockade has been ongoing since Oct. 15. Land protectors have come out in force to block the gate to the Nalcor facility at Muskrat Falls.

Industry-sponsored study says sulfur cap might raise bunker fuel price - - Severe economic strain going beyond shipping could develop in the wake of a tighter, global sulfur cap on marine fuel, according to new, shipping and oil industry-sponsored research presented Monday to the Marine Environmental Protection Committee, a committee of the International Maritime Organization. The research, on the feasibility on 0.5% global sulfur cap, said the refining sector would struggle to meet the resulting new pattern of demand, forcing up bunker fuel prices.Both studies agreed that nameplate refining capacity could meet the switch in demand to low sulfur material, the Ensys report found that the reality would be very different. "There is a big difference [between nameplate refining capacity] and the effective utilization of that capacity," The MEPC is sitting in London this week to decide when that sulfur cap should start -- 2020 or 2025 -- or defer any decision to another meeting. The official fuel oil availability study commissioned by the MEPC and undertaken by CE Delft answered the refining capacity question in the affirmative. But this supplementary study, sponsored by shipping industry organization BIMCO and oil industry organization IPIECA and undertaken by Ensys/Navigistics, said that the refining capacity was not there.

Australia's coal seam gas emissions may be vastly underestimated – report -- The coal-seam-gas industry could be vastly underestimating its emissions, jeopardising Australia’s commitments made at Paris and swamping any benefits gas has over coal, according to a landmark report by the Melbourne Energy Institute, commissioned by the Australia Institute. The report found the industry’s true emissions could easily amount to twice the emissions Australia has promised to cut by 2030. While no studies in Australia have examined emissions from methane escaping directly into the atmosphere, in the US those measurements show it is often 170 times higher than that claimed by the Australian industry and 34 times higher than that what the Australian government reported to the UN. “We’re potentially not measuring the equivalent of the emissions from our entire transport sector,” said Mark Ogge, principal advisor at the Australia Institute. “If the emissions are a lot more than what is being estimated now, it could jeopardise our commitments made at Paris,” said report author Tim Forcey from the Melbourne Energy Institute. Gas has been spruiked as the lower-emissions fossil fuel since, when burned, it emits 60% less carbon dioxide than coal for each unit of energy produced. But unburned gas – mostly made up of methane – is a much more powerful greenhouse gas than carbon dioxide, exerting a warming influence 84 times that of carbon dioxide over a 20-year time frame.

Dangerous Metals Found in Latest Duke Energy Coal Ash Spill - The record-breaking flood of the Neuse River inundated three inactive coal ash ponds for five days last week from the Duke Energy H.F. Lee facility, 10 miles upstream of Goldsboro, North Carolina. The flooded ponds are unlined and uncovered, containing more than 1 million tons of coal ash spread over more than 170 acres in a layer 4 to 10 feet deep.  On Oct. 14 at 4:28 p.m., before the flood waters had completely receded from the flooded ash ponds, Duke Energy reported a spill of an undetermined amount of coal ash into the Neuse River to the U.S. Coast Guard's National Response Center . On Oct. 15, Duke Energy and the North Carolina Department of Environmental Quality personnel inspected the inactive ash ponds by foot, claiming they "determined that the amount of material that was displaced would not even fill the bed of an average pickup truck."  On Oct. 17, the flood waters had receded enough to allow the Waterkeeper Alliance rapid response team to launch a boat in the Neuse River to inspect for coal ash releases. Later that afternoon, the Upper Neuse Riverkeeper discovered a second coal ash spill coming from the inactive ash ponds at HF Lee. The coating of ash on tree branches high above the receding flood waters proved the spill had been ongoing for almost a week. Duke Energy and DEQ claim their representatives identified the second spill on Oct. 17 as well, independent of Waterkeeper Alliance's public disclosure of the spill on Oct. 18. The Waterkeeper Alliance rapid response team questions the claim that both DEQ inspectors and Duke Energy staff traveled to the location of the second spill by boat on Oct. 17 and identified the white substance floating on the water and coating the trees. To the contrary, Duke Energy reportedly told WNCN on the evening of Oct. 18 that it had not yet conducted water sampling from a boat because state regulators had not deemed it safe to boat on the flooded river. This directly contradicts subsequent claims by Duke and DEQ that they had observed the spill by boat on Oct. 17.  "The agency that should be a watchdog protecting the public is acting more like a PR firm trying to protect Duke Energy's reputation," Waterkeeper Alliance attorney Pete Harrison said. "This is the same agency that only a year ago stood up in court and tried to block an agreement between Waterkeeper and Duke that requires Duke to remove all the coal ash from the ash ponds that flooded."

After denying any spills, Duke Energy ordered to clean up spilled coal ash - Duke Energy, North Carolina’s largest utility, has been ordered to submit a post-flood plan for the storage ponds at one coal-fired power plant, after reports surfaced of coal ash residue contaminating a local waterway.  After flooding from Hurricane Matthew earlier this month, Duke initially told ThinkProgress that any overflow from its coal ash storage ponds was not “significant.” Then, last week, the company admitted to the state that “an unknown amount of coal ash” had been discharged. On Wednesday, Waterkeeper Alliance, a local watchdog organization, published pictures of “a substantial but undetermined amount of coal ash” along the Neuse River in southwestern North Carolina. The following day, the state responded.  The North Carolina Department of Environmental Quality (DEQ) sent Duke a letter requiring the company to determine exactly how much coal ash had been released, come up with a testing plan for water and sediment near the basin, and assess any damage to the facility. DEQ had previously told reporters that the amount of spill would “fit in the bed of a pickup truck.” Over a million tons of coal ash is contained in the storage ponds that were submerged underwater, temporarily becoming part of the river after the hurricane passed through.  “It is hard for me to understand how both Duke Energy and state regulators failed to notice such a large area of coal ash contaminating the Neuse River when they claim to have inspected these very ash ponds on Saturday,” Upper Neuse riverkeeper Matthew Starr said in a statement. Video of the contamination can be found here.

Study: Coal ash not culprit for cancer-causing contaminant(AP) — A cancer-causing heavy metal found in water wells near coal ash pits and other industrial sites is much more widespread and naturally occurring than previously thought, university researchers said Wednesday. The presence of hexavalent chromium is more related to volcanic rock found in North Carolina and nearby states than the pits used to store the waste left after burning coal, Duke University geochemistry professor Avner Vengosh said. Badly tainted groundwater was found in wells more than 18 miles from a coal ash storage basin in central North Carolina’s Piedmont region, according to the study published in the American Chemical Society’s publication Environmental Science & Technology Letters.. “Groundwaters near coal ash ponds are contaminated. We see evidence for that. But the issue with hexavalent chromium, we’re finding, is unrelated and much larger than we thought.” The U.S. Environmental Protection Agency says hexavalent chromium is likely to be carcinogenic when ingested. The chemical was portrayed as poisoning residents in a California town in a Hollywood movie describing the work of former legal clerk and sleuth Erin Brockovich. The findings mean it’s urgent that the EPA set uniform safety limits for hexavalent chromium in drinking water, said Vengosh, who studies coal ash contamination at Duke’s Nicholas School of the Environment. The EPA’s current standard for all variations of chromium is 100 parts per billion, while California’s limit specifically for the more toxic hexavalent form is 10 parts per billion. The heavy metal is at the center of concerns about whether massive coal ash basins are polluting nearby groundwater. North Carolina last year warned more than 300 neighbors of Duke Energy Corp. coal plants against drinking their well water. That was based on calculations by state scientists that ingesting water containing more than 0.07 parts per billion over the course of a lifetime created a one-in-a-million chance of causing cancer. Duke Energy, which is not related to the university, said the study bolstered its position that its coal ash pits are not responsible for groundwater pollution.

Obama administration sends $28 million to aid coal regions | Reuters: The U.S. government released $28 million in federal grants to 13 coal-producing states on Wednesday to help them cope with the decline of the coal industry, driven by the move toward cleaner energy. With the Obama administration's announcement, over $66 million has been awarded this year to 71 projects that aim to aid workers displaced from coal company bankruptcies and create new industries in these areas. The competitive grants are part of President Barack Obama's POWER Initiative that provides federal resources to fund locally-created initiatives that help communities affected by coal job losses to prepare them for new economic activity. For example, the University of Utah will receive $790,000 to test whether technology to convert coal into carbon fiber materials can be used in different industries. And Friends of Southwest Virginia, a nonprofit group, will receive $3 million to boost the burgeoning tourism industry in the once prolific coal region. Wise County, Virginia, will get $2.2 million to train workers for jobs in the emerging drone industry. The future of the POWER program is uncertain and will depend on who wins the presidential election on Nov. 8. Democratic nominee Hillary Clinton has proposed a $30 billion plan to support the economic transition of coal-dependent regions, which would build on Obama's POWER Initiative.Republican nominee Donald Trump meanwhile has pledged that he will roll back environmental regulations, a strategy that he says will help revive the coal industry and put miners back to work.

Coal undermines climate and development goals, say aid bodies -- The coal industry has made false claims about the fuel’s role in combating poverty, three international aid bodies have said.In a report Beyond Coal, the Overseas Development Institute (ODI), the Catholic Agency for Overseas Development (Cafod) and Christian Aid said increasing the number of coal power plants around the world would neither deliver universal energy access nor eradicate extreme poverty. The report said coal had claimed too much credit for progress towards these goals, and cleaner and cheaper energy options could give better results. While the coal industry maintained that expanding the fuel’s use was critical to fighting extreme poverty and improving energy access in developing countries, “the opposite is true”, the three organisations said. Building just one third of planned coal-fired power plants would take the world past the 2 degrees centigrade level of warming, which would itself push “hundreds of millions into extreme poverty”, the report said. The sharp decline in solar and wind power costs meant scaled-up distributed renewable energy would be the cheapest and quickest way of reaching households that lack reliable electricity. Co-author Ilmi Granoff said: ‘There’s no question that rich economies must rapidly replace coal with low-carbon energy to avoid a climate crisis. “The coal industry continues to spread false claims that coal is critical to fighting extreme poverty and improving energy access in poorer countries. This paper, from organisations on the front line of the fight against poverty, shows that coal undermines both climate and development goals, while clean energy supports them.”

Energy poverty is a real problem. Coal is a bogus solution --Some 1.2 billion people around the world lack access to electricity. 2.8 billion burn charcoal, wood, or other biomass to cook and heat their homes. Lack of access to clean, reliable energy services, or "energy poverty," is a terrible problem for those who face it, leading to hours of drudgery gathering fuels and high mortality from indoor pollution (which kills around 4 million people a year). Energy poverty stands in the way of better health, better education, and better jobs. Development experts increasingly agree that there is no way to end extreme poverty without making energy access universal. That’s what the UN and the World Bank have set out to do by 2030 with the Sustainable Energy for All initiative.Meanwhile, the coal industry finds its fortunes on the decline in the developed world, losing out to natural gas and renewables. All its hopes for survival, much less growth, rest with the developing world.So it has glommed on to the surge of interest in energy poverty and is now selling itself as a solution. For instance, here’s Peabody Energy, calling "advanced coal" a solution to energy poverty:  Here’s the World Coal Association doing the same. Here’s Arch Coal providing energy-poverty talking points to Jeb Bush when he attacked the pope over climate change. Here’s Murray Energy CEO Robert Murray delivering the same talking points on Fox News. Here’s the Daily Caller pushing them, direct from right-wing think tank the Energy & Environment Legal Institute. Here’s Fred Smith of the Competitive Enterprise Institute. And so on. Are they right? Is coal the key to providing universal energy access? A new paper, from 12 international poverty and development organizations (led by the Overseas Development Institute), argues no. In fact, the opposite is true: Not only will more coal plants do nothing for energy access, they will impose unnecessary suffering on the poor.

German economy minister sees no brown coal exit before 2040 | Reuters: Economy Minister Sigmar Gabriel does not expect Germany to withdraw from brown coal in its power production before 2040, despite a growing debate over how to protect the climate from rising CO2 emissions. "It will on no account be switched off in the next decade - in my opinion not even in the one after that," Gabriel told an energy conference in Berlin. Calls have grown for Germany to set out a timetable for a withdrawal from coal in power production following the climate protection deal struck in Paris last December. The government has pledged to reduce CO2 emissions by up to 95 percent compared to 1990 by the middle of the century. Domestic hard coal mining will cease in 2018 and Germany's coal miners and users expect the country's last brown coal mines to close by around 2045. While coal will lose significance, Gabriel said it was important to first come up with alternative business opportunities in affected regions.

Fort Calhoun Nuclear Plant Closes When It Can't Compete With Cheaper Energy : NPR: A drive 30 minutes north of Omaha, Neb., leads to the Fort Calhoun nuclear power plant. It's full of new equipment. There's a white concrete box building that's still under construction. It's licensed until 2033. But the plant is closing Monday.Nuclear power is expensive, especially when compared to some of the alternatives, so the U.S. nuclear power industry is shrinking. As more plants go offline, industry leaders are forced to reckon with what critics call a "broken system" for taking plants out of service and storing radioactive waste.Brock Lindau has spent most of his career at the Fort Calhoun power plant. He helped install almost $700 million worth of upgrades that got the plant through a flood and a fire, and helped get it licensed to operate until 2033. "I think we're going 100 mph, running perfect, and somehow they just took the wheels out from underneath us, and we're trying to skid to a halt," Lindau says. For all the work Lindau has put into the plant, he's gotten a good income. He and his wife Lisa used some of that money to buy a big house that they love, but they're getting the house ready to sell for when Brock loses his job. If the Lindaus are perplexed it's understandable. The Fort Calhoun plant cranked out electricity for 43 years, and it was licensed for another 17. Decommissioning will cost up to $1.5 billion, and take up to 60 years to complete. Still, Tim Burke figures eating all of that is cheaper than keeping the plant in production.Burke runs the Omaha Public Power District, which owns Fort Calhoun. He says operating a small plant like this one, especially in a region with abundant wind power and natural gas, just doesn't make sense.

Moniz: Congress should authorize interim nuclear fuel storage --Energy Secretary Ernest Moniz warned Monday that Congress and businesses need to act with more urgency to work out a medley of challenges in promoting nuclear power. The United States is on track to experience a wave of nuclear plant retirements around 2030. Those closures will make it even harder for states to meet their goals under the Clean Power Plan if it’s upheld by the U.S. Supreme Court, Moniz said at an event hosted by the Center for Strategic and International Studies. Because raising capital and making the necessary business decisions on nuclear power is a slow process, there are only about five years left to start relicensing before many nuclear plants close. If more nuclear plants can extend their licenses to run for 80 years rather than 60, that would be “a very big deal” in terms of keeping nuclear power available, Moniz said. This is important because the lack of a clear solution for storage of spent nuclear fuel creates a “significant headwind” for opening new nuclear facilities, Moniz said. He called on Congress to pass legislation creating an interim storage facility for spent nuclear fuel. Moniz previously told a Senate Appropriations subcommittee the department might be allowed to store nuclear waste at a privately managed facility without congressional approval. Even so, Moniz said Monday that it would help if Congress acted on the issue. “If Congress acted to give us the authorities — and whether public or privately held storage — we could be having a pilot facility running in not much more than five years,” he said.

 Radioactive Iodine Leak Reported At Norwegian Nuclear Research Reactor --Norwegian authorities reported that a radioactive leak had taken place at a nuclear research reactor in southern Norway. The reactor at the Institute for Energy Technology (IFE) in Halden leaked radioactive iodine, the Norwegian Radiation Protection Authority (NRPA) said. Those working at the reactor at the time of the discharge on Monday were evacuated from the facility, SkyNews reported. The leak has now been contained, the IFE said. In a statement, the NRPA said the fault occurred "due to a technical failure during treatment of the fuel in the reactor hall". The incident is not expected to harm the environment outside the reactor, it added. NRPA director Per Strand said: "Our focus now is that IFE stopped the spill. "We are in continuous contact with the IFE. "We will open a new supervision relating to this incident to uncover how this could happen and why we were not notified until the day after."The IFE reactor is close to the border with Sweden, but the Swedish Radiation Safety Authority said it did not detect any radiation after the discharge.

French 'Shocked' As Power Prices Spike To 8-Year Highs On Nuclear Reactor Probe Shutdown The scale of forced closures in nuclear power-reliant France - 19 reactors offline and 12 more due to shut - is the biggest since the Fukushima disaster in 2011, after French nuclear safety watchdog ASN warned its sprawling probe into forged quality control reports on reactor parts would turn up more irregularities. These deepening setbacks have sent French power prices soaring to 8 year highs and are expected to spike more into the winter...As Bloomberg reports, French power prices for next-month delivery, already at the highest in eight years, are set for a record increase in October amid expectations that prolonged maintenance at Electricite de France SA’s nuclear reactors will expose further anomalies after manufacturing problems in components came to light. Concerns about shrinking supply as colder winter weather increases consumption helped boost electricity imports and sent prices soaring to record levels in Germany and the U.K. Reuters adds that traders said other fuels that interact with power such as coal, oil, gas and EU carbon emissions respond to different drivers and were only partially bullish because of the French nuclear situation. But concerns are adding up. On Tuesday, a delayed restart at the Civaux-2, Dampiere-3 and Gravelines-2 plants added to nervousness as much as a French government decision to maintain a mechanism under which main utility EDF must sell supply cheaply to rivals."Would France stop all the faulty nuclear plants in case it means shutting down factories in the country and have people freezing?" asked one trader.

Russia Unveils First Images Of Nuclear Missile Capable Of Reaching US Soil --Russia reveals photos of a new highly advanced liquid fuelled heavy ICBM capable of evading anti-missile defences and hitting US territory with 10 tonne nuclear payload.The Makeyev Design Bureau – the designer of Russia’s heavy liquid fuelled Intercontinental Ballistic Missiles (“ICBMs”) – ie. of missiles capable of reaching US territory from Russian territory, has published the first picture of Russia’s new heavy Sarmat ICBM which is due to enter service shortly, probably in 2018. The picture is accompanied by a short statement which reads “In accordance with the Decree of the Russian Government ‘On the State Defence Order for 2010 and the planning period 2012-2013,’ the Makeyev Rocket Design Bureau was instructed to start design and development work on the Sarmat. In June 2011, the Bureau and the Russian Ministry of Defense signed a state contract for the Sarmat’s development. The prospective strategic missile system is being developed in order to assuredly and effectively fulfil objectives of nuclear deterrent by Russia’s strategic forces.” The Sarmat is the planned replacement of the R-36 family of Russian ICBMs, which entered service with the Soviet armed forces in the 1960s. The R-36 family culminated in a series of missiles known in the USSR and Russia as the R-36M, which entered service in the 1970s. With a throw weight of 8,800 kg these were the heaviest and most powerful ICBMs built up to now. Here is a video of one being launched:

Next U.S. offshore wind farm set to emerge from Lake Erie -- The next U.S. offshore wind farm in the U.S. will probably be almost 500 miles (800 kilometers) from the nearest ocean. The Lake Erie Energy Development Corp. expects to finalize a deal by yearend with Fred Olsen Renewables AS to build a 20.7 megawatt wind project in Lake Erie, off the Ohio coast, the president of the Cleveland-based non-profit group said in an interview. LeedCo is developing the $127 million Icebreaker project to demonstrate that offshore turbines are viable in the Great Lakes, a region with the potential to generate 1,000 megawatts of wind energy by 2020. Construction may start in early 2018. The only U.S. offshore wind farm was completed this year near Block Island, by Deepwater Wind LLC. “Building offshore wind on the Great Lakes is our best opportunity to generate clean energy locally,” LeedCo President Lorry Wagner said in an interview Wednesday at the American Wind Energy Association Offshore Windpower conference in Warwick, Rhode Island. The project received a $40 million grant in May from the U.S. Energy Department. Norway-based Fred. Olsen will build, maintain and eventually own the project. Cleveland Public Power has agreed to buy two-thirds of the electricity and LeedCo is negotiating to sell the remainder to other companies.

Corporate leaders urge GOP to reinstate renewable energy  -- Some of the world's largest corporations employing more than 25,000 in Ohio oppose plans by state GOP lawmakers to get rid of state standards requiring utilities to sell increasing percentages of power generated by wind, solar and other renewables. Nine corporations, including manufacturers Whirlpool and Owens Corning and food giants Nestle and Campbell Soup, released statements Tuesday urging state lawmakers to bring back rules requiring power companies to provide annually increasing amounts of electricity generated by wind, solar and other renewable technologies. The nine, many of which have also worked with the Ohio Manufacturers' Association to oppose changes in Ohio's renewable energy standards, this time organized with Ceres, a non-profit group that works with global corporations and investors around the world to encourage corporate sustainability."Now is the time for lawmakers to strengthen Ohio's energy efficiency and renewable energy standards," said Alli Gold Roberts, policy manager at Ceres. "These standards are good for business, and failing to reinstate them will send the wrong signal to companies and investors throughout the state." Republican majorities "froze" the rules for two years in 2014 after months of bitter hearings about renewable mandates and parallel rules requiring utilities to help customers use less electricity. Lawmakers froze that law as well, saying they wanted time to study the issue.

Murray Energy sells Utica shale land in eastern Ohio for $63.6M - Columbus Business First - Ohio coal company Murray Energy Corp. has sold 5,900 acres in the state's Utica shale oil and gas play. Murray sold the land to an undisclosed buyer for $63.6 million. The acreage is in Belmont and Monroe counties, two of the most active natural-gas production counties in the state. Murray is based in St. Clairsville in Belmont County. In a statement, CEO Bob Murray said the sale allows the company to focus on its core business – which is coal, not oil and gas. We've asked how much land the company still owns and will update if the company discloses it. Murray will get $48.6 million upfront and $7.5 million in 2017 and again in 2018. It'll use some of the funds to lessen its debt. Murray Energy is the largest privately owned coal mining company in the country, led by Murray, an outspoken advocate for the industry who is equally outspoken against regulatory policies he sees as threatening coal. “Obama is the greatest destroyer America has ever had,” Murray told me late last year. “There’s no question about it. That’ll be his legacy. Jimmy Carter was bad; this guy is horrible. So I don’t know who’s gonna come out of this but it's vital to the survival of the United States.”

 Prices, Oil Rig Numbers Up in Ohio and West Virginia — Southwestern Energy Co. lost $2.5 billion in the first nine months of 2016, a reflection of the global oil and natural gas price collapse that could be felt throughout the Marcellus and Utica shale region this year. However, commodity prices on the New York Mercantile Exchange are steadily recovering, so Southwestern and other drillers should be able to place more rigs and fracking crews back in service across Ohio and West Virginia — all the while recovering from a year of monetary losses. Amid those profit losses, some landowners are seeing companies offer them far less to renew the leases originally signed five years ago when prices boomed into the $5,000-per-acre range and beyond. “When rigs are running, that is a great sign,” said Tim Greene, owner of Land & Mineral Management of Appalachia and a former West Virginia Department of Environmental Protection inspector. “Any uptick in price certainly helps.” In April, a 1,000-cubic-foot unit of natural gas (Mcf) was worth about $1.97 on the NYMEX, but on Friday, this price hovered around $3. A barrel of oil, meanwhile, sold for about $39 on the exchange in April, but the price is now over $50. “Any little bit helps,” said Shawn Bennett, executive vice president of the Ohio Oil and Gas Association. “As long as gas prices are at least around $3, you’ll have some drilling in Belmont County and Monroe County.” Oilfield services giant Baker Hughes tracks active drilling rig counts across the globe. There are now 14 rigs running in Ohio compared to only 11 in April, a small but steady increase. The numbers in West Virginia, however, dropped to 10 as of last week. “It’s really just supply and demand, like anything else,” Greene said. “As long as the price goes up, the number of rigs will follow.”

Enterprise close to committing to US NGL project -  Enterprise Products Partners is close finalizing initial plans that call for building out a system to transport 60,000 b/d of propane from the Marcellus and Utica shale gas-producing plays to Mont Belvieu, Texas, in part by repurposing and reversing the flow on the 795-mile Centennial Pipeline, a pipe that carries refined products from Texas to Illinois that has been virtually unused since mid-2011. "We're on the one-yard line of getting this project committed to and taking off," Danika Yeager, vice president regulated business, said on the sidelines of the Platts Appalachian Oil & Gas Conference on Tuesday. Enterprise is a 50% partner in Centennial with Marathon Petroleum, which operates the line. Marathon was not immediately available to comment Tuesday. "If we can get construction started by the end of this year, we expect to have this in service by third quarter 2018," Yeager said.She said future plans call for expanding the project to where it also will be able to carry ethane, with a capacity of delivering 100,000 b/d of NGLs from the Marcellus and Utica plays to the Gulf Coast after 2018. Yeager said the project developers are counting on seeing a strong NGL demand pull from the Gulf Coast region in coming years. "We're forecasting that the demand is not is going to be met with western US supply alone and that Appalachia is going to be critical to providing the supply to meet that demand down in the Gulf Coast," she said.

Sunoco Logistics pipeline spills gasoline in Pennsylvania: media | Reuters: A Sunoco Logistics Partners LP pipeline spilled about 1,300 barrels of gasoline into the Susquehanna River in Lancaster County, Pennsylvania, on Friday, according to local media. The pipeline breach was caused by heavy flooding in Lycoming County, which lies in the north-central region of Pennsylvania, LancasterOnline reported. The 8-inch (20-cm) pipeline began leaking in Gamble Township, Lycoming County, at about 3 a.m. on Friday, LancasterOnline reported, citing a statement from Sunoco Logistics. The line was reportedly shut down after detecting a drop in pressure. Sunoco Logistics and the Pennsylvania Emergency Management Agency did not respond to requests for comment. The report of the leak comes as the Standing Rock Sioux tribe and environmental activists have been protesting construction of the 1,100-mile (1,886-km) pipeline in North Dakota for several months saying it threatens water supply and sacred sites.

55,000 gallons of gasoline spills into Susquehanna, effect on Lancaster County drinking water unclear - A broken pipeline in Lycoming County on Friday dumped 55,000 gallons of gasoline into the Susquehanna River. As the river, swollen with 6 to 8 inches of rain that fell overnight Thursday, rushes south, Lancaster County officials are gearing up to prevent contamination of the local water supply. “With the amount that spilled, we certainly could see some impact on our intake along the Susquehanna River,” Charlotte Katzenmoyer, director of public works for Lancaster, said Friday afternoon. “We’ll continue to monitor it.”The 8-inch pipeline was breached in Gamble Township, Lycoming County, at about 3 a.m. Friday, according to a statement from Sunoco Logistics, which shut down the line after detecting a drop in pressure. The bureau said their “best guess” is that 1,300 barrels of product — approximately 55,000 gallons — spilled into Wallis Run, a tributary that flows into the Susquehanna. A response team from the Department of Environmental Protection is on site with local emergency responders, the bureau reported. “Personnel are still having trouble accessing the break site to put eyes on it and get a better idea of the extent and volume due to flooding in the area,” according to the alert. “Please inform local water authorities of the potential contamination if they use the Susquehanna River as a water source.” “Certainly it’s something to be concerned about,” added Randy Gockley, director of the Lancaster Emergency Management Agency. “We don’t know yet the speed it will travel down the river.” State officials said Friday the gasoline could reach the Lancaster area early Tuesday morning.

 Demonstrations Planned at Schumer's Offices in Fight Against Gas Pipeline - As a Nov. 1 target date for the opening of the Algonquin Incremental Market expansion project (A.I.M.) approaches, project developer Spectra Energy and community and environmental activists united against it are each rushing to their own emergency measures. The activists are organizing statewide demonstrations on Oct. 26 at the offices of Sen. Chuck Schumer of New York, demanding that he come out from behind his desk and take a "now or never" stand against the natural gas pipeline project. Meanwhile, Spectra subsidiarity Algonquin is rushing to get the gas running through the just completed network—or nearly completed to be most accurate. The company has failed to get a drill bore across the Hudson to connect the pipeline segment in Rockland to the next segment in Westchester county. According to activists, Federal Energy Regulatory Commission filings indicate Spectra is now seeking permission to use the old pipeline that A.I.M. was supposed to replace to move gas across the Hudson to the new section already laid alongside the Indian Point nuclear power plant. That emergency mix-and-match approach has only heightened concerns among community members already alarmed by the project itself, its hurry-up construction schedule and its route through beloved parkland and among middle-class homes throughout northern Westchester. A.I.M. has been criticized by just about all the local residents directly affected by its construction and by the local politicians and municipal officials who represent the communities that will play host to it.    But proximity is a relative notion in this case, Paola Dalle Carbonare points out. Should the worst occur and a pipeline explosion damage critical structures at Indian Point, millions of people in the tri-state area will discover how truly small the Indian Point neighborhood actually is. “We are all involved,” she says. “There are 20 million people involved here. This is a national security issue.

Breaking: 15 Arrested Protesting Spectra Pipeline Scheduled to Go Online Nov. 1 -  Fifteen people were arrested today at a rally this morning outside the Manhattan office of New York Sen. Charles Schumer, where they have maintained a presence for the past 60 days. With the Algonquin Incremental Market (AIM) expansion of the Spectra Energy pipeline in Westchester County, New York set to go online by Nov. 1, opponents are asking Schumer to intervene and use his influence to put a halt to the project. Schumer's office did not respond to a request for comment by EcoWatch.  Members of Resist Spectra and their supporters showed up on Third Avenue, chanting "We will not let you build this pipeline." Many sat along 780 Third Avenue, the building housing Schumer's New York City office.  The AIM project is set to carry Marcellus Shale fracked gas to New England, passing through New York State and crossing the Hudson River at scenic Stony Point. The pipeline runs close to the aging Indian Point nuclear power plant in Buchanan. The oldest of the three reactors on site began operations in 1962, but has since been shut down. The other two operating reactors date to 1974 and 1976. One of the opponents' main concerns is the proximity of the pipeline to the nuclear facility. The 42-inch pipeline passes within 105 feet of an electrical substation and 1,320 feet from the reactors. While it's not California, Westchester County does have a history of earthquakes and the Ramapo Fault runs near the Indian Point nuclear plant. In 1783 , a magnitude 5.0 quake struck the area, and in the early morning hours of Oct. 19, 1985, a 3.6-magnitude earthquake on the Ramapo Fault system caused the plant to declare "an unusual event" but no damage was reported. The probability of a 5.0 or greater earthquake in the county in the next 50 years is estimated at 3.36 percent.  That's enough to rattle residents from Westchester to Brooklyn . Pipeline opponents point out that 20 million people live within a 50-mile radius of Indian Point. An elementary school sits just 400 feet from the pipeline.

Fracking Linked to Cancer-Causing Chemicals, Yale Study Finds --- Yet another study has determined that hydraulic fracturing, or fracking , might be a major public health threat . In one of the most exhaustive reviews to date, researchers from the Yale School of Public Health have confirmed that many of the chemicals involved and released by the controversial drilling process can be linked to cancer . "Previous studies have examined the carcinogenicity of more selective lists of chemicals," lead author Nicole Deziel, Ph.D., assistant professor explained to the school . "To our knowledge, our analysis represents the most expansive review of carcinogenicity of hydraulic fracturing-related chemicals in the published literature." For the study, published in Science of the Total Environment, the researchers assessed the carcinogenicity of 1,177 water pollutants and 143 air pollutants released by the fracking process and from fracking wastewater . They found that 55 unique chemicals could be classified as known, probable or possible human carcinogens. They also specifically identified 20 compounds that had evidence of leukemia/lymphoma risk. One of the scarier parts from this study is that the researchers could not completely unpack the health hazards of fracking's entire chemical cocktail. More than 80 percent of the chemicals lacked sufficient data on cancer-causing potential, "highlighting an important knowledge gap," the school noted.  The unconventional drilling rush in the U.S. has expanded to as many as 30 states, spelling major consequences to the air we breathe and the water we drink. The Wall Street Journal reported in 2013 that more than 15 million Americans lived within a mile of a well.  The biggest concern is for people and especially children with fracking operations right in their backyards. In fact, Environment America found that more than 650,000 kindergarten through 12th grade children in nine states attend school within one mile of a fracked oil or gas well.

Report: Children and the elderly at risk from "dangerous and close" fracking - – More than 650,000 kindergarten through twelfth grade children in nine states attend school within one mile of a fracked oil or gas well, putting them at increased risk of health impacts from dangerous chemicals and air pollution. The finding comes from a new study (see PDF) by Environment America Research & Policy Center that exposes the proximity of fracking near schools, hospitals, day care centers and nursing homes, risking the health of our children and other vulnerable populations.  “Schools and day care centers should be safe places for kids to play and learn,” said Rachel Richardson, director of Environment America’s Stop Drilling program and co-author of the report. “Unfortunately our research shows far too many kids may be exposed to dirty air and toxic chemicals from fracking right next door.”  Using data provided by the oil and gas industry and state regulators, Dangerous and Close – Fracking Puts the Nation’s Most Vulnerable People at Risk found that:
* 1,947 child care facilities, 1,376 schools, 236 nursing care providers and 103 hospitals are within a one-mile radius of fracked wells in the nine states examined.
* More than 650,000 kindergarten through twelfth grade children attend school within one mile of a fracked well.
* The highest percentage of children attending school close to fracked wells is in West Virginia, where 8 percent of children spend their school days within one mile of a fracked well.
* Texas has the largest number of children attending school close to a well, with 437,000 kindergarten through twelfth grade students attending public or private school within one mile of a fracked well.
The report included data from nine states total including Arkansas, California, Colorado, New Mexico, North Dakota, Ohio, Pennsylvania, Texas and West Virginia. “American society aspires to protect children, the sick and the elderly," said Elizabeth Ridlington, policy analyst with Frontier Group and co-author of the report. "This report shows that we’re violating that ideal because of our overwhelming dependence on fossil fuels. We’ve sunk to putting vulnerable populations at risk instead of making the wholesale shift to conservation and renewable energy."

Is the shale honeymoon over for PADD1 (East Coast) refineries? -- The shale boom breathed new life into East Coast refineries that were under threat of closure by their owners between 2009 and 2012. Now some of those same refineries are under threat again, this time due to poor margins as well as the high cost of compliance with environmental regulations. After enjoying three years of improved margins through access to advantaged domestic crude delivered by rail from North Dakota, five East Coast refineries are now paying international prices for imported crude again in 2016 after differentials between domestic benchmark WTI and international equivalent Brent narrowed to less than $1/bbl in the wake of the crude price crash and an end to the federal ban on most crude exports. Today we discuss PADD 1 refinery prospects.

Energy Producers Edge Closer to Tapping ‘Drilled but Uncompleted’ Wells -- U.S. oil and gas companies have drilled thousands of wells they have yet to tap, creating a ready reserve of fuel that could surge onto the market when energy prices recover. As producers report quarterly earnings during the next few weeks, a question looms: When will they start exploiting these “drilled but uncompleted” wells? While the industry often has an inventory of drilled wells awaiting completion, the backlog has grown significantly during the past two years as companies such as Continental Resources Inc. and EOG Resources Inc. deliberately delayed tapping wells to wait for higher energy prices.Federal estimates show the number of such wells in the nation’s seven most prolific drilling regions stood at 5,069 in September, up from 3,768 in January 2014, before oil prices began falling. Because companies have already spent the money to drill the wells, known in the industry as DUCs, bringing on the supply they hold is cheaper than drilling and fracking a new well. That means DUCs are an economic proposition for many companies, especially with U.S. crude now trading at around $50 a barrel. Ryan Duman, a senior analyst at energy-consulting firm Wood Mackenzie, said he expects to see companies completing many of the delayed wells in the next 18 months. “You’re at a point where pretty much every DUC that’s sitting out there is in the money,” Mr. Duman said.

Environmental groups raise concerns over Texas oil find near Balmorhea (AP) — Some environmental organizations have raised concerns about a reported big oil and gas discovery in West Texas. The Houston Chronicle ( reports several environmental groups are scrutinizing plans to drill around Balmorhea (BAL’-muh-ray) State Park and its famous spring-fed pool. Houston-based Apache Corp. last month announced plans for drilling after projecting up to 3 billion barrels of oil and 75 trillion cubic feet of natural gas in an area it calls Alpine High. The group called Earthworks has commissioned an assessment of the potential risks to the local waters. The Nature Conservancy plans to begin testing water quality on several sites it owns in the area. Apache says it’s taking environmental responsibility very serious and will work with University of Texas at Arlington scientists to study the area’s water quality.

New Oil Discoveries Largely Unaffected by Paris Pact | Climate Central: Large crude oil discoveries in 2016 face uncertain prospects of development for many reasons, but climate change isn’t one of them, at least for the moment. Climate policies that help countries meet their obligations under the Paris Agreement are likely to have little effect on newly discovered oil fields because the Paris pact all but ignores crude oil consumption and production, experts say. The fate of new oil discoveries hinges mainly on volatile crude oil markets, the availability of oil in existing fields and evolving electric vehicle technology.Energy companies in the U.S. have announced major crude oil discoveries that could significantly contribute to greenhouse gas pollution even as U.S. carbon-cutting policies like the Clean Power Plan are contested in court.Apache Corp. announced in September that it has discovered 3 billion barrels of oil in West Texas and Caelus Energy said in October that it found 6 billion barrels of crude beneath the Arctic Ocean off of Alaska’s North Slope. If all of the oil in those discoveries is consumed, its carbon dioxide emissions may be roughly equivalent to 70 percent of the U.S.’s total annual carbon dioxide pollution, according to U.S. Department of Energy data. Every billion barrels of oil that are consumed emit roughly the equivalent of about 8 percent of U.S. annual carbon emissions, Energy Information Administration analyst Perry Lindstrom said.

USGS: Oklahoma earthquake likely caused by wastewater disposal (AP) — The third-largest earthquake in Oklahoma was likely triggered by underground disposal of wastewater from oil and natural gas production, the U.S. Geological Survey found in a report issued Monday. The magnitude 5.1 quake that struck northwest of Fairview in February was likely induced by distant disposal wells, the agency said. The USGS report indicated that in the area around where the Fairview quake occurred, the volume of fluid injected had increased sevenfold over three years. The Fairview temblor had been the largest in the central and eastern U.S. since a magnitude 5.7 quake hit near Prague in 2011. In September, the largest earthquake in the state struck near Pawnee with a magnitude 5.8. The relationship between that quake and wastewater injection is still being studied. A study by the U.S. Geological Survey last year suggested that the sharp rise in earthquakes in Oklahoma in the past 100 years had likely been the result of industrial activities in the energy-rich state, such as oil and natural gas production.In response to research suggesting a wastewater disposal-earthquake link, state regulators have ordered the shutdown of some disposal wells and asked producers to reduce disposal volumes in earthquake-prone regions of the state.

Federal agency levies $732,100 in fines against ONEOK (AP) — The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration has announced fines totaling $732,000 against Tulsa-based ONEOK following a fire at a ONEOK facility in Bushton, Kansas. The PHMSA says 15 safety violations of pipeline safety regulations were found during an investigation following the fire. The fines are against ONEOK NGL Pipeline, L.P., ONEOK NGL Pipeline, L.L.C., and ONEOK Underground Storage Company, L.L.C. PHMSA says ONEOK operates 11,500 miles of pipeline transporting natural gas liquids in Oklahoma, Kansas and several other states. Officials with ONEOK and the PHMSA did not immediately respond to requests for comment.

Oil spill reported at key U.S. storage depot (UPI) -- Local media in Oklahoma reported Monday a company was working to contain a release of crude oil from near the main U.S. oil storage hub in Cushing. News9, a CBS-affiliated television station in Cushing, Okla., reported a release from a pipeline controlled by the Seaway Pipeline Co. The release was reported Monday morning, though no spill volume was available. "As emergency responders work on clean up, law enforcement says the spill is not a threat to residents and no evacuations have been ordered," the report read.  There was no statement available from Seaway. The pipeline is run by a joint venture between Enbridge and Enterprise Products Partners, which operates the 400,000 barrel per day artery. The Seaway pipeline runs from the Cushing storage hub to the southern U.S. coast. The direction of the pipeline was reversed in 2012 in order to reduce transportation costs and accelerate development of crude oil reserves in North America. The capacity was expanded from 150,000 bpd before the reversal. The release from the Seaway pipeline is the second associated with the Cushing storage hub in less than a month. Plains All American Pipeline reported problems with infrastructure from Colorado City to Cushing earlier this month. Deliveries to and from Cushing could impact data on crude oil storage later in the week and skew market perceptions. An increase in storage is indicative of supply-side pressures, while a draw would support a market characterized by strong demand.

Enterprise's Seaway Crude pipeline system shut after Cushing, Oklahoma spill | Reuters: A leak late on Sunday prompted Enterprise Products Partners to shut its Seaway Crude Pipeline system, the largest conduit for moving oil from the major storage hub in Cushing, Oklahoma to Gulf coast refineries. News of the leak dragged U.S. crude prices lower on Monday on worries that shutting down the 850,000 barrel-per-day (bpd) Seaway system would bottle up barrels in storage in Cushing, the delivery point for the benchmark West Texas Intermediate (WTI) futures contract. U.S. crude futures slipped 1.3 percent in afternoon trading, while international benchmark Brent crude futures fell about 1.2 percent. Enterprise said on Monday it had shut down the 400,000-bpd pipeline, which it calls its legacy line, but did not provide an estimate of the volume spilled. The total amount released would not be determined until recovery efforts were complete, the company said. The company on Monday afternoon said it had restarted its 450,000 bpd Seaway Twin, which was shut as a precaution. Most of the oil released was contained in a retention pond at a facility belonging to Enbridge Inc, a joint owner of the Seaway Crude Pipeline Company with Enterprise. Enterprise said there was no threat to the public and no evacuations were ordered following the spill, located near the intersection of Linwood Avenue and Texaco Road in Cushing. The company was working with emergency responders and law enforcement to address the situation.

Seaway Restarts One of Two Pipelines Shut After Spill -- 2nd Update - Enterprise Products Partners LP ( EPD ) resumed pumping Monday on one of two major north-south oil pipelines that were shut down after an oil spill in Oklahoma. The Seaway Crude Pipeline Co., a 50/50 joint venture between Enterprise and Enbridge Inc. ( ENB ), said the 400,000- barrel-a-day Legacy pipeline remains closed after the Sunday night spill while investigators try to figure out the cause and quantity of oil released. It said in the statement the adjacent, 450,000-barrel-a-day Loop pipeline, which was also shut as a precaution, "has resumed service." The spill happened in an industrial area of Cushing, Okla., the small town that is the U.S. hub for crude oil. About 60 million barrels of crude oil are stored in Cushing in massive tanks and pipelines. Seaway said the section where the oil spilled has a capacity to hold 50,000 barrels of oil but said "the actual amount of crude oil released will be significantly less." It said all of the crude oil spilled was contained in a retention pond at Enbridge's facility, adding that workers with trucks are collecting the spilled oil to put it back into storage tanks onsite. It said there were no injuries or fire related to the incident and that there was never a threat to the public. The oil-pipeline spill and shutdown comes one month after a major gasoline pipeline run by Colonial Pipeline Co. had to halt pumping for a couple of weeks due to a spill in Alabama.

Seaway pipeline operating at half capacity - The roadway to Seaway Crude Pipeline System is closed but just beyond it is where 850,000 barrels of crude oil per day are produced. Right now its operating at just about half of its capacity. The Seaway Crude Pipeline is comprised of two pipelines, the legacy pipeline and the twin pipeline. The company tells Fox 25 when they learned that just before midnight on Sunday that they legacy pipeline was releasing crude oil they shut down both pipelines. "The line that was not impacted that was shut down as a precautionary measure was returned to service earlier this morning." Seaway Spokesperson Rick Rainey said. "As far as the line that had the release on it we are still early in the process, our main concern right now is making sure that we continue to clean up and it's safe for our people to go in and and take a look at the pipeline." The Seaway Crude Pipeline is one the largest pipeline systems feeding crude oil from Cushing, Oklahoma to the Gulf Coast Coast Refineries. News of the oil leak also made national headlines. However, things appear to be under control and there was never a threat to residents since the pipeline is located an industrial area on Linwood Avenue in Cushing. "The crude oil was actually contained within a reservoir on the site of a third party operator and we now have seven vacuum trucks there on site and we are in the process of returning the crude oil to the on site tank," Rainey said.

Oklahoma, Pennsylvania recovering after weekend oil spills - An oil spill in Oklahoma forced the shutdown of a major, 850,000-barrel per day pipeline system that supplies crude oil to Texas refineries. The incident follows another pipeline rupture in Pennsylvania, where 55,000 gallons of gasoline poured into a river. As of Monday, the Seaway Crude Pipeline Co. has resumed pumping at its 450,000-barrel-a-day (bpd) Loop (twin) pipeline, which was shut down “as a safety precaution” following the spill at a parallel pipeline. “Vacuum trucks are being used to recover the crude oil and return it to storage tanks onsite,” the company said in a statement Monday, as clean-up operations continued. The 400,000-bpd “legacy line” remained closed in the meantime, but Seaway hopes to bring it back “as soon as possible.” “The impacted segment of the legacy pipeline has a capacity of 50,000 barrels,” the company said without providing the actual amount of the crude oil that spilled. The company says that the total won’t be assessed until recovery efforts are complete, but expects that amount of released oil will be “significantly less” than the pipeline’s capacity. The spill in Oklahoma came less than two days after an incident in Pennsylvania, which resulted in 55 gallons (or 1,300 barrels) of gasoline seeping into the Susquehanna River in Lancaster County on Friday. The 8-inch (20-cm) Sunoco pipeline began leaking in Gamble Township, Lycoming County, at about 3:00am on Friday. Pennsylvania American Water warned customers to reduce water use as the leak threatened drinking water. The “conservation notice” was lifted on Sunday. “The company started to resume normal operations Saturday afternoon after testing of source water along the Susquehanna River found no detection of gasoline near the Milton Treatment Plant’s raw water intake,” Pennsylvania American Water said in a statement, warning that water could be “discolored or cloudy” in some areas.

220 'Significant' Pipeline Spills Already This Year Exposes Troubling Safety Record - Three major U.S. pipeline spills within the last month are just a small part of the 220 significant incidents reported so far this year—and 3,032 since 2006—that provide a stark reminder of the environmental hazards of an aging pipeline infrastructure carrying fossil fuels. The costs of these leaks since 2006 has amounted to $4.7 billion.

  • 1. Oklahoma: On Oct. 24, the 30-inch S-1 pipeline carrying crude oil from the critical Cushing, Oklahoma hub to refineries and chemical plants on the Gulf Coast began to leak and was shut down overnight. It was the second release connected with the Cushing storage facility in less than a month.
  • 2. Pennsylvania: On Oct. 21, 55,000 gallons of gasoline gushed from a ruptured Sunoco Logistics pipeline in Williamsport, Pennsylvania, just upstream from the Susquehanna River. Carol Parenzan, Middle Susquehanna Riverkeeper , said that witnesses who contacted her office reported that the "smell of petroleum is so thick you can taste it." The 80-year old pipeline was damaged by a heavy storm that dumped seven inches of rain on the area.
  • 3. Alabama: Last month, the Colonial Pipeline in Alabama leaked an estimated 336,000 gallons of gasoline and triggered concerns about gas shortages for drivers in the East. That spill was Colonial's fifth in the state this year and occurred on a 43-year old section of the pipeline.

Based on data from the Pipeline and Hazardous Materials Safety Administration (PHMSA), an arm of the U.S. Department of Transportation, the number of significant pipeline incidents grew 26.8 percent from 2006 to 2015. A significant incident is defined as one that results in serious injury or fatality, costs more than $50,000, releases more than five barrels of volatile fluids such as gasoline or 50 barrels of other liquids, or results in a fire or explosion. In 2015, there were 326 such incidents—almost one per day.  Some 55 percent of the U.S. network of 135,000 miles of pipeline is more than 45 years old. Technology designed to detect pipeline leaks is highly unreliable, even though companies like Colonial Pipeline tout their use as a way "to insure safe operations." But a recent Reuters report found that these technologies are "about as successful as a random member of the public" finding a leak. Of 466 incidents studied by Reuters, only 22 percent, or 105, were detected by advanced detection systems. The others were found in different ways, with the public finding 99 of the leaks.

Is Nevada Sitting On One Of The Biggest Undiscovered Oil Fields? - Most of the giant oil fields on earth, ''elephants'' are deposited in passive margin shelves like the Paleozoic passive margin shelf of the Great Basin of western Utah and eastern Nevada. These shelf Paleozoic sediments thicken from several thousand feet east of the Utah Hingeline in central Utah to more than forty-two thousand feet in central Nevada (Figure 1). Many of the age-equivalent shales of North America were deposited in this stratigraphic wedge. However, the Great Basin shales are not just as organically rich as the other shales but they are many times thicker. The eastern Great Basin, covering 71 million acres, is the last underexplored basin in North America that likely contains giant oil and gas fields.  Bakken age-equivalent Mississippian-Devonian Pilot oil shale is up to 900 feet thick in the Great Basin in contrast with the Bakken shale that is only 150 feet thick or less in North Dakota. Oil bleeds out of some outcrops of tight sandstone interbedded in the Pilot when it is freshly broken. Oil seeps occur in organic rich Marcellus age-equivalent Middle Devonian shales in Nevada outcrops. One well, with gas shows, cut eight thousand feet of Utica age-equivalent Ordovician Vinini shale and was still in Vinini at total depth. These Ordovician shales are so organic rich that they have been retorted for oil. Organic rich Great Basin Mississippian Antler foreland basin oil shales are measured in thousands of feet in contrast to the age-equivalent Barnett shale that is measured in only hundreds of feet in Texas. Analyses of shale samples combined with the shale thickness indicate that the shales potentially have enough organic content to literally generate trillions of barrels of oil (Figure 2).

Bakken Update: Contributing To The Oil Glut -- 31% Production Increase, EURs of Almost 1 Million BOE -- Unconventional well results continue to improve. This has been the theme in the Bakken, Permian, Eagle Ford and all other US plays. Core well economics have improved enough to grow US oil production at $60/bbl. Some areas saw production increases at just $40/bbl. When I was in elementary school (it was a long time ago), we were told oil prices wouldn't be high enough to support Bakken production in our lifetime. Estimates in the late seventies were a breakeven at a $500/bbl oil price. That obviously changed, but most things do. Ten years ago, peak oil theorists believed we would soon reach a period of time where demand outpaced supply. The current glut, caused by unconventional production, has slowed this talk. Summary:

  • US unconventional wells continue to improve with production increases seen across all plays.
  • Increased production per foot continues to stress oil prices as new wells are completed in the best core areas.
  • The Bakken core has seen consistent production increases per well regardless of interval.
  • Bakken/Three Forks core wells model to an EUR of 875 MBOE.

'They Always Break!' Latest Pipeline Leak Underscores Dangers of DAPL --Underscoring once again the dangers of America's unreliable fossil fuel infrastructure, a significant U.S. oil pipeline has been shut down after a leak was reported Monday morning.Enterprise Products Partners said Monday it had shut its Seaway Crude Pipeline, a 400,000-barrel per day conduit that transports crude oil from Cushing, Oklahoma to Gulf coast refineries. The leak occurred Sunday night in an industrial area of Cushing.    "Seaway personnel continue to make progress in cleaning up the spill, substantially all of which has been contained in a retention pond at Enbridge's facility," the company said in a news release (pdf), explaining that the pipeline is a "50/50 joint venture" between Enterprise and Enbridge Inc. "Vacuum trucks are being used to recover the crude oil and return it to storage tanks on-site."."The incident comes after another pipeline rupture in Pennsylvania early on Friday, where 55,000 gallons of gasoline poured into the Susquehanna River, and about one month after a major gasoline pipeline run by Colonial Pipeline Co. had to halt pumping for a couple of weeks due to a spill in Alabama.Meanwhile, UPI reports that "[t]he release from the Seaway pipeline is the second associated with the Cushing storage hub in less than a month. Plains All American Pipeline reported problems with infrastructure from Colorado City [Texas] to Cushing earlier this month."Environmentalists, Indigenous people, and energy companies are in the midst of a heated debate over pipeline safety. Water protectors and their allies along the proposed route of the Dakota Access Pipeline (DAPL) have been saying for months that the project threatens their right to safe drinking water. "Oil pipelines break, spill, and leak—it's not a question of if, it's a question of where and when," 13-year-old Anna Lee Rain YellowHammer, a member of the Standing Rock Sioux Tribe, wrote in a recent appeal.

83 Arrested at Dakota Pipeline Protest, Frontline Camp Erected on Unceded Territory -- More than 80 people were arrested in North Dakota Saturday, as police armed with pepper spray descended on a protest near the Dakota Access Pipeline (DAPL) construction site.  The 83 water protectors were hit with charges ranging from rioting to criminal trespass, according to the Morton County sheriff's department. The Bismarck Tribune reported :  Kellie Berns, a protester who hung back behind a fence at the scene, said she received reports of people being pepper-sprayed and thrown to the ground and described law enforcement as being more aggressive than in past incidents. She said protesters were encircled by police as they walked onto the site.  "People came back very distressed," she said of those who returned to the fence following the demonstration. "The pipeline is getting a lot closer, so the stakes are getting higher."   Protests against DAPL have been ongoing for months, as the Standing Rock Sioux, along with other tribes and environmental activists, say the $3.8 billion, 1,100-mile pipeline threatens their access to clean water and violates Native American treaty rights.  Last week, riot charges against Democracy Now! host Amy Goodman were dismissed after she turned herself in to North Dakota police.  Meanwhile, documentary filmmaker Deia Schlosberg faces up to 45 years in prison for reporting on the protests.

125 Arrested As Dakota Pipeline Protests Grow Hostile; Media Drones Shot Down By Police - Protests over the construction of the Dakota Access Pipeline (DAPL) in North Dakota grew increasingly hostile over the weekend as police arrested 127 activists who setup multiple highway blockades claiming “unceded territory” in the direct path of the pipeline's construction.  According to a report by RT, police were forced to make arrests as the blockades directly threatened the ability of local officials to provide emergency services. The Morton County Sheriff's Department posted the following update to their Facebook page claiming that the 127 arrests from the weekend brought the total since August 10th to 269.  "Today’s situation clearly illustrates what we have been saying for weeks, that this protest is not peaceful or lawful," said Sheriff Kyle Kirchmeier. "It was obvious to our officers who responded that the protesters engaged in escalated unlawful tactics and behavior during this event. This protest was intentionally coordinated and planned by agitators with the specific intent to engage in illegal activities." Law enforcement officials also fired on media drones after reports surfaced of drones flying too close to surveillance helicopters "in a threatening manner."  The Sheriff's office reported that a deputy aboard the helicopter as well as the pilot and other passengers were"in fear of their lives." "The drones being operated near the local protests and the camps south of Mandan generally are not being operated within the regulations," Sheriff Kirchmeier said. "Reports of drones not being operated within the FAA guidelines or in a reckless and unsafe manner are being investigated and forwarded to the Morton County States Attorney’s office."

Video: Police Viciously Attacked Peaceful Protesters at the Dakota Access Pipeline - On October 22, just before dawn, hundreds of people, including many families, gathered and prepared to march toward the Dakota Access pipeline construction site near Standing Rock, North Dakota. Native American organizers lit sage and prayed for protection from police brutality before setting off on the 8-mile trek. Many in the crowd were emotional as they stood over what was once their ancestral burial grounds. Just last month, construction workers and contractors destroyed the site in preparation for installing the pipeline. But the marchers never made it to their destination. Instead, they were attacked by police forces who used pepper spray and beat protesters with batons. Dozens of officers, backed by military trucks, police vans, machine guns, and nonlethal weapons, violently approached the group without warning. “Don’t move, everyone is under arrest,” said a voice from the loudspeaker of the military vehicle. As the protesters attempted to leave, the police began beating and detaining them. Several Native American women leading the march were targeted, dragged out of the crowd, and arrested. One man was body-slammed to the ground, while another woman broke her ankle running from the police. The military and police trucks followed the protesters as nearly a hundred officers corralled the protesters into a circle. Among the arrested were journalists, a 17-year-old pregnant girl, and a 78-year-old woman. In total, more than 140 people were detained in half an hour. It was the largest roundup of protesters since the movement against the pipelines intensified two months ago. A majority of those arrested were charged with rioting and criminal trespass. Overall, close to 300 people have been arrested since protests against the pipeline kicked off over the summer.When we arrived in Mandan, the jail was so overwhelmed with people that we had to sit on the floor in the jail’s common area. Two Native American men were thrown into solitary confinement. A number of women faced humiliating strip searches, which included spreading their body parts and jumping up and down while coughing. We were refused phone calls and received no food or water for eight hours after being arrested. Two women fainted from low blood sugar and another had her medication taken away, causing her to shake and sweat profusely.

Guards for North Dakota pipeline could be charged for using dogs on activists -- Private security guards who deployed dogs on protesters at a North Dakota oil pipeline demonstration were not properly licensed and could face criminal charges, according to a local investigation. The Native American-led protests of the Dakota access pipeline received national attention in September when officers allegedly pepper-sprayed activists while guard dogs attacked protesters in a confrontation that was caught on video by the news program Democracy Now! On Wednesday, the Morton County sheriff’s office, which has been leading the police response to the demonstration and conducted mass arrests over the weekend, announced that it had investigated private guards working for the pipeline and determined that “dog handlers were not properly licensed to do security work in the state of North Dakota”. The disclosure is significant at the continuing pipeline protest, where members of the Standing Rock Sioux tribe and their supporters say law enforcement officers have become increasingly aggressive and militarized, using excessive force against peaceful, unarmed activists and targeting journalists for arrest. Security officials told the Morton County sheriff’s office that “there were no intentions of using the dogs or handlers for security work”, the office said in its investigation report. “However, because of the protest events, the dogs were deployed as a method of trying to keep the protesters under control.” The sheriff’s department said there were seven handlers and dogs but that police could only identify two people. Frost Kennels, from Ohio, provided employees and dogs, but police said the company had not been cooperative in the investigation and that it was not a registered security company.

Press Freedom? Dakota Access Pipeline Documentarian Faces 45 Years In Prison For Filming Activists - A couple of days ago we noted that protests in North Dakota, over the Dakota Access Pipeline, were growing increasingly hostile with police arresting over 125 people just last weekend alone.  Another startling discovery from the weekend was reports of police efforts to shoot down multiple media drones which some thought indicated an increasing hostility toward press seeking to cover the protests.   Certainly, Deia Schlosberg, a documentarian who was recently charged with three felonies for filming activists shutting off oil pipelines, would tend to agree.  According to Schlosberg, she was charged with conspiracy to theft of property, conspiracy to theft of services and conspiracy to tampering with or damaging a public service, all of which carry a combined 45-year maximum sentence.  According to RT, the actions filmed by Schlosberg were part of a multi-state protest by “Climate Direct Action” which vandalized five pipeline valve stations in multiple states to protest the movement of tar-sands oil from Canada into the US, and to show solidarity with ongoing protests in North Dakota.  That said, Schlosberg claims she never participated in the illegal activities and filmed from public land. (video)"From the beginning, I was just dumbfounded by the charges," Schlosberg told RT America's Ed Schultz. "They seem to come from out of nowhere."She said she understood the "unprecedented nature of this action and knew that it wasn't likely to be covered by mainstream media.""I was doing my job," she added. "I was documenting a climate action."What precipitated her arrest is difficult to discern, she said."I was there. I was documenting and they didn't know what my involvement was. I told them I was a filmmaker and that I was filming from public property, and they still put me in jail for 53 hours and (charged) me with three counts of conspiracy, which are all felonies."

Native American leaders decry increasingly harsh treatment of Dakota Access protesters -- The tribe at the heart of the contested Dakota Access oil pipeline asked the Department of Justice to step in after law enforcement arrested 127 activists using what the tribe's chairman called "military tactics." "Thousands of persons from around the country, and the world, have come to express their opposition to the pipeline in a peaceful way," said Dave Archambault II, chairman of the Standing Rock Sioux Tribe, in an Oct 24 letter addressed to U.S. Attorney General Loretta Lynch. "But state and local law enforcement have increasingly taken steps to militarize their presence, to intimidate participants who are lawfully expressing their views, and to escalate tensions and promote fear." Archambault's letter cites the use of aerial surveillance, roadblocks and checkpoints, military vehicles and "strong-arm tactics" such as the "invasive and unlawful strip searches of men and women who have been arrested for misdemeanors." He urges the Justice Department to "investigate these matters promptly, to address civil rights violations by state and local law enforcement, and to protect the right to free speech and free exercise of religion." The letter was released on the same day that more than 100 protesters—who call themselves water protectors—set up camp on private ranchland along the pipeline route near Cannon Ball, N.D in Morton County. Energy Transfer Partners, the Dallas-based company behind the pipeline, has not responded to requests for comment. Neither has the Department of Justice or the Morton County sheriff's office.Energy Transfer Partners bought the land in September, but the activists now say the land still belongs to the tribe under the Fort Laramie Treaty of 1851 and was never ceded to the U.S. government.

Protesters set up camp in project’s path for the 1st time (AP) — American Indians and others who oppose the construction of the Dakota Access oil pipeline have set up a new camp on private land in North Dakota, moving their long-running protest directly in the project’s path for the first time. Many of those gathered at the encampment Monday vowed they would stay put until the four-state pipeline is scrapped. The group erected tents and teepees over the weekend, arguing that the land, which was recently purchased by the pipeline development company, rightfully belongs to Native Americans under a more than century-old treaty. “We never ceded this land,” Joye Braun, a protest organizer, said. But the local sheriff’s office called it trespassing. A spokeswoman said the office wouldn’t immediately remove the more than 100 people because it didn’t have the manpower. Morton County Sheriff Kyle Kirchmeier said at a news conference Monday that authorities put out a call for help earlier this month and six states are sending officers. He would not say if the goal was to remove the protesters. Safety remains the No. 1 priority, and authorities are attempting to negotiate with camp leaders, he said. The development company, Texas-based Energy Transfer Partners, didn’t return a request for comment Monday. The $3.8 billion pipeline, most of which has been completed, crosses through North Dakota, South Dakota, Iowa and Illinois. Opponents worry about potential effects on drinking water on the Standing Rock Sioux Tribe’s reservation and farther downstream on the Missouri River, as well as destruction of cultural artifacts, including burial sites.

141 Arrested During Police Raid of Camp Halting Construction of the Dakota Access Pipeline -- According to Reuters: "Police arrested 141 Native Americans and other protesters in North Dakota in a tense standoff that spilled into Friday morning between law enforcement and demonstrators seeking to halt construction of a disputed oil pipeline. Police in riot gear used pepper spray and armored vehicles in an effort to disperse an estimated 330 protesters and clear a camp on private property, according to photos and statements released by the Morton County Sheriff's Department. "  In Cannonball, North Dakota, more than 100 police with military equipment are advancing on a resistance camp established by Native American water protectors in the path of the proposed $3.8 billion Dakota Access pipeline . Photos and multiple videos posted to Facebook Live depict more than 100 officers in riot gear lined up across North Dakota's Highway 1806, flanked by multiple mine-resistant ambush protected military vehicles, a sound cannon, an armored truck and a bulldozer. There have also been reports from water protectors that the police presence includes multiple snipers. Police appear to be evicting the camp in order to clear the way for the Dakota Access pipeline company to continue construction—which was active at times on Thursday just behind the police line. Cody Hall of Red Warrior Camp told Democracy Now! that behind the line of police, the Dakota Access pipeline company is carrying out construction with cranes and bulldozers on the sacred tribal burial site where on Sept. 3, unlicensed Dakota Access security guards unleashed dogs and pepper spray against Native Americans . Water protectors have set up a blockade of the highway using cars, tires and fire. Elders are also leading prayer ceremonies. Dallas Goldtooth of the Indigenous Environmental Network reported in a Facebook Live video posted Thursday just before 2 p.m. local time that police have begun arresting water protectors in the ongoing standoff. Sacheen Seitcham of the West Coast Women Warrior Media Cooperative told Democracy Now! police have used tasers against water protectors and that she was hit with a concussion grenade.   The frontline camp sits directly in the proposed path of the Dakota Access pipeline on private property purchased recently by the Dakota Access pipeline company for $18 million. In establishing this frontline camp, water protectors cited an 1851 treaty, which they say makes the entire area unceded sovereign land under the control of the Sioux. Over the weekend, police arrested more than 120 people in a peaceful march to this site during which police deployed tear gas and used rubber bullets to shoot down drones the water protectors were using to document police activity.

Tension Between Police and Standing Rock Protesters Reaches Boiling Point.— For months, tensions had mounted between protesters and law enforcement officials over the fate of an oil pipeline not far from the Standing Rock Sioux Reservation. Late this week, the strained relations boiled over as officers tried to force the protesters out of an area where they had been camping.Scores of officers dressed in riot gear walked in a wide line, sweeping protesters out of the area as face-to-face yelling matches broke out. Several vehicles, including at least one truck, were set ablaze. A standoff unfolded beside a bridge known as the Backwater Bridge, where protesters set fire to wooden boards and signs and held off the line of officers over many hours. By Friday evening, officers said they had arrested at least 142 protesters on charges including engaging in a riot and conspiracy to endanger by fire and explosion. Protesters gathered near the bridge were refusing to leave, the authorities said.  Each side complained vehemently about violent tactics by the other. Officers said that protesters had attacked them with firebombs, logs, feces and debris. They acknowledged using pepper spray and beanbag rounds against the protesters, as well as a high-pitched sound device meant to disperse crowds.In one case, the officers said, they used a Taser gun after a protester threw pepper in officers’ faces. One woman who was being arrested, the authorities said, had pulled a gun out and fired at a police line. No one was hit by those shots, they said, though two officers had minor injuries after being hit by debris.

Police from 5 States Escalate Violence, Shoot Horses to Clear 1851 Treaty Camp (photos) Over 300 police officers in riot gear, 8 ATVs, 5 armored vehicles, 2 helicopters, and numerous military-grade humvees showed up north of the newly formed frontline camp just east of Highway 1806. The 1851 Treaty Camp was set up this past Sunday directly in the path of the pipeline, on land recently purchased by DAPL. Today this camp, a reclamation of unceded Dakota territory affirmed as part of the Standing Rock Reservation in the Ft. Laramie Treaty of 1851, was violently cleared. Both blockades established this past weekend to enable that occupation were also cleared. In addition to pepper spray and percussion grenades, shotguns were fired into the crowd with less lethal ammunition and a sound cannon was used (see images below). At least one person was tased and the barbed hook lodged in his face, just outside his eye. Another was hit in the face by a rubber bullet. A prayer circle of elders, including several women, was interrupted and all were arrested for standing peacefully on the public road. A tipi was erected in the road and was recklessly dismantled, despite promises from law enforcement that they would merely mark the tipi with a yellow ribbon and ask its owners to retrieve it. A group of water protectors was also dragged out of a ceremony in a sweat lodge erected in the path of the pipeline, wearing minimal clothing, thrown to the ground, and arrested. Photo by Jonathon Klett A member of the International Indigenous Youth Council (IIYC) that had her wrist broken during a mass-arrest on October 22nd was hurt again after an officer gripped her visibly injured wrist and twisted it during an attempted arrest. At least six other members of the youth council verified that they had been maced up to five times and were also shot and hit with bean bags. In addition to being assaulted, an altar item and sacred staff was wrenched from the hands of an IIYC member by police. Several other sacred items were reported stolen, including a canupa (sacred tobacco pipe). Two medics giving aid at front line were hit with batons and thrown off the car they were sitting on. Then police grabbed another medic, who was driving the car, out of the driver side while it was still in motion. Another water protector had to jump into the car to stop it from hitting other people.

30 Powerful Photos Show Standoff Between Militarized Police and Dakota Access Pipeline Protestors -- The 2,000 water protectors who have gathered to oppose the pipeline's construction were met today by the Morton County Sheriff Department , who removed people and their camping gear.   Heavily armed authorities pushed through a supply area for the Water Protectors blockade Thursday. The public witnessed a new level of escalation that day in the Native struggle at Standing Rock, as police swept through an encampment in the direct path of the Dakota Access pipeline. The resulting standoff with the National Guard, and police officers from various states, led to 141 arrests . Advancing authorities attacked Water Protectors with flash grenades, bean bag launchers, pepper spray and Long Range Acoustic Devices. It is crucial that people recognize that Standing Rock is part of an ongoing struggle against colonial violence. The Dakota Access pipeline is a front of struggle in a long-erased war against Native peoples—a war that has been active since first contact, and waged without interruption.

Thousands of Wild Buffalo Appear Out of Nowhere at Standing Rock (VIDEO) Native Americans attempting to stop a pipeline from being built on their land and water just got assistance from a large herd of wild buffalo. Indigenous culture honors American bison (known as Tatanka Oyate, or Buffalo Nation) as a symbol of sacrifice, as the bison give their lives to provide food, shelter, and clothing through the use of their meat and their hides. Native Americans maintain a spiritual tradition with bison, believing that as long as buffalo — a gift from the Great Spirit — roam free and as long as the herds are bountiful, the sovereignty of indigenous people would remain strong. And in the midst of mass arrests, mace attacks, and beatings from batons, a stampede of bison suddenly appeared near the Standing Rock protest camp. A cry of joy reportedly erupted from the Standing Rock Sioux, as they had been praying for assistance from the Tatanka Oyate during their standoff with riot police and national guardsmen.

 Sioux Protest that Inspired the World - Activists and law enforcement clashed this weekend in North Dakota over construction of the Dakota Access Pipeline, leading to dozens of arrests and a temporary road closure as protesters set up camp near the pipeline’s proposed path.  The peoples of Standing Rock is getting ready for the winter. Winters are hard and merciless in the Great Plains of the United States, with temperatures below -20ºC (-4 ºF). They transport blankets, water, food, jackets and timber to their camps at the riverside of the Missouri River, North Dakota. Although the construction of the “Dakota Access” oil pipe has been temporarily been suspended, the indigenous peoples are not leaving. Their fight intends to definitively cancel the terrible project.  The issue is much more than opposing the oil pipe that would go directly through indigenous territories and small farms in that forgotten regions of the US. Multiple indigenous peoples from all around the country have decided to fight alongside the Lakota, Dakota and Sioux people because they see in that battle a second clash of worlds, as terrible as the conquest or the genocide of the 16th to 19th centuries in the North.  According to calculations, during that period of time, the indigenous population of the U.S. was decimated by massacres and diseases brought by Europeans, from 10 million to less than 250,000 people in 1900. The U.S. government, which was in a full-fledged territorial expansion, used a policy of constant betrayal, signing treaties that were violated sooner than it took the ink to dry. Peoples from Latin America have sent representatives to Standing Rock. Nina Gualinga, representative of the Kichwa people of Ecuador, points out that indigenous peoples are only 4% of the world population but they are guardians of 80% of the biodiversity which they have protected for millennia. Mario Luna, one of the leaders of the movement in defense of water of the yaqui tribe in northern Mexico and former political prisoner was there because the traditional authorities of his people see Standing Rock as part of the same struggle they are carrying out against the Independence aqueduct.

Hundreds in Los Angeles protest climate change, North Dakota pipeline | Reuters: Hundreds of people gathered in Los Angeles on Sunday to protest against climate change and show support for activists demonstrating against the construction of an oil pipeline in North Dakota. Several Hollywood stars, including Mark Ruffalo and Susan Sarandon, were among the more than 800 people who attended the climate rally in MacArthur Park. Rallygoers carried signs urging to "shut it all down now" and chanted slogans like "water is life." "Not only is it an environmental, but it's a problem in terms of social justice," Sarandon told the rally. "We can do it. We can stop fracking. We can stop the pipeline. But really it's only because of great numbers of people." Also among celebrity attendees was actress Shailene Woodley, who earlier this month was arrested in North Dakota while protesting the planned pipeline in an incident that was live-streamed on Facebook. In North Dakota, more than 80 protesters were arrested on Saturday after clashing with police near a pipeline construction site, according to the local sheriff's department, which pepper sprayed demonstrators. The Standing Rock Sioux tribe and environmental activists have been protesting construction of the 1,100-mile (1,886-km) pipeline in North Dakota for several months, saying it threatens the water supply and sacred sites. The pipeline, being built by a group of companies led by Energy Transfer Partners LP, would be the first to bring Bakken shale from North Dakota directly to refineries on the U.S. Gulf Coast. Supporters say the pipeline would provide a safer and more cost-effective way to transport Bakken shale to the U.S. Gulf than by road or rail.

Why Are California Farmers Irrigating Crops With Oil Wastewater? - In the last three years, farmers in parts of California's Central Valley irrigated nearly 100,000 acres of food crops with billions of gallons of oil field wastewater possibly tainted with toxic chemicals, including chemicals that can cause cancer and reproductive harm, according to an Environmental Working Group (EWG) analysis of state data.  Since 2014, oil companies reported that they used more than 20 million pounds and 2 million gallons of chemicals in their operations, including at least 16 chemicals the state of California classifies as carcinogens or reproductive toxicants under the state's Proposition 65 law. That recycled wastewater was then sold to irrigation districts largely in Kern County. The Central Valley Regional Water Quality Control Board has allowed the practice for at least four decades and only recently required the oil companies and water districts to disclose the details.  EWG detailed its findings in a report released Wednesday, two days before a public meeting of an expert panel convened to study the practice's safety. Although scientists don't know whether using oil field wastewater to grow crops poses a health risk to people who eat the food, the water board has refused to halt the practice until the expert panel releases its findings. "No one should stop eating produce from California," said Tasha Stoiber, an EWG senior scientist and author of the report. "But there are too many unanswered questions about whether crops could take up the chemicals in the wastewater and whether that could harm people's health. The only way to know for sure if this practice is safe for consumers, farm workers and the environment is to conduct a thorough and independent study."

Aboriginal, environmental groups to sue Canada over Petronas LNG project | Reuters: Aboriginal and environmental groups plan to file lawsuits on Thursday against the government of Canada to overturn the permit for a controversial $27 billion liquefied natural gas (LNG) project in British Columbia, representatives of the groups said. The planned lawsuits will name Malaysian state oil firm Petroliam Nasional Berhad (Petronas) [PETR.UL], which owns a majority stake in the project, as an associated party, the groups told Reuters this week. In September, Canada gave the green light for the Pacific NorthWest LNG project in northern British Columbia with 190 conditions, despite concerns it would destroy a critical salmon habitat and produce a large amount of greenhouse gases. The decision was a major test for Canada's Liberal Party, juggling the needs of an energy industry sustaining job losses and the concerns of environmentalists, who were courted by Prime Minister Justin Trudeau in last year's election campaign. A statement from the groups on Wednesday said they would be launching "multiple legal actions" against the project on Thursday at the Federal Court in Vancouver. A legal challenge puts the future of the project at risk after it has already been hit with a three-year delay in getting its environmental permit and as Asian LNG prices have dropped by about two-thirds since 2014.

Canada's Trans Mountain crude pipeline oversubscribed by 18% in Nov: Kinder Morgan -  Kinder Morgan Canada will limit crude nominations on its Trans Mountain pipeline system by 18% in November, meaning the line will only carry 82% of nominated volumes, up from 76% of nominations in October, the company said Monday. November volumes on the Trans Mountain mainline system are expected to average 303,700 b/d, up from 281,675 b/d in October, Kinder Morgan said. Exports from the Westridge Dock near Vancouver are expected to average 79,809 b/d in November, compared with 78,091 b/d in October. Vessel loadings are expected to consist of two barges and five tankers, the same amount as in October, Kinder Morgan said. Throughput on the Puget Sound pipeline is expected to average 142,138 b/d in November, up from 128,926 b/d in October.The Trans Mountain pipeline ships Canadian crude from Edmonton, Alberta, to the Westridge export terminal in Burnaby, British Columbia, and on to the connected 180,000 b/d Puget Sound pipeline to Seattle-area refineries.

Natural Gas Prices Down Nearly 20% In Two Weeks -- Two weeks ago, with the front month contract of natural gas trading at $3.34 per million British thermal units (MMBtu), I urged caution in Time To Get Cautious On Natural Gas. This followed months of me arguing that natural gas was undervalued. In response to that article, I had some comments and several emails from readers arguing that I was dead wrong, and that it was time to get bullish, not cautious. Given the action in natural gas prices since then, I thought an update was in order. That article urging caution was published on October 13th. Here is what happened to the front month contract since then: The front month contract for natural gas has fallen by 17% since the previous update . The winter contracts have also taken a dive. Now, admittedly sometimes you just get particularly lucky with a call. While I felt like natural gas prices had advanced too quickly and the downside risk was growing, the fact that the drop began the day after I published that article was luck. That leads into the points I want to make.  I invest only when I believe the risks are fairly well-characterized and manageable. In this case, the very high seasonal inventory levels for natural gas are a risk as we head into the winter heating season. This was the inventory graphic I posted in the previous story:

Natural Gas Prices Shake Off Inventory Build -- Natural-gas prices ended higher Thursday after swinging between gains and losses, as a continued build in inventory failed to outweigh hopes for higher demand in the winter. Futures for November delivery settled up 3.3 cents, or 1.2%, at $2.764 a million British thermal units on the New York Mercantile Exchange, and traded as low as $2.684/mmBtu earlier in the session. The November contract expires Thursday, and the more active December contract settled up 3.2 cents, or 1.1%, to $3.068/mmBtu. On Thursday, the U.S. Energy Information Administration reported storage levels grew by 73 billion cubic feet, slightly higher than the 72 billion average forecast of 14 analysts, brokers and traders surveyed by The Wall Street Journal. Although natural gas dipped following the report, prices quickly bounced back as traders turned to focus on the potential for a colder winter and increased consumption. “There’s a number of other issues that the market is currently focused on,” said Teri Viswanath, managing director of natural gas at PIRA Energy Group. The recent drop in natural gas has sparked buying interest as the commodity has become oversold, according to some analysts. While there are expectations for record storage levels this year, Ms. Viswanath said investors are currently more focused on weather forecasts in the coming months. Thursday’s move is “more the markets sizing up the fundamentals and wondering if they should really throw in the towel for the winter,” she said. Natural-gas prices are influenced by weather forecasts, since half of U.S. homes use it for winter heating.

NYMEX November gas settles at $2.764/MMBtu, up 3.3 cents - In the final day of trading before expiration, the NYMEX November natural gas futures contract fluctuated around Wednesday's settlement before ultimately rising 3.3 cents to close at $2.764/MMBtu Thursday following the release of the US Energy Information Administration's storage report. The latest US EIA weekly storage gas data, for the week ending October 21, showed a 73-Bcf injection into storage, bringing total stocks to 3.909 Tcf, closer to the 4 Tcf level last surpassed in mid-November 2015, according to EIA data. While this build falls near the 75 Bcf expected from a consensus of analysts S&P Global Platts surveyed, which limited the data's market impact, this is the first injection since April 1 to break above the previous year's build. Before moving to the prompt month, the December contract stabilized after falling 28.3 cents from Monday to Wednesday, increasing 3.2 cents to trade at $3.068/MMBtu Thursday. According to Phil Flynn, senior market analyst at Price Futures Group, the December contract run up can be attributed to a combination of November expiration and the prospects for more seasonal weather for the second half of November. For the first half, the National Weather Service predicts above-average temperatures over much of the continental US, placing much of the country in a temperature zone that may limit heating and cooling demand through November 9. Platts Analytics' Bentek Energy projects demand to hover around 67.8 Bcf/d, almost 2.88 Bcf/d below the comparable year-ago period, with much of the decrease from a 3.26 Bcf/d drop in power burn, while residential/commercial demand remains largely stable.

Supplying Mexico's growing natural gas demand, part 2. - Mexico’s power sector is one of three major demand centers U.S. natural gas producers and pipeline projects are targeting, the other two being the U.S. power sector and LNG exports. U.S. natural gas exports to Mexico are up 20% year-on-year in 2016 to date to nearly 3.5 Bcf/d––more than double the export volume five years ago––and are poised to soar past 6 Bcf/d by the end of the decade. Mexico’s energy operators are on a tear adding new natural gas-fired power generation capacity and building a sprawling network of natural gas transportation capacity. But delivering increasing volumes of U.S. natural gas to Mexico will require substantial changes on the U.S. side as well, particularly in Texas. Today, we continue our look at plans for adding pipeline export capacity along the Texas-Mexico border. In Part 1 of this blog, we detailed the veritable natural gas renaissance taking place south of the U.S.-Mexico border. The state-owned Comisión Federal de Electricidad (CFE) is investing heavily in expanding and modernizing its power generation fleet with thousands of megawatts of new, natural gas-fired combined-cycle power plants. And, Mexico’s Energy Secretariat (SENER) has appointed a dedicated steward—Centro Nacional de Control del Gas Natural (CENAGAS)—to oversee an aggressive five-year plan to develop the kind of expansive network of natural gas pipelines that would facilitate Mexico’s conversion to natural gas.

Merger of Oil and Gas Infrastructure Companies Would Be the Larges Ever - While the bold resistance to the Dakota Access Pipeline continues in North Dakota, a backroom deal has been brokered to make Big Oil and Gas even stronger. Enbridge — a major backer of the pipeline — and Spectra are set to merge, creating the largest oil and gas infrastructure company in North America. We’ve taken a deeper look at who’s behind the Dakota Access Pipeline and who would profit heavily from this terrible project. Take a look at the graphic below to see whose pocket books will be lined by this pipeline that would endanger major water sources and would cut right through sacred indigenous lands. Enbridge, along with Phillips 66, Energy Transfer Partners, Sunco Logistics and Marathon, are behind-the-scenes of the Bakken Pipeline — which includes the Dakota Access Pipeline — and are banking on a massive payoff at the community’s expense. At $1.5 billion, Enbridge acquired the largest ownership stake.¹ An Enbridge-Spectra merger not only creates a mega-corporation, but also increases the power of Big Oil and Gas and emboldens them to continue to build the Dakota Access Pipeline over the objections of Native American water protectors. Beyond this project, they will continue to build out other pipeline and oil and gas export projects to maximize production, all at the expense of targeted communities and our climate. Send a message to block the oil and gas industry from consolidating and running rampant in our communities. Dirty fossil fuel projects endanger our communities, and we have to look no further than Enbridge and Spectra to see how these corporations are harming us and destroying our environment. In 2010, Enbridge sent thousands of barrels of oil into the Kalamazoo River in Michigan, and it was Spectra’s pipeline that exploded in Pennsylvania earlier this year, severely burning a person. A merger of these companies would increase Big Oil and Gas’ power to control the energy market, grow their ability to influence government regulations and allow them to build more projects like the Dakota Access Pipeline. The Department of Justice (DOJ) and Attorney General Loretta Lynch have the power to block this merger from going forward, but they need to hear from us.

 Bankruptcy Bust: How Zombie Companies Are Killing the Oil Rally - WSJ: Their owners may be bankrupt, but the sprawling mines of Wyoming’s Powder River Basin are still churning out coal. It is the same story in oil fields along the Gulf Coast and with shale-gas wells in the Rocky Mountains. Energy investors have long hoped that falling prices would solve themselves by driving producers into bankruptcy and stanching the flood of excess supply. It turns out that while bankruptcy filings are up, they have barely impacted fossil-fuel markets. About 70 U.S. oil and gas companies filed for bankruptcy in 2015 and 2016. They now produce the equivalent of about 1 million barrels a day, about the same as before they declared bankruptcy, according to Wood Mackenzie. That represents about 5% of U.S. oil-and-gas output. That resilience has kept energy inventories flush and prices capped. Oil shot to $50 a barrel this summer, but has had trouble making much progress beyond that mark. On Friday, oil futures in New York rose 0.4% to $50.85 a barrel. The theory that bankruptcies would help balance the market “was misguided to begin with,” says Roy Martin, a research analyst at energy consultancy Wood Mackenzie. “And people are starting to come around to that now.” This is exactly the way chapter 11 was meant to work. The process is designed to save companies that can be saved, and many energy companies are using it to lighten their heavy debt loads, adapt to lean times and keep producing.Peabody Energy Corp., Arch Coal Inc. ARCH 1.97 % and Alpha Natural Resources Inc. CNTE 1.42 % —three of the five largest U.S. coal miners—all filed for bankruptcy in the past 18 months. They accounted for about 36% of U.S. coal supply in the first half of 2015. This year, production declined only in line with the rest of the sector, and their share for the first six months was nearly unchanged at about 33%, according to IHS Global Energy. Arch Coal and Alpha Natural Resources recently emerged from bankruptcy. “A lot of those companies just operate similarly to how they were prior to entering bankruptcy. It definitely doesn’t help.”

Oil Companies Shift Exploration Tactics, Curb Spending - WSJ: —In June, oil giant BP BP 0.82 % PLC announced what it deemed an “important” new discovery in Egypt. It turned out to be a modest natural-gas find that didn’t even rank in the top 50 discoveries since 2012. The fact that BP and its partner Eni SpA hailed it as a major success is a sign of the times for the oil industry. For years, big oil and gas companies committed ballooning sums to seeking mammoth reserves in difficult locations. But their record was spotty, and a dearth of major finds was followed by the oil-price slump that began in 2014. It prompted companies to cut costs and shift away from expensive, high-risk exploration. World-wide, oil-exploration spending last year was the lowest since 2007. There has been less conventional oil and gas (as opposed to resources contained in shale or oil sands) discovered in the past 2½ years than in 2012 alone, according to Edinburgh-based consultancy Wood Mackenzie. And oil companies will likely show continued pressure on exploration budgets when they report their third-quarter earnings over the coming week, say analysts. Oil prices were down Wednesday and hovering around a three-week low over worries that U.S. oil stockpiles would rise this week and that the Organization of the Petroleum Exporting Countries won’t follow through on promised production cuts. Brent crude, the international benchmark, fell 2%, dropping below $50 a barrel for the first time in nearly a month. Some in the industry say the decline in exploration spending will eventually contribute to an oil drought—and spiking crude prices. Saudi Arabia’s energy minister, Khalid al-Falih, told an oil conference in London this month that the underinvestment caused by weak oil prices over the past two years will result in “a period of shortage of supply.”Others say it is the new normal, in which giants like BP and Royal Dutch Shell PLC will increasingly focus their exploration on less risky and more easily accessible reserves—and spend some of the money they used to commit to exploration to buy already discovered resources from smaller companies.

Exxon Mobil Could Be On The Brink Of 'Irreversible Decline’ - Exxon Mobil Corp. may be facing “irreversible decline” as the oil giant fails to cope with low oil prices and mounting debt, a report released Wednesday found. The Texas-based company, scheduled to report its third-quarter earnings on Friday, has suffered a 45 percent drop in revenue over the past five years as it bet big on drilling in oil sands, the Arctic and deep-sea sites ― decisions that proved expensive, environmentally risky and politically controversial.  Combined with a two-year plunge in oil prices, ballooning long-term debt to cover dividend payments to shareholders and an evaporating pool of cash, Exxon Mobil’s finances show “signs of significant deterioration,” according to new research from the Institute for Energy Economics and Financial Analysis, a nonprofit based in Cleveland. “Investors right now are getting less cash from Exxon than they have historically, and are likely to get less cash in the future,” Tom Sanzillo, director of finance at the IEEFA, told The Huffington Post on Wednesday. “This is going to be a much smaller company in the future, and the oil industry is going to be much smaller in the future.” In April, Exxon Mobil was stripped of Standard & Poor’s top credit rating for the first time since the 1930s. The rating agency said it worried Exxon took on billions in debt to fund new drilling projects at a time when oil prices were high. Now, with the price of crude below $50 per barrel, that debt looks risky. Despite S&P specifically citing such payments in its downgrade, Exxon Mobil actually increased its dividend by 2 cents the next day.  Usually, dividends go up as a company’s stock price thrives. But shares of Exxon have trailed the S&P 500 for 10 quarters in a row, the report noted, and that’s before factoring in the risks of climate change.

Total beats third-quarter forecast helped by cost cuts, new projects and renewables | Reuters: France's Total battled lower refining margins to beat third-quarter profit expectations on Friday helped by cost cuts, output from new projects and a strong contribution from its renewable energy ventures. Total reported a 25 percent fall in third-quarter adjusted net income to $2.1 billion, beating the $1.9 billion expected by analysts polled by Reuters. Revenue fell 8 percent to $37.4 billion. "Total's Q3 results look resilient. Total continues to post solid earnings and there's a lot to like about the direction of travel," analysts at Jefferies who maintain a 'hold' rating on the stock said in a note. The energy company said the sale of a solar farm by U.S. subsidiary SunPower had provided a significant boost to its results, and New Energies businesses added $100 million in the quarter's $545 million adjusted net operating income. Italian peer Eni (ENI.MI) reported a worse-than-expected adjusted net loss for the quarter hurt by a shutdown at a key Italian field. Total said increased oil and gas production and an aggressive saving drive put it on track to organically cover spending and dividends in a low oil environment of $55 a barrel next year. Total's oil production in the quarter was up 4.3 percent thanks to five new fields. That, and a ramp-up at nine fields which started last year drove output growth and bolstered cash flow in the upstream segment.

After Lean Years, Big Oil May Emerge Stronger Than Ever - Big Oil is clawing its way back. After a heart-stopping plunge in the price of crude over the last two years, along with slashed dividends and the elimination of tens of thousands of jobs, the biggest oil companies are proving surprisingly adept at again pumping profits, as well as oil, out of the ground. Indeed, with oil trading in a range of $40 to $50 barrel for most of the 2016, experts say the biggest energy producers are poised to rebound if prices remain stable. “It’s a hunger games environment, but they are learning how to be more efficient,” said Evan Calio, an equity analyst with Morgan Stanley. “Two years ago, nobody thought costs could drop as quickly as they did. It’s staggering, and there’s no doubt this has surprised people.” Not that it has been easy. Over the last 12 months, drillers have eliminated nearly 20,000 jobs in the United States, according to the Labor Department, and Morgan Stanley expects domestic oil production to finish 2016 half a million barrels below where it started. Deepwater drilling has been curtailed in places like the Gulf of Mexico, as have multibillion dollar projects around the world. In the continental United States, once red-hot regions like North Dakota, where the fracking boom transformed the economy, have abruptly cooled. Individual companies that were especially aggressive about seeking new finds have been humbled. Besides being forced to cut its dividend, ConocoPhillips reduced its capital budget for exploration and production by more than $10 billion — or roughly two-thirds. Since late 2014, its shares have fallen from over $70 to around $40 recently. But if crude prices can stay above $40 a barrel, the dividends, and stock prices, of the big American oil companies should be secure. And if oil stays above $50, or even hits $60 in the coming months or years, Big Oil may well emerge from the recent lean years stronger than ever. “Whoever survives this is going to win,” “They’re going to come out smelling like roses.”

Tier 3 sulfur requirements closing in on refiners -- New “Tier 3” requirements to limit sulfur content in gasoline are set to take effect in just over two months — on January 2017. In March 2013, the Environmental Protection Agency (EPA) proposed to limit the sulfur content of gasoline produced or imported into the U.S. to no more than 10 parts per million (ppm) from the current “Tier 2” 30 ppm standard by January 1, 2017.   With these upcoming “Tier 3” requirements, refiners have been developing their strategies to meet the regulations and in some cases have already invested hundreds of millions of dollars in their facilities. Today, we look at the various approaches refiners can take for compliance and their impacts on the industry. The RBN blogosphere last covered Tier 3 regs in June 2013, a couple of months after the EPA released the proposed requirements but prior to the full approval of the regulations (see The Tears of a Refiner – New Gasoline Sulfur Regulations).  In that blog, we recapped the history of EPA’s “Tier” program and considered the potential impact of Tier 3.  In summary, this program was kicked off by the Clean Air Act of 1990.  The regulations were introduced in stages (the Tiers) to progressively lower all sorts of emissions, including carbon monoxide (CO), nitrogen oxides (NOx), particulate matter (PM), formaldehyde (HCHO), and non-methane hydrocarbons (NMHC).  Tier 1 was implemented progressively between 1994 and 1997.  The Tier 2 program was a refinement proposed in 2000 and phased in by 2006 that included sulfur in the program.   The Tier 2 program treated both vehicles and fuels as a combined system, recognizing that reducing vehicle emissions of toxins required changes to fuel specifications as well as vehicle emission systems. More specifically, the fuel part of the Tier 2 program reduced the average sulfur content in gasoline by 90 percent from 300 ppm down to 30 ppm.   Now it is time for Tier 3, which cuts the permitted sulfur content in gasoline even further.

 Big Oil Companies Reap Windfall From Ethanol Rules - WSJ: Environmental regulations designed to boost the amount of ethanol blended into the U.S. gasoline supply have inadvertently become a multibillion-dollar windfall for some of the world’s biggest oil companies. Companies including Chevron, Royal Dutch Shell, and BP could reap a total of more than $1 billion this year by selling the renewable fuel credits associated with the ethanol program, according to an analysis commissioned by CVR Energy, a refinery operator controlled by billionaire Carl Icahn, a vocal critic of the rules. For other companies, especially smaller refiners, the rules have had the opposite effect, forcing them to spend hundreds of millions to buy credits to comply. Some large oil companies acknowledge they are reaping revenue from the regulations, but say their advantage stems from large investments they made to comply with it, and stress that not all of the money translates into profit. “Because a few other companies made different business decisions and are now living with the consequences is not a reason to suddenly change the rules,” said Geoff Morrell, a senior vice president for BP. Spokesmen for Chevron and Shell said they couldn’t immediately comment. A spokesman for Citgo, the U.S. arm of state-owned Petróleos de Venezuela SA, disputed it was profiting from the credits as the analysis claims, saying that it buys more than it sells annually to comply with its obligations. The ethanol and biodiesel program, created during President George W. Bush’s administration, was aimed in part at reducing U.S. dependence on foreign oil. But those concerns have waned as a result of the abundant new U.S. oil and gas supplies unlocked by shale drilling. The rules require refiners to either blend ethanol with the gasoline they produce or buy credits.

A “New Normal” for the Oil Market – iMFdirect -- While oil prices have stabilized somewhat in recent months, there are good reasons to believe they won’t return to the high levels that preceded their historic collapse two years ago. For one thing, shale oil production has permanently added to supply at lower prices. For another, demand will be curtailed by slower growth in emerging markets and global efforts to cut down on carbon emissions. It all adds up to a “new normal” for oil.mShale has been a game changer. Unexpectedly strong shale-oil production of 5 million barrels per day contributed to the global supply glut. That, along with the surprising decision by the Organization of the Petroleum Exporting Countries (OPEC) to keep production unchanged, contributed to the oil price collapse that started in June 2014.Although the price collapse led to a massive cut in oil investment, production was slow to respond, keeping supply in excess. What’s more, the resilience of shale production to lower prices again surprised market participants, leading to even lower prices in 2015. Shale drillers significantly cut costs by improving efficiency, allowing major players to avoid bankruptcy. While reduced investment is expected to result in lower production by non-OPEC countries in 2016, production still exceeds consumption. Many experts expect oil markets to balance in 2017, albeit with high level of inventory (Chart 1). That said, there is uncertainty regarding supply, especially regarding the cost associated with extraction as well as production from so-called shale “fracklog”—drilled but uncompleted wells. The latter can add to production flows in a matter of weeks and hence considerably change the dynamics of production compared to conventional oil—that features long lead times between investment and production.  Falling prices spurred oil-demand growth, which rose to a record high of about 1.8 million barrels per day in 2015. That’s expected to slow to the trend level of 1.2 million barrels per day in 2016 and 2017. Using basic estimates for demand elasticity with respect to price suggests the “price effect” accounts for a 0.8 million-barrel per day increase in demand. A sizable share of oil demand growth is attributable to the price drop rather than income gains. With limited scope for further declines in prices in dollar terms, increases in oil demand will depend largely on prospects for global economic growth.

US will remain major gasoline exporter with oil below $60/b: analyst - Global gasoline demand will rise as long as crude stays below $60/b, and a shortage of Asian gasoline refining capacity will drive US exports higher, Fereidun Fesharaki, chairman of Facts Global Energy consultancy, said Thursday. "Any way that we look at the future refineries under construction [in Asia], they cannot produce enough gasoline," Fesharaki said at the Center for Strategic and International Studies in Washington. Fesharaki expects US net exports of refined products to keep rising. In a decade, the US has made a dramatic swing from 3.9 million b/d of net imports in October 2005 to 2.3 million b/d in net exports in July, according to US Energy Information Administration data."As time goes by, there is a gasoline shortage worldwide that only US refiners can supply," he said. "We expect huge amounts of exports of US gasoline to all over Asia, without which Asia cannot balance its system." Fesharaki said another dramatic shift in refining economics will come as a result of the International Maritime Organization's announcement Thursday to impose a 0.5% global sulfur limit starting in 2020, rather than delaying it for five years. "Today we have 4 million b/d of bunkering, which is using 3.5%-4% [sulfur] fuel oil," he said, with most of that demand in Asia, Africa, Latin America and the Middle East. "If God almighty comes from the heavens, he cannot make 0.5% fuel oil by 2020," he said.

Mid-$50s/b oil is catalyst for sustained N American recovery: Baker Hughes CEO -  Oilfield services provider Baker Hughes sees WTI oil prices in the mid-to-upper $50s/b as the catalyst for recovery in North America, including the Gulf of Mexico, where the company was hit hard hard in the third quarter of 2016, its CEO said Tuesday. The North American market has continued to "grind slowly upwards" as the rig count, particularly in the US, ticks ahead from troughs seen six months ago, Martin Craighead said during a quarterly conference call with analysts. But "customers need to be more confident of the durability of those prices before making any significant change to their spending patterns," Craighead said. The mid-$50s/b price is about 10% above where front-month WTI has teetered most of the past month, and Craighead's suggestions about this level echo comments made by peers at Halliburton and Schlumberger in separate conference calls during the past week. But for Baker Hughes, a stagnant Gulf of Mexico hit its balance sheet hard in Q3 and nearly canceled out rising North American land activity and seasonal Canadian uplift. As a result, its North American revenue of $674 million in Q3 represented an increase of just 1% sequentially.

Would the US ever attend an OPEC meeting? -  The recent invitation by OPEC for US officials to join in production freeze talks is clearly a nod to the production powerhouse Americas has become as a result of the shale revolution. But it wasn’t always that way. Just ask former US Energy Secretary Bill Richardson, who, 16 years ago, was the point person in talks with Saudi Arabia to boost production, which would keep US gasoline prices stable. Richardson’s tenure from 1998 through 2000 came at a much different time for both the US’ relations with OPEC and its role in the world oil market. For one, the US was producing only about 5.9 million b/d and was in the midst of a historic supply decline that would crater at about 3.9 million b/d by October 2005. In the spring of 2000, Richardson was urging Saudi Arabia through phone calls and what he called “quiet diplomacy” to orchestrate an OPEC production increase as the Clinton administration was worried about a crude oil price spike. That price spike had brought prices to over $34/b, a level which roughly 15 years later would create a crisis for producers and a boon for consumers. And OPEC has also changed significantly, Richardson said. “It’s a different OPEC,” Richardson said in an interview with S&P Global Platts. “Today, they’re not unified, there are more players and while the Saudis are still the leaders, they’re no longer as friendly to us as they used to be nor can they totally dictate [prices].”

Oil drilling underway beneath Ecuador's Yasuní national park - Ecuador has confirmed that oil drilling has begun under the country’s Yasuní national park, one of the world’s biodiversity hotspots. But the government claims that there has been only minimal disturbance to the Unesco biosphere reserve in the Amazon rainforest since extraction of 23,000 barrels of oil a day began last month. Ecologists, environmentalists and political groups in Ecuador and elsewhere condemned president Rafael Correa when in August 2013 he scrapped a pioneering conservation planto leave oil under the Ishpingo-Tambococha-Tiputini (ITT) area of the park, in return for $3.6bn (3bn) compensation. Nobel prizewinners, Hollywood stars such as Leonardo DiCaprio, UN general secretary Ban Ki-moon and conservationists had backed the ambitious plan when Correa first proposed it in 2007, but when after six years only $200m had been pledged by the international community, Correa said he had no option but to allow drilling to pay for poverty relief. Critics feared that oil would destroy Yasuní in the same way it had led to widespread deforestation and pollution across much of Ecuador and the western Amazon. Not only could oil workings fatally contaminate water and soils, but new oil roads would be constructed deep into the forest allowing hunting, deforestation and colonisation by people seeking land. In addition, said critics, it was likely that an army of oil workers would clash with the two semi-nomadic tribes of Waorani Indians known to be living within the national park.

Venezuelan Oil Is Largely Staying in Ground or Going Up in Smoke - WSJ: —This fading oil town has an eerie glow at night, illuminated by dozens of oil wells burning off precious oil and gas for lack of functioning equipment to process it.Every month, Punta de Mata’s smoke columns grow higher, a staggering waste at a time when Venezuela, the holder of the world’s largest oil reserves, desperately needs cash from every barrel to import scarce food and medicine. The wells are, quite literally, burning money.Making matters worse, for every barrel of light crude burned off at Punta de Mata’s wells, Venezuela needs to spend dollars importing a barrel of diluent to mix with the very heavy oil produced in the country’s south.“This is pure mismanagement,” said Carlos Bellorin, an oil analyst at IHS Inc. in London. “There’s no other rational explanation for such waste.”The decrepid state of aging fields like Punta de Mata, which provide the bulk of Venezuela’s revenues, is a crucial reason why the country’s oil output is falling faster than that of any other major oil producer bar insurgency-riven Nigeria. Venezuelan crude production shrank 11% to 2.3 million barrels a day in a year to September, according to government figures, and the consulting firm Medley & Associates expects the fall to accelerate in the next 12 months. Barring a spike in oil prices, falling production will plunge Venezuela ever deeper into economic crisis. The decline in output deepens Venezuela’s economic pain at a time when the economy is already forecast to contract by 10% this year. The government is struggling to earn enough dollars to import food and medicine and pay almost $16 billion due to foreign creditors between now and the end of next year. In the oil fields that dot the country’s eastern savanna, pump jacks sit idle because of parts shortages, abandoned oil barges rust onshore and drillers earning $9 a week often skip shifts. Overall, the number of working oil rigs in Venezuela declined by a quarter in the 12 months to September, according to Houston-based oil-field-service company Baker Hughes Inc. There are now more rigs drilling in Oman, where proven reserves are just 1.7% of Venezuela’s.

 US said to be closing in on PDVSA-linked seizures, charges.  (Bloomberg) -- Federal prosecutors are preparing to charge several individuals and confiscate their property over the alleged looting of Venezuela’s state oil company in what may amount to one of the biggest asset seizures in U.S. history. Three people familiar with the case say the government has been investigating at least a dozen Venezuelans and is expected to file charges in Houston against a few of them as soon as next month. Those on the list, including former executives of Petroleos de Venezuela SA, known as PDVSA, are suspected of having taken bribes from middlemen to award contracts at inflated prices, helping to siphon more than $11 billion out of the country. All three people spoke on condition of anonymity because the investigation is ongoing and sensitive due to its impact on U.S. foreign policy. The government has set its sights on a number of U.S. assets, including about 20 residential properties, some in West Palm Beach and the Houston suburbs. Switzerland has seized $118 million in assets from Swiss banks related to the matter and sent $51 million to U.S. authorities, Bloomberg reported on Tuesday. Venezuela’s opposition-run congress is separately seeking to recover $11.3 billion that went missing from PDVSA between 2004 and 2014 while Rafael Ramirez, currently Venezuela’s ambassador to the United Nations, was company president. It seeks to hold him politically responsible. Ramirez has rejected the congressional accusations as lies. Investigators are also looking at the dealings involving PDVSA and a number of companies, including Pratt & Whitney, General Electric Co. and Rolls Royce Holdings Plc, as well as ProEnergy Services, a Missouri-based firm, two of the people said. The prosecutors have been tracking money that flowed through Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co., they added.

India set to strike oil barter deal with Venezuela - India will strike a barter deal with Venezuela to settle past dues of $530-$600 million payable for its oil equity in the Latin American nation, a senior official at state-owned Oil and Natural Gas Corp said Thursday. ONGC Videsh Limited, the overseas arm of upstream major ONGC, has a 40% stake in the San Cristobal oil field in Venezuela. The dues included its accumulated share of oil sales. "They [Venezuela's PDVSA] would be giving us crude every month," ONGC chairman and managing director D K Sarraf, who is also chairman of OVL, said after releasing ONGC's results for the second fiscal quarter (July-September). In July, Indian oil minister Dharmendra Pradhan raised the issue of barter deal with his Venezuelan counterpart Eulogio del Pino during his visit to the Indian capital.India set to strike oil barter deal with Venezuela - Oil | Platts News Article & Story: "Based on the discussions three months ago with the Venezuelan team, an agreement is being finalized," Sarraf said, and hoped that the barter deal would be finalized "very soon." In 2008, OVL invested around $190 million in the project where PDVSA holds a 60% stake. Sarraf declined to give specific details related to the monthly quantity of Venezuelan crude to be imported as part of the deal and the timeline to square off the outstanding dues by saying minute details were still being worked out. "By utilizing those quantity [to be finalized], we would be able to recover the debts," Sarraf said, adding the squaring off the dues would take couple of years. In fiscal year 2015-16 (April-March), India imported 23.6 million mt of crude from Venezuela, accounting for 12% of the country's crude imports.

Analysis: India's oil demand seen rebounding after sluggish September -  After posting double-digit growth in August, India's oil products demand in September declined as widespead rains and regional unrest took toll on transport, but analysts expect a rebound in October on the back of firm fundamentals and following the end of the monsoons. The sharp growth in consumption of LPG and jet fuel in September was not enough to offset a drop on demand for diesel and gasoline, pulling down overall oil products demand 0.8% year on year to 14.6 million mt, or 3.82 million b/d, latest provisional data from the Petroleum Planning and Analysis Cell showed. "The conclusion of seasonal rainfalls, the onset of winter, and improving industrial demand amid festive season should propel growth in coming months, notwithstanding any increases in crude prices," said Sri Paravaikkarasu, senior consultant and Asia downstream specialist at Facts Global Energy. The negative growth recorded in September was a steep decline from the double-digit demand growth of 11% year on year to 15.81 million mt, or 4 million b/d, posted in August.Analysts attributed the fall in demand to heavy rains towards the end of the June-September monsoon season and water sharing disputes between two southern states -- Karnataka and Tamil Nadu -- and political unrest in the northern state of Jammu and Kashmir.

Pakistan's OGDC Q3 crude output up 2.8% on year to 40,230 b/d, natural gas slips -  Pakistan's largest exploration and production company, Oil & Gas Development Company Limited, produced 40,230 b/d of crude in the July-September quarter, up 2.8% from corresponding period a year ago, the company said Thursday. Output increased on higher production from the Kunnar, Rajian and Sinjhoro fields as well as increases in the company's production share from non-operated joint venture fields, it said in a filing to the Pakistan Stock Exchange. Gas production dipped to 1.050 Bcf/day in the quarter compared to 1.086 Bcf/day a year earlier, primarily due to lower output from the Qadirpur field due to annual maintenance, the statement said. Output at the Dakhni and Nashpa fields was also hit by maintenance. LPG output increased by 28% to 342 mt/day on a rise in production from the Sinjhoro field and shares in non-operated joint venture fields, statement said. OGDC's average realized price for crude oil sales in the quarter ended September 30 fell to $44.37/b from $52.46/b a year earlier. The price of gas sold during the period averaged Pakistan Rupees 242.17/Mcf ($2.29/Mcf), down from Rupees 264.20/Mcf, the company said. OGDC's exploration expenditure rose sharply to Rupees 4.321 billion from Rupees 1.807 billion while July-September net profit declined 19.8% to Rupees 14.362 billion from Rupees 18.26 billion a year earlier.

Asian gasoline cash premium hits one-year high on tight supplies - The Asian gasoline cash premium, the spread between FOB Singapore 92 RON physical cargo and MOPS Strip, hit a one-year high Tuesday as spot physical cargo offerings in the region became much less abundant over the course of October while buying interest soared. The premium reached $1.16/b Tuesday, the highest since hitting $1.35/b on October 26, 2015. Traders pointed to a much tighter balance for November, with export supplies in the Middle East and India expected to dry up. Saudi Arabia, the biggest gasoline exporter in the Middle East, will see two major refineries going into turnaround in November and December. Saudi Aramco plans to shut units at the 400,000 b/d Yasref refinery for a month from early November. The joint-venture refinery, co-owned with Sinopec, produces up to 90,000 b/d of gasoline. Aramco also plans to shut units at the 550,000 b/d Ras Tanura refinery for 45 days from early December. The wholly owned refinery produces up to 120,000 b/d of gasoline.There will be an even bigger production loss in India, with Asia's biggest gasoline exporter, Reliance Industries, planning a five-week shutdown of its 200,000 b/d fluid catalytic cracker at the 660,000 b/d DTA plant starting the second week of November. Gasoline production during the period will decrease by at least 400,000 mt, according to Platts calculations. Although the DTA plant is focused on the domestic market, Reliance is expected to cut export volumes significantly, hence reducing supplies to the Middle East, its biggest export destination.

The Beginning Of The End For Europe’s Natural Gas War - Russia’s Gazprom is on the verge of striking a deal with EU regulators to settle a half-decade old dispute over natural gas pricing, and the resolution could change the way Gazprom does business and lead to lower gas prices for much of Eastern Europe. The conflict began back in 2011 when EU antitrust regulators began investigating Gazprom for anticompetitive behavior, citing Gazprom’s practice of pricing natural gas differently to different countries depending on how compliant they were to Moscow. The EU Commission launched a formal investigation that ultimately led to negotiations, which were temporarily put on ice after Russia’s takeover of Crimea. The details are arcane, but Gazprom is about to offer concessions to the EU in order to avoid potentially having to pay billions of dollars in fines. These include allowing recipients of Russian gas to resell that gas. Gazprom has opposed that practice because it undercuts their ability to demand certain prices from individual customers and countries. Gazprom and Russia were much happier under the old system, in which they could sign an array of bilateral deals on an individual basis, rather than negotiating with European countries collectively. That allowed the company to tie gas contracts to political aims – should a European country lend its support to a Russian cause, such as a pipeline, they would receive better terms. That leads to the second concession that Gazprom will have to grant Europe: they will have to charge customers similar rates for natural gas. But the agreement stops short of entirely breaking Gazprom’s practice of linking gas prices to oil prices.  The deal is not yet secured – it still needs to be reviewed by European countries – but if it is, Gazprom will avoid having to pay billions of dollars in fines. However, the agreement could then become legally binding, subjecting Gazprom to European law, something it has objected to up until now. Gazprom would have to pay fines if it violates the terms of the agreement.

Far East Russian crudes rally as China shifts focus to low sulfur sweet grades - Oil | Platts News Article & Story: Cash differentials for Far East Russian crudes rallied to multi-month highs Tuesday morning in Asia, as regional refiners showed strong preference for short-haul crude cargoes amid rising freight rates, while China's tougher rules on pollution stoked strong demand from Chinese end-users for low sulfur crude grades such as ESPO Blend and Sokol. S&P Global Platts pegged second-month, December, ESPO notionals at a premium of $3.40/b to front-month Dubai crude assessments at 11 am (0300 GMT) Tuesday, the highest level since March 28 when it was assessed at $3.70/b. Light sweet Sokol crude notionals at 11 am were at a premium of $4.20/b to the December average of first-line Dubai and Oman assessments, its highest level since September 16. Regional traders said a combination of upside factors contributed to the latest bull run in the Far East Russian crude complex, including tighter supply of Sokol crude for December.Market sources noted that a total of 11 Sokol cargoes, each 700,000 barrels, are expected to load over December, with Russia's Rosneft, Japanese consortium Sodeco and oil major ExxonMobil each holding three cargoes, while India's ONGC Videsh Limited has the remaining two cargoes. In November, a total of 12 cargoes of Sokol crude of a similar size are scheduled to be exported out of DeKastri terminal at Sakhalin-1.

The Niger Delta Oil Wars Are Unlikely To End Soon - The Nigerian government announced in August that it had resumed amnesty payments to former militants in the Niger Delta, many of them members of the Movement for the Emancipation of the Niger Delta (MEND) (Naija Headlines, August 4). It had significantly reduced the amount of money available for such payments in late 2015 and claimed to have suffered a technical hiccup delaying payments in early 2016, resulting in accusations from the militants that Abuja was failing to abide by the arrangements agreed upon in the 2009 Presidential Amnesty Program (PAP) (Information Nigeria, August 2; The Leadership, November 29, 2015; Punch, February 24). The decision to resume payments to the insurgents was indicative of an increasing desperation on the part of the government to reduce the level of violence in the Niger Delta and enable oil production to return to pre-conflict levels. Violence in the region since the start of 2016 has cut oil production to a near-30-year low, a serious concern for the government, which relies on oil for two-thirds of government revenue and nearly all of its export earnings. About 30,000 former fighters are now receiving amnesty payments of $206 per month, on the condition that they end their attacks on pipelines in the Niger Delta (Information Nigeria, August 2). However, it remains uncertain whether this will lead to a genuine decrease in violence in the Niger Delta and unlikely that the reintroduction of amnesty payments will change the dynamics of the conflict in the Delta.   The main difficulty with attempts to end conflict in the Delta through the resumption of amnesty payments is that numerous militant factions in the region never received amnesty payments in the first place and were excluded from the PAP. This was one of the main contentions of the Niger Delta Avengers (NDA), who distanced themselves from MEND when they first emerged in early 2016. The NDA claimed that MEND commanders had never cared about the Niger Delta and had grown rich from the amnesty payments without redistributing the money to the foot soldiers of the rebellion (Niger Delta Avengers, May 3). It claimed to be different, although there are several indications that the NDA is composed of many former MEND fighters – not least that NDA attacks escalated significantly after the government halted amnesty payments and began arresting those linked to corruption within the program (The Paradigm, January 16).

Nigeria's oil production climbs up to 1.9 million b/d: oil ministry - Nigeria's oil production has risen to 1.9 million b/d, the oil ministry said Tuesday, even as the government has begun moves for all-inclusive talks with Niger Delta leaders to end militancy in the region and bolster oil production. "We have built capacity of up to 2.4 million b/d, but [we are] currently producing about 1.9 million b/d," Omar Farouk, the special adviser on international energy relations to Nigeria's oil minister of state, said on the ministry's twitter handle. Farouk said Nigeria was in urgent need of new investments to increase its reserve base and output. "Nigeria has produced over 10 billion barrels of oil since the year 2000. However, we have not discovered this much in the same period," he said.Nigerian oil output plummeted to near 30-year lows of around 1.5 million-1.6 million b/d in August, according to government estimates, from 2.2 million b/d earlier in the year as attacks on oil facilities in the Niger Delta rose at an alarming pace amid resurgent militancy. The sharp drop in oil production has severely hurt Nigeria's economy, already exacerbated by the slump in global oil prices. Militant group Niger Delta Avengers, responsible for most of the attacks on oil facilities that cut Nigerian production by more than 700,000 b/d, said late in September it was abandoning its ceasefire announced September 2 over what it said was the Nigerian government's failure to respond to its peace overtures. Some other militant groups, including the self-styled Greenland Justice Mandate, have been carrying out pockets of attacks on pipelines operated by state-owned Nigerian National Petroleum Corp.

Why the Energy Crisis is Coming Sooner Than Most Experts Forecast - Ilargi: We have written little on the topic of energy lately, other than related to oil prices going up and down, empty OPEC ‘promises’ to cut oil production, and the incredible debt load threatening to crush US -and Canadian- unconventional oil and gas. It’s a logical outcome of focusing more on finance than energy, because we feel the former has a shorter timeline than the latter. Something that harks back to our Oil Drum days. But that doesn’t mean that the idea and/or principle of peak oil has disappeared, or that we have completely forgotten it. It has just been snowed under by the financial crisis (and by unconventinal oil and gas). And while we continue to find that the financial world will dump us into a bigger crisis sooner than energy will, it’s useful to look at oil et al from time to time. Please note: we don’t wish to deny that oil depletion has its own dynamics, but in our view those dynamics will be hugely affected by the financial crisis that is looming big and will strike first. A crisis that, by the way, will affect not just oil and gas, but solar and wind just as much. You can get only as much ‘alternative’ energy as you can pay for, and that is before we even mention solar and wind’s EROEI (Energy Return On Energy Investment). What the world needs to do, but we very much doubt it will voluntarily, is not to look for other forms of energy to replace oil and gas, but to look for ways to use much less energy (90% or so) while still maintaining societies that function as best they can. We doubt this because man is no more made to volunteer for downsizing than any other species. The interview below with Louis Arnoux by the SRSrocco Report, combined with an article Louis wrote in July on the site of our old friend Ugo Bardi is an excellent opportunity to catch up on energy issues. The discussion of energy relative to finance will no doubt continue, and Louis doesn’t seem to have the exact same view as us, but that’s fine, or at least it shouldn’t deter us from listening. This graph from his work, for instance, contains a great depiction of what EROEI really means, and how it works out, and that is important to know. First, here’s the SRSrocco Report interview, below it you’ll find the article.

 Thermodynamic Oil Collapse: Why The Global Economy Will Disintegrate Rapidly -- The world is heading towards a rapid disintegration of its economic and financial system due to a "Thermodynamic oil collapse."  I spoke with Dr. Louis Arnoux of nGeni, about the details of the thermodynamics of oil depletion and its impact on the global economy.Unfortunately, the world is completely in the dark about this energy information and its dire implications to global economic trade and finance, in a relatively short period of time.  During the interview, Louis Arnoux discusses the dynamics of the "Thermodynamic oil decline" using six slides, including one on his nGeni technology towards the end of the interview.  The information in this interview is so important, Louis needed to take the extra time to explain these concepts in detail.In the beginning of the interview, Louis describes the significance of the first chart showing how the world's fuel gauge is now "Running On Empty."Dr. Louis Arnoux presents his views concerning the depletion of oil reserves, that is, how to best assess depletion, what stage the depletion is at and what this means in financial and economic terms. This is based on his own research and on that of Bedford Hill and his Hill's Group team that he has scrutinised in depth. Dr Arnoux is now part of a team of researchers who have recently refined the Hill's Group work.They are presently preparing a paper to  be published in a peer reviewed scientific journal that will present their thermodynamic analysis of the oil industry, the Hill's Group Etp model, how this model enables assessing the depletion status of the global oil reserves, and the high fit of their analysis with empirical data. In the present interview Dr Arnoux is not at liberty to discuss this work as it is not published yet. Instead he explains in lay terms the general dynamics of depletion and focuses on the economic and financial implications for the globalised industrial world of the advanced depletion status of oil reserves. In addition, Louis also provides a chart during the interview showing just how disconnected the financial markets are compared to the reality... or the real physical economy.  He developed this chart to show how inflated the U.S. GDP (Gross Domestic Product) is compared to gold and oil:

Why There's No Economically Sustainable Price For Oil Anymore (podcast) Actuary Gail Tverberg returns to provide an update on where we are in the global energy story. Her outlook is not rosy: she doesn't not see a path for society to transition to an affordable, plentiful substitute to petroleum as a transportation fuel. The physics as well as the funding do not pencil out, at least with today's known technologies.Without such a solution in hand, the world finds itself now mired in a scenario where there really is no long-term workable range for the price of oil. It's either "too high" and demand suffers, or "too low" and producers can't afford to extract it. The acceptable middle ground has disappeared:When on the rising side of the Hubbert curve, everybody has good wage level and everybody can feed themselves. You can build new oil wells and everything works out fine. But what happens as you get past the 50% mark is that you no longer have enough oil coming out for the economy to keep growing. It starts going down. And what happens then is that the economy doesn’t function in the same way. You start getting the prices to spike as you try to get higher-cost oil out. And this is what we saw in the 2007-2008 period.The price of oil spikes and you get recession. Then the price of oil comes back down. But wages don't recover and you get the very low price problem that we have right now. So it doesn’t work right. You can’t keep getting the same amount of oil out, essentially because the wages of the people don’t stay up high enough in order to afford the output of the economy.At this point, it has gotten bad enough that there is no price that works. The price that producers need is higher than what the market will bear.If we go to a place like Saudi Arabia, you'd say: They can get it out of the ground for $20 a barrel. But then when you look at it, you discover that they really need a much higher price if you include in all of the taxes and all of the funding they need to keep social order, import lots of wheat and the many other things that their economy needs, and build a desalination plant. So they really can’t get along on $20 a barrel. They learned how they can get along on $100 or $120 a barrel, but they can’t get along on $50 a barrel  -- even in Saudi Arabia.So you end up with a situation where there isn’t any kind price that really will work.

 LHS crude market falls to multi-month lows as barrels come out of tanks - The Light Houston Sweet crude market saw a late-week decline in value relative to cash WTI, which market sources attributed to a number of factors including a disappearing contango structure in the Brent-WTI spread. The sweet crude grade ended the week at a 95 cents/b premium to November cash WTI, down 15 cents/b from Thursday and 25 cents/b less than one week ago. It is also the weakest premium for LHS over cash WTI since July 19, when it was at 90 cents/b over cash WTI, S&P Global Platts data showed. "It's the usual cash period mess," a Houston crude trader said, referring to the period of time between when front-month NYMEX WTI expires and the cash market rolls a little less than one week later. A second trader said the Gulf Coast market was a "bloodbath" Friday and added grades were "completely collapsing.""The market is flooded with everything coming out of tanks," a crude trader said Friday. "That will help push crude down." The front-month Platts WTI-Brent Houston swap ended the week at minus $1.71/b, compared with minus $1.63/b for month 12 -- a difference of about 8 cents/b contango. That compares with a front-month to month-12 spread of 3 cents/b backward one week ago, Platts data showed.

Oil dips on Buzzard restart, Iraq; U.S. crude tests below $50 | Reuters: Oil prices dipped on Monday, with U.S. crude briefly falling below $50 per barrel, on news of the impending restart of Britain's Buzzard oilfield and Iraq's wish to be exempted from OPEC production cuts. Buzzard, the North Sea field that contributes to the Forties crude stream and which pumps about 180,000 barrels per day (bpd), will restart on Tuesday or Wednesday, from a month-long planned maintenance, an industry source said. Iraq's oil minister Jabar Ali al-Luaibi said the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC) wanted to be exempt from output curbs as it needed more money to fight Islamic State militants. OPEC hopes to remove about 700,000 bpd from an estimated global supply of 1.0-1.5 million bpd. Details of how much each member should cut have been left to its meeting in Vienna on Nov. 30. Brent, the international benchmark for crude, settled down 32 cents, or 0.6 percent, at $51.46 a barrel. Its session low was $50.50. U.S. West Texas Intermediate (WTI) crude fell 33 cents, or 0.7 percent, to settle at $50.52. WTI slid below $50 for the first time since Oct. 18, hitting a session low of $49.62, as some players locked in profits from oil's climb of more than $5 a barrel, or about 13 percent, over the past month.

Oil edges up ahead of US data, OPEC squabbles cap gains: Oil edged up on Tuesday ahead of the release of U.S. crude inventory data, which in recent weeks has provided bullish surprises, but a flurry of top-level comments from OPEC members regarding chances of an output cut kept a lid on prices. International Brent crude oil futures rose 13 cents to $51.59 per barrel at 7:10 a.m. ET (1110 GMT) from their last close.U.S. West Texas Intermediate (WTI) crude futures turned positive, gaining 21 cents to $50.73 a barrel, after being negative throughout much of Asia trading. The private American Petroleum Institute is due to publish its weekly crude stocks estimates on Tuesday at 2030 GMT, followed by the official Energy Information Administration data due on Wednesday. "Crude oil does not want to drop the support until it sees if it can use the weekly U.S. statistics for another test of an upside break-out," analysts at Petromatrix said in a note. A Reuters poll showed that U.S. crude inventories were forecast to have risen last week by a likely 800,000 barrels to 469.5 million barrels. That came after a fall of more than 5 million barrels in the week to Oct. 14. Analysts said a leak in a pipeline leading out of the huge Cushing, Oklahoma, storage hub should lead to more build up of stocks in the coming weeks.

Iraq Threatens To Sink OPEC Deal - Oil prices dropped more than 1 percent on Tuesday as waning expectations of an OPEC deal weighed on the market.  Iraq insisted on Sunday that it be allowed to be exempt from production cuts should OPEC reach a deal in a month’s time in Vienna. Iraqi officials said that it needs every possible resource to fight against the Islamic State, and the costly battle is a justification for allowing Iraq to be excluded from the coordinated production cuts."We are fighting a vicious war against IS," Iraq’s oil minister Jabar al-Luaibi told reporters. The head of Iraq’s state-owned oil marketing company, SOMO, went further. "We should be producing 9 million if it wasn't for the wars,” Falah al-Amiri said, according to Reuters. "Some countries took our market share.” Fellow OPEC members like Saudi Arabia, and especially Iran, have ratcheted up output over this past year. Iran, for one, will be exempt from the November cuts, a fact that is not lost on Iraqi officials. Iraq makes a strong argument for its special treatment, but every exemption granted by OPEC to member countries pokes holes in the efficacy of a final deal. With Iran, Libya and Nigeria already not included in the planned cuts, the significance of any result is already in doubt. But if Iraq, too, is excluded, then any cut of substance will really need to come from Saudi Arabia. OPEC members agreed to a collective cut of a relatively small 200,000 to 700,000 barrels per day. Much of that could be achieved through the usual seasonal adjustments in Saudi Arabia – as summer ends and cooler temperatures arrive, Saudi demand falls and as a result production is throttled back. Saudi Arabia might have cut several hundred thousand barrels per day because of the end of summer demand, and so it gains a lot and loses little by calling it a “production cut” as part of an OPEC deal, than to quietly lower output as it typically might at this time of year anyway.

Oil Slides Below $50; Hits Two Week Lows As Concerns Over Iraq Break From OPEC Agreement Mount - Having flirted with the key psychological level of $50/bbl ever since the first week of October as a result of an ongoing short squeeze due to concerns that OPEC just may pull of the production cut it agreed on in Algiers in late September, moments ago the active WTI contract dipped below $50 without any notable news. Furthermore, as Reuters' Amanda Cooper points out, the 1M/2M contango has now blown out to the wide level in almost a year. As there was no immediate catalyst, traders attributed to slide to the delayed reaction from this weekend's news that Iraq has effectively split from the Algiers agreement, and now demands to be granted the same exemption from oil production cut rights as were granted to Iran, Libya and Nigeria.  As a reminder, and as we reported yesterday, Iraq's Oil Minister Jabber Al-Luaibi said Sunday at a news conference in Baghdad that his country should be exempted from output restrictions as it was fighting a war with Islamic State. "We are fighting a vicious war against IS," Luaibi said in e briefing for reporters, adding that Iraq should get the same exemption as Nigeria and Libya.“We are with OPEC policy and OPEC unity,” Al-Luaibi said. “But this should not be at our expense.” Instead, it is looking like a cut, if any, will be entirely at the expense of Saudi production, which may be forced to cut 1mmbpd or more, should OPEC continue to see rising record monthly production.Cited by Reuters, Falah al-Amiri, head of Iraq state oil marketer SOMO, said Iraq's market share was compromised by the various wars it fought since the eighties.Even more fascinating was Iraq's stated expectations of what its true output should be: a whopping 9 million barrels per day, roughly double from where it is now! "We should be producing 9 million if it wasn't for the wars." He added that Iraq has "passed 4.7 million barrels a day" and made it quite clear that Iraq would certainly not cut production: “We are not going back. It’s a question of sovereignty.”

Oil Tumbles To 3 Week Lows After Unexpectedly Large Inventory Build - Having closed below $50 for the first time in 3 weeks, WTI Crude extended its losses to 3 week lows after API reported crude inventories rose by a bigger than expected 4.8mm barrels (more than double the 2mm expectation). API

  • Crude +4.8mm (+2mm exp)
  • Cushing -2.3mm (-500k exp)
  • Gasoline +1.7mm (-1mm exp)
  • Distillates -940k

Crude inventories have drawn down for 6 of the last 7 weeks but rose notably this last week. Cushing inventories drewdown by the most since Feb 2014 (we suspect the spillage was the driver) and distillates inventories drew down for the 5th straight week). Gasoline inventories built notably despite expectaions of a sizable draw.

Oil Prices Plunge After API Reports Significant Build To U.S. Crude Stocks - American crude oil supplies surged upwards by 4.8 million barrels this week, almost completely offsetting last week’s 5.2-million-barrel draw, according to the American Petroleum Institute (API) report released on Tuesday. This week’s inventory build will likely press further down on oil prices, which were already trading down on the market’s increasing uneasiness over the OPEC drama, including Iraq’s OPEC rebellion, Russia’s vague and vacillating comments as to whether they’ll join in a freeze or a cut, and Venezuela’s pleas to get non-OPEC members to cut in proportion to the bloc’s to-be-determined limits.The West Texas Intermediate (WTI) price settled to three-week lows once the report went public Tuesday afternoon. At the time of the report’s writing, WTI stood at $49.30 – down 2.41 percent from the day’s start, while Brent fell to $50.29, or 2.27 percent from the open.Experts had predicted an inventory build of two million barrels of crude, according to Zero Hedge.Gasoline inventories rose by 1.7 million barrels, against an anticipated draw of one million barrels.Tomorrow’s official inventory report from the Energy Information Administration (EIA) will add to the volatility, particularly if the numbers stray far from API’s data.Supplies at the Cushing storage facility in Oklahoma decreased by 2.3 million barrels, instead of the modest 500,000-barrel draw that analysts expected, the report said.  Six of the past seven weeks have seen notable crude supply draws, with the current build breaking the streak.“You’ve gone from a very optimistic sentiment immediately following the Algiers announcement to a sentiment that’s more skeptical of the ability of OPEC to pull off a meaningful cut,” Paul Crovo of the Philadelphia-based consulting company by PNC Capital, told Zero Hedge.

Iraq opens up on oil output but remains firm on OPEC stance (video) S&P Global Platts senior editor Eklavya Gupte, following his visit to Baghdad, recounts some of the revelations by Iraq's oil ministry on its oil output and its position ahead of OPEC's crucial meeting on November 30.

WTI Crude Spikes Above $50 After Unexpected Inventory Draws Across Crude Complex -- Following API's reportedly large crude build last night, DOE reports a very divergent draw of 553k barrels (2mm bbl build exp). In fact the entire crude complex saw major drawdowns, sending WTI Crude back above $50. DOE

  • Crude -553k (+2mm exp)
  • Cushing -1.337mm (-500k exp)
  • Gasoline -1.956mm (-1mm exp)
  • Distillates -3.354mm

Forget OPEC The Oil Market Is Rebalancing (Video) - We keep getting surprise Oil Inventory reports each week for the last 6 weeks, it seems we are in slight deficit right now, which is unusual for this time of year. We are headed to $60 a barrel regardless of OPEC nonsense.

Oil futures decline despite surprise draw in US crude stocks -  Oil futures fell Wednesday even though Energy Information Administration data showed across-the-board inventory draws, as doubts over an OPEC-led production agreement pressured prices. NYMEX December crude settled down 78 cents at $49.18/b. ICE December Brent settled 81 cents lower at $49.98/b. NYMEX November ULSD settled 1.2 cents lower at $1.5511/gal. NYMEX November RBOB settled down 1.74 cents at $1.4831/gal. Oil futures initially jumped after EIA data was released. Crude stocks fell 553,000 barrels last week to 468.158 million barrels, which seemed to catch the market off-guard. Analysts S&P Global Platts surveyed Monday were looking for a build of 400,000 barrels. The size of the expected build ratcheted even higher after the American Petroleum Institute reported late Tuesday a build of 4.8 million barrels. NYMEX December crude hit an intraday high of $50.10/b, but the relief rally was short-lived and the oil complex drifted lower. "Fundamentally the report was pretty solid," ION Energy consultant Kyle Cooper said. "The one thing is that crude production edged back over 8.5 million barrels per day." US crude production increased 40,000 b/d last week to 8.504 million b/d, according to EIA estimates. Output fell to 8.428 million b/d the week ended July 1, ranging since then between 8.445 million b/d and 8.597 million b/d. Greater refinery activity outweighed upticks in imports and domestic production, pulling crude stocks slightly lower last week. Crude runs increased 182,000 b/d last week to 15.552 million b/d. Refinery utilization increased 0.6 percentage point to 85.6% of capacity. Imports rose 109,000 b/d last week to 7.016 million b/d, but that was still well below the year-to-date average of nearly 7.9 million b/d.

OPEC May Need Help to End the Global Oil Glut -- Even if OPEC defies a skeptical market by implementing output cuts in full, it still won’t drain the ocean of surplus oil already pumped from the ground. The Organization of Petroleum Exporting Countries aims to shrink the world’s bloated oil inventories with its first production cut in eight years, according to Secretary-General Mohammed Barkindo. Yet the bloc’s own data show that even the maximum reduction under consideration would barely dent record stockpiles next year. That makes securing help from competitors -- chiefly Russia -- critical to ending the glut.  Global supplies have exceeded demand for three years straight, resulting in the accumulation of an oil-inventory surplus big enough to fill about 160 supertankers. While cutting output to the lower end of the range adopted last month would stop a further expansion, it would curb the existing excess by just 11 percent next year, the group’s data show. If the organization can’t make a deal with Russia, there’s a risk of another price collapse, according to Commerzbank AG. The Algiers accord is “primarily geared” toward bringing down “the high, unsustainable level of inventories that have built up over the last two years or so,” OPEC’s Barkindo said on Oct. 18. Saudi Arabian Energy and Industry Minister Khalid Al-Falih, who represents OPEC’s most powerful member, said the following day he’s confident the organization will succeed. Many analysts agree, with International Energy Agency Executive Director Fatih Birol predicting the deal will hasten the re-balancing of supply and demand in 2017. World oil inventories will decline by 270,000 barrels a day next year if the cuts are implemented, or stay roughly unchanged if OPEC keeps output steady, according to Harold “Skip” York, vice president of integrated energy at consulting firm Wood Mackenzie Ltd. in Houston. Still, OPEC’s own data indicate that cutting production to the bottom of the proposed range would only have a superficial impact on stockpiles.

OilPrice Intelligence Report: Oil Prices Falter on OPEC Uncertainty: Oil prices faltered in the second half of this week, on deteriorating expectations of an OPEC deal. Prices regained some ground on Thursday following EIA data showing a surprise drawdown in crude oil stocks after the market predicted an increase. Gasoline stocks also fell by more than expected. Adding a bit more buoyancy to the market were comments from OPEC officials suggesting that the cartel would be willing to cut production by 4 percent. The markets initially took the announcement as positive news, but in what has become a familiar script from the oil cartel, the lack of details or hard commitments ultimately meant the price impact wore off. OPEC is meeting today and tomorrow to discuss the technical details of the Algiers accord, ahead of its official meeting at the end of November. Investors should take every OPEC utterance with a giant grain of salt, and wait to see what happens in a month’s time. WTI hovered slightly below $50 per barrel in early trading on Friday. Third quarter earnings start coming in. The quarterly earnings reports started this week, with Statoil posting a hugely negative result. The Norwegian firm lost $432 million in the third quarter, worse than the $307 million it lost a year earlier. The figure was also much worse than expectations, and Statoil said that it would cut spending by an additional $1 billion. ConocoPhillips did not fare much better, reporting a $1 billion loss for the three months ending in September, although those figures beat estimates. The company lowered its full-year spending forecast from $5.5 billion to $5.2 billion. ExxonMobil reported earnings of $2.7 billion, or $0.63 per diluted share, down 35 percent from a year earlier. Eni lost 484 million euros in the third quarter, compared to a 317 million euro loss in the third quarter of 2015.

Let Crude Crash: US Oil Producers Are Hedging At Levels Not Seen Since 2007 - As warned here one month ago after the farcical OPEC meeting in Algiers, the cartel's latest jawboning ploy to keep prices artificially higher - if only for one more month - is fast falling apart. Just a few hours ago, Bloomberg reporter Daniel Kruger penned the following assessment of the situation: Production-Cut Talk Is as Good as It Gets for Oil. Some OPEC members are talking about cutting production again, and so prices are rising. Saudi Arabia and other producers both in and out of the cartel have done a good job fostering the storyline that there are terms under which parties can agree to pump less crude. Continuing signs of concord among producer nations have boosted oil prices to an average of $50 a barrel this month in New York. Yet several obstacles make it difficult for countries to commit to signing on to a deal. One obstacle is that sacrifices are needed for the agreements to succeed. Another is that those sacrifices aren’t shared equally. Having successfully raised $18 billion in the bond market, Saudi Arabia is better positioned to withstand the loss of some revenue. Iraq, OPEC’s second-biggest producer, was the latest to plead for an exemption from a cut, citing its fight against Islamic State as a cause of hardship. Ultimately, no one wants to pump less because the upside is so limited. Saudi Arabia’s 2014 decision to double down on production in a drive for market share succeeded in making it more difficult for higher-cost producers to thrive as they once had. But having committed to that goal, they also locked themselves into a fight to keep what they’d won. And while ConocoPhillips’ announcement this week that it plans to cut spending on major projects demonstrates the partial success of the Saudi plan to drive out rivals, it also shows producers see  diminishing chances for crude to climb much above $60, said Wells Fargo Fund Management’s James Kochan. The big reason, of course, is latent U.S. supply. Baker Hughes data shows the most rigs at work in the Permian Basin since January. Sanford C. Bernstein analyst Bob Brackett suggests the per-acre price of drilling lease land will rise to $100,000 from about $60,000 now.  But an even more amusing twist is that a plunge in oil prices may be just what US shale producers are waiting for. The reason for that is that while OPEC has been busy desperately jawboning oil higher, US producers have been thinking of the inevitable next step, oil's upcoming reacquaintance with gravity. As a result, as the EIA reports, the amount of WTI short positions held be producers and merchants is just shy of a decade high.

U.S. Oil Rig Count Falls For The First Time In 4 Months - This week’s Baker Hughes report shows a small two-rig decline in the United States oil count, ending what was 17 straight weeks of no-decline in the active rig figure, providing a possible small reprieve for oil prices which have been wallowing today in the extremely sensitive market. Prior to the release of the Baker Hughes data, today’s oil prices were on the decline, reaching losses not seen for six weeks on the market’s lack of enthusiasm over the latest round of OPEC chatter and meeting with non-OPEC producers, which unsuccessfully sought to prop up markets ahead of the Nov 30 OPEC meeting that some believe will result in a freeze or cut of some type. Supply glut or not, the increase in overall rig count over the last four-plus months— despite this week’s small loss—still suggests that US oil is ready to take advantage of any opportunity brought by even marginally higher oil prices—no matter how volatile the day-to-day market, and no matter what the inventory numbers show—just so long as a price increase of some kind exists. This week’s dip in prices may, however, have an effect on next week’s count, as the number of active rigs usually trails pricing data. While the oil rig count is down slightly this week, the year-on-year numbers have improved since last week. The oil rig count now sits 137 rigs below the 578-rig figure reported during the same period last year. The gas count saw a six-rig increase to 108 rigs, and now stands at 83 rigs fewer than the count the same time last year. The biggest losers were Colorado, which lost three sites, and New Mexico, which lost two. By basin, the Williston basin added the most rigs, for a five-site gain to bring the total for that basin to 35. At 12:30pm EST, a half hour before Baker Hughes released the rig count data, West Texas Intermediate was trading down 1.03 percent at $49.21, with Brent trading down at 0.89 percent at $50.02. Within minutes of Baker Hughes releasing the data, WTI was trading down even further at $49.16, with Brent at $49.96.

BHI: Overall US rig count up 4 despite drop in oil units -The tally of US oil-directed rigs ended 17 straight weeks without a decline during the week ended Oct. 28. But the overall rig count was again bolstered by a recent surge in rigs targeting natural gas, with increases in the Haynesville and Marcellus regions. The overall US count has now risen in 19 of the last 22 weeks, gaining 4 units to 557, up 153 since the week ended May 27, according to the latest data from Baker Hughes Inc.  Compared with the count for the week ended Dec. 5, 2014, just before the drilling dive commenced after the initial plunge in crude-oil prices, the overall tally is down 1,363 units. Oil-directed rigs were down by 2 to 441, still up 125 since May 27. Gas-directed rigs rose 6 units to 114, up 33 units since a decades-long bottom in BHI data that was twice touched in August. Gas-directed units were up 11 two weeks ago, while oil-directed units added 11 last week (OGJ Online, Oct. 21, 2016). During an event this week at the Center for Strategic & International Studies in Washington, DC, Laszlo Varro, chief economist at the International Energy Agency, said US tight-oil production “could restart in a dynamic fashion if and when global oil prices improve,” and that US firms “are ready to go.” An IEA annual report on global energy investments explained that the impact of low oil prices on cash flow tested the debt-financed investment model used by US shale producers, resulting in a 52% drop in spending over the past 2 years (OGJ Online, Oct. 26, 2016).“The shorter investment cycle of shale projects and the widespread use of futures hedging [have] enabled independent shale producers to rely on a highly leveraged business model in contrast to major oil and gas companies that rely predominantly on internal cash flow for investment,” the report explained. “Access to bond markets for US shale companies and the cost of capital are directly influenced by oil prices,” it said. “While financial pressures in the shale industry remain widespread despite a recent partial recovery in oil prices, the operators that have filed for bankruptcy represent only a minor proportion of total US unconventional production.”

 WTI Tumbles To $48 Handle After Iraq, Iran "Deadlock": OPEC Admits "It's Getting Complicated" -- "It is getting complicated...every day there is a new issue coming up," one OPEC delegate said this morning as it is clearly becoming harder to keep the smoke and mirrors jawboning of a possible cut/freeze alive in the face of a reality that is very clearly enunciated by Russia's energy minister, "any output freeze could be offset by a quick recovery in US shale oil output." In other words, why bother with a freeze at all.. which is exactly what Iran and Iraq just said... Iran, Iraq refuse to freeze output -

Saudi Bond Sale Spurs Gulf Borrowing to Record With More to Come - Gulf borrowers have raised a record amount in the public debt markets in 2016, and they’re not finished yet.  Saudi Arabia’s $17.5 billion international bond sale, the largest ever from an emerging market, boosted the amount raised through loans and bonds in the six-nation Gulf Cooperation Council to $151 billion, according to data compiled by Bloomberg, eclipsing the full-year record of $142 billion set in 2007. That’s before Equate Petrochemical Co.’s planned sale of five- and 10-year bonds this week, an offering that may raise as much as $3 billion, according to two people familiar with the deal.  A halving of oil prices since mid-2014 has hurt public finances across a region that produces about a fifth of the world’s oil, pushing Saudi Arabia, Qatar, Abu Dhabi, Oman and Bahrain to sell bonds to bridge budget shortfalls. The surge in new sovereign debt means governments are poised to overtake financial institutions as the region’s biggest borrowers for the first time since 2009. “As long as the oil price stays at current levels, I expect GCC sovereigns will continue to rely on the capital markets to meet budget deficits,” said Andy Cairns, the global head of debt origination and distribution at National Bank of Abu Dhabi PJSC, the United Arab Emirates’ second-biggest bank by assets. “Next year we’ll see a further increase in GCC bond issuance with growth coming not only from sovereigns but also more supply from regional corporates and financial institutions.”

Saudi central bank asks banks to reschedule property loans as austerity bites | Reuters: Saudi Arabia's central bank said on Tuesday it had asked local banks to reschedule the property loans of citizens whose incomes had been reduced by government austerity measures. Last month the government said it was cutting the allowances of employees in the public sector, where about two thirds of Saudis work, to save money as low oil prices strain state finances. Economists estimated the cuts might reduce the income of many people by about 20 percent, making it harder for them to service their property and consumer loans. At the end of last month, the central bank asked local banks to reschedule consumer loans to help cash-strapped borrowers service them; it is now doing the same with real estate loans.

"No Going Back": Iraq Demands Exemption From Oil Production Cut, As Rosneft Slams Saudis -- With just one month left until the OPEC Vienna meeting in which by some miracle, the cartel of oil producing countries (as well as non-OPEC countries) are expected to agree on production cut quotas, things are not looking good. The latest complication emerged on Sunday when Iraq, which one month ago tipped its hand that it would not comply by the Algiers agreement, said it would maintain oil production at current levels after exceeding 4.7 million barrels a day in September, even as other OPEC members discuss limits on output. As Bloomberg reports, and as we predicted in September, Iraq joined Libya, Iran and Nigeriain asking OPEC for an exemption from its participation in any cuts, Oil Minister Jabber Al-Luaibi said Sunday at a news conference in Baghdad. Ali al-Luaibi said on Sunday his country should be exempted from output restrictions as it was fighting a war with Islamic State. "We are fighting a vicious war against IS," Luaibi said in e briefing for reporters, adding that Iraq should get the same exemption as Nigeria and Libya. “We are with OPEC policy and OPEC unity,” Al-Luaibi said. “But this should not be at our expense.” Instead, it is looking like a cut, if any, will be entirely at the expense of Saudi production, which may be forced to cut 1mmbpd or more, should OPEC continue to see rising record monthly production. Cited by Reuters, Falah al-Amiri, head of Iraq state oil marketer SOMO, said Iraq's market share was compromised by the various wars it fought since the eighties. Even more fascinating was Iraq's stated expectations of what its true output should be: a whopping 9 million barrels per day, roughly double from where it is now! "We should be producing 9 million if it wasn't for the wars." He added that Iraq has "passed 4.7 million barrels a day" and made it quite clear that Iraq would certainly not cut production: “We are not going back. It’s a question of sovereignty.”

Kremlin Slams Demands For Assad's Ouster As ISIS Kills Hundreds Of "Human Shields" In Mosul - While the recently unveiled Iraqi assault on Mosul (with US support) continues, in what some have speculated is an election stunt meant to liberate Mosul just ahead of the November 8 vote and provide a boost for the Hillary campaign, while others see even more ulterior motives, namely to "grant" ISIS fighters free passage out of Iraq and into Syria to fight Assad, there may be some complications. According to press reports citing Iraqi intelligence sources, today the Islamic State rounded up and killed 284 men and boys as Iraqi-led coalition forces closed in on Mosul, the terror group's last major stronghold in Iraq. Those killed Thursday and Friday were used as human shields against attacks forcing ISIS out of southern parts of Mosul, the source said. ISIS dumped the corpses in a mass grave at the defunct College of Agriculture in northern Mosul, the intelligence source said. The victims, including children, were all shot, said the source, who asked for anonymity because he is not authorized to speak to the media. CNN could not independently confirm the killings. Separately, according to Reuters, roughly 1,000 people had been treated for breathing problems linked to toxic gases from a sulphur plant which ISIS militants are suspected to have set on fire near the city of Mosul. No deaths were reported in connection with the incident, said the sources at the hospital in Qayyara, a town south of Mosul.

Sunni Arabs forced to leave Kirkuk after Islamic State attack, residents say | Reuters: Hundreds of displaced Sunni Arab families have had to leave Kirkuk after an Islamic State attack on the Kurdish-controlled city which authorities suspect was helped by Sunni sleeper cells, humanitarian workers and residents said on Tuesday. The Sunni families, who had been sheltering in Kurdish-controlled Kirkuk province from the conflict with Islamic State, began moving out after authorities told them on Sunday to leave or face being forcibly expelled, the sources said. About 330,000 Sunni Arabs have taken refuge in the oil-rich Kirkuk province in the last two years, after Islamic State swept through northern, central and western Iraq in 2014. Some had fled because of the fighting and others because of the hardline Sunni group's harsh rules and the difficult living conditions in their villages and towns. Islamic State fighters stormed police stations and buildings in Kirkuk on Friday, killing about 100 security force members and civilians. Sixty-three militants also died in the heavy fighting that lasted until Sunday, when authorities restored control. The jihadists carried out the operation to relieve pressure on Mosul, the last major city stronghold of Islamic State in Iraq, where the group is fighting off an offensive by Iraqi army units and Kurdish forces backed by a U.S.-led coalition.

The Oil-Gas War Over Syria (In 4 Maps) -- Turkey’s Anadolu News Agency, though government-run, is providing remarkably clear and reliable diagrammatic descriptions of the current status of the U.S - and - fundamentalist - Sunni, versus Russia - and - Shia - and - NON - fundamentalist - Sunni, sides, in the current oil-and-gas war in the Middle East, for control over territory in Syria, for construction of oil-and-gas pipelines through Syria supplying fuel into the world’s largest energy-market: Europe. Russia is now the dominant supplier of both oil and gas, but its ally Iran is a Shiite gas-powerhouse that wants to share the market there, and Russia has no objection. Qatar is a Sunni gas-powerhouse and wants to become the main supplier of gas there, and Saudi Arabia is a Sunni oil-powerhouse, which wants to become the major supplier of oil, but Saudi oil and Qatari gas would be pipelined through secular-controlled (Assad's) Syria, and this is why the U.S. and its fundamentalist-Sunni allies, the Sauds, and Qataris, are using Al Qaeda and other jihadists to conquer enough of a strip through Syria so that U.S. companies such as Halliburton will be able safely to place pipelines there, to be marketed in Europe by U.S. firms such as Exxon. Iran also wants to pipeline its gas through Syria, and this is one reason why Iran is defending Syria’s government, against the U.S.-Saudi-Qatari-jihadist invasion, which is trying to overthrow and replace Assad. Here are the most-informative of Anadolu’s war-maps: The first presents the effort by many countries to eliminate ISIS control over the large Iraqi city of Mosul. A remarkably frank remark made in this map is "An escape corridor into Syria will be left for Daesh [ISIS] so they can vacate Mosul" - an admission that the U.S. - Saudi - Qatari team want the ISIS jihadists who are in Mosul to relocate into Syria to assist the U.S. - Saudi - Qatari effort there to overthrow and replace the Assad government: The second is about the Egyptian government's trying to assist the Syrian government's defense against the Saudi - U.S. - Qatari invasion of Syria, at Aleppo, where Syria's Al Qaeda branch is trying to retain its current control over part of that large city. The Saud family are punishing the Egyptian government for that: Here is Russia's proposed gas-pipeline, which would enable Russia to reduce its dependence upon Ukraine (through which Russia currently pipes its gas into Europe). Obama conquered and took over Ukraine in February 2014 via his coup that overthrew the democratically elected neutralist Ukrainian President there: In addition, there is the following map from

Syria Is Another Pipeline War - Gaius Publius: Proposed pipeline routes through the Middle East to gas markets in Europe. The purple line is the Western-supported Qatar-Turkey pipeline. All of the nations it passes through — Saudi Arabia, Jordan, Turkey (all highlighted in red) — have agreed to it … except Syria. The red line is the “Islamic Pipeline” from Iran through Iraq into Syria. See text below for further explanation. (Source: MintPress News; click to enlarge) I’m not sure most Americans have figured out what’s happening in Syria, because so much of what we hear is confusing to us, and really, we know so little of the context for it. Is it an insurgency against a brutal ruler? Is it a group of insurgencies struggling for power in a nearly failed state? Is it a proxy war expressing the territorial and ideological interests of the U.S., Russia, Turkey and Iran? Or something else? According to Robert F. Kennedy Jr. it is something else — a war between competing national interests to build, or not build, a pipeline to the Mediterranean so natural gas can be exported to Europe. Inconveniently for Syria, that nation lies along an obvious pipeline route. Which makes it another war between interests for money — something not very hard to understand at all. Here’s Kennedy’s argument via EcoWatch. This is a long piece, well worth a full read, but I’ll try to present just the relevant sections here.

‘There Are No More Panes of Glass Left in Aleppo’ - WSJ:   When the bodies of 16 members of the Qasim family were pulled from the rubble of their home last month, there was no space left in one of Aleppo’s largest cemeteries to bury them.  Gravediggers unearthed seven graves of relatives and divided the newly dead among them. “We pushed the old bones to one side and then lowered the new body in,” The challenge of where to bury the dead is just one of the daily miseries afflicting the people living under a choking siege in Aleppo. Some 300,000 people in the rebel-held, eastern side of the divided city are struggling under a blockade by the Assad regime imposed in July that has kept them from getting food, fuel and medicine. Heavy bombing by the regime and its ally Russia has brought the city to a breaking point after more than five grinding years of civil war.“The city of eastern Aleppo, at this rate, may be totally destroyed,” said United Nations Special Envoy for Syria Staffan de Mistura earlier this month. Aleppo at the outset of the war had five times the population of Dresden, which was flattened by Allied raids during World War II. The destruction is akin to when Atlanta burned ahead of Sherman’s March to the Sea. Secretary of State John Kerry has compared it to Carthage, which was razed by the Romans in 146 B.C. Satellite imagery earlier this year showed Aleppo is Syria’s most damaged city, with the rate of destruction doubling in the past two years, according to a World Bank report released earlier this year. Out of six Syrian cities assessed, Aleppo accounted for 58% of the destruction in the housing, health, education, water and energy sectors. As of March 2016, 29% of the residential buildings have been estimated to be either damaged or destroyed, according to the World Bank.  Since then, damage has accelerated as a result of the renewed offensive using increasingly destructive weapons. Imagery since September reveals that in one week 90 locations were damaged or destroyed in an area about the size of Manhattan, according to Amnesty International.. Flying shards have injured and killed so many people that they have been replaced by opaque fiberglass or tarps. “There are no more panes of glass left in Aleppo.”

Putin Tried To Warn Us About Syria Three Years Ago, But Nobody Listened - As Russia and the United States approach arguably the most dangerous crossroads in history — and as Western media continues to crucify Russia for its actions within Syria — a closer look at the rationale Putin used for intervening in the Syrian war paints a sane explanation of how we ended up at this juncture of a global conflict. Unsurprisingly, the explanation comes from the Russian president himself and was actually offered over 3 years ago. As expected, the Western corporate media and the Obama administration chose to ignore Vladimir Putin’s explanation for Russia’s stance on Syria and continued a number of policies that have completely exacerbated the conflict. In a live interview with RT in June 2013, Putin was asked for an explanation regarding Russia’s support for Bashar al-Assad in Syria, even though this support has made some people very angry at Russia. Putin’s response was that Russia does not support the Assad government or Assad himself, but before defining Russia’s official position, he explained what Russia doesnot want to do within Syria or across the Middle East: “We do not want to interfere into the internal schism of Islam, between Shias and Sunnis. These are internal issues of the Islamic world. We have very good relations with much of the Arabic world, Iran for example, and others.” However, according to Putin, what worries Russia can be identified by having a look “at what is going on in the Middle East in general.” “Egypt is not calm. Iraq is not calm – and it is not assured in its continued existence as one state.  Yemen is not calm; Tunisia is not calm. Libya is witnessing inter-ethnic, inter-tribal conflict. So the entire region has been engulfed, at a minimum, into a state of conflict and undecidedness. And now Syria, down the same path.” In Putin’s eyes, these events are no accident. As he puts it, these events happened for a reason: “Some people, from the outside, think that if they can ‘comb’ the region to how they see fit – some of them call this ‘democracy’ – then the region will come into calmness and order. That’s not how it is.  Without taking into account the history, the traditions, religious particularities, you must not do anything in the Middle East, especially as an outsider.”

NATO Pushing For "Biggest Military Build-Up On Russia's Borders" Since The Cold War - As Russia pushes on with the biggest naval deployment since the cold war as Russia's only carrier group slowly headed toward Syria in a show of force along Europe's shores, NATO defense ministers are focusing on a ground expansion and aim to make good on a July promise by NATO leaders to send forces to the Baltic states and eastern Poland from early next year. As a result, NATO will press its member allies on Wednesday to "contribute to its biggest military build-up on Russia's borders since the Cold War " as the alliance prepares for a protracted quarrel with Moscow. According to Reuters, the US hopes for binding commitments from Europe to fill four battle groups of some 4,000 troops, part of NATO's response to Russia's 2014 annexation of Crimea and concern it could try a similar tactic in Europe's ex-Soviet states.  France, Denmark, Italy and other allies are among the nations expected to join the four battle groups led by the United States, Germany, Britain and Canada to go to Poland, Lithuania, Estonia and Latvia, with forces ranging from armored infantry to drones. Jens Stoltenberg, the NATO Secretary-General, said the commitments would be "a clear demonstration of our transatlantic bond." They will also send a clear message to Russia that its concerns about NATO build up on its borders were correct. Diplomats added that it would also send a message to Donald Trump, who has complained that European allies do not pay their way in the alliance. The battle groups will be backed by NATO's 40,000-strong rapid-reaction force, and if need be, further follow-on forces, for any potential conflict, which could move into Baltic states and Poland on rotation.

Britain to send hundreds more troops to Russia border as Cold War tension escalates across Europe: Britain will send hundreds more troops close to Russia’s border, the Government has said, as the Prime Minister also called for “pressure” on Moscow over the Syria crisis. Around 800 soldiers along with tanks, armoured vehicles and drones will now head to Estonia in the spring in a Nato effort to reassure the Baltic states over Russian aggression. The boosted mission, up from 500 announced earlier this year, will be Britain’s largest long-term deployment to one of Russia’s neighbours since the end of the Cold War. Defence sources said the six-month deployment to Tapa army base, around 100 miles from the border, was the start of a persistent UK presence in the country. The British troops will form one of four Nato battalions being deployed in response to a perceived threat from Russia to the alliance's eastern allies. The announcement came as Russia abandoned plans to refuel and provision warships headed for the war in Syria at a Spanish port following international pressure on Madrid. Russia’s embassy in Spain said on Wednesday that vessels from a squadron led by the Admiral Kuznetsov, Russia’s only aircraft carrier, would not stop as planned for refuelling in Ceuta, a Spanish port on the North African coast. Theresa May said "What we have seen, sadly, is that the Russians are already able to unleash attacks on innocent civilians in Syria. "What matters is that we put pressure on Russia to do what everybody agrees is the only way that we are going to resolve this issue, which is to ensure that we have a political transition in Syria, and that's where we should focus our attention."

NATO Continues To Prepare For War With Russia - NATO uses any pretext to accuse Russia of harboring aggressive intentions. It has raised ballyhoo over the recent deployment of Iskander short-range surface-to-surface ballistic missiles to the Kaliningrad region.Time and time again, the alliance reaffirms its bogus Russia narrative. “We see more assertive and stronger Russia that is willing to use force,” concluded NATO General Secretary Jens Stoltenberg speaking at the round table in Passau, Bavaria on October 10.At the same time, NATO is pushing ahead with its military "Schengen zone" in Europe."We are working to ensure that each individual soldier will not require a decision at the political level to cross the border," said Estonian Defense Minister Hannes Hanso.The idea is to do away with travel restrictions on the movement of NATO forces troops and equipment across Europe. There will be no need to ask for permissions to move forces across national borders. It will undermine the sovereignty of member states but facilitate the cross-continent operations instead. The Baltic States and Poland are especially active in promoting the plan. The restrictions in place hinder rapid movement of the 5,000 strong “Very High Readiness Joint Task Force”.Besides being the first response tool, it could be used for preventing Article 4 situations, such as subterfuge, civil unrest or border infractions, from escalating into armed conflict. The troops can move freely in time of war, but introducing a NATO Schengen zone is needed for concentrating forces in forward areas in preparation for an attack across the Russian border. The formation of the much larger 40 thousand strong NATO Response Force (NRF) is on the way.

Is the US Headed Towards War in Syria? - Real News Network video interview and transcript - The Obama administration is currently considering a proposal to send more arms to CIA backed anti Assad forces in Syria. According to the Washington Post, Obama has not made a decision yet and could leave it up to whoever wins the election in November. This of course raises questions of what would a President Hillary Clinton or President Donald Trump do in Syria? This has also been the topic at the presidential debates, recently. Joining us to discuss the Clinton’s’ and Trump’’s approach as to foreign policy is Larry Wilkerson. Larry is a retired United States army soldier and former Chief of Staff to the United States Secretary of State Colin Powell. He’s also just published an article in National Interest, written together with Gordon Adams about this topic. Larry thank you so much for joining us today.

Why won’t anyone admit that America is fighting 5 wars? - In an election flush with conspiracy theories, here's one that's real: Both major party nominees, as well as the journalists who cover the election and moderate the debates, are actively conspiring to avoid talking about the fact that the United States is waging war in at least five countries simultaneously: Iraq, Syria, Yemen, Libya, and Somalia. In the first two presidential debates, our involvement in the Syrian civil war was briefly discussed, as was ISIS in vague terms, and the Iran nuclear deal, and Russia's mischief-making in Eastern Europe and the Middle East, and Libya, though mostly in the past tense, focused on our 2011 intervention to depose Moammar Gadhafi and the subsequent attack on American government facilities in Benghazi a year later. But our role in "advising" the Iraqi army "a few miles behind the front lines" as it works to take back territory from ISIS? Our "secret war" against Shabab militants in Somalia? Our support for Saudi Arabia's bloody assault on Houthi rebels in Yemen? Our air strikes pounding positions in and around the city of Sirte on the Libyan coast?   Nada. Zip. Nothing.

Idlib school attack could be deadliest since Syrian war began, says UN -Airstrikes in rebel-held Idlib province on Wednesday were possibly the deadliest attack on a school since the Syria war began, a top UN official has said, describing the incident as an “outrage” and a possible war crime.The strikes by Syrian or Russian warplanes killed at least 35 people, most of them schoolchildren, rescue workers and a monitoring group have said. “This is a tragedy. It is an outrage. And if deliberate, it is a war crime,” said Unicef’s executive director, Anthony Lake. “This latest atrocity may be the deadliest attack on a school since the war began more than five years ago,” he added. “Children lost forever to their families … teachers lost forever to their students … one more scar on Syria’s future. When will the world’s revulsion at such barbarity be matched by insistence that this must stop?”Wednesday’s raids hit a residential area and a school in Hass village, the Syrian civil defence rescue workers’ network said on its Facebook account.  Syria’s civil war pits the president, Bashar al-Assad – backed by Russia, Iran and Shia Muslim militias from Lebanon, Iraq and Afghanistan – against an array of mostly Sunni Muslim rebel groups, including some backed by Turkey, Gulf monarchies and the US.

Gas helps to warm Russia, Turkey relations after tumultuous 12 months - Moving toward the brink of war is about as serious as a geopolitical relationship can get — and that is where Moscow and Ankara found themselves after NATO member Turkey shot down a Russian fighter jet on the border with Syria on November 24 last year. Diplomatic efforts succeeded in calming the immediate tensions, but nonetheless Moscow’s reaction was a pledge to “seriously reevaluate” its relationship with Ankara. As well as a raft of economic sanctions, part of the geopolitical rhetoric was a move by the Kremlin to halt all talks around the already complex negotiation process on the planned TurkStream gas pipeline from Russia to Turkey under the Black Sea. The link — originally intended as a 63 Bcm/year South Stream replacement — had already been downgraded to a two-line 31.5 Bcm/year project, and talks were becoming increasingly protracted as Ankara insisted the pipeline’s realization be linked to a gas discount on Russian gas imports. But Moscow drew a line under TurkStream after the fighter jet incident (which Turkey initially refused to apologize for), suspending talks on further progress on the pipeline. The result was speculation about what could replace it — Bulgaria looked to capitalize on the Russia-Turkey standoff by quietly promoting the idea of a new version of South Stream to Bulgarian shores. But as quickly as TurkStream was written off, it rose again in September like a phoenix from the ashes of the downed jet following a July apology from Turkish President Recep Tayyip Erdogan. And then in October, Moscow and Ankara signed an intergovernmental agreement on the construction of two 15.75 Bcm/year lines to Turkey, one for the domestic market and one to the Greek border for onward transit to southeast Europe.

The Turks want Mosul and Aleppo “back.” - "Speaking during an opening ceremony for an educational institution in Bursa on Saturday, Turkish President Recep Tayyip Erdogan compared the way that Syrians and Iraqis have been driven away from homes because of the self-proclaimed Islamic State (IS; ISIS/ISIL), to how Turkish people were once forced out from the same cities.  Erdogan added that the cities of Mosul and Aleppo belong to the Turkish people."  If you know anything about the history of the Ottoman Empire you should not be surprised by this.  These two cosmopolitan ME cities were among the most important in the empire.  Baghdad was another but there was always a large Arab majority there,  Mosul and Aleppo were much more diverse.   It was only in the Kemalist consolidation of the Turkish Republic in the 1920s that Turkish sovereignty over these places was surrendered officially.  This statement makes clear what Erdogan's ultimate ambition is and ensures that no Iraqi government will ever acquiesce in the participation of Turkish troops in the liberation of Mosul or Kirkuk.  Only an ignorant neocon fool like Ashton Carter would think differently.   Perhaps the Clinton Administration's foreign policy team, Wolfowitz, Bolan, Petraeus, Keane et al  will be able to bully the Iraqis into accepting this.  I think not. 

Fighting Rages on Yemen-Saudi Border Despite Truce: Fighting in Yemen, with government forces and their Saudi-led allies battling Houthi rebels backed by Iran, raged from Friday into Saturday on the Saudi-Yemen border, despite a 72-hour cease-fire that ended late Saturday. Witnesses reported Saudi-led coalition airstrikes on Houthi missile launchers east of the capital, Sana'a. All parties had agreed to honor the U.N.-backed truce as a means to allow critically needed supplies to reach civilians cut off from outside help. U.N. special envoy Ismail Ould Cheikh Ahmed had described the truce as "largely holding" on Saturday and was seeking to extend it, but there was no information available on whether combatants would agree to such a move. Ahmed described the cease-fire as an opportunity to establish a foundation for talks to end nearly two years of civil war in Yemen, which borders Saudi Arabia on the south. Monitors say nearly 7,000 people, at least half of them civilians, have died since the uprising began. Late Friday, Ahmed met in the Saudi capital with exiled Yemen Vice President Ali Mohsen al-Ahmar, and said afterward that Yemeni government forces were "exercising restraint" in the face of what he said were more than 400 truce violations by Shi'ite rebel fighters. The cease-fire was the sixth formal attempt to end the fighting since the Saudi-led Sunni coalition of Gulf states intervened early last year to support the internationally recognized Sunni government of President Abd Rabu Mansour Hadi.

 China's SPR push, India's insatiable demand crucial for oil: IEA's Birol -  China's thirst for crude imports will continue to grow as Beijing steps up efforts to bolster strategic stocks, but India will witness structural growth in demand as disposable incomes rise, Fatih Birol, executive director of the International Energy Agency, said Tuesday. "India is moving to the centerstage of global energy affairs as a major consumer. With growing income levels in India, we will see oil demand growth increasing, which will boost oil imports by India," Birol told a news conference on the sidelines of the Singapore International Energy Week. India's oil products demand grew 8.5% year on year in 2015 to 177 million mt, or 3.81 million b/d. Over January-August this year, products demand was up 10% at 128.39 million mt, or 4.13 million b/d, according to India's Petroleum Planning and Analysis Cell. The IEA expects India's oil demand to average 4.3 million b/d in 2016. The government's clear policies, strong and sustained GDP growth, and a huge push towards making India a manufacturing hub were not only helping to accelerate oil consumption but was also whetting the appetite of leading multinationals to set up shop in the nation. Commenting on China, Birol said that crude oil imports would grow in the coming years despite weak domestic demand because of declining domestic production and increased efforts to maintain higher levels of crude stocks for energy security. "China is one of those countries whose oil security measures are of crucial importance for China and also for the rest of the world. I am very happy to see the Chinese government taking oil security as a serious issue. This is a very good policy to follow," he added.

Angola Becomes China's Largest Oil Supplier As Beijing Stockpiles Record Amounts Of Crude - Overnight China's customs data revealed that with imports from both Russia and Saudi Arabia posting modest declines in the past month, Angola once again became China's largest crude supplier for the second time in September, taking the top position from Russia. China imported 4.19 million tonnes of oil from the southern African nation last month, up 45.8% from a year ago. That meant Angolan shipments stood at 1.02 million barrels per day, below 1.11 million bpd seen in August, the last time the country was the top exporter to China. according to Reuters, China imported record volumes of crude oil last month, eclipsing the United States as the world's top buyer of foreign oil as Beijing's state reserves shipped in cheap crude to fill new storage tanks. China's Pivate "teapot" refiners boosted runs to a record 55.98% as of Sept. 29.The amount of crude oil heading east from ports on Africa's west coast is expected to reach a five-month high in September, partly driven by trading houses such as Trafigura and Gunvor, according to a Reuters survey.Furthermore, it seems that as Saudi Arabia and Russia continue to posture for market share, the west African nation will be the winner for the foreseeable future: Chinese demand for Angolan oil, which is cheaper and deemed to offer stable supply, is set to accelerate in October as the refinery maintenance season comes to an end.  In the first nine months of 2016, Angola was also China's third-largest supplier. Imports jumped 17.7 percent on-year to 34.39 million tonnes (916,229 bpd) in the period, data showed.

Chinese Home Prices Surge Most On Record, Ignore "Cooling" Measures -- Over the past month, one of the key Chinese economic themes has been Beijing's tepid, if growing, desire to gradually deflate the country's unprecedented housing bubble. Alas, according to the latest, September data, the government has so far failed to tame the epic homebuying frenzy it unleashed just over a year ago courtesy of a record debt and fiscal stimulus flood, when it in turn scrambled to offset the popping of the 2013 housing bubble. According to China's National Bureau of Statistics, average new-home prices in the 70 cities tracked surged by 1.8% in September from the month prior. On an annual basis, housing prices soared 11.2% year over year, after a 9.2% jump in August. This was the biggest annual jump on record, and the 12th consecutive month in year-over-year gains.  Still, despite the obvious failure to cool the market, the NBS noted in its statement that the market “apparently cooled” in response to targeted measures rolled out in some cities. If a record jump in prices is considered "cooling", we'd be curious to know what China considers a "overheating."

China’s Insanely Leveraged Housing Market Will Enter Its Secular Bear Market In 2017 --naked capitalism Yves here. Many people have predicted a bust in China’s bubblicious housing market for quite some time. Regardless of whether you believe that the endgame is nigh or not, this analysis contains some interesting data. Wolf Richter posted yesterday that China House Price Bubble Soars Most Ever, Government Freaks out, Preannounces Plunge. Even though this is a deliberately attention-geting headline, Richter also stresses that the government has taken aggressive steps to try to keep its latest round of monetary stimulus from goosing housing prices further by imposing restriction, including requiring bigger down payments. This appears to have led to an influx of purchases ahead of the October 1 deadline, and in a never-before move, released preliminary data for October, which shows a meaningful decline in many big cities.  And one point I found telling in the article below was that it was retail investor money that has been pouring in, even as professionals are pulling out. That is often the sign of a market top. 

China Gets Desperate About Debt - With its debts surging and growth sluggish, China has hit on a new strategy to revitalize its ailing economy. It’s the same as the old strategy. Only this time, it won’t work. Earlier this month, China’s State Council released guidelines for a new swap program, in which companies can exchange troubled debt with banks in return for equity. The government hopes this will give the firms a chance to restructure on favorable terms, and avoid the prospect of “zombie companies” propped up indefinitely by state-owned lenders. Optimists point to a similar program that China executed, with some success, a little more than a decade ago. But they’re overlooking the primary reason that the previous swap seemed to work -- which doesn’t portend success this time around. In the late 1990s, responding to a similar bout of excessive borrowing, China’s government created state-owned asset-management companies to help banks clean up their balance sheets. Firms such as China Cinda Asset Management Co. and China Huarong Asset Management Co. grew out of this program. These “bad banks” purchased a wide variety of assets and held them for extended periods with minimal return, thus helping the banks to continue lending. The extent to which this solved any problems, as opposed to papering them over, is debatable. But even the limited success of that program won’t be repeated this time around. One major difference is where the capital to fund the program is coming from. In the previous iteration, the government used public funds and reserve injections from the People’s Bank of China to capitalize the bad banks. This time, it has resisted committing any public capital and hopes that existing financial firms will heed the call to participate in the swap. But those firms have no financial incentives to do so -- only political ones.

China’s September Reserve Sales (Using the Intervention Proxies) - The most valuable indicators of China’s intervention in the foreign exchange (FX) market are now out, and both point to a pick-up in sales in September, and more generally in Q3. The data on FX settlement shows $27b in sales in September, and around $50b in sales for Q3. Add in changes in the forwards (new forwards net of executed forwards) reported in the FX settlement data, and the total for September rises to $33 billion, and the total for Q3 gets to around $60 billion. FX settlement is my preferred indicator, though it is always important to see how it lines up with other indicators. The data on the PBOC’s balance sheet shows a $51 billion fall in reserves in September, and a fall of over $100 billion in Q3. I like to look at the PBOC’s foreign assets as well as reserves, this shows a slightly more modest fall ($47 billion in September), as the PBOC’s other foreign assets continued to rise. But total foreign assets on the PBOC’s balance sheet are still down around $95 billion in q3 (with a bigger draw on reserves than implied by the settlement data, which includes the banking system; chalk the gap between settlement and the PBOC’s balance sheet up as something to watch).  $100 billion in a quarter isn’t $100 billion a month—but it is noticeably higher than in Q2. All in all, the pressure on China’s “basket peg” or “basket peg with a depreciating bias” exchange rate regime (take your pick on what managing with reference to a basket means, it certainly has meant different things at different points in time this past year) is now large enough to be significant yet not so large as it appears to be unmanageable. China still has plenty of reserves; I wouldn’t even begin to think that China is close to being short of reserves until it gets to $2.5 trillion given China’s limited external debt, tiny domestic liability dollarization, and ongoing external surpluses. $2.5 trillion would still be the world’s biggest reserve portfolio by a factor of two, it also would be roughly 20 percent of China’s GDP, which would be in line with what many emerging markets hold.

Rethinking Capital Controls - Barry Eichengreen –- Economists are taught – and taught and taught – to appreciate the virtues of free markets. But they are also trained to be alert to circumstances in which markets, left to their own devices, produce less-than-optimal results. Sorting out the cases in which markets fail to generate efficient use of productive resources and justify government intervention can be tricky, though. And, as China's ongoing financial convulsions should remind us, few examples can be trickier to assess than international markets for capital.  First things first. If you took Economics 101, you can probably dredge up cases of market failure in which government intervention is justified. For example, governments tax the emission of pollutants (or regulate them directly) because the cost of pollution would otherwise be borne by third parties and thus not taken into account in the balance of supply and demand. By the same token, governments regulate pharmaceuticals because buyers would otherwise lack enough information about their safety and efficacy to judge their value.The rationales for regulating both pollution emissions and drugs have also been applied to financial markets – for example, regulating the complex mortgage contracts that millions of poorly informed borrowers signed in the housing bubble of the early 2000s, which generated vast collateral damage when the bubble collapsed in 2008.Parallel arguments apply to international transactions. Most economists support the prohibition of imports made with slave labor, at least in part because consumers lack adequate information about the conditions under which those imports are produced. And they generally support safety regulation of imported food on the grounds that imperfectly informed purchasers would not otherwise know what they're ingesting. With all that in mind, consider the issue of taxing or regulating international capital flows – capital controls, for short. It's fair to say that the vast majority of economists are deeply skeptical about (if not downright hostile toward) their imposition. Yet it is not hard to find evidence in international financial markets of the kind of distortions that are likely to lead to imperfect information and, as a result, to economically inefficient and socially undesirable outcomes.

As China Liquidates US Treasuries, It is "Gobbling" Up Japanese Government Bonds -As we reported one week ago, the latest Treasury International Capital report revealed something disturbing: not only had foreign central banks sold a record amount of US Treasurys in the past 12 months, some $346 billion worth...... but America's largest foreign creditor, China, sold a record $34 billion in US paper in the latest month, and bringing its total holdings to the lowest since 2012. This led to an obvious question: is China dumping all of its foreign reserve holdings proportionately, or is Beijing strategically offloading its US paper, for financial, political reasons or otherwise, as it buys other foreign government bonds. The answer, at least according to the Nikkei, is the latter. As the Japanese owner of the Financial Times reports, China is on a shopping spree, and has been "gobbling" up Japanese government bonds, adding that Beijing bought close to a net 9 trillion yen ($86.6 billion) worth of JGBs in the January-August period, more than tripling the amount from the same period last year. Incidentally that's almost equivalent to the number of US Treasurys sold by China.A simple explanation for the shift is that the People's Bank of China has been reducing its holdings of U.S. Treasurys in anticipation of higher U.S. interest rates and shifting some of its money to JGBs, where higher rates - courtesy of 250% in debt/GDP - are largely guaranteed to never arrive. But more importantly, and this could explain the perplexing recent strength in the Yuan, this trend may be a reason behind the yen's appreciation in foreign exchange markets in recent months. According to Japan's Ministry of Finance, China invested 8.9 trillion yen in Japanese securities in net terms between January and August. Buying started to exceed selling more often on a monthly basis in the second half of 2015. In April, net buying surpassed 3 trillion yen. Curiously, China is not buying the Japanese bonds for the "yield", but rather for liquidity: most of the securities purchased by the PBOC are bonds with maturities of one year or less. Judging by the latest TIC data, China's selling of US paper is accelerating, which also suggests that just as China has been a factor pushing the Yuan higher, the dollar has been pressured lower by the ongoing Chinese liquidation. One wonders how much higher the USD will jump if and when China decides to halt its selling of US paper, and how much lower the Yuan will then tumble in response, leading to even faster capital outflows from China.

 Japanese Fleeing Negative Rates Take Refuge in Indian Yields - Japanese household investors are buying rupee-linked bonds like never before as negative interest rates at home prompt them to take greater risks in search for yield. The amount of Uridashi notes sold in the Indian currency surged to a record $1.45 billion this year from 105 offerings, making up 6.2 percent of the total issuance, and surpassing Turkey and New Zealand to enter the top five target nations. The rupee is projected to climb 8.1 percent against the yen by the end of 2017, the most in Asia, according to surveys of analysts by Bloomberg. “Pull factors like the improving India growth outlook and relatively attractive yields are driving Japanese investors to such debt,” said Kaushik Rudra, Singapore-based head of rates & credit research at Standard Chartered Plc. There are also “push factors such as the low-yield environment globally and accommodative monetary policy,” he said. The fastest growth among the world’s major economies, Asia’s second-highest sovereign yields and a stable currency have made India the top pick for several emerging-market investors, including Mark Mobius of Franklin Templeton Investment Funds. BlackRock Inc., the world’s largest money manager, has been increasing positions in local bonds.Rupee uridashi issuance this year is almost double the $783 million for all of 2015, with offerings from international lenders including Credit Suisse AG and HSBC Bank Plc. In 2014, the currency accounted for just 0.5 percent of total sales of the securities, which are issued outside Japan and sold directly to the nation’s household investors. Prime Minister Narendra Modi has burnished India’s appeal through policy changes aimed at boosting growth and improving public finances. Gross domestic product rose 7.1 percent in April-June from a year earlier, while Japan’s economy grew an annualized 0.7 percent in that quarter. Global holdings of rupee-denominated government and corporate notes in India climbed for a fourth day on Tuesday, making it the longest stretch of increases this month, to 3.47 trillion rupees ($51.9 billion), according to data from the National Securities Depository Ltd. The rupee was little changed at 66.8250 per dollar in Mumbai on Wednesday.

BOJ official says new policy is not firm target for yields: Nikkei  - The Bank of Japan's new policy of targeting interest rates and the slope of the yield curve is not an attempt to peg yields at a fixed rate, the head of the central bank's financial markets division said on Tuesday in an interview with Nikkei news. The BOJ is prepared to allow yields to fluctuate within a range, but that range is not a firm target, Seiichi Shimizu said, according to Nikkei. Instead, the BOJ will look at the speed, direction and volatility of moves in yields when deciding the amount of bonds to buy in its market operations. "We are not trying to pinpoint a specific level," Shimizu said, according to Nikkei. "We expect rates to rise and fall due to market forces." The BOJ last month switched its policy target to interest rates from expanding the monetary base after its massive asset purchases failed to generate sustained inflation. Under a new "yield curve control" framework, the BOJ's main means for monetary easing would be to deepen negative interest rates from the current minus 0.1 percent, or lower its 10-year bond yield target - now set at around zero percent. The policy switch has caused some confusion because investors are not sure how low the BOJ will let 10-year bond yields fall.

Asia’s Persistent Savings Glut - Back in 2005, when Ben Bernanke first warned of the risk of a global savings glut, the combined savings rate of Asia’s main “surplus” economies (China, Japan, South Korea, Taiwan, Hong Kong, and Singapore) equaled 35 percent or so of their collective GDP. That number now? About 40 percent.That is obviously a lot of savings—savings which either has to finance a very high level of investment at home or has to be exported to the rest of the world. And with low interest rates around the world, the world’s doesn’t especially need to import savings from Asia right now.East Asia’s high level of savings is the subject, obviously, of my new CFR working paper.Much is often made of the small fall in China’s national savings rate. China’s savings rate peaked at a bit over 50 percent of GDP; in 2015 it dipped to 48 percent. A fall, yes, but not a big one. Remember that the flip side of high savings is a low level of consumption; without high levels of investment, domestic demand growth can easily fall short.In the aggregate data for Asia’s surplus countries, the rise in China’s share of the region’s output more than offsets the (modest) fall in China’s savings rate. The national savings rate in Korea and Taiwan has also increased over the last five years. Hence record regional savings.In dollar terms, the jump in savings is even more spectacular. Asian surplus economies saved around $2.8 trillion back in 2005. Now they save around $7 trillion. China’s savings have increased from $1 trillion to more than $5 trillion.

As Europe and Asia hoard cash, economists see echoes of crisis — European and Asian investors have been rushing into the United States bond market, spurred by a global glut of savings that has reached record levels. Running from near-zero interest rates at home, foreign buyers are piling into the booming market for corporate bonds, including high-grade debt securities issued by the likes of IBM and General Electric and riskier fare churned out by energy and telecommunications companies. A growing number of economists are concerned that this flood of money may inflate the value of these securities well beyond what they are worth, potentially leading to a market bubble that eventually bursts. More broadly, however, these economists fear that an excess of ready cash in Europe and Asia is on the rise, which could keep a damper on global growth prospects. That is because the cash, instead of being spent on building bridges in, say, Germany, or individual shopping sprees in China and Japan, is accumulating and being recycled into global capital markets, keeping interest rates artificially low as investors chase after returns. And again, economists say, the burden is placed on the US, with its still fragile economy, to be the growth engine for the world. “Asia and Europe keep exporting their savings to the rest of the world,” said Mr Brad W Setser, an expert in global financial flows who worked at the US Treasury from 2011 to 2015. “All this money sloshing around looking for a home is not healthy — it indicates a real lack of demand in other parts of the global economy.” The surge in flows echoes a wave of investment in the years right before the financial crisis, when mostly European investors snapped up billions of dollars of mortgage-backed securities before the US housing market imploded.

If Beijing can claim South China Sea, US can call Pacific ‘American Sea’, says Clinton in leaked speech -- US presidential hopeful Hillary Clinton has said the US could claim the Pacific Ocean as an “American Sea” if China claims all of the South China Sea, according to excerpts of her speech contained in hacked emails revealed by WikiLeaks. In a speech the Democratic candidate gave to bankers from Goldman Sachs in October 2013, she said the Chinese “have a right to assert themselves” in the South China Sea but the US needed to “push back” to keep Beijing from getting a “chokehold over world trade”. “You can’t hold that against them. They have the right to assert themselves,” Clinton said in the speech. “But if nobody’s there to push back to create a balance, then they’re going to have a chokehold on the sea lanes and also on the countries that border the South China Sea.” In the speech given eight months after her resignation as US secretary of state, Clinton reportedly told the audience that China “basically wants to control” all of the South China Sea, which includes the world’s busiest trade routes. She said that “48 per cent of the world’s trade, obviously that includes energy but includes everything else, goes through the South China Sea”.  China has drawn a “nine-dash line” to demarcate its maritime claims, which encircle almost all of the South China Sea. These claims are contested by the Philippines, Vietnam, Malaysia, Brunei, and Taiwan. Indonesia says it has no territorial dispute with China, but the two countries have overlapping maritime claims.  Clinton said she confronted Chinese officials about the South China Sea during her tenure as secretary. “I said, by that argument, you know, the United States should claim all of the Pacific. We liberated it; we defended it. We have as much claim to all of the Pacific. And we could call it the American Sea, and it could go from the West Coast of California all the way to the Philippines.” She said in the speech that she had told her Beijing counterparts the Chinese claims to the South China Sea were based on “pottery shards” from “some fishing vessel that ran aground in an atoll somewhere”, whereas the US claim to the Pacific would be based on “convoys of military strength” in the second world war and the claim Americans “discovered Japan”.

Philippines Duterte tells U.S. to forget about defense deal 'if I stay longer' | Reuters: Philippine President Rodrigo Duterte hit out at the United States on Tuesday, saying he did not start a fight with Washington and it could forget about a military agreement between both countries if he were to be in power longer. Duterte said he was against the presence of any foreign troops in his country and the United States could "forget" an Enhanced Defence Cooperation Agreement (EDCA) with the Philippines, if he stayed longer, without elaborating. The United States, he said, should not treat the Philippines "like a dog with a leash", adding to confusion about the future the longtime allies' ties. "I look forward to the time when I no longer see any military troops or soldier in my country except the Filipino soldiers," Duterte said prior to his departure to Japan.

Rodrigo Duterte Says He Wants All Foreign Troops Out Of The Philippines - Philippine President Rodrigo Duterte, who has insulted the U.S. and called for an end to joint military exercises between the two countries, said Wednesday that he'd like all foreign troops to leave his country — possibly within the next two years. Duterte was speaking to an audience in Japan, where he's on a three-day visit.The U.S. used to maintain military bases in the Philippines, a former U.S. colony, but in 1991, the Philippines voted to eject U.S. forces. In 2014, a new agreement between the countries allowed for some American military presence, intended to counterbalance the growing influence of China in the South China Sea dispute.Protesters calling for the departure of U.S. troops gathered outside the American Embassy in Manila earlier this month, where police responded violently and a police van repeatedly rammed some of the demonstrators.Duterte was out of the country at the time — visiting China, in fact. The president, who took office earlier this year, has courted Beijing while distancing himself from the U.S.The Associated Press has more from Duterte's speech to a business audience in Tokyo:"In his speech, the Philippine leader departed at the end of his prepared remarks on economic development and investment to address the topic that he said he knows is 'what is in everybody's mind.'"He said he is pursuing an independent foreign policy, and that he wants foreign troops to leave, maybe in the next two years. 'I want them out,' he said. " 'I may have ruffled the feelings of some but that is how it is,' he said. 'We will survive, without the assistance of America, maybe a lesser quality of life, but as I said, we will survive.' "

Duterte Says God Told Him to Stop Cursing: — The foul-mouthed Philippine president, who once called the pope a “son of a bitch” and told Barack Obama to “go to hell,” says he has promised to God he won’t spew expletives again. President Rodrigo Duterte’s profanities have become a trademark of his political persona, especially when threatening to kill drugs dealers as part of his war on illegal drugs that has left thousands dead since he took office at the end of June. Duterte made the stunning pledge on arrival in in his southern hometown of Davao city late Thursday from a trip to Japan. He said that while flying home, he was looking at the sky while everyone was sound asleep and he heard a voice that said “‘if you don’t stop epithets, I will bring this plane down now.”“And I said, ‘Who is this?’ So, of course, ‘it’s God,'” he said. “So, I promise God to … not express slang, cuss words and everything. So you guys hear me right always because (a) promise to God is a promise to the Filipino people.” Duterte’s vow was met with applause, but he cautioned: “Don’t clap too much or else this may get derailed.”

In Latest Blow To US, Malaysia Will Buy Navy Vessels From China -- Having largely lost long-time ally Philippines as an anchor to US foreign policy in the Pacific rim, a loss which comes at a critical time for the US just as China is aggressively expanding its territorial ambitions in the South China Sea, Washington is set to lose another key ally, and a critical one at that: as Reuters reports, in a "blow to the US", Malaysia's corrupt Prime Minister Najib Razak, whose involvement in the 1MBD scandal has been extensively reported by the WSJ for over a year now, will sign a contract to purchase Littoral Mission Ships from China when he visits Beijing next week, according to a Facebook posting by the country's Ministry of Defense. The text of a speech to be delivered by Malaysian defense minister Hishammuddin Hussein appears to have been accidentally posted on Facebook on Tuesday, but was later removed after Reuters asked a defence ministry spokesman for comment. The purchase of the patrol vessels, if it proceeds, would be Malaysia's first significant defence deal with China and comes amid rising tensions in the South China Sea and as the United States and China compete for influence in the region. It would also be the latest, if far more nuanced, pivot away from a US sphere of influence in the region since Philippines' Duterte said he was severing ties with the US last week.   One reason, as we noted last weekend, is that thanks to the Podesta leaks, we got a glimpse into the real reason for the TPP, which was to appease countries such as Malaysia and prevent them from shifting to a pro-Chinese trade sphere. As a Soros memo revealed, "Malaysia received more TPP carve-outs than any other TPP member country." However, now that the TPP appears to be in jeopardy, any leverage the US may have had with Razak has been put on hiatus and gives Kuala Lumpur a green light to pursue Beijing and see just what they have to counteroffer.

Islamic State claims attack on Pakistan police academy, 59 dead | Reuters: Militant group Islamic State said on Tuesday that fighters loyal to its movement attacked a police training college in Quetta in southwest Pakistan in a raid that officials said killed 59 people and wounded more than 100. Pakistani authorities have blamed another militant group, Lashkar-e-Jhangvi (LeJ), for the late-Monday siege, though the Islamic State claim included photographs of three alleged attackers. Hundreds of trainees were stationed at the college on the city outskirts when masked gunmen stormed in. Some cadets were taken hostage during the raid, which lasted nearly five hours. Most of the dead were cadets. "They just barged in and started firing point-blank. We started screaming and running around in the barracks," one police cadet who survived told media. Other cadets spoke of jumping out of windows and cowering under beds as the attackers hunted them down. Video footage from inside one of the barracks showed blackened walls and rows of charred beds. Islamic State's Amaq news agency published the claim of responsibility, saying three IS fighters "used machine guns and grenades, then blew up their explosive vests in the crowd." Mir Sarfaraz Bugti, home minister of the province of Baluchistan, whose capital is Quetta, said the gunmen attacked a dormitory where cadets rested and slept. "Two attackers blew themselves up, while a third was shot in the head by security men," he said. A Reuters photographer at the scene said authorities carried out the body of a teenaged boy who they said was one of the attackers and had been shot dead by security forces.

How Will Pakistan Respond to Terrorist Attack on Quetta Police Academy? -  Riaz Haq - Quetta has suffered yet another mass tragedy with a major terrorist attack on a police academy that has claimed at least 60 young lives of cadets.  What is behind these continuing attacks in Balochistan and elsewhere in Pakistan? Who's doing these and why? All indications are that these attacks are part of the ongoing campaign to ratchet up the pressure on Pakistan to act against the Haqqani group, Laskhar-e-Taiba founder Hafiz Saeed and Jaish-e-Mohammad founder Masood Azhar. Another motivation for such attacks appears to be sabotage of the China-Pakistan Economic Corridor (CPEC) that is strongly opposed by the Modi government in New Delhi. On the one hand, the Modi government and its allies in Kabul are funding the Teheek--e-Taliban Pakistan (TTP), various Baloch insurgent groups, MQM militants and other groups to terrorize Pakistanis. On the other hand, they are accusing Pakistani government of sponsoring terror in Afghanistan and Kashmir and demanding action against the Kashmiri support groups headed by Hafiz Saeed and Masood Azhar and the Haqqanis. It appears that the "Doval Doctrine", named after India's hawkish national security advisor Ajit Doval,  is designed to stretch Pakistan Army so thin that it finally collapses and paves the way for India to dominate Pakistan. The Doval Doctrine is fully supported by the Tajik-dominated government in Kabul.  Will foreign pressure on Pakistan work? Will Pakistan do the bidding of foreign governments to relieve the pressure being ratcheted up through major terrorist attacks on its soil? To answer this question, let us look at the following two quotes:
1.  "The Pakistani establishment, as we saw in 1998 with the nuclear test, does not view assistance -- even sizable assistance to their own entities -- as a trade-off for national security vis-a-vis India". US Ambassador Anne Patterson, September 23, 2009
2. “Pakistan knows it can outstare the West."  Pakistani Nuclear Scientist Pervez Hoodbhoy, May 15, 2011
Leaders in Kabul, New Delhi and Washington need to heed the words of Ambassador Anne Patterson and Dr. Pervez Hoodbhoy as they pursue their policy of using violence to put pressure on Pakistanis.

 Weak South African Economy Muddies Budget as Downgrade Looms - A sluggish economy and weak revenue mean South African Finance Minister Pravin Gordhan may fail to narrow the budget deficit as quickly as he pledged, putting the nation’s credit rating at risk of a downgrade to junk. Gordhan will present his mid-term budget on Wednesday and while he projected in February this year’s fiscal deficit would be 3.2 percent of gross domestic product, the shortfall may rather be 3.4 percent of GDP, according to the median of 15 economist estimates compiled by Bloomberg. The deficit will probably only narrow to 3 percent of GDP by 2019, well off the 2.4 percent the National Treasury had targeted, according to the Bloomberg survey. Low commodity prices, sluggish global demand and the worst drought in more than a century have weighed on output and boosted inflation in Africa’s most-industrialized economy, while policy uncertainty and political turmoil have pushed business confidence to a three-decade low. The nation is at risk of losing its investment-grade credit rating as S&P Global Ratings and Fitch Ratings Ltd., which put South Africa at the lowest investment grade, are due to review their assessments by the end of the year. “If there is a delay to their fiscal consolidation, from a strategic perspective, it would be quite fatal, because that would then pave the way for a downgrade,” Iraj Abedian, chief executive officer at Pan-African Investments and Research Services in Johannesburg, said by phone Monday. “Tax revenues haven’t kept their targets, at the same time government expenditure has hardly been cut back in any area.” While both S&P and Fitch kept their ratings at BBB- in June, they warned that the government must take decisive steps to bolster growth and quell policy uncertainty to avoid future downgrades. Fitch said a failure to stabilize government debt, which Gordhan projected earlier will peak at 51 percent of GDP next year, could trigger a negative rating action.

Hyperinflation Looms As 'Black Market' Egyptian Pound Crashes To Record Low --With all eyes on the drop in the British Pound, it is another 'pound' that is utterly collapsing. Despite its official exchange rate is 8.88 per dollar, Egypt’s pound dropped to 16.11 per dollar in the black market, another record that extends declines over the past month to 19% and down over 40% since it devalued in March. The Sovereign CDS market (which prices for both default and devaluation) is pricing in a further dramatic devaluation of the official rate...Bloomberg reports that Africa’s third-biggest economy will close a $12 billion lifeline from the International Monetary Fund within two months, according to Prime Minister Sherif Ismail, as pressure grows on the country to weaken its currency to lure foreign investment and stimulate growth. Ever since General Sisi ousted the Muslim Brotherhood, the Egyptian economy has remained in shambles. Businessmen are fed up.  They are ignoring government gag orders, and are making their voices heard. And why not?  They are losing sales, missing deadlines, and scrapping expansion plans because of limited access to U.S. dollars.Where are the greenbacks that Egyptians demand? Well, even though General Sisi has passed the begging bowl, the cupboard is pretty bare (as the accompanying chart shows).  This, in part, is due to the Muslim Brotherhood.  The Brotherhood did one thing well: they blew through foreign exchange reserves like wildfire.   Not surprisingly, the Sisi administration is squeaky tight about holding on to its limited reserves.

Venezuela Throws In The Towel On Hyperinflation: Will Print 200x Higher-Denominated Bills - While several years ago it was perhaps debatable in polite society that Venezuela's socialist economy would collapse ultimately unleashing hyperinflation, any doubt was put to rest early this year when the IMF's own inflationary forecast confirmed as much. However, while the international community had long accepted the inevitable fate of Maduro's socialist paradise, the local government sternly refused to admit reality and to avoid confirming what the local population already knew, it insisted on keeping the highest denomination bill in circulation at 100 bolivars, whose worth is approximately 8 cents on the black market, turning the most basic transactions into logistical nightmares and saddling banks with crippling money-handling costs. Economists and central bank employees say Mr. Maduro didn’t want to acknowledge the country’s inflation problem by printing bigger notes.This has finally changed, and as the WSJ reports, Venezuela’s government, slammed by hyperinflation has finally thrown in the towel, and is planning to issue new bills in December with larger denominations—up to 200 times higher than the current biggest bill, according to people familiar with the plans. The move marks an implicit acknowledgment by the government that skyrocketing prices have slashed the value of the currency.  The new coins and notes will go up to 20,000 bolivars, according to people close to the central bank, the finance ministry, the country’s banks and bill suppliers. This would make the biggest note worth $15 on the black market. And since by doing so the government will tacitly admit that it has lost control over prices, It will also create a self-fulfilling prophecy of even higher prices, sending the country's hyperinflation into overdrive.

Brazil defaults stay at record as refinancing gets tougher | Reuters: The share of loans delinquent for at least 90 days in Brazil was unchanged at a record high in September, a signal that efforts by commercial banks to refinance looming debt maturities are yet to help ease the country's worst credit crunch in two decades. The so-called default ratio, a benchmark for delinquencies, came in at the equivalent of 5.9 percent of outstanding non-earmarked loans, unaltered from a revised figure in August, the central bank said in a report on Wednesday. The default ratio has climbed almost a full percentage point over the past year. Likewise, early default ratios, or loans in arrears between 15 days and 90 days, rose slightly for consumers as some unsecured lending went through a significant deterioration last month. Banks have been refinancing potentially problematic loans earlier than usual to allow more borrowers to stay current. The numbers provided new reason for concern over lingering risks amid the pickup in loan renegotiation and refinancing deals. Record defaults came as lending fell 0.2 percent in September, to 3.11 trillion reais ($998 billion), the report showed. While some economists are becoming confident that Brazil's credit crunch will ease with an expected central bank reduction in borrowing costs, commercial lenders see defaults falling in the first half of next year at the earliest.

Former Haitian Senate President Calls Clintons "Common Thieves Who Should Be In Jail"   -- Despite repeatedly bragging about all the good work the Clinton Foundation did to help Haiti recover from the devastating 2010 earthquake, at least one Haitian, former Senate President Bernard Sansaricq, thinks it was the Clintons, not the Hiatian people, who benefitted most from the Foundation's "charitable work" in Haiti.  Appearing on a radio show last week, Sansaricq offered a scathing assessment of the Clinton's track record in Haiti saying they are "nothing but common thieves...and they should be in jail."  Per PJ Media: Sandy Rios of American Family Radio interviewed former Haitian Senate President Bernard Sansaricq on Thursday, and the enraged Haitian had nothing good to say about the Clintons. He angrily claimed that they brought their "pay to play" politics to Haiti at the expense of the Haitian people. Sansaricq said that the Clinton Foundation received 14.3 billion dollars in donation money to help with the relief effort. President Obama and UN Secretary General Ban Ki-moon put the Clinton Foundation in charge of the reconstruction, but Haiti has seen no help. The money all went to friends of Bill Clinton. "They are nothing but common thieves," the enraged Sansaricq told Rios. "And they should be in jail."

Canada's Record Household Debt Is Threatening Its Financial Stability - Canada’s debt, swelled by a decade-long housing boom to almost triple the size of its economy, is drawing increasing concern from an international banking community that says it threatens growth and financial stability.The combined debt of Canadian governments, companies and households reached $4.4 trillion in the first quarter, or 288 percent of gross domestic product, exceeding the same gauge for the U.S., the U.K. and Italy, according to the Bank for International Settlements.While Canada boasts the lowest government debt load among Group-of-Seven countries, household debt is the highest of its peers, the Basel, Switzerland-based BIS said last month in its quarterly report. In September, Statistics Canada reportedhousehold liabilities rose to 100.5 percent of GDP, exceeding the size of its economy for the first time. Canada was the only developed country showing early signs of stress in its domestic banking system amid “unusually high” credit growth relative to GDP, the BIS said. “This debt overhang represents one thing and one thing only: a pervasive constraint on Canada’s economic growth potential,” David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates Inc. said by phone from Toronto. “When you get to levels on total debt that makes even the Italians blush, you know you’re in a straitjacket.” The economy continues to struggle to find growth drivers in the wake of an oil-price slump with exports consistently disappointing and business investment limping. Figures released last week showed retail sales fell 0.1 percent in August, the third monthly decline, and the inflation rate trailed forecasts at 1.3 percent. The weak data comes after the Bank of Canada cut its growth forecast on Oct. 19 to 1.1 percent for this year from a previous 1.3 percent forecast, and to 2 percent in 2017, from 2.2 percent.

Bank of Canada: rate cut would bring unconventional tools closer -- A further easing from the Bank of Canada would bring the central bank closer to unconventional monetary policy and the decision on whether to cut rates again is not one to take lightly, Governor Stephen Poloz said on Monday. The Bank of Canada last week held rates at 0.50 percent but admitted it had actively considered cutting for the third time in two years. With rates already so low, the bank has laid out a number of unconventional measures that are in its toolkit if need be, including negative interest rates, asset purchases and forward guidance. It has said there is not a prescribed order for using those tools."We have to weigh the risks of waiting longer against what are the costs associated with doing something more immediate," Poloz said during his appearance before lawmakers."If we were to be easing further, we'd be very close to using unconventional tools, so that is of course not a decision we would take lightly."Poloz's comments helped the Canadian dollar rally against its U.S. counterpart as it tempered market speculation about further rate cuts.Poloz said the two-speed nature of the economy as parts of the country adjust to the oil price shock makes it difficult to speed up the regions where growth is accelerating.The head of the c entral bank also said that given the negative impact of the drop in oil on Canada, its economy could diverge from that of its neighbor to the south for three years or more.

EU-Canada trade deal in crisis as Canadian minister walks out - President of European parliament makes last-ditch bid to save talks as Chrystia Freeland announces ‘failure’ of Ceta over Wallonia objections. A landmark trade deal between the European Union and Canada is in meltdown, after Canada’s trade minister walked out of talks with the Belgian regional parliament that has been blocking the deal. The Canadian trade minister, Chrystia Freeland, was on the verge of tears on Friday as she announced the “end and the failure” of talks with the Walloon government. However the head of the European parliament said late on Friday he would hold emergency talks in a bid to save the deal.  Leaving the Élysette, the home of the Walloon government in Namur, Freeland said: “It seems obvious that the EU is now not capable of having an international agreement, even with a country that shares European values such as Canada, even with a country that is so kind and patient. “Canada is disappointed. I am personally very disappointed. I have worked very very hard. We have decided to go home. I am truly very, very sad.” The comprehensive economic and trade agreement (Ceta), which would eliminate tariffs on most goods between the EU and Canada, has been seven years in the making. But it has stumbled near the finish line as the Belgian region of Wallonia, with a population of 3.5 million, blocked Belgium’s government from signing the deal. The EU, a single market of 510 million people, requires unanimity on trade deals.

EU sets Belgium Monday deadline to back Canada trade deal | Reuters: The European Union has given Belgium until late on Monday to overcome opposition to a free trade deal with Canada from its French-speaking region or a summit to sign the pact that could boost both economies is off, EU sources said on Sunday. EU trade negotiators are rushing to assuage the Walloon government's concerns before the Monday deadline set by Canadian Prime Minister Justin Trudeau to decide whether to fly to Brussels, according sources familiar with the matter. "The Commission has been working 24/7 to find a solution," EU Trade Commissioner Cecilia Malmström tweeted on Sunday. "We now hope that Belgium will bring this matter to a successful close." Canada, the EU's 12th-largest trading partner, says it is ready to sign the pact as planned on Thursday and years-long negotiations were over, with trade minister Chrystia Freeland saying "the ball is in the EU court." All 28 EU governments back the Comprehensive Economic and Trade Agreement (CETA), which supporters say could increase trade by 20 percent, but Belgium cannot give assent without backing from its five sub-federal administrations. French-speaking Wallonia has steadfastly opposed it, saying the deal is bad for Europe's farmers and gives too much power to global corporate interests. Walloon premier Paul Magnette has said the summit should be delayed to allow more time to deliberate. "An ultimatum is not compatible with the exercise of democracy," he was cited by Belgian public broadcaster RTBF as saying on Sunday.

Wallonia resists EU, defends Justice and Democracy in all Europe - The European Union, the world’s biggest trading bloc, is, for the second time in a matter of months, on the verge of seeing one of its mega trade deals fall into disarray. If the objections of several regions in Belgium are upheld, the signing of the Comprehensive Economic and Trade Agreement (CETA) with Canada planned for next week will most likely be cancelled. This follows the near collapse of TTIP, the EU’s proposed agreement with the US. Rather than despairing at the state of the EU, we should see how these developments provide a unique opportunity for the EU to take the lead in shaping new trade regimes for the future that are beneficial for people and the environment. The opposition to CETA and TTIP has been unprecedented in the history of the EU. Concerns have been expressed by millions of people across the continent, including lawyers, academics, political parties, local authorities and virtually all sectors of civil society. Many governments have also expressed reservations on CETA. Only the Walloons, however, had the guts to show it the red card. Wallonia, the Belgian region taking the lead in its steadfast opposition to CETA, is doing us all a favour. For a start, they are exercising their democratic right to raise concerns about a proposed EU deal. One of the most important issues raised by Wallonia is how CETA would give power to foreign investors to sue governments for huge compensation if democratically agreed decisions to protect citizens or the environment interfere with their profits. Wallonia faces not only substantial financial liabilities, but also a serious impairment to its democratic decision-making powers. It is only normal that the region should have its say in this matter.

Wallonia sends EU trade policy back to the drawing board - The European Commission needs a new trade policy — and fast. A veto from Belgium’s French-speaking region of Wallonia has struck a potentially fatal blow to the EU’s trade deal with Canada and exposed a devastating structural threat to any future deals, with countries such as Japan and the U.S.EU officials are now scrambling for ways to regain control over one of the few portfolios in which they ever wielded genuine power. Cecilia Malmström, the EU’s trade commissioner, conceded last week that the bloc needed to reappraise how “trade policy should be made in the future” and stressed that Europe needed to seal trade agreements “in a way that they are not taking years to be ratified, because things happen so quickly in a globalized world.”Some German politicians in the European Parliament are proposing a way for Brussels to reassert its authority. They argue that the Commission needs to roll out a new kind of two-track trade agreement that denies national and regional assemblies such as Wallonia the ability to veto the key elements of trade accords that fall under the remit of EU-wide law, such as tariffs and shared regulations.National parliaments should only be allowed a say in the second-tier issues — such as investment protection — that cross over with national law, they argue. EU trade policy has fallen into an unexpectedly precipitous death spiral over the past four months after European Commission President Jean-Claude Juncker made the fateful decision to pass the Comprehensive Economic and Trade Agreement with Ottawa to 38 national and regional parliaments for ratification. The danger of that strategy — treating CETA as a so-called “mixed” agreement — became clear when Wallonia vetoed. “What we have seen in past months is the EU’s common commercial policy being massively undermined,” “We need to ensure that the Commission can again make trade deals, which are democratically approved by the EU’s own institutions,” he said. “What we don’t need is 28 states or even regions negotiating alone for the whole bloc. That has nothing to do with democracy.”

Corporate Sovereignty Helps To Bring EU-Canada Trade Deal To Brink Of Collapse -- The trade deal between the EU and Canada, known as CETA -- the Comprehensive Economic and Trade Agreement -- is remarkable for the fact that it has still not been signed and ratified, even though its completion was "celebrated" over two years ago. That's partly because of growing resistance to the inclusion of a corporate sovereignty chapter -- also known as investor-state dispute settlement (ISDS). In an attempt to head that off, the European Commission persuaded Canada to swap out vanilla ISDS for a new, "improved" version called the Investor Court System (ICS). As Techdirt noted before, this is really just putting lipstick on the pig, and doesn't change the fact that companies are being given unique privileges to sue a country for alleged harm to their investments using special tribunals, as well as in national courts.  CETA has faced other problems, notably from Bulgaria, Romania and Belgium. The first two said they wouldn't sign because of Canada's refusal to lift visa requirements for their citizens. That blackmail seems to have paid off. The Sofia Globe reports that Canada has agreed to remove the visa requirements from December 2017, and Bulgaria and Romania now say that they will sign CETA.  That leaves Belgium, or more precisely, the French-speaking Belgian region of Wallonia, which, as we noted back in April, was not happy with CETA. A couple of weeks ago, the Walloon parliament confirmed that it would refuse to give its permission for the central government to sign CETA in its name (original in French). Because of the way the Belgian political system works, that meant that Belgium would not be able to sign CETA on October 27, as the European Commission had originally hoped.  That, in its turn, meant that the European Union as a whole would not be able to sign CETA on that day. That's because back in July, European Commission president Jean-Claude Juncker agreed to treat CETA as a so-called "mixed agreement," a deal that must be ratified by all of the EU member states' national assemblies, as well as by the bloc. If Belgium can't do that because of Wallonia, CETA is blocked.

Europe’s trade genie is out of the bottle – Last-minute agonizing over an EU-Canada trade pact after Belgium’s Wallonia region held up its ratification raises the wider question of whether Europe’s common trade policy — one of the historic achievements of decades of integration — is on the rocks. Canadian Trade Minister Chrystia Freeland was right to ask with whom the EU could reach a trade deal if not with like-minded Canada, a country proud of its socialized medicine and public services that is governed by Justin Trudeau’s center-left, environment-friendly administration. European Council President Donald Tusk dramatized the stakes when he said at last week’s EU summit that the problem went far beyond the Comprehensive Economic and Trade Agreement (CETA) negotiated with Ottawa. “If you are not able to convince people that trade agreements are in their interests … we will have no chance to build public support for free trade and I’m afraid that means that CETA could be our last free trade agreement,” Tusk said. What is clear is that something needs to change to rebuild a broad consensus in support of trade, which has been a driver of the European Union’s prosperity.

Wallonia premier says region not opposed to EU-Canada free trade deal | Reuters: Wallonia premier Paul Magnette said the Belgian region was not opposed to a planned EU-Canada free trade deal in itself but that an arbitration scheme needed to be dropped and public services protected. All 28 EU governments support the Comprehensive Economic and Trade Agreement (CETA) but Belgium cannot give assent without backing from five sub-federal administrations. French-speaking Wallonia has steadfastly opposed it. "Let's be clear, I'm not a herald of anti-globalization, I want a deal," Magnette told French daily Liberation in an interview published on Tuesday. But he said a court system specifically created to resolve disputes between investors and governments could be exploited by big business to dictate public policy. "I would prefer that this entity disappears pure and simple and that we rely on our courts," he said. "Or at the very least, if we want an arbitration court, it must provide equivalent guarantees to domestic ones." Magnette referred to a mechanism known as Investor-state dispute settlement (ISDS), which allows foreign companies to challenge state interference, such as expropriation. Typically, the lawsuit is brought before a panel of private arbitrators, its members appointed by the investor and state in dispute. The mechanism has been criticized because of lawsuits brought by companies against tighter rules on public health, environmental and labor standards. Magnette said Canada agreed with Wallonia on this issue. "In truth, it's a debate that is purely internal to the European Union," he said.

Why Trade Deals Lost Legitimacy -- Dani Rodrik: The Walloon mouse: Instead of decrying people's stupidity and ignorance in rejecting trade deals, we should try to understand why such deals lost legitimacy in the first place. I'd put a large part of the blame on mainstream elites and trade technocrats who pooh-poohed ordinary people's concerns with earlier trade agreements. The elites minimized distributional concerns, though they turned out to be significant for the most directly affected communities. They oversold aggregate gains from trade deals, though they have been smallish since at least NAFTA. They said sovereignty would not be diminished though it clearly was in some instances. They claimed democratic principles would not be undermined, though they are in places. They said there'd be no social dumping though there clearly is at times. They advertised trade deals (and continue to do so) as "free trade" agreements, even though Adam Smith and David Ricardo would turn over in their graves if they read, say, any of the TPP chapters.And because they failed to provide those distinctions and caveats now trade gets tarred with all kinds of ills even when it's not deserved. If the demagogues and nativists making nonsensical claims about trade are getting a hearing, it is trade's cheerleaders that deserve some of the blame. One more thing. The opposition to trade deals is no longer solely about income losses. The standard remedy of compensation won't be enough -- even if carried out. It's about fairness, loss of control, and elites' loss of credibility. It hurts the cause of trade to pretend otherwise.

Belgium reaches agreement on CETA  - Belgium resolved an internal deadlock over the Comprehensive Economic and Trade Agreement (CETA) between the European Union and Canada on Thursday, Prime Minister Charles Michel told reporters in Brussels. The EU cancelled Thursday's planned summit with Canada, after Belgium failed to reach an agreement Wednesday night in time for it to be signed by both sides. "Given that not all EU member states are ready to sign the CETA, the EU-Canada summit will not start today as planned," an EU source told the DPA news agency on condition of anonymity. All 28 members of the EU must accept the deal. Although Belgium's federal government agrees to it, certain regions of Belgium do not - and the country requires their approval. As it stands, only the Dutch-speaking region of Flanders has given the green light to CETA. Lawmakers in Wallonia say they are concerned the agreement could hurt local farming. It is backed by labor and green groups that worry the trade deal could undercut national laws that protect the environment and worker rights.Late on Wednesday, Canada said its delegation would not be traveling to Brussels to sign the agreement as planned on Thursday. "Canada remains ready to sign this important agreement when Europe is ready," Alex Lawrence, the spokesperson for Canada's International Trade Minister Chrystia Freeland, told German news agency DPA. Donald Tusk, president of the European Council and host of the planned EU-Canada summit, has warned the EU's reputation would suffer if the deal falls through, saying Canada is "the most European country outside Europe and a close friend and ally."

‘White smoke’ on EU-Canada trade deal breakthrough -- Belgium’s regional governments have granted a temporary stay of execution to the European Commission’s trade policy by agreeing at the 11th-hour to support a landmark EU deal with Canada.Three Belgian regions — most significantly French-speaking Wallonia — have threatened to veto the EU-Canada trade accord over the past two weeks, severely undermining the credibility of the Commission in conducting trade negotiations on behalf of the 28-country bloc.Belgium’s Prime Minister Charles Michel announced on Thursday that days of marathon talks between the federal government and regional leaders had finally paid dividends and that it would be possible to win backing for the Comprehensive Economic and Trade Agreement from the rebel assemblies: Wallonia, Wallonia-Brussels and Brussels.In their most significant demand to secure a deal, the Belgians want the European Court of Justice to test the legality of the court system in CETA through which foreign investors can sue governments. A green light from Belgium will allow the EU member countries to bring CETA into force on a provisional basis at the beginning of next year.“The commitment taken by my colleagues and minister-presidents of the regional governments is, by tomorrow midnight at the latest, to sign off on the text.” Michel said in the Belgian federal parliament.EU Trade Commissioner Cecilia Malmström hailed “white smoke.” Paul Magnette, minister president of Wallonia, tweeted: “Victory. Thanks to you, we have obtained major gains for Walloons and Europeans.” In order to break the internal impasse, the Belgians have drawn up a series of clauses to add to the CETA deal to safeguard farmers and ensure Belgium’s continued right to veto at least parts of the deal in future.

Belgium's Wallonia formally approves EU-Canada trade deal - France 24: The parliament of Belgium’s French-speaking southern region of Wallonia voted in favour of a planned EU-Canada trade agreement on Friday, ending its opposition that threatened to destroy the entire deal. Lawmakers in the Namur parliament of Wallonia, which led Belgian opposition to the Comprehensive Economic and Trade Agreement (CETA), voted 58 for and 5 against, after Belgian politicians agreed to an addendum on Thursday to allay concerns. The parliaments of Brussels and the French-speaking community will vote later on Friday. Both votes are expected to mirror that of Wallonia, given similar Socialist-led coalitions are in control. All 28 EU governments back CETA, which supporters say could increase trade by 20 percent, but Belgium’s central government had been prevented from giving its consent because it needed approval from sub-federal authorities. Wallonia’s Socialist premier Paul Magnette, who had become a hero to protesters across Europe, said Belgian negotiations had led to a deal he could live with. “The amended and corrected CETA is more just than the old CETA. It offers more guarantees and it is what I will defend,” Magnette told a session. The Belgian addendum addresses fears that a system to protect foreign investors could strengthen multinationals and provides a safeguard clause for farmers.

EU’s precautionary principle haunts TISA talks -- The European Union is insisting that its refusal to make concessions on “new services” in the Trade in Services Agreement is not new. A European Commission source said it was originally agreed that in exchange for Brussels making its market access offer on a negative list basis, it would be able to reserve its right to discriminate on services that have not yet been invented. ..“The U.S. is a bit more risk prone, but the EU is more precautionary principle driven,” the source said. “Our attitude in TISA is just like the one we have for agriculture,” referring to a regulatory practice where the EU puts in place rules before a product or service is widely available to the public. But U.S. officials have been clear that they won’t accept the EU’s new services exclusion — this may be driven by the fact that pressure from Capitol Hill, where the deal will eventually be approved, is intense on this issue. Despite the ongoing debacle regarding a pending EU-Canada trade deal, the source downplayed concerns over the deal being a “mixed agreement,” meaning it will require additional approval by national and regional parliaments. Certain services addressed by the deal, such as those affecting transportation, have long been under the jurisdiction of member states, the source said.

Vladimir Putin’s Third Way: As Seen Through the Nooscope -- Vladimir Putin’s most recent staff change has western experts baffled. According to the BBC, Mr. Putin’s new chief of staff Anton Vaino has reached the top of the Kremlin pecking order “shrouded in mystery”. However cloak & dagger Mr. Vaino’s appointment may seem though, it’s a clear sign Russia is headed off into a far more progressive policy realm than Londoners or Wall Street financiers would have us believe. Here is a candid look at the Putin way ahead.  Olga Ivshina and Dmitry Bulin of BBC’s Russian service tell us just how disparate western capitalist ideas are from the “Third Way” Mr. Putin and his Kremlin advisers have set out in quest of. I alluded to this path in a previous article for NEO. Now I find it fascinating that western media and economists cannot seem to keep up with Putin, even in fiscal policy matters. The BBC piece entitled; “Nooscope mystery: The strange device of Putin’s new man Anton Vaino”, does illuminate readers to reality, albeit unintentionally. An article by Mr. Vaino entitled; “The capitalisation of the future” is the key to understanding how Russian will go forward in this “new way” policy project. Though the BBC, ABC, and a score of other mainstream media outlets fail to understand, the essence of “Third Way” government is not so hard to grasp. Here’s the gist.

Germany to send tanks to Russian border | Germany | DW.COM | 27.10.2016: Germany has confirmed it is sending Leopard 2 tanks to Lithuania as part of NATO plans to reinforce the Baltic states. But the presence is largely symbolic, since Russia is still militarily superior in the region.Protecting Lithuania from Russia is to be Germany's responsibility, according to the new NATO defense plans that emerged at this week's summit in Brussels. The German Defense Ministry showed on Wednesday evening just how seriously it is taking this task, confirming to the DPA news agency that next year it will be sending Leopard 2 tanks to the Baltic country's Russian border in addition to the 650 soldiers it had already promised - though it would not clarify how many. The move is part of NATO's wider plan to protect its Baltic members, who have all shown concern about Russian ambitions following the annexation of Crimea in 2014 and the subsequent war in eastern Ukraine. A NATO battalion of around 1,000 soldiers will be stationed in Lithuania as of June next year, and will then be rotated every six months. Around 450 to 650 of these troops are to be supplied by the Bundeswehr, while the others will come from France, Belgium and Croatia. German media reported that the combat-trained unit will also be equipped with tanks, armored vehicles, snipers, and engineers.

German Ammunition Sales Skyrocket Tenfold In First Half Of 2016 -- While the rest of the world is devolving into proxy, or even outright warfare, one nation is profiting handsomely. Germany's ammunition exports skyrocketed in the first half of 2016, a leaked report has revealed according to Germany's Deutsche Welle. And ironically Turkey, a country whose political relationship with Germany has deteriorated sharply over the past year - if only for popular consumption - and is currently suppressing its political opposition, has moved up the list of the country's best customers. As DW reports, the German government has allowed the country's gun-makers to sell even more ammunition around the world in the first half of 2016, according to an arms export report leaked to the DPA news agency and due to be discussed in a cabinet meeting on Wednesday. The sales of small arms themselves have fallen slightly, from 12.4 million euros ($13.5 million) to 11.6 million euros, but the approved ammunition sales rose from 27 million euros to 283.8 million euros. This broke down into 275 million euros worth of sales to EU, NATO, and NATO-allied countries (Australia, New Zealand, Japan, and Switzerland) as well as some 5.4 million euros to Iraq. The three biggest single customers were France, Poland, and Iraq, where Germany is supporting the Kurdish fighters in their battle against "Islamic State."

UN: Mediterranean 3 Times More Deadly Than In 2015 - The death toll on the Mediterranean has nearly matched that of all last year, with more than 3,740 migrants and refugees having drowned on their way to Europe, and perilous winter months still to come, aid agencies said on Tuesday.Smugglers are now sending thousands of people on flimsy inflatable rafts from Libya to Italy in mass embarkations, perhaps to lower their own risks of being caught, but also complicating the work of rescue teams, they said.At least 3,740 people have perished so far, nearly matching the death toll of 3,771 for all of 2015 when three times as many people, more than one million, took to the seas, the United Nations refugee agency said.“This is by far the worse we ever have seen in the Mediterranean,” William Spindler, spokesman of the U.N. High Commissioner for Refugees (UNHCR), told a news briefing. “You could say that the death rate has increased three-fold.”About 2,200 migrants were plucked to safety in the central Mediterranean in 21 rescue missions on Monday and 16 bodies were recovered, the Italian Coast Guard said.At least 17 corpses from those weekend incidents are being brought to Italy, the International Organization for Migation (IOM) said. “We were told by witnesses there may be many more. There may be other shipwrecks that occurred over the weekend that we’re learning more about,” IOM spokesman Joel Millman said.

Investors Have Pulled $8 Billion From Deutsche Bank's ETF Unit -Earlier this month, Deutsche Bank stock was shaken following a Bloomberg report that Deutsche Bank's hedge fund clients had withdrawn billions in margin cash from the bank's prime brokerage unit, adding a shade of liquidity concerns to the bank's ongoing capitalization woes. It now appears that DB has continued to hemmorhage cash with the FT reporting that the German lender's exchange traded fund unit has seen billions in outflows as Germany’s biggest lender considers whether to sell parts of its asset management business. Investors have pulled $8bn from Deutsche’s ETF arm so far this year. This is an unwelcome collapse after a strong performance in 2015 when the unit attracted positive inflows of $28bn, according to ETFGI, a London-based consultancy. DB's clients have been heading for the exit after the bank was threatened with a $14bn claim by the DOJ.“The noise around Deutsche Bank has clearly not helped its ETF business,” said a senior executive from a rival asset manager who did not wish to be named.As the FT adds, Deutsche has put aside €5.5bn to cover potential litigation costs but the threat of a larger bill has forced it to consider selling a minority stake in its asset management arm, its best-performing division in recent years. However, efforts to raise fresh capital could be hindered by the outflows from the ETF unit, which is widely regarded as one of the crown jewels of Deutsche’s asset management operations.

Europe’s Banks Think They’re Incredibly Safe - Given the parlous state of Europe’s economy, it’s hard to imagine that the investments of the region’s banks are among the safest in the world. Yet that is precisely what they would have regulators and investors believe. The banks’ safety has come into the spotlight as European officials -- including German Finance Minister Wolfgang Schaeuble and European Commission financial-services chief Valdis Dombrovskis -- battle with global regulators over requirements for capital, the layer of loss-absorbing financing that prevents bad investments from turning into system-wide disasters. The dispute involves risk-weighting, a process in which the largest and most sophisticated banks assess the riskiness of their assets to figure out how much capital they need. A loan to a struggling company might require a lot, safe government bonds none at all. Less capital means more leverage, which in good times boosts measures of profitability such as return on equity. Hence, banks have an incentive to make their assets look as safe as possible. Europe’s banks have excelled in this minimizing endeavor. On average for eight of the euro area’s most systemically important institutions, risk-weighted assets amounted to just 31 percent of total unweighted assets at the end of June -- as if about seven out of every 10 euros in investments were risk-free. For Germany’s Deutsche Bank, among the world’s most thinly capitalized, the ratio was just 22 percent. That compares with averages of 35 percent and 45 percent for the largest U.K. and U.S. banks, respectively. Here’s how that looks:

Stability, equity and monetary policy - by Mario Draghi - 2nd DIW Europe Lecture, German Institute for Economic Research (DIW), Berlin, 25 October 2016 - The most salient feature of the landscape facing monetary policy today is the low level of nominal and real yields everywhere. Among the G7, three countries currently have negative yielding 5-year bonds – Germany, France and Japan – representing 14% of world GDP. And that proportion rises to 22% if we include bonds yielding less than 1%. Some observers see this as an artificial state generated by the policies of central banks – and argue that it threatens not only economic and financial stability, but social equity too. So what I would like to discuss in my remarks today is why interest rates are so low, and what the implications of those low rates really are. My focus will be in particular on the distributional effects of monetary policy.

“Should We Rethink Fiscal Policy?” -- naked capitalism - Yves here. One has to wonder who the royal “we” is in the headline, and in context, it is Serious Economists. What this post unintentionally illustrates how much inertia there is in orthodox economic thinking. In late 2012, and reconfirmed in 2013, Olivier Blanchard, the IMF’s chief economist, effectively admitted that austerity in Europe was a failure because, in econo-speak, “fiscal multipliers were greater than one.” That meant that cutting government spending would lead to even greater declines in GDP, making debt to GDP ratios worse. Conversely, deficit spending would actually lower debt to GDP ratios, by virtue of the economies growing even faster than the increase in borrowings.  Blanchard tried to square the circle and shield the IMF from blame by depicting this outcome as if it was a special case that applied only to deeply recessionary economies. But pray tell, when exactly is the IMF called in to do salvage operations? When economies are sick! So this was a major indictment of one of the big elements of the standard IMF playbook.  Yet there’s only been some minor shifts in the willingness to engage in more aggressive fiscal policy. Far too many articles and papers treat “fiscal consolidation” which is code for “austerity” as if it worked. Some European leaders are at least now talking up the need for more deficit spending, but it hasn’t translated to a shift in practice. And as you can see from the summary of articles below, even though more and more economists are approving of a more active fiscal stance, this shift comes four years after the IMF cleared its throat, and is still pretty cautious. Originally published at Bruegel:

 ECB all but certain to keep buying bonds beyond March, ease QE rules - central bank sources | Reuters: The European Central Bank is nearly certain to continue buying bonds beyond its March target and to relax its constraints on the purchases to ensure it finds enough paper to buy, central bank sources have told Reuters. The moves will come in an attempt to bolster what is being heralded as the start of an economic recovery in the euro zone. ECB policymakers are due to decide in December on the future shape and duration of their 80 billion euros (£71.58 billion) monthly quantitative easing (QE) scheme, based on new growth and inflation forecasts. They did not discuss specific options at last week's meeting and no policy proposal has been formulated. But sources familiar with the matter said it was all but sure that money printing would continue in some form beyond March, currently the ECB's earliest end-date. This would be consistent with ECB President Mario Draghi's guidance last week that the Bank would keep a "very substantial degree of monetary accommodation" and his dismissal of an abrupt end to the bond scheme. The ECB declined to comment for this article. Whether the current monthly volume of purchases will be maintained or reduced after March has not been decided and will depend on incoming economic data, the sources said.

Why the ECB is Going to Print, Print, PRINT! - naked capitalism - Yves here. This article is a sad vignette of how severely central bankers and many economic commentators, in this case one at Westpac, are locked into destructive orthodox thinking. The ECB’s unconventional monetary policy experiment has been an abject failure. And the reason should be obvious: businesses don’t borrow to expand just because money has gone on sale. They borrow to expand if they see an opportunity and if the cost of funding does not constrain the growth plan. The parties most likely to borrow just because money is cheap are the last ones you want to do that: financial speculators, since the cost of money is one of their biggest costs and zombie businesses, since they will borrow if they can to keep an otherwise failed venture going.  Notice also that Westpac, presumably following the ECB, views more consumer demand for credit as a good thing. Since more and more economic studies have found that borrowing by households is economically unproductive beyond a modest level, policymakers need to get over the wrongheaded idea that they should promote growth in consumer credit.  It is also bizarre to see what central bankers have rationalized or ignored in order to persist in increasingly counterproductive monetary experiments. For instance, super low interest rates drain demand by reducing incomes of savers and retirees. Yet the monetary authorities told themselves that pensioners would choose to spend their capital to maintain their lifestyles. That’s not what has happened. They’ve cut spending and even tried increasing saving to make up for lost returns. For the most part, the ones who have eaten into their nest eggs had no choice. Similarly, super low interest rates signal a lack of official confidence about the economy, and unprecedented monetary experiments are very disconcerting to many businessmen. If the officialdom is signaling deflationary risk, the rational response is to save, since goods and services will be cheaper later.

Austria’s 70-Year Debt Sale Expands Europe’s Ultra-Long Universe - Austria sold 2 billion euros ($2.2 billion) of bonds due in November 2086 via banks, according to a person familiar with the matter. The sale follows this year’s century bond offerings from Belgium and Ireland, as well as 50-year deals from France, Italy and Spain, as countries take advantage of historically low interest rates to issue ultra-long debt. The 100-year bond sales by Belgium and Ireland were private placements for 100 million euros each.  “Many issuers have been extending the average maturity of their funding,” . “It makes sense for them to try and lock in low funding costs for a long time. On the demand side, there are still many buyers out there like pension funds and insurance companies that want to buy these bonds for hedging purposes.”  Austria’s 30-year bund yields fell two basis points, or 0.02 percentage point, to 0.99 percent as of 3:10 p.m. London time. The 1.5 percent security due in February 2047 rose 0.592, or 5.92 euros per 1,000-euro face amount, to 113.419. The yield on bonds maturing in January 2062, the nation’s longest-dated outstanding debt, dropped two basis points to 1.17 percent.  The 70-year bonds were priced to yield 53 basis points more than that on the February 2047 security, the person said. The Treasury in Vienna also sold 3 billion euros of notes maturing in July 2023. Investor interest in multi-decade debt has increased as the European Central Bank’s asset-purchase program crushes yields on shorter-dated securities. The amount of government debt due in 10 years or more has swelled by a record $733 billion this year, having more than doubled since 2009 to about $6 trillion, data compiled by Bloomberg and Bank of America Corp. show.

Brussels Demands €5.5 Billion In New Budget Cuts From Spain In Letter To Guindos - Brussels wasted no time after the announcement of a new vote of confidence in Mariano Rajoy (PP) on Tuesday, dashing off a letter to interim Economy Minister Luis de Guindos to demand €5.5 billion in new budget cuts for 2017. Valdis Dombrovskis and PierreMoscovi told Mr. Guindos that the Draft Budgetary Plan submitted on October 15 was not enough, and sought "reassurances" that the new government would place this matter at the top of its overflowing inbox. "We acknowledge that the DBP only includes the policy measures that the caretaker government has adopted to date, with no new planned measures for 2017 because it does not have full budgetary power." The European Commission says the current plan for a deficit of 3.6% of Gross Domestic Product (GDP) in 2017 is too high and that the agreed upon figure was 3.1%. The 0.5 percentage point difference is equal to about €5.5 billion in new cuts, based on Spain's 2015 GDP figure of €1.081 trillion. "We are therefore seeking reassurances from the Spanish authorities in the coming days that the incoming government, as soon as possible upon taking office, will submit an updated draft budgetary plan to the Commission and to the Eurogroup, which will ensure compliance with the targets set out in the Council decision under Article 126(9) TFEU of 8 August 2016."

Adoption Of The Euro Has Been 'Unequivocally Bad' For Southern European Economies - Via GEFIRA, Some say that the common currency prevents less productive economies from cheating by weakening their national currencies and forces them to become more efficient and competitive. Industrial production data shows that it is not the case. Italy, France, Greece and Portugal have not only stopped producing more; they are producing now less than in 1990! The decay started immediately after the introduction of the euro in 2002! The OECD industrial production data analysis leads to the following conclusions:

  • 1. since 1990 industrial production (manufacturing and construction included) has been growing in volume at large, even in the most developed countries;
  • 2. the disproportion between industrial output in Germany and two other biggest euroarea economies, Italy and France, occurred already just after the 2001-2002 crisis;
  • 3. Southern Europe’s economies have lost their ability to rebound in industrial production alongside the adoption of the euro.

In most of the most developed countries in the world industrial production has grown in volume since 1990, although a great deal of manufacturing capacities have been moved from the West to the emerging markets. Moreover, in countries like the USA, Israel, Switzerland, Austria and Germany the output has surpassed the 2008 pre-crisis levels. However, if we take a look at the euroarea or the Group of Seven (G7), then numbers are still lower than in 2008 but definitely higher than in 1990. A closer look at the European industrial production numbers gives a clear signal: something bad has happened after 2000. Before the introduction of euro, production trends ran more or less in the same direction. Meanwhile after the 2001-2002 crisis, French and Italian output did not rebound, while production in Germany expanded enormously and was able to reach the 2008 level quickly after the last crisis. Industry in France and Italy not only has not rebounded but also has started to curb. Countries with a sovereign currency can easily build up their economies because of one simple mechanism: depreciation. A relatively strong currency (strong in comparison to the economic condition) would not have to be a problem for Italy or Greece if there still were some capacities for more debt. Then internal consumption could prop up industrial production. But Spain, Greece, Italy and Portugal have had neither a weak sovereign currency nor the possibility of incurring more debt.

Prospects for the Spanish Left -- This is the first part of a three-part series on Spain’s economic crisis, the program of the new leftist political party Podemos, and both the limitations and potential of the Spanish left today. The authors point to the importance of employment policy (and especially a job guarantee) for pulling Spain out of the crisis, the necessity of a “left exit” (lexit) from the euro, and the relevance of Modern Monetary Theory (MMT) in transcending conventional balanced-budget thinking.

Greece: Disaster after the capitulation - In January of 2015, opponents of neoliberalism and the harsh policies of economic austerity rejoiced at the electoral victory of Syriza in the Greek parliamentary elections.  Touted as the “first-time left,” the new Syriza-led government was portrayed as a “would-be savior” for Greece. Flash forward to today: One year after ignoring the result of a referendum which rejected further austerity measures proposed by Greek lenders, the Syriza-led government is enforcing the dictates the third memorandum, an even more onerous austerity agreement agreed to in August 2015. In the interim, further legislation has been passed which has ceded control over the entirety of Greece’s publicly-owned assets for 99 years and relinquished the sovereign parliamentary right to pass legislation on key budgetary and economic issues. The end results of these agreements and the new austerity plan which has followed have been catastrophic. Already-battered pensions have been further slashed by as much as 50 percent or more. The port of Piraeus, 14 profitable regional airports, the national railway system, and the prime site of Athens’ former international airport have been sold off to foreign investors at bargain-basement prices and privatized. The sell-off of Greece’s municipal water utilities, which Syriza officials at one time claimed would occur “over our dead body,” is the next in line to be completed. Further, automatic budget cuts lurk ominously ahead, to be implemented automatically if Greece does not meet its troika-imposed fiscal targets. After a long period of dormancy, lulled by the promise of a government that was purportedly engaged in hard negotiations with Greece’s lenders, the people of Greece have roared back to life. Air traffic controllers recently staged a wildcat strike, walking off from their jobs in protest of the privatization of Greece’s airports–a process slated to be expanded to the remaining facilities in which the Greek state still owns a share. With nothing left to lose, pensioners have taken to the streets to protest the virtual elimination of their already meager pensions.

Hungary's PM threatens to sue EU over mandatory migrant quotas (Reuters) - Hungary will sue the European Commission and resist mandatory migrant resettlement quotas if Brussels does not take them off the agenda, Prime Minister Viktor Orban said on Friday. Orban said his government would use a recent referendum in Hungary, in which the overwhelming majority of those who voted rejected the EU quotas, to challenge Brussels. Turnout for the vote was too low to make it legally binding. He said there was a stalemate on the issue right now; Slovak Prime Minister Robert Fico, who holds the rotating EU presidency, is to propose a solution by the next EU summit in December. Orban told state radio that if the European Commission did not give up the idea of quotas, "then we will resist ... we will not carry out (the EU decision), we will sue the Commission". "There will be a serious legal debate on whether a foreign population can be imposed on the people of an EU member state against its will," he added. "This will be a big battle, and for this we need the (amended) constitution." Orban says deciding whether to accept migrants is a matter of national sovereignty, and wants to amend Hungary's constitution next month to ban the settlement of migrants there. Orban responded to the influx of migrants last year by sealing Hungary's southern borders with a razor-wire fence and thousands of army and police. He says Hungary, with its Christian roots, does not want to take in Muslims in large numbers, and that they pose a security risk.

Calais migrants: France begins to clear 'Jungle' camp - BBC News: More than 1,200 police and officials in France have begun an operation to clear the "Jungle" migrant camp in Calais. The camp has been housing at least 7,000 people in squalid conditions. Migrants queued peacefully to be processed, and the first of some 60 coaches that will carry them to refugee centres across France have now left. There is concern that some migrants will refuse to go because they still want to get to Britain and that weekend clashes with police could be repeated. The dismantling of the camp is expected to start on Tuesday. The UK has begun to accept some of the estimated 1,300 unaccompanied children from the camp. The first group without family ties to the UK has arrived in Britain under the "Dubs amendment" rules, which grant refuge to the most vulnerable. However, the Home Office said on Monday the transfer process had been paused during the demolition of the Jungle, at the request of the French.

Calais erupts in violence as migrant camp closed -- Calais was gripped by violence last night as police clashed with migrants and fired tear gas into the crowds before the biggest refugee evacuation in France for decades. Hundreds of officers and heavy vehicles were brought in and a security cordon put around the camp yesterday to thwart attacks by anarchists, many from Britain, bent on stirring up violence. The French government vowed to deal severely with the “No Borders” militants, who have urged followers to confront the police as they start to evict all inhabitants of the Jungle today and dismantle the sprawling migrant camp. Radicals were rounded up at motorway checkpoints on their way to Calais but police admitted that several dozen were already inside the camp, having infiltrated it in the past week. “The state will be absolutely tough with them,” said Patrick Kanner, the towns minister.Officials and charity workers fanned out through the muddy shantytown trying to convince the 6,000-8,000 people there that they had no option but to accept a ride on the fleets of coaches to one of nearly 300 new “temporary reception centres” around France where their cases will be processed. They distributed leaflets, including some in comic strip form. Home Office officials speeded up the processing of applications from children with ties to Britain and “vulnerable” children who will be accepted under certain conditions. Nearly 200 children have left for Britain over the past five days and the French hope that Britain will take a total of 600 by the end of this week. About 1,300 minors remain in the camp, where they will be lodged in a “village” of containers while their cases are assessed.

Calais 'Jungle' children with nowhere to sleep - BBC News: Dozens of unaccompanied minors were left in the "Jungle" camp in Calais overnight, despite French officials declaring the camp now empty. Aid workers say about 100 young people slept rough, but the head of the regional government said it was 68. Fabienne Buccio also claimed some of those who remained overnight were not originally from the "Jungle" camp. Nearly 5,600 people have been moved to reception centres since Monday, the government said (in French). This includes about 1,500 unaccompanied minors being housed in an on-site container camp, which activists say is now full. The camp has become a key symbol of Europe's migration crisis, with its residents desperate to reach the UK.Demolition crews are continuing to clear remaining tents and shelters from the area, which were damaged in fires reportedly set by departing migrants. Caroline Gregory of Calais Action, a British charity, said about 100 unaccompanied children had been left in the camp overnight. "We were begging the French authorities to actually do something about the refugee children and nothing was done," she told the BBC on Thursday. Volunteers found shelter for the children in a warehouse where many of the migrants were being processed, as well as a makeshift school inside the camp. Some residents were forced to flee the camp without their possessions Some of the youths slept on the ground outside one of the centres that was being used to register migrants for relocation over the past three days. "I spent the entire night here," one young Afghan told the AFP news agency. "I am in the queue for minors to go to England. I have family there." French police, meanwhile, say they are still finding migrants in shelters who do not want to leave.

 As Calais "Jungle" Burns, Refugees Try To Storm Their Way Back In - It has been a harsh week for the 8,000 refugees inhabiting the Calais "Jungle" camp.Continuing an operation which began on Monday, workers ramped up demolition of France's notorious Calais "Jungle" on Wednesday after fierce blazes cut through a swathe of the camp overnight, sending migrants fleeing for safety.  Fabienne Buccio, the prefect of Pas-de-Calais, said it was "mission accomplished" for the demolition.However his assessment may have been premature as charities said many unaccompanied minors had not been processed and BBC reporters at the camp said groups of adults remained.Wearing hardhats and orange overalls in the morning fog, a team of around 15 workers resumed tearing down tents and makeshift shelters at the camp that has become a symbol of Europe's migrant crisis. As recounted by AFP reporters, a new fire threw black smoke into the sky as several dozen wood shacks smouldered on a main thoroughfare of the sprawling slum. "Someone burned our tents. Maybe they used petrol or something, I don't know, but the fires spread fast. We had to run out in the middle of the night," said Arman Khan, a 17-year-old Afghan. "I left all my things behind, I have nothing now."Riot police had cordoned off the demolition area while aid workers and government officials checked that the dwellings were empty. Others carted away the debris and abandoned belongings - mattresses, multi-coloured blankets, supermarket trollies and so on - in small earth-movers. Gas canisters, sinks, refrigerators and other metal objects lay scattered across the desolate scene. The fires spread just hours after workers moved in Tuesday to clear the squalid camp that has been home to an estimated 6,000-8,000 migrants, many with hopes of reaching Britain.

Calais: France says Britain must take in more than 1,000 refugee children - French officials have demanded that Britain give homes to more than 1,000 refugee children who remain in shipping containers on the site of the now-cleared Calais camp, amid renewed tense diplomatic wrangling over the fate of the unaccompanied minors. As bulldozers began destroying the remains of the camp, there was concern about the future of nearly 1,500 children given short-term accommodation in a fenced-off section of the camp. Both the president of the regional council and the head of France’s official refugee agency, Ofpra, said on Friday night that Britain should accept all of them. Xavier Bertrand, president of the Hauts-de-France regional council, pointed out that only 300 minors had been taken to the UK, and added: “We now need the British government to implement and accelerate the juvenile transfer process to the UK ... It is a question of humanity and dignity.” The head of Ofpra, Pascal Brice, said that since France had given homes to around 4,400 adults, it was only fair that Britain took its share. “We’ve done Britain’s work in tending to the adults,” he told Reuters. “The least they can do is take care of the isolated minors who are now at the CAP [temporary lodgings] and who have an interest in going to Britain.” The renewed pressure on the UK to take more Calais refugees came 24 hours after the French interior minister, Bernard Cazeneuve, told his British counterpart, Amber Rudd, that Britain should “quickly execute its responsibilities to take in these minors, who hope to come to the United Kingdom. This is the best way to give them the protection they are due.” The Home Office has said it expects to give sanctuary to a few hundred more children once their asylum claims have been investigated, but will not make any firm commitment

Theresa May set to reject flexible Brexit deal for Scotland -Theresa May is set to rebuff a bid by Scotland’s first minister Nicola Sturgeon for a flexible Brexit deal, as Downing Street faces growing pressure to create special arrangements for favoured industries. Ms Sturgeon wants to secure Scotland’s place in the single market, even if England and Wales opt for a harder Brexit deal. “Scotland — which voted overwhelmingly to remain in Europe — must be able to secure a continuing close relationship with Europe, including membership of the single market,” the first minister writes in the Financial Times on Monday.  Ms Sturgeon, who will join political leaders from Wales and Northern Ireland for a summit at Downing Street on Monday, said she does not accept that Mrs May has a mandate to take “any part of the UK” out of the single market. She called the support of some Conservative ministers for a so-called “hard Brexit” “politically unwarranted” and “economically ill-advised”.  She also proposed the creation of “a cross-party coalition to avert a hard Brexit for the UK as a whole”.  Ms Sturgeon’s comments suggest that a flexible, two-tier Brexit is likely to be a key negotiating demand for the devolved administrations.  London mayor Sadiq Khan has already mooted a separate work-permit scheme for the capital, while the government has hinted at the possibility of some kind of carve-out or compensation for major exporters including carmakers such as Nissan, if they are hit with tariffs as a consequence of Britain’s departure from the EU.  “If [Westminster] is prepared to countenance such arrangements for different sectors, there is no reason for it not to consider a flexible Brexit for different regions too, particularly for those parts of the UK which voted decisively to remain in Europe,” Ms Sturgeon writes.

Theresa May warned of risk of constitutional crisis over Brexit deal -- Theresa May has been warned to expect a “full-blown constitutional crisis” unless agreement on the terms of Brexit can be reached between the government and the UK’s devolved administrations. The stark prediction comes as the prime minister hosts talks on Monday with the leaders of Scotland, Wales and Northern Ireland for the first time since the UK voted to leave the EU on 23 June. In a report published on Monday, the Institute for Government said unless all four leaders agree on the “core planks” of the UK’s negotiating position before May triggers article 50, formally starting the Brexit process, the result could be “a serious breakdown in relations between the four governments and nations of the UK”.May is preparing to offer Scotland’s first minister, Nicola Sturgeon, the Welsh first minister, Carwyn Jones, and Northern Ireland’s first minister, Arlene Foster, and her deputy, Martin McGuinness, a “direct line” to the Brexit secretary, David Davis, to allow them to help shape Britain’s EU exit strategy.But the offer is made against a background of continuing clashes between May and Sturgeon  over who has a more substantial mandate regarding Scotland’s relationship with the UK and Europe, and as the devolved administration leaders present an increasingly united front against Westminster. Ahead of the joint ministerial committee (JMC) meeting on Monday, in a letter to May, Sturgeon formally endorsed a proposal from Jones that any planned negotiating package should be subject to a vote in all four UK parliaments and assemblies. Anticipating that the three devolved governments would seek such a vote, the Institute for Government noted that although the UK parliament remains sovereign and could legally ignore the views of Holyrood, Cardiff Bay and Stormont, this would be a “reckless strategy for a government committed to the union”. The organisation warned that forcing the devolved administrations to comply “would seriously undermine relationships between the four governments, and increase the chances of Scottish independence and rifts in Northern Ireland’s fragile power-sharing arrangements”.

Another Huge Brexit Spanner in the Works: UK Faces Customs Train Wreck With Need for IT Upgrade - Yves Smith - The insanity on the Brexit front has become so pronounced that I’ve been finding it hard to keep up. But a story in today’s Financial Times, plus some other sightings du jour, give a window into how the Brexit boosters have not even begun to deal with practicalities. For instance, one example of how keen the Brexiteers are to claim they have the upper hand is a new study by Civitas that claims that if the EU and the UK were to fail to reach a post-Brexit pact, the cost to the EU would be greater, at £12.9 billion a year goods sold the UK than £5.2 billion in tariff costs on UK exports to the EU. First, this analysis assumes a default to WTO rules. As we’ve written, based on warning by the Director-General of the WTO pre-Brexit that have been reaffirmed, there is no “WTO default”. A new deal with the WTO has to be negotiated, and those take years. Even if the WTO were to waive the principle that it cannot begin negotiations with the UK until it has left the EU (and this is a matter of treaty, and the Europeans are very procedural about these matters, so making optimistic assumptions is not wise), experts have said that for the UK to conclude a deal with the WTO in as little as 5 years would be unprecedentedly fast, and the WTO is not going to prioritize the UK over other countries that also have negotiations in process.  So basically, Civitas has made clear it has no idea what it is talking about, which makes it hard to take the rest of its work seriously.  Second, the UK has a massive trade deficit with the EU. So the tariffs on the EU side would be larger ex any unusual offsets due to differences in the mix of good. So? Third, the UK economy will be roughly one-fifth the size of the EU economy post Brexit. Thus tariffs on the UK of 2X the EU level translate into a load in economic terms for the UK that will be 2.5 times greater than what the EU will bear.  Fourth, EU leaders from the outset have made clear that they understand that they will face economic costs in the event of a Brexit. That has not deterred them from taking a hard stance for political reasons, since they clearly regard preserving the rest of the EU as paramount, and that means cutting the UK no slack. Yet remarkably, the folks at Civitas act as if the EU doesn’t understand the tradeoffs, when it is the Brexit camp that is in its own echo chamber.  On to the bigger story, which is the impending Brexit IT train wreck.

Brexit Bulletin: Bankers Prepare for Exodus From London - Banks will start moving operations out of the U.K late this year and early next as they anticipate a hard Brexit. That's according to Anthony Browne, chief executive officer of the banking lobby group BBA, writing in the Observer newspaper on Sunday. International banks’ “hands are quivering over the relocate button,” he wrote. “Many smaller banks plan to start relocations before Christmas; bigger banks are expected to start in the first quarter of next year.” Without identifying any banks by name, he said lenders can’t wait until the last minute and have to “plan for the worst,” especially because “public and political debate at the moment is taking us in the wrong direction.” Handily, some real estate companies are already finding them new digs. A property company managed by Schroders Plc is bidding for an office building in Frankfurt, joining CBRE Global Investors LLC and Standard Life Plc, which are seeking to purchase office space in cities from Dublin to Amsterdam. Real estate investors are seeking to capitalize on a shortage of available offices in Paris, Frankfurt and Amsterdam, Bloomberg's Jack Sidders reports. The lack of development and growing domestic demand has already pushed vacancy rates for prime space in the business districts of those cities to the lowest levels in about a decade, according to broker Savills Plc.

 Taking Monetary Policy to the People - Howard Davies – The United Kingdom was late to adopt central-bank independence, because then-Prime Minister Margaret Thatcher firmly opposed allowing unelected bankers to control interest rates. She famously asserted that she would never hand that control away, and the Bank of England was not set free until 1997, when Tony Blair’s first Labour government was elected.   In the years before the 2008 global financial crisis, independent central banks were seen as successful in controlling inflation; and countries with sizable fiscal deficits were especially enthusiastic about central-bank independence because they benefited from lower long-term interest rates. Central banks that also regulate the banking industry were asked tough questions about their insouciance in the face of rapid credit expansion, but they were widely praised for their prompt and decisive response when trouble hit.  But the period of monetary-policy consensus may be coming to an end. In the United States, Republican presidential candidate Donald Trump has challenged Fed governors’ independence, and made it clear that he would quickly replace the Fed’s leadership were he elected. In Europe, the European Central Bank’s quantitative-easing policies have been widely criticized, and ECB President Mario Draghi recently had to defend his approach before a highly critical German Parliament. British politicians have also begun to protest, even though criticizing the BoE was long considered tantamount to blaspheming in church. British Prime Minister Theresa May, in a recent speech before the Conservative Party Conference, noted that “monetary policy has had some bad side effects. People with assets have got richer. People without them have suffered … a change has got to come. And we are going to deliver it.”  William Hague, an influential former Conservative leader, was even more blunt when he recently issued a not-so-veiled threat: if central banks do not “change course soon, they will find their independence increasingly under attack.” In that case, he added, “the era of their much-vaunted independence will come, possibly quite dramatically, to its end.”  While May has denied any split between her government and BoE Governor Mark Carney, it is clear that monetary policy has become a subject of political debate for the first time in 20 years. In response to these heretical outbursts, Carney has sounded emollient and understanding; and Draghi has laudably engaged with his critics’ arguments.

Why sterling’s collapse is not good for the UK economy - The most dramatic economic effect of the UK’s Brexit vote has been the collapse of sterling. Since June, the pound has fallen by 16% against a basket of currencies. Mervyn King, the previous governor of the Bank of England, hailed the lower exchange rate as a “welcome change”. Indeed, with Britain’s current-account deficit running above 7% of GDP – by far the largest since data started being collected in 1955 – depreciation could be regarded as a boon. But is it? Economists would typically argue that the way to balance a country’s external accounts is through a fall in its currency, which would make imports more expensive and exports cheaper, causing the former to fall and the latter to rise. Higher import prices – a net loss for the country – would be offset by the higher employment and wages generated by the more competitive position of the country’s exports. But in order for currency depreciation to work its magic, more demand for exports must be forthcoming when the exchange rate falls (or, as economists say, the price elasticity of demand for exports must be high). But various studies have shown that the price elasticity of demand for UK exports is low. For example, a recent paper by Francesco Aiello, Graziella Bonanno, and Alessia Via of the European Trade Study Group finds that “the long-run level of exports appears to be unrelated to the real exchange rate for the UK”. This means that British consumers and producers will have to bear the entire brunt of devaluation: their import consumption will be rationed through a sharp rise in price inflation, with no offsetting gain for exports. This is by no means merely a theoretical proposition. In 2008-09, when the rest of the world was on the verge of deflation, the UK was enduring an inflationary recession, with GDP contracting at a top rate of 6.1% annually, while inflation reached some 5.1%. This occurred because sterling fell more than 21%, peak to trough, from 2007 to 2008.

The pound just fell off a cliff - Sterling dropped ike a stone on Tuesday afternoon. After a fairly sanguine morning for the currency, around 12.50 p.m. BST (7.50 a.m. ET) the pound began to drop sharply against the dollar. Sterling fell below $1.21 for the first time in several weeks just before 4.00 p.m. BST (11.00 a.m. ET), before pulling back as Bank of England Governor Mark Carney appeared in front of the House of Lords Economic Affairs Committee to give the committee an update on the progress of monetary policy in the UK. Topics included the BoE's response to the UK's Brexit vote, and whether Carney will leave his post in 2018, or stay for a full term until 2021. Here's how the pound's movements look as of 4.40 p.m. BST (11.40 a.m. ET): Commenting on the move prior to Carney's appearance, Alexandra Russell-Oliver of Caxton FX said in an emailed statement: "Sterling has dropped, partially as a result of pressure on the pound ahead of Carney’s testimony this afternoon and partially due to dollar strength following above-forecast housing data. There is the risk of further sterling weakness/volatility during Carney’s testimony, which will focus on the economic consequences of the Brexit vote." Earlier on Tuesday, Chancellor Philip Hammond told the House of Commons that he sees "no reason" why he would necessarily reject any future requests from the Bank of England for further quantitative easing. Sterling's crash in recent weeks has been well documented, and has led to comparisons between the UK's economy and that of emerging market nations.

Time for a Sterling Crisis? - The UK pound plunged again earlier this month: two dates are marked with vertical lines: the the Brexit vote (red line) and again the Prime Minister's speech signalling that the most likely outcome was a "hard Brexit" (green line) where the UK leaves the European single market (i.e., that it won't become part of the European Economic Area, like Finland, or negotiate an arrangement like Switzerland's).Departure from the EU and the single market make the UK a less attractive location for foreign investment (see, e.g., comments from Nissan's CEO about its Sunderland plant).  A decrease in demand for UK assets implies a drop in the pound.  The UK is also a less attractive location for domestic investment now as well, and the situation is probably not a good one for consumer confidence - a reduction in demand due to lower desired consumption and investment would imply lower interest rates, which also would cause the pound to fall.  Is this yet another "sterling crisis"?  Not in the usual sense - as Gavyn Davies notes, there is no fixed exchange rate to defend this time, and most of the UK's external debt is denominated in pounds. As Paul Krugman explains, a fall in the pound is a part of the adjustment process.  He writes: Pre-Brexit, Britain was obviously experiencing a version of the so-called Dutch disease. In its traditional form, this referred to the way natural resource exports crowd out manufacturing by keeping the currency strong. In the UK case, the City’s financial exports play the same role. So their weakening helps British manufacturing – and, maybe, the incomes of people who live far from the City and still depend directly or indirectly on manufacturing for their incomes. However, a rebalancing of the UK economy in favor of manufacturing exports will not come quickly, according to Barry Eichengreen (Robert Skidelsky goes further and argues for helping the process along through "import substitution" policies).

Pound Tumbles After UK Government Wins Brexit Suit In Northern Ireland Court - Moments ago sterling did what it has been doing so well these past few months, it tumbled by as much as 50 pips after the UK government won a Brexit suit in a Northern Ireland court: a Northern Irish judge rejected a pair of challenges to the Brexit process, removing at least one obstacle to Prime Minister Theresa May’s plan to begin severing ties with the European Union by the end of March.  The Northern Irish High Court ruled that lawmakers don’t need to hold a vote to start the two-year countdown to Brexit. The judge also rejected a challenge based on Good Friday Peace Agreement. But the court also said that it would defer to English courts on the wider issue of whether Prime Minister Theresa May and her ministers have the authority to invoke Article 50 of the EU Lisbon Treaty, the mechanism by which a nation can leave the bloc, without the explicit backing of the British parliament. Reuters adds that Northern Ireland rights activist MccRod will appeal the high court ruling, however according to ING analyst Petr Krpata, the decision reduced the probability that article 50 won’t get triggered, Bloomberg reported. In the immediate aftermath, GBP/USD dropped 0.32% to day low of 1.2125 while EUR climbs to 0.89941 against the pound in sharp moves.