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

Saturday, March 28, 2015

week ending Mar 28

Fed moves the markets --As widely expected, at Wednesday’s FOMC meeting the Federal Reserve dropped its statement that “the Committee judges that it can be patient in beginning to normalize the stance of monetary policy”, the magic formula that many observers had thought would open the way for a hike in interest rates at the Fed’s June meeting. But the yield on a 10-year U.S. Treasury bond dropped 10 basis points immediately following the FOMC release. More important than leaving the word “patient” out of the latest FOMC statement was a significant downward revision in the interest rate that the Fed itself seems to be anticipating. The median FOMC member now anticipates a fed funds rate over the next few years that is 50 basis points lower than was anticipated last December.  Notwithstanding, the fed funds futures market is pricing in significantly lower expectations yet.  It’s also worth noting that the median FOMC “longer run” interest rate prediction came out at 3.75% from both the December and the March meetings, though the distribution of the individual “dots” from the latter has clearly drifted down. With a long-run inflation objective of 2%, that implies an equilibrium real interest rate of 1.5-1.75%. Compare that to the yield on a 10-year Treasury inflation-protected security that is now below 20 basis points.   All of which raises the question: does the Fed know something the market doesn’t, or vice versa? Tim Duy concludes “it is now clear the bond market is not moving toward the Fed; the Fed is moving toward the bond market.” But my answer to the question is: a little of both. Based on the historical evidence reviewed here I think it’s reasonable to expect an equilibrium real rate significantly above 0.2% and significantly below 1.5%. But given my own (and everyone else’s) uncertainty about exactly where the number is within that range, it makes sense for the Fed to wait a little longer before raising rates.

Raise Rates or Face ‘Devastating’ Bubbles, Says Fed Official -- The US risks inflating asset price bubbles with “devastating consequences” if it leaves interest rates at zero, according to a senior Federal Reserve official. James Bullard, head of the Reserve Bank of St Louis, told the Financial Times on Monday the Fed “should get on with normalisation” as soon as possible so that it does not have to raise rates more aggressively later causing significant market volatility. The unemployment rate dipped to 5.5 per cent in February, its lowest rate since 2008, and was poised to go below 5 per cent by the third quarter of the year, Mr Bullard said. Recalling the tech bubble in the 1990s and the housing bubble of the 2000s, he said: “Zero [interest rates] is too low in that kind of environment. I wouldn’t be comfortable with that. A zero rate would feed into an asset price bubble”.  “When asset bubbles start, they keep going until they blow up out of control with devastating consequences.” The policy maker dismissed the softer US economic data that has emerged so far this year as temporary and said that the current low inflation was caused by cheap energy prices and would move up once the oil market stabilised. He said that the dollar was unlikely to soar much higher when the Fed raised rates as markets had already priced this move into the exchange rate.  Growth, he added, was likely to be running about 1 percentage point above its long-run trend and this would continue to push unemployment down towards the 3.8 per cent low of the 1990s and the 4.2 per cent low of the 2000s.

Raise Fed Rates Now? - A quick note on the US and the Fed. Pressure for rate rises never really stopped, but lately it has intensified. Today I read on the FT that James Bullard, Saint Louis Fed head, urges Janet Yellen to raise rates as soon as possible, to avoid “devastating asset bubbles”. Just a few months ago we learned that QE was dangerous because, once again through asset price inflation, it led to increasing inequality. Not to mention the inflationistas (thanks PK for the great name!) who since 2009 have been predicting Weimar-type inflation because of irresponsible Fed behaviour (a very similar pattern can be found in the EMU). Let’s play the game, for the sake of argument. After all, asset price inflation, and distortions in general are not unlikely in the current environment. So let’s assume that the Fed suddenly were convinced by its critics, and turned its policy stance to restrictive (hopefully this is just a thought experiment). I have two related questions to rate-raisers (the same two questions apply to QE opponents in the EMU):

  1. Do they think that private expenditure is healthy enough to grow and to sustain economic activity without the oxygen tent of monetary policy?
  2. If not, would they be willing to accept that monetary restriction is accompanied by a fiscal expansion?

Is the Fed bluffing on rate hikes? – Izabella Kaminska -It might not be polite to say it overtly, but concerns are growing that the Fed’s rate hiking promises may be nothing more than a big bluff. The vogue for doubting Fed rhetoric started in earnest on March 11, when Ray Dalio, founder of hedge fund firm Bridgewater Associates, wrote to investors that there was a risk if the Fed raised rates too fast it could create a market rout similar to that of 1937.  According to Bloomberg, the note Dalio sent clients said: We don’t know — nor does the Fed know — exactly how much tightening will knock over the apple cart…. We think it would be best for the Fed to err on the side of being later and more delicate than normal. This followed comments from Jeffrey Gundlach, co-founder of DoubleLine Capital, that if the Fed raises rates in the middle of 2015 as intended it will likely have to reverse course. Since then Tad Rivelle, chief investment officer for fixed income at TCW has come out saying the Fed is giving the markets conflicting messages on rates, evoking Michael Jackson’s famous moonwalk with its signalling by making it look like it’s going one way when in fact moving in the other direction.On Monday, BoAML’s global rates and currencies research team joined the doubting Thomas brigade, asking whether Fed hikes this year really are a certainty? As they noted: we think the Fed may delay hikes if core inflation continues to decline this year. At the same time, the bulk of statistical evidence suggests inflation is poorly predictable, so the likelihood of a further decline in inflation could be substantial and, arguably, not very far from 50%. In particular, inflation may continue to decline despite the tighter labor market. Note that although we believe the market may underestimate the likelihood of no hikes this year, we do not think this is the most likely scenario. Our economists expect the Fed to start normalizing rates in September, consistent with our view.

Fed’s Williams: Midyear Will Be Time to Start Rate Increase Debate - Federal Reserve Bank of San Francisco President John Williams reiterated on Monday his belief that central bankers should consider raising rates some time this summer. “Things are looking better–in fact, they’re looking downright good,” the official said in a speech to be delivered to an audience in Sydney and Melbourne via video. Given how much the economy has improved and is likely to continue to gain ground, “I think that by mid-year it will be the time to have a discussion about starting to raise rates,” Mr. Williams said. The strength of the U.S. dollar against a “broad index” of currencies is not an impediment to the U.S. economy reaching real GDP growth of 2.5% this year, he said. “The U.S. economy has good momentum…even with what is a rather large appreciation of the U.S. dollar,” Mr. Williams said. As interest rates are normalized, Mr. Williams warned of unintended consequences for the economy given that interest rates are a “blunt” policy tool. But he said the focus of policy should be on higher interest rates over time. “The goal for me is just to get the economy back to full employment, get inflation back to 2.0% and get interest rates back up as appropriate, back to more normal levels,” he said.

Fed’s Bullard: Risks of Keeping U.S. Policy Rates at Zero Too Long ‘May be Substantial’ - Current low levels of U.S. inflation are likely temporary and the risks of keeping U.S. policy rates at zero for too long “may be substantial,” Federal Reserve Bank of St. Louis President, James Bullard, said Thursday, signaling that the U.S. central bank should get on with raising rates soon. “Now may be a good time to begin normalizing U.S. monetary policy so that it is set appropriately for an improving economy over the next two years,” Mr. Bullard said in prepared remarks to the OMFIF City Lecture in Frankfurt. “Even with some normalization, policy will remain exceptionally accommodative.” He said that from his perspective, normal Fed policy would suggest an eventual return to historical norms with a balance sheet closer to $1 trillion–versus over $4 trillion now–and official policy rates of “several hundred basis points.” Mr. Bullard’s comments echo recent warnings he has made that the Fed’s zero interest rate policy is no longer appropriate for the U.S. economy that has grown strongly in recent quarters, pushing unemployment down. Mr. Bullard, who isn’t a voting member of the Fed’s rate-setting board this year, warned that if interest rates remain near zero for too long, destabilizing bubbles may form in some asset markets. “If a bubble in a key asset market develops, history has shown that we have little ability to contain it,” Mr. Bullard said. “A gradual normalization would help to mitigate this risk while still providing significant monetary policy accommodation for the U.S. economy.” In his speech, the Fed official downplayed the effects of the U.S. dollar’s strong rise in recent months, brought on in part by the European Central Bank’s decision in January to launch a large-scale bond purchase program that began earlier this month. In contrast, Fed officials signaled this month that they are likely to raise interest rates this year by dropping their assurance that they will be “patient” in tightening policy. The change in language “should be interpreted as a sign of strength for the U.S. economy,” Mr. Bullard said Thursday.

Fed’s Evans: Central Bank Shouldn’t Raise Rates This Year - Overly weak inflation and a lack of evidence suggesting price pressures are about to heat up means the Fed shouldn’t raise interest rates this year, Federal Reserve Bank of Chicago President Charles Evans said in a speech Wednesday. “I think economic conditions are likely to evolve in a way such that it will be appropriate to hold off on raising short-term rates until 2016,” Mr. Evans said. While the economy is growing and adding jobs at a very healthy clip, inflation remains well under the 2% level targeted by the Fed, and that argues for caution, he said. Mr. Evans’ comments came from the text of a speech prepared for delivery in London. The official is a voting member of the rate-setting Federal Open Market Committee. The FOMC met last week in a gathering that continued to prepare the way for an increase in what are now near-zero short-term rates. Most central bankers support such a move this year, believing that growth is likely to continue and that inflation, currently weighed down by temporary factors like a sharp drop in oil, will rise back to the desired level over time. While a number of Fed officials share Mr. Evans’s worry about inflation, most officials appear to agree the door to rate rises comes with the Fed’s mid-June policy meeting. In a speech Monday evening, San Francisco Fed President John Williams, also an FOMC voter, said, “I think that by midyear it will be the time to have a discussion about starting to raise rates.” In his speech, Mr. Evans shared the optimism his colleagues have about the economy. But he again cautioned the Fed faces serious problems if it raises rates too soon.

Janet Yellen says US interest rates likely to rise gradually - US interest rate rises are likely to happen only at a gradual pace after an initial increase later this year, as the headwinds from the financial crisis slowly dissipate, the head of the Federal Reserve said on Friday, spelling out detailed arguments for a cautious approach. Janet Yellen said the Federal Open Market Committee (FOMC) was giving “serious consideration” to beginning to lift rates later this year, pointing out that excessive delay could lead to an inflation overshoot or stoke up financial stability risks. The jobs market was likely to continue improving, and there was reason to expect consumer spending to expand at a “good clip” this year, she told a conference in San Francisco. However, Ms Yellen added: “If conditions do evolve in the manner that most of my FOMC colleagues and I anticipate, I would expect the level of the federal funds rate to be normalised only gradually, reflecting the gradual diminution of headwinds from the financial crisis and the balance of risks I have enumerated of moving either too slowly or too quickly.” The Fed this month dropped its pledge to be “patient” before lifting rates, opening the door to a move at some point this year. In her speech, Ms Yellen attempted to shift the focus from the timing of that first move to the evolution of rates thereafter, setting out a number of reasons for proceeding cautiously. One of them is the expectation on the part of Fed officials that the “equilibrium real federal funds rate” — a measure of the economy’s underlying strength — is set to rise only slowly over time. The experience of foreign central banks, including Japan’s and Sweden’s, shows that hiking rates when the equilibrium real rate is low can result in “appreciable economic costs”, she said. That applies especially when rates are at near-zero levels, constricting the bank’s ability to cut further to boost growth. While there have been welcome improvements in the labour market, with jobs growth averaging 275,000 per month over the past year, this has been achieved only on the back of extraordinarily easy monetary policy, suggesting the underlying economy remains “quite weak by historical standards”, said Ms Yellen.

BIS Slams The Fed: The Solution To Bubbles Is Not More Bubbles, It Is Avoiding Bubbles In The First Place - BIS now says the solution to an asset bubble is not some incomprehensible jibberish of "macroprudential regulation" or a "bubble-busting" SWAT team at the Fed, not another asset bubble (especially not one which leads to house price deflation, the same that is slamming the Chinese economy at this moment), which by now has become clear to all is the only "tool" in a central banker's aresnal, and the remedy to debt is not even more debt.  How best to address financial cycles is a broader policy question that the specific analysis in this article obviously cannot answer. As discussed in detail elsewhere (see eg Borio (2014a,b)), there is a case that policy should first and foremost constrain the build-up of financial booms – especially in the form of strong joint credit and property price increases – as these are the main cause of the subsequent bust. And once the financial bust occurs, after the financial system is stabilised, the priority should be to address the nexus of debt and poor asset quality head-on, rather than relying on overly aggressive and prolonged macroeconomic accommodation through traditional policies. This would pave the way for a sustainable recovery. The idea would be to have macroeconomic policies that are  more symmetrical across financial booms and busts so as to avoid a persistent bias that could, over time, entrench instability and chronic economic weakness as well as exhaust the policy room for manoeuvre

Fed’s Mester: Fed Needs Further Refinements of Forward Guidance - Federal Reserve Bank of Cleveland President Loretta Mester said Monday that the U.S. central bank can do more with the words it uses to help guide the public’s expectation of where its interest rate policy may be heading. Ms. Mester says this so-called “forward guidance” can be honed beyond the various strategies the Fed employed as it tried to provide additional economic stimulus after pegging short-term interest rates at near zero at the end of 2008. Having told the public when it expected it could raise rates and then having emphasized policy will be driven by economic events, Ms. Mester wants to see a new round of refinements. “I would like to see the forward guidance evolve over time to give more information about the conditions we systematically assess in calibrating the stance of policy to the economy’s actual progress and anticipated progress” toward the Fed’s official employment and inflation goals, Ms. Mester said. Better guidance “would articulate the considerations the Committee would take into account when determining future changes in policy, as well as information to help the public anticipate how policy is likely to change in response to changes in economic developments that affect the economic outlook,” she said.

Fed Should Push Unemployment Well Below 5%, Paper Says - The Federal Reserve should hold short-term interest rates near zero long enough to drive unemployment well below 5%, even if it means letting inflation exceed the central bank’s 2% target. That’s according to Laurence Ball, economics professor and monetary policy expert at Johns Hopkins University, in a paper to be published next week by the Center for Budget and Policy Priorities and made available to The Wall Street Journal. Fed officials have made clear they expect to start raising their benchmark short-term interest rate, the federal funds rate, from near zero sometime this year as long as the economy continues to improve. Fed officials last week released updated economic forecasts showing they generally expect unemployment to fall from 5.5% in February to between 5.0% and 5.2% by the end of this year, and they expect the jobless rate to settle into that range in the long run. They do forecast the rate could go as low as 4.9% by the end of 2016 and 4.8% by the end of 2017. Mr. Ball says the Fed could create more jobs by letting the unemployment rate fall lower. It should seek to push the rate “well below 5%, at least temporarily,” he writes. That could help bring some discouraged workers to reenter the labor market, as well as help the long-term unemployed find work and involuntary part-time workers find full-time jobs, he said. “A likely side effect would be a temporary rise in inflation above the Fed’s target, but that outcome is acceptable,” writes Mr. Ball, who has been a visiting scholar at various central banks, including the Fed and often testifies on Capitol Hill about Fed policy. “To push unemployment down, the Fed should keep interest rates near zero for longer than is currently expected, certainly past the end of 2015.”

Choosing the Right Policy in Real Time (Why That’s Not Easy) » NY Fed - As an economist, you make policy recommendations at any point in time that depend on what model of the economy you have in mind and on your assessment of the state of the economy. One can see these points play out in the current discussion about the timing of interest rate liftoff and the speed of the subsequent renormalization. If you think nominal rigidities are not all that important, you are likely to conclude that accommodative policies won’t do much for growth but will generate inflation. Similarly, if you are convinced that the economy is already firing on all cylinders, you may see little need for prolonged accommodation. The problem is, you are not quite sure about the state of the economy or what the right model is. If you are a Bayesian, you may want to try to put probabilities on different models/states of the world and take it from there. The first post in this series, “Combining Models for Forecasting and Policy Analysis,” introduced a procedure called dynamic pools that shows how to do just that. In this post, we apply that procedure to a policy exercise. We can’t publicly discuss current policies, so we will instead apply our method to consider alternative monetary policies at the onset of the Great Recession.

Currency wars rebound on the Fed -- When the Brazilian finance minister Guido Mantega complained that the Federal Reserve was waging a currency war against his country in September 2010, his comments led to a wave of sympathy and concern. The Fed’s aggressive monetary easing was causing a capital flight from the US into the apparently unstoppable emerging markets. Uncompetitive exchange rates and domestic credit booms in the EMs were the result of US quantitative easing. American monetary policy makers showed little sympathy, arguing that the US had its own domestic inflation and unemployment mandates to worry about. If the dollar fell in the process, so be it. That episode proved short lived. The Brazilian real is now a chronically weak currency. Yet the term “currency wars” has stuck. It is now alleged that almost all the major central banks are engaged in weakening their currencies, if not against each other then certainly relative to commodities, goods and services.Unlike in the 1930s, when all currencies were eventually devalued from the gold standard, monetary policy in many economies is now trying to “devalue” paper currencies relative to a “CPI standard” for the prices of goods and services. This standard is implied by a 2 per cent inflation target that is proving difficult to hit.Until last week, the US and the UK seemed to be exceptions, allowing their currencies to rise because they were fairly confident of hitting their inflation targets. But both the Fed and the Bank of England have clearly now blinked. No one wants a rising currency for very long in a deflationary era. QE by the European Central Bank and Bank of Japan, via the currency impact, has forced the US and the UK onto a more accommodative path for monetary policy. Five years ago, the US was exporting unwelcome exchange rate pressure to other countries. Now the process is being reversed. But while the currency wars have come full circle, the overall result is the same – yet more global monetary easing.

Key Measures Show Low Inflation in February -- The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning: According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (3.0% annualized rate) in February. The 16% trimmed-mean Consumer Price Index rose 0.2% (2.0% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report. Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.2% (2.6% annualized rate) in February. The CPI less food and energy rose 0.2% (1.9% annualized rate) on a seasonally adjusted basis. Note: The Cleveland Fed has the median CPI details for February here. Motor fuel added to inflation in February following several months of steep declines. However oil and gasoline prices declined again in March, and will pull down inflation again.This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.2%, the trimmed-mean CPI rose 1.8%, and the CPI less food and energy rose 1.7%. Core PCE is for January and increased 1.3% year-over-year. On a monthly basis, median CPI was at 3.0% annualized, trimmed-mean CPI was at 2.0% annualized, and core CPI was at 1.9% annualized. On a year-over-year basis these measures suggest inflation remains below the Fed's target of 2% (median CPI is slightly above 2%). The key question for the Fed is if these key measures will move back towards 2%.

Persistent Low Inflation Hurts Fed Credibility, Evans Says - The Federal Reserve’s persistent failure to hit its 2% inflation target in recent years raises the concern that objective will lose credibility with the public and financial markets, Chicago Fed President Charles Evans said Friday. Mr. Evans was asked by economists and monetary policy experts at the Brookings Institution about the possibility of raising the central bank’s inflation target to give the Federal Open Market Committee more policy wiggle room. He said a higher target was not necessary as long as policy makers managed to prove they were just as serious about fighting too-low inflation, which points to a weak economy, as they are about too-high inflation, which signals growth may be running too hot. The Fed has held its benchmark short-term rate near zero since December 2008. Most Fed officials have indicated they expect to raise the rate this year, with some saying they want to consider a move as soon as June. Mr. Evans argued in a paper presented at the Brookings conference that heightened uncertainty about the Fed’s ability to meet its 2% inflation target calls for waiting longer than usual to raising borrowing costs. “What goes hand in hand with this is whether or not the FOMC demonstrates its commitment to a symmetric inflation objective,” Mr. Evans said. “We ought to spend sort of half of the time above 2% and half the time below, and over the last six years, we’ve averaged 1.5% and forecasts say we’re going to spend two to four years below 2% if things play out the way” Fed officials see them playing out. Mr. Evans also pushed back against the notion that, while inflation may be low, keeping interest rates near zero for a prolonged period creates risks of financial instability, particularly in the form of asset bubbles.

Fed's Evans: U.S. inflation at 2.5% better than hiking too quickly - Charles Evans, president of the Chicago Federal Reserve, said on Wednesday he's so worried about weak consumer prices that he'd be okay with inflation cruising above the Fed's target of 2% to avoid suffering from a loss credibility like the Bank of Japan. The Japanese central bank abandoned its zero-rate policy in 2000 and hiked interest rates in a surprise move, which has since been criticized by many economists. "They've been suffering the consequences of that loss of credibility for a very long period of time," Evans said at the London event. "I'd rather see inflation go above 2% a little bit, maybe 2.5%, than having to worry about a situation like that." The Chicago Fed president repeated his stance that it's better for rates to stay low for longer, advocating for a rate hike in 2016 rather than 2015.

Economists agree: deflation is either good, or bad, or irrelevant --That’s an American propaganda poster from WWII advertising the merits of the Office of Price Administration, which was in charge of setting nominal costs, as well as rationing to prevent shortages. The argument in the poster is simple and elegant: people spend less when things get more expensive, which encourages businesses to run down their inventories and cut back on capital expenditures, and, eventually, causes them to start firing their workers. The implied corollary is that falling prices ought to make people spend more, which would be good for business and lead to vigorous hiring. That is the exact opposite of today’s consensus. Here’s an excerpt from a note by a researcher at the Federal Reserve Bank of St. Louis: While the idea of lower prices may sound attractive, deflation is a real concern for several reasons. Deflation discourages spending and investment because consumers, expecting prices to fall further, delay purchases, preferring instead to save and wait for even lower prices. Decreased spending, in turn, lowers company sales and profits, which eventually increases unemployment…Deflation also creates an additional pressure for businesses—wages that remain steady as the price level falls. Unlike pay raises, pay cuts are not well received and usually take time. The burden of these higher real wages in a weak economy can further depress business profits, expansion, and hiring. For much of the 1990s and 2000s, these effects plagued Japan as it battled disinflation or deflation in a malaise termed the Lost Decade

The Inflation Cycle May Have Turned -  Central banks around the world have been alarmed at how inflation has plummeted in the last year, in many cases into negative territory. Though much of that is due to oil prices, core inflation, which excludes energy and food, has also been disturbingly low. But there are tantalizing signs that the cycle has turned. In February, U.S. U.S. consumer prices rose 0.2% from January, which pulled the annual inflation rate out of negative territory; it’s now zero. More important, core prices rose 0.16%, which nudged the annual rate up to 1.7% from 1.6%. It was the second upside surprise to core inflation in a row. The driver in January was firmer service prices, this month it was goods. There have been scattered signs that inflation has bottomed out elsewhere, as well. In the eurozone, the 12-month inflation rate rose from minus 0.6% in January to minus 0.3% in February, while core inflation ticked up ever so slightly to 0.7% from 0.6%. (Britain is an exception: both headline and core inflation came in lower than expected in February.) Anecdotal evidence is also piling up. As my colleague Josh Zumbrun has noted, the Billion Prices Project at the Massachusetts Institute of Technology, which skims the Internet every day for up to date pricing information, is signaling a turn. To be sure, these are tentative signs. Still, they are consistent with some of the fundamentals as well. The first is oil. It dropped to $46 per barrel in late January and has more or less hung around there. The futures market is pricing oil for delivery a year from now at $56. Oxford Economics projects that inflation using the price index of personal consumption expenditures (the Federal Reserve’s preferred gauge) will reach 1.7% by the end of this year, assuming crude prices rise by $10 per barrel, and core inflation will hit 2%. (It will rise less, if, instead, oil prices drop $10 from here.)

Strong Dollar’s Drag on Prices Will Not Cause Deflation, Cleveland Fed Economists Say -  Federal Reserve officials have flagged the possibility a stronger dollar will put downward pressure on U.S. inflation through import prices, but a new paper from the Cleveland Fed finds the impact should be fairly minor. The U.S. dollar has been rallying sharply against major currencies around the world, in part because of the prospect that the Fed will begin to tighten credit in the U.S. this year at the same time central banks around the world are cutting interest rates or pursuing other types of aggressive stimulus policies. “Some worry that the price impacts of the dollar’s appreciation will push an already soft U.S. inflation rate deeper into negative territory. The threat is real, but certainly overblown,” write Owen Humpage and Timothy Stehulak, respectively economic adviser and research analyst at the Cleveland Fed, in a briefing. “Most of the change in import prices reflects declines in petroleum products, which have not been driven by exchange-rate movements.” The authors acknowledge that the impact of dollar strength on import prices sometimes happens in phases: “Dollar appreciations can have both direct and secondary impacts on import prices; consequently their effects can linger.” However, they also suggest the effects are not sufficiently strong to affect the course of Fed thinking on monetary policy.

The dollar’s rise is a threat domestically and globally -  Among the more striking international economic developments over the past six months has been the 15 percent appreciation of the U.S. dollar. U.S. policymakers would be ignoring this development at their peril. Not only is that appreciation likely to hurt the U.S. economy, but it also poses a major risk to the economic outlook for the emerging markets, which in recent years have been the main source of dynamism in the global economy. Past experience suggests that a stronger dollar both dampens U.S. export growth and reduces inflation. According to International Monetary Fund estimates, if the dollar appreciation over the past year is sustained, it would shave off around a full percentage point from gross domestic product growth and reduce inflation by around 1 percent from the level that it would otherwise have been. In the months ahead, there is every reason to expect that the U.S. dollar will continue to appreciate due to the strength of the U.S. economy in contrast to that of the other major industrialized countries.  A further significant appreciation of the dollar would be particularly problematical for a number of major emerging market economies which are already struggling to sustain their recoveries. According to the Bank for International Settlements, the corporate sector in the emerging market economies has borrowed in excess of $2 trillion in dollar denominated debt. Any further dollar appreciation could subject these corporations to major financial stress, which in turn could cloud the economic outlook for the emerging markets.

Fed’s Bullard sees roaring boom for US economy, but nasty shock for markets --The US economy will be in full-blown boom by the end of the year and risks overheating unless Federal Reserve lifts interest rates soon, a veteran Fed rate-setter has warned.  “Zero interest rates are no longer appropriate for the US economy. If we don’t start normalizing monetary policy we’ll be badly behind the curve two years from now,” said James Bullard, the head of the St Louis Fed.  Mr Bullard said investors are far too complacent about the pace of monetary tightening and could be in for a nasty shock as the policy cycle turns over coming months.  “I think reconciliation between what markets think and what the committee (FOMC) thinks will have to happen at some point. That's a potentially violent reconciliation and I am concerned about that,” he told a City Week forum in London.  The warning echoes comments this week by the San Francisco Fed’s John Williams, who said the US economy is firing on all-four cylinders. “Things are looking better: in fact, they’re looking downright good. I think that by mid-year it will be the time to have a discussion about starting to raise rates,” he said.  Both men are bell-weather moderates on the monetary spectrum rather than hard-line hawks, indicating where the Fed’s centre of gravity now lies.  Mr Bullard said underlying growth in the US is running at 3.3pc and the unemployment rate is likely drop below 5pc by the third quarter of this year, stoking wage pressures and increasing the risk of a serious error by the authorities.

Chicago Fed: "Index shows economic growth slightly below average in February" - The Chicago Fed released the national activity index (a composite index of other indicators): Index shows economic growth slightly below average in February The Chicago Fed National Activity Index (CFNAI) edged lower to –0.11 in February from –0.10 in January. Two of the four broad categories of indicators that make up the index decreased from January, and two of the four categories made negative contributions to the index in February.  The index’s three-month moving average, CFNAI-MA3, declined to –0.08 in February from +0.26 in January. February’s CFNAI-MA3 suggests that growth in national economic activity was slightly below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year. This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Chicago Fed: Economic Growth Slightly Below Average In February- "Index shows economic growth slightly below average in February": 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:  The Chicago Fed National Activity Index (CFNAI) edged lower to –0.11 in February from –0.10 in January. Two of the four broad categories of indicators that make up the index decreased from January, and two of the four categories made negative contributions to the index in February.  The index’s three-month moving average, CFNAI-MA3, declined to –0.08 in February from +0.26 in January. February’s CFNAI-MA3 suggests that growth in national economic activity was slightly below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.  The CFNAI Diffusion Index, which is also a three-month moving average, decreased to a neutral reading in February from +0.10 in January. Forty-eight of the 85 individual indicators made positive contributions to the CFNAI in February, while 37 made negative contributions. Forty- six indicators improved from January to February, while 39 indicators deteriorated. Of the indicators that improved, ten made negative contributions. [Download PDF News Release]  The previous month's CFNAI was revised downward from 0.13 to -0.11. The Chicago Fed's National Activity Index (CFNAI) is a composite of 85 monthly indicators as explained in this background PDF file on the Chicago Fed's website. The index is constructed so 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. 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.

US Economic Activity Worst Since 2011 Amid Major Downward Revisions, Chicago Fed Signals -- January's "optimistic" +0.13 print for CFNAI was revised drastically lower to -0.10 and now February prints -0.11 against an expectation of +0.10 for the 3rd miss in a row - the worst run since Q3 2011. The Chicago Fed National Activity Indicator (which has gained in prominence in recent months) indicates a 3rd month of "below trend growth," for the first time since June 2011.

Q4 GDP unrevised at 2.2% Annual Rate -  From the BEA: Gross Domestic Product: Fourth Quarter 2014 (Third Estimate) Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- increased at an annual rate of 2.2 percent in the fourth quarter of 2014, according to the "third" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 5.0 percent. The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was also 2.2 percent. While increases in exports and in personal consumption expenditures (PCE) were larger than previously estimated and the change in private inventories was smaller, GDP growth is unrevised, and the general picture of the economy for the fourth quarter remains the same  Here is a Comparison of Third and Secord Estimates.  PCE was revised up from 4.2% to 4.4% - solid. Private investment was revised down from 5.1% to 3.7%. This was below expectations of a revision to 2.4%.

Q4 GDP Third Estimate Remains Unchanged at 2.2% - The Third Estimate for Q4 GDP, to one decimal, came in at 2.2 percent, unchanged from the Second Estimate. Today's number was a minor disappointment for most economic forecasts, which were looking for a somewhat higher Third Estimate. For example, both and had forecast of 2.4 percent. Here is an excerpt from the Bureau of Economic Analysis news release:Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- increased at an annual rate of 2.2 percent in the fourth quarter of 2014, according to the "third" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 5.0 percent.  The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was also 2.2 percent. While increases in exports and in personal consumption expenditures (PCE) were larger than previously estimated and the change in private inventories was smaller, GDP growth is unrevised, and the general picture of the economy for the fourth quarter remains the same (see "Revisions" on page 3). The increase in real GDP in the fourth quarter reflected positive contributions from PCE, nonresidential fixed investment, exports, state and local government spending, and residential fixed investment that were partly offset by negative contributions from federal government spending and private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.  The deceleration in real GDP growth in the fourth quarter primarily reflected an upturn in imports, a downturn in federal government spending, a deceleration in nonresidential fixed investment, and a larger decrease in private inventory investment that were partly offset by accelerations in PCE and in state and local government spending. [Full Release]  Here is a look at GDP since Q2 1947 together with the real (inflation-adjusted) S&P Composite. The start date is when the BEA began reporting GDP on a quarterly basis. Prior to 1947, GDP was reported annually. To be more precise, what the lower half of the chart shows is the percent change from the preceding period in Real (inflation-adjusted) Gross Domestic Product. I've also included recessions, which are determined by the National Bureau of Economic Research (NBER).

Fourth-Quarter GDP – At A Glance - U.S. economic output expanded at a 2.2% seasonally adjusted annual rate in the final months of 2014, the Commerce Department said Friday.  The 2.2% seasonally adjusted annual rate matches the Commerce Department’s late-February estimate for real gross domestic product growth. There were shifts beneath the surface, with upward revisions to consumer spending and exports canceled out by downward revisions for inventories and government spending. The headline reading represents a slowdown from the third quarter’s 5% growth pace, and early estimates from private economists see the U.S. economy slowing even more sharply in early 2015. The first official estimate for first-quarter GDP will be released on April 29. U.S. Corporate Profits Drop Sharply A measure of U.S. corporate profits posted its sharpest drop since early 2011 during the fourth quarter of 2014, according to estimates in the GDP report. Profits after tax, without inventory valuation and capital consumption adjustments, fell at a 3% pace from the prior quarter after a 2.8% rise in the third quarter. That was the biggest decline since the first quarter of 2011, edging out the 2.9% drop seen in the first quarter of 2014. For the full year, profits rose 3.8% in 2014, slowing from 4.7% annual growth in 2013. Services Spending Rises At Fastest Pace Since 2000 U.S. consumer spending rose at a 4.4% annual pace in the fourth quarter, up from an earlier estimate of 4.2% and the fastest pace since the first quarter of 2006. Spending on goods rose at a 4.8% rate versus an earlier estimate of 4.5%. Spending on services grew at a 4.3% pace, up from the earlier estimate of 4.1% and the fastest pace since the second quarter of 2000. Spending on health-care services contributed 0.88 percentage point to the quarter’s 2.2% growth rate, versus 0.53 percentage point in the prior GDP report, offset in part by a downward revision to spending on financial services. What changed? Hard data on revenue at service-providing companies became available earlier this month through the Census Bureau’s Quarterly Services Survey.

Final Estimate of 4th Quarter GDP « U.S. Economic Snapshot (9 graphs) The third and final estimate of GDP released today by the Bureau of Economic Analysis provides no substantial new information on the growth of the economy…and therefore little to guide us to the future of interest rate changes by the FOMC. The final number for real GDP growth for Q4 is 2.2%, seasonally adjusted at an annual rate.Since the negative growth rates in 2008 and 2009, real GDP growth has been weak, but fairly steady year to year, 2010: 2.5%, 2011: 1.6%, 2012: 2.3%, 2013: 2.2%, and 2014: 2.4%; but, as noted here and elsewhere, quite slow relative to previous expansions. Consumption growth received a small boost, as did net exports, but inventories took a hit. Real investment took about 25 quarters to get back to it 2007 peak, typically taking only about 10 quarters. Residential fixed investment has yet to get back to its peak in 2007, it is still about 14% below that level. There is still real debate within the FOMC, From KC President George’s remarks: “While the FOMC has made no decisions about the timing of this action, I continue to support liftoff towards the middle of this year due to improvement in the labor market, expectations of firmer inflation, and the balance of risks over the medium and longer run. Liftoff in the middle of this year, in my view, would be fully consistent with the FOMC’s Statement on Goals and Monetary Policy Strategy, which reminds the public that monetary policy actions tend to influence economic activity and prices with a lag.” But, Chicago President Evans from a speech in London: “What is my personal view of the appropriate path for Fed policy? I think economic conditions are likely to evolve in a way such that it will be appropriate to hold off on raising short-term rates until 2016.” In their own words, the future of lift-off will be “data-driven.” When isn’t it?

Final Q4 GDP Unchanged At 2.2%, Below Expectations; Corporate Profits Tumble - So much for the "self-sustaining", "escape-velocity" recovery. Again. After rising at an annualized pace of 4.6% and 5.0% in Q2 and Q3, the final Q4 GDP estimate (a number which will still be revised at least 3-4 times in the coming years), slid more than half to 2.2%, the same as the second estimate from a month ago, and below the consensus Wall Street estimate of 2.4%. There were few changes underneath the surface (as can be expected with the bottom line number not changing) however most notable was the increase in Personal Consumption which increase from 2.83% to 2.98%, with this increase more than offset by a drop in Inventories from a 0.12% contribution to a -0.10% detraction from Q4 annualized growth. Net trade ended up subtracting -1.03% from Q4 growth, compared to -1.16% previously. Finally, fixed investment and government spending were virtually unchanged. But the worst news was the following: For the year 2014, profits from current production decreased $17.1 billion, in contrast to an increase of $84.1 billion in 2013. Profits of domestic financial corporations decreased, and profits of domestic nonfinancial corporations increased. The rest-of-the-world component of profits decreased $9.0 billion in 2014, in contrast to an increase of $1.3 billion in 2013.

Housing Contribution To US GDP Lowest In Post-War Era -- Deutsche Bank is out predicting that a sluggish US housing market is likely to impact the supply of MBS going forward. As DB notes, housing isn’t the GDP contributor it once was and not by a long shot. Not only that, but when it comes to recoveries, the housing market’s GDP contribution was 7 times below its post WW2 average in year one and has fared even worse since. Here’s DB with more: The contribution of housing to US GDP continues to run at some of the lowest levels since the end of World War II. New construction of single- and multi-family homes, renovations, broker fees and the like still only make up a bit more than 3% of current GDP, well below the post-war average of 4.7%. Not only has the level of lift from housing come in low, but it has bounced out of the last official recession slowly, too. Housing on average has contributed a half a percentage point to GDP a year after the end of every post-war US recession. This time around, housing added only 7 bp. And the contribution of housing in the second and third years after the recent recession also has fallen well below post-war averages.

GDP Growth Estimates Tumble, Again - Real Time Economics - WSJ: Could the U.S. economy be seeing a repeat of last year’s winter contraction? The latest estimates are moving in that direction, though they’re still in positive territory. Several economists on Wednesday lowered their estimates for first-quarter growth in gross domestic product following a disappointing report on business spending and investment. Orders for durable goods—products varying from computers to lawn mowers to washing machines designed to last at least three years—declined a seasonally adjusted 1.4% in February from a month earlier, the Commerce Department said.. Many economists said the report shows weaker-than-expected spending on equipment at the start of the year, a potential drag on economic output. At least one first-quarter tracking estimate is already close to zero. The Federal Reserve Bank of Atlanta on Wednesday put its gauge at 0.2%, down from its earlier estimate of 0.3%. Morgan Stanley economists lowered their estimate for first-quarter growth to an annualized 0.9% from an earlier forecast of 1.2%, pointing to light inventories and lower capital goods exports as weighing on GDP. They said other factors, including severe winter weather and the West Coast ports slowdown, also could weigh on GDP. Economists at Barclays lowered their projection a tenth of a percentage point to 1.2%. The forecasting firm Macroeconomic Advisers also trimmed its estimate down to 1.2% from 1.5% before Wednesday. Both cited, among other factors, worries that the drop in shipments last month foretells a decline in first-quarter equipment investment. J.P. Morgan Chase economists lowered their first-quarter forecast to an annualized 1.5%, from 2%, saying a decline in investment by oil companies — the result of the plunge in oil prices — could offset the lift from higher consumer spending.

GDP Projections Drop Yet Again, Still Too High - In the wake of a 6th consecutive decline in business spending GDP Growth Estimates Tumble, Again:

  • The Federal Reserve Bank of Atlanta on Wednesday put its gauge at 0.2%, down from its earlier estimate of 0.3%.
  • Morgan Stanley economists lowered their estimate for first-quarter growth to an annualized 0.9% from an earlier forecast of 1.2%, pointing to light inventories and lower capital goods exports as weighing on GDP.
  • Economists at Barclays lowered their projection a tenth of a percentage point to 1.2%.
  • The forecasting firm Macroeconomic Advisers also trimmed its estimate down to 1.2% from 1.5% before Wednesday. Barclays and Macroeconomic Advisers cited, among other factors, worries that the drop in shipments last month foretells a decline in first-quarter equipment investment.
  • J.P. Morgan Chase economists lowered their first-quarter forecast to an annualized 1.5%, from 2%, saying a decline in investment by oil companies — the result of the plunge in oil prices — could offset the lift from higher consumer spending.

Fed Now Sees Only 0.2% GDP Growth In Q1 -- From almost 2.5% GDP growth expectations in February, The Atlanta Fed's GDPNow model has now collapsed its estimates of Q1 GDP growth to just 0.2% - plunging from +1.4% just 2 weeks ago. The reality of plunging capex and no decoupling is starting to rear its ugly head in the hard data and as the sun warms things up, weather will start to lose its ability to sway sentiment. While sell-side consensus has dropped (Goldman, Morgan Stanley, and Barclays all cut today following Durable goods), it remains unable to quite accept the reality of massively weaker than expected macro data evident everywhere (except in the soft-survey PMI data).

U.S. Growth Revisions Pose Challenge for the Fed - The U.S. central bank is getting whipsawed this week by conflicting signals on the U.S. economic outlook. On Tuesday the Labor Department reported the U.S. consumer price index firmed in February, rising 0.2% in February after three straight monthly declines. That, and an increase in the index excluding food and energy, were a sign slack in the economy is diminishing, as Fed officials project. On Wednesday, a grim economic report led a wave of Wall Street firms to downgrade their estimates of first quarter economic growth, a sign slack in the economy actually might be building again. Bank of American reduced its estimate of growth for the quarter to near zero, while Morgan Stanley, Barclays, J.P. Morgan and Macroeconomic Advisers also cut their projections. The precipitating event was a Commerce Department report that orders by U.S. firms for durable goods declined in February. . Bad winter weather might be a transitory factor holding the economy back. If that’s the case, there’s no reason to worry. Output contracted in the first quarter of 2014 and then bounced back in the second. The worry is that other strains, including the fallout on energy sector investment from tumbling oil prices, might be having deeper and longer-lasting effects on output growth than Fed officials anticipated. It’s a good thing they have until June to make sense of the cross-currents. That’s when they have said they’ll consider whether interest rate increases from near-zero are warranted.

Fed Sent Nearly $97 Billion to the U.S. Treasury in 2014 -  The Federal Reserve handed a record $96.90 billion in profit over to the Treasury Department in 2014, the U.S. central bank said Friday. In January, the Fed had tentatively estimated its Treasury remittances last year at $98.7 billion. The slightly lower number was released as part of the Fed’s audited annual financial statements. The central bank’s revenue from various sources is used to cover its operating expenses, and much of the rest goes to the Treasury to help fund the federal government. In 2013, the Fed sent $79.63 billion to the Treasury, down from $88.42 billion in 2012. The Fed earns interest income on the huge portfolio of bonds that the central bank purchased in recent years to support the U.S. economy through a financial crisis, deep recession and painfully slow recovery. It concluded its latest round of bond-buying in October. The Fed’s remittances are expected to decline in coming years as it raises short-term interest rates and allows its bond portfolio to gradually shrink. The Fed’s assets totaled $4.498 trillion at the end of 2014, up from $4.024 trillion a year earlier, according to Friday’s report.

Fed pays record $96.9 billion to Treasury: The Federal Reserve paid a record $96.9 billion to the U.S. Treasury in 2014 as interest income on its bond purchases increased solidly. The annual payment to U.S. taxpayers was up from $79.6 billion in 2013, according to the Fed's annual financial statement and audit by Deloitte & Touche released Friday. The Fed earned $115.9 billion in interest income on its securities, up $25.5 billion from the previous year.  The Fed, by law, must hand over the bulk of its profits to the Treasury -- payments that have swelled as the central bank has purchased large quantities of bonds since the recession to spur the economy. In late 2012, the Fed began a third round of purchases of Treasury bonds and mortgage-backed securities to push down long-term interest rates and pump cash into the banking system. The program ended last October. The central bank's total assets at year's end were $4.5 trillion, up from $4 trillion a year earlier. Its holdings of Treasuries increased by $237 billion to $2.6 trillion last year. Its portfolio of mortgage-backed securities grew by $255 billion to $1.79 billion.

A New Structure for U. S. Federal Debt - A new paper by that title, here. I propose a new structure for U. S. Federal debt. All debt should be perpetual, paying coupons forever with no principal payment. The debt should be composed of the following:

  1. Fixed-value, floating-rate debt: Short-term debt has a fixed value of $1.00, and pays a floating rate. It is electronically transferable, and sold in arbitrary denominations. Such debt looks to an investor like a money-market fund, or reserves at the Fed. 
  2. Nominal perpetuities: This debt pays a coupon of $1 per bond, forever. 
  3. Indexed perpetuities: This debt pays a coupon of $1 times the current consumer price index (CPI).
  4. Tax free: Debt should be sold in a version that is free of all income, estate, capital gains, and other taxes. Ideally, all debt should be tax free. 
  5. Variable coupon: Some if not all long-term debt should allow the government to vary the coupon rate without triggering legal default. 
  6. Swaps: The Treasury should manage the maturity structure of the debt, and the interest rate and inflation exposure of the Federal budget, by transacting in simple swaps among these securities.

Congressional Budget Plans Get Two-Thirds of Cuts From Programs for People With Low or Moderate Incomes -- The budgets adopted on March 19 by the House Budget Committee and the Senate Budget Committee each cut more than $3 trillion over ten years (2016-2025) from programs that serve people of limited means. These deep reductions amount to 69 percent of the cuts to non-defense spending in both the House and Senate plans.  Each budget plan derives more than two-thirds of its non-defense budget cuts from programs for people with low or modest incomes even though these programs constitute less than one-quarter of federal program costs. Moreover, spending on these programs is already scheduled to decline as a share of the economy between now and 2025.[1]  The bipartisan deficit reduction plan that Alan Simpson and Erskine Bowles (co-chairs of the National Commission on Federal Policy) issued in 2010 adhered to the basic principle that deficit reduction should not increase poverty or widen inequality. The new Congressional plans chart a radically different course, imposing their most severe cuts on people on the lower rungs of the economic ladder.

Bloody Budget Cuts - Unlike politically incorrect journalists in the mainstream media (including Fox News), one can't accurately report on bloody budget cuts — and then, just to appear non-partisan, say it's "Congress" who's proposing the cuts — not when it's the Republicans within Congress who are the ones proposing all these bloody budget cuts.  OK — maybe "bloody" might have been an unfair adjective to use. So instead, let's use the word barbaric, bitter, brutal, brutish, callous, cold-blooded, cold-hearted, cruel, harsh, inhuman, immoral, grievous, harrowing, heartless, merciless, painful, pitiless, remorseless, ruthless, sadistic, savage, severe, traumatic, unkind or just plain vicious. There's no other way to sugar-coat the facts. But first, one question needs to be asked: Why do the Republicans always insist on passing legislation that they know Obama will always veto, rather than attempting to draft more palatable and bipartisan proposals — something that actually has a chance of passing — rather than grid-locking all government functions? Is it in the hope that something else (like an abortion amendment) might slip through the cracks when the Democrats aren't paying attention or caught napping? The same can be said for both of the GOP's budget proposals. Currently, the House Budget Committee has 22 Republicans and 14 Democrats; while the Senate Budget Committee has 12 Republicans and 10 Democrats (including one Independent). According to the Center on Budget and Policy Priorities, the budgets recently adopted by both GOP dominated committees cut more than $3 trillion over ten years (2016-2025) from programs that serve people of limited means. These deep reductions amount to 69 percent of the cuts to non-defense spending in both the House and Senate plans. Each budget plan derives more than two-thirds of its non-defense budget cuts from programs for people with low or modest incomes, even though these programs constitute less than one-quarter of federal program costs.

GOP-Controlled House Passes Budget to Erase Deficits - Normally quarrelsome House Republicans came together Wednesday night and passed a boldly conservative budget that relies on nearly $5 trillion in cuts to eliminate deficits over the next decade, calls for repealing the health care law and envisions transformations of the tax code and Medicare. Final passage, 228-199, came shortly after Republicans bumped up recommended defense spending to levels proposed by President Barack Obama. Much of the budget's savings would come from Medicaid, food stamps and welfare, programs that aid the low-income, although details were sketchy. Rep. Tom Price, R-Ga., chairman of the House Budget Committee, called the plan a "balanced budget for a stronger America" — and one that would "get this economy rolling again." Democrats rebutted that the GOP numbers didn't add up and called their policies wrong-headed. "People who are running in place today are not going to be moving forward under the Republican budget, they're going to be falling back,"

Sense and Sensibilities - The GOP House passes its budget. It promises to balance the books within 10 years by cutting spending by  $5.4 trillion. Cuts include $2 trillion from repeal of the Affordable Care Act, $1 trillion from  Medicaid and the Children’s Health Insurance Program, and $1 trillion  from other unspecified benefit programs. Another $500 billion would come from unspecified domestic  programs. The Dems say the math doesn’t make sense. In case you missed it, they’re not alone. But the “Doc Fix” would add billions more to the deficit. CBO figures the measure to boost Medicare payments to physicians by 0.5 percent annually for five years would add about $140 billion to the debt over the next decade. The Committee for a Responsible Federal Budget figures it would add $500 billion in red ink through 2035.

Senate Passes Republican Budget With Deep Safety Net Cuts: he Senate passed a Republican-authored budget plan early on Friday that seeks $5.1 trillion in domestic spending cuts over 10 years while boosting military funding. The 52-46 vote on the non-binding budget resolution put Congress on a path to complete its first full budget in six years. It came at the end of a marathon 18-hour session that saw approval of dozens of amendments ranging from Iran sanctions to carbon emissions and immigration policies. Two Republican senators who are running or considering running for president, Ted Cruz and Rand Paul, voted against their party’s budget plan, which is similar to one passed by House Republicans on Wednesday. In addition to aiming to eliminate deficits within 10 years, both documents seek to ease the path for a repeal or replacement of President Barack Obama’s signature health care reform law. But differences between the two documents still need to be worked out and a combined budget passed next month by both chambers. Doing so would allow Republicans to invoke parliamentary rules to repeal “Obamacare” with a simple majority in the Senate rather than a tough-to-achieve 60 vote threshold. Under the convoluted U.S. spending process, the budgets do not become law, but influence government agency funding bills later in the year. They also showcase the fiscal vision for Republicans, who now control both Houses of Congress for the first time since 2006 and are eager to demonstrate their ability to govern.

Budget Grandstanding in the Senate - The Republican Senate caucus – long one of the most irresponsible, ideologically blinkered and right-wing in history – spent last night producing its first budget. I almost thought it was a joke. There were plenty of fools and foolishness involved in this nonsense, but it’s not April 1 yet.  The budget repeals President Obama’s health reform law (because, of course, it’s working pretty well and helping people who don’t send large checks to the GOP).   It guts Medicare and turns it into a voucher-driven private insurance program (a huge gift to the health-care oligopoly and a crushing burden for the elderly); cuts back even farther on the pittance that Republicans in Congress are willing to give to the poor through Medicaid and food stamps; and – of course – provides a nice tax break to the highest-paid Americans, who don’t need or deserve a tax break.This budget, which drew not one Democratic vote, is extremely unlikely to become law. Mostly, it was driven by political grandstanding and by the strange belief among many Senate Republicans that they are qualified to be President. As Politico pointed out, the budget debate dissolved at one point into a contest among some of the most annoying armchair hawks in the Senate over who has the biggest swagger when it comes to national security and defense spending.  Watching Senators Marco Rubio and Ted Cruz act as though they have the slightest idea how to manage American foreign policy and the military is a reminder that it will be a very long 20 months until the election, with not much in the way of happy endings to look forward to.

U.S. House okays bipartisan bill to fix Medicare doctor payments (Reuters) - The U.S. House of Representatives on Thursday overwhelmingly approved a bill to permanently repair the formula for reimbursing Medicare physicians, marking a rare bipartisan achievement and sending the issue next to the Senate. The measure drafted and driven forward by Republican House Speaker John Boehner and Democratic Leader Nancy Pelosi would fix a long-standing problem with how Medicare pays doctors. It would also make adjustments to the health program for seniors. The House vote was 392-37. The Senate may not act until it returns from a two-week recess that starts this weekend. Some senators in both parties had concerns about the bill, but it also had strong support. Democratic President Barack Obama praised the House passage and said he hoped the Senate would approve the measure too, because he wants to sign it. "I called the Speaker, John Boehner, and the Democratic Leader, Nancy Pelosi, and I said, congratulations, this is how Congress is supposed to work. They came together; they compromised," Obama said."This is great. Let's do more of this."

Stop freaking out about dynamic scoring - A much-needed corrective by the WSJ’s Greg Ip to the hysteria over the new House rule that requires the CBO dynamically score major legislation. Statically assuming that, say, big tax cuts have no impact on the economy will almost assuredly give you the wrong budget score. Ip notes that the IMF as well as fiscal scorekeepers in the UK and the Netherlands use dynamic scoring: Done right, dynamic scoring would be an invaluable addition to the policy tool kit. To date, dynamic scoring has yet to show that any tax cut pays for itself; indeed, its results vary considerably with the underlying assumptions and seldom move the deficit dramatically one way or another. Yet it still clarifies the trade-offs and shortcomings of the different choices confronting Congress. … The challenge for the CBO and JCT is to ensure its dynamic scoring is based on models that independent and authoritative economists find reasonable. They should be transparent about their assumptions and the uncertainty surrounding their estimates, and apply those assumptions consistently to different policies. The result should be better information for policy makers.Of course, policymakers should remember that the US economic is one massive, complicated entity. Thus dynamic models showing huge shifts by nudging tax rates a few points in either direction should be treated with great skepticism. Donald Marron of the Tax Policy Center also suggests tamping down expectations:  Some advocates hope that dynamic scoring will usher in a new era of tax cuts and entitlement reforms. Some opponents fear that they are right. Reality will be more muted. Dynamic scores of tax cuts, for example, will include the pro-growth incentive effects that advocates emphasize, leading to more work and private investment. But they will also account for offsetting effects, such as higher deficits crowding out investment or people working less because their incomes rise.

Not Ready for Prime Time -  Inside-the-Beltway wisdom holds that the $1.4 trillion F-35 Joint Strike Fighter (JSF) program is too big to cancel and on the road to recovery. But the latest report from the Defense Department’s Director of Operational Test and Evaluation (DOT&E) provides a litany of reasons that conventional wisdom should be considered politically driven propaganda. The press has already reported flawed software that hinders the ability of the plane to employ weapons, communicate information, and detect threats; maintenance problems so severe that the F-35 has an “overdependence” on contractor maintainers and “unacceptable workarounds” (behind paywall) and is only able to fly twice a week; and a high-rate, premature production schedule that ignores whether the program has demonstrated essential combat capabilities or proven it’s safe to fly. All of these problems are increasing costs and risks to the program. Yet rather than slow down production to focus resources on fixing these critical problems, Congress used the year-end continuing resolution omnibus appropriations bill—termed the “cromnibus”—to add 4 additional planes to the 34 Department of Defense (DoD) budgeted for Fiscal Year 2015. The original FY2016 plan significantly increased the buy to 55, and now the program office is further accelerating its purchase of these troubled planes to buy 57 instead. At some point, the inherent flaws and escalating costs of a program become so great that even a system with massive political buy-in reaches a tipping point. In sum, the old problems are not going away, new issues are arising, and some problems may be getting worse.Below are some of the key issues raised by the DOT&E report.

Obama touts new efforts to attract foreign investment to US: — President Barack Obama is announcing federal efforts to combine with states to attract more global investors to the United States. The Obama administration also wants to make it simpler for international companies to bring certain workers to the U.S. from overseas to help launch new operations. Obama says that America "is proudly open to business." The effort is part of a program the administration initiated in 2011 called SelectUSA that aims to streamline efforts to bring foreign businesses to the U.S. Obama announced the new initiatives Monday at a "SelectUSA Investment Summit." The foreign worker proposal would offer new policy guidance on L-1B visas, which allows foreign companies to bring workers with specialized knowledge into the U.S. temporarily. Before being implemented, the guidance must undergo a period of public comment.

Pentagon loses track of $500 million in weapons, equipment given to Yemen - The Pentagon is unable to account for more than $500 million in U.S. military aid given to Yemen, amid fears that the weaponry, aircraft and equipment is at risk of being seized by Iranian-backed rebels or al-Qaeda, according to U.S. officials. With Yemen in turmoil and its government splintering, the Defense Department has lost its ability to monitor the whereabouts of small arms, ammunition, night-vision goggles, patrol boats, vehicles and other supplies donated by the United States. The situation has grown worse since the United States closed its embassy in Sanaa, the capital, last month and withdrew many of its military advisers. In recent weeks, members of Congress have held closed-door meetings with U.S. military officials to press for an accounting of the arms and equipment. Pentagon officials have said that they have little information to go on and that there is little they can do at this point to prevent the weapons and gear from falling into the wrong hands. “We have to assume it’s completely compromised and gone,” said a legislative aide on Capitol Hill who spoke on the condition of anonymity because of the sensitivity of the matter. U.S. military officials declined to comment for the record. A defense official, speaking on the condition of anonymity under ground rules set by the Pentagon, said there was no hard evidence that U.S. arms or equipment had been looted or confiscated. But the official acknowledged that the Pentagon had lost track of the items.

Proof that Russia and Iran Want War: Look How Close They Put Their Countries To Our Military Bases!  -- Proof! Bad people are putting their countries closer and closer to our military bases:  Look how close Russia put its country to our military bases:  Government Iran is just as bad: This proves that Russia and Iran are the bad guys!

Let’s limit tax breaks for the rich, expand them for low-income workers - The ten costliest federal tax “expenditures” were worth nearly $1 trillion, or 6% of GDP, back in 2013, according to CBO and JCT. More than half of the tax benefits from those tax breaks went to households in the top 20%. And nearly a fifth of the benefits accrued to the top 1%. OK, in light of that data, my colleague Michael Strain offers an elegant, simple, smart idea: Move the tax code away from spending  so much money on high-income Americans. Spend less money on folks who need it the least. And preferably do so by shifting, scaling back, or eliminating some of that spending through the tax code. Strain’s preference would be to phase out the mortgage-interest deduction and the tax exclusion for employer-provided healthcare, two tax expenditures together worth over $300 billion a year. I would also take a hard look at the $80 billion state and local tax deduction. Another option would be to merely limit each household’s combined benefits “from a specified set of tax expenditures to a certain share of its income.” And do what with all that dough, exactly? Lower tax rates is one idea. Reduce projected budget deficits is another. Here’s a third one: Help poorer Americans by making work pay more. Strain: One way to solve this this massive disparity is to use federal money to supplement the earnings of low-income workers. Specifically, we should expand the Earned Income Tax Credit (EITC). The EITC is a federal earnings subsidy to low-income households. The basic idea is simple: If you work and your household earns below a certain amount, the government cuts you a check to supplement your earnings. … Previous expansions of the EITC have pulled significant numbers of jobless Americans into the workforce. And the EITC lifts millions of people, including children, out of poverty.

Ron Wyden, Progressives and the TPP - Are progressives willing to attack Ron Wyden on TPP? The question isn’t mine — it’s from the National Journal (my emphasis throughout): In recent months, progressives have been voicing their opposition to the Trans-Pacific Partnership. And they might try and make an example out of Sen. Ron Wyden over it, even though he’s been a reliable ally for years.The free trade agreement, which would involve 12 Asia-Pacific countries—including the U.S. along with countries like Mexico, Japan and Canada—could account for 40 percent of global GDP and one-third of all world trade. Progressive groups say that the deal is no good: it could ship more jobs overseas, undercut environmental and labor standards, and increase Internet censorship. The deal’s future may rest with Wyden, the ranking Democrat on the Senate Finance Committee, and his support for the partnership has some progressives thinking about going after one of their own in their fight against the deal.Wyden’s support for the partnership has led the Oregon wing of the Working Families Party, a minor political party that supports progressive candidates and causes, to challenge Wyden in his next Senate race in 2016, the party’s state director Karly Edwards told National Journal on Wednesday. The group takes issue with Wyden’s support for trade promotion authority, also known as “fast track,” which would allow the Obama administration to negotiate the Trans-Pacific Partnership with other nations without having Congress amend or filibuster. It’s also not a fan of Wyden’s previous support for the North American Free Trade Agreement and the Central American Free Trade Agreement. "Wyden has a track record of supporting job-killing trade deals,” Edwards said, adding that the party also opposed Wyden in 2010. “We have smart, savvy voters. They will take account the entire picture.”

Wikileaks releases piece of secret Trans-Pacific Trade Partnership pact expanding corporate power -  The TPP Investment Chapter, published today, is dated 20 January 2015. The document is classified and supposed to be kept secret for four years after the entry into force of the TPP agreement or, if no agreement is reached, for four years from the close of the negotiations.  Julian Assange, WikiLeaks editor said: "The TPP has developed in secret an unaccountable supranational court for multinationals to sue states. This system is a challenge to parliamentary and judicial sovereignty. Similar tribunals have already been shown to chill the adoption of sane environmental protection, public health and public transport policies."

Wikileaks releases Trans-Pacific Partnership investment chapter - Via Daily Kos, we learn that Wikileaks has released the investment chapter of the Trans-Pacific Partnership (TPP). This is a critical chapter, as it was in the North American Free Trade Agreement (NAFTA), because it establishes investor-state dispute settlement (ISDS) mechanisms. Despite its neutral-sounding name, ISDS is actually a radical concept. Instead of using the courts to settle disputes, which have appeals procedures and build up case law via precedent, ISDS allows companies to take governments to arbitration, where neither precedent nor appeals exist. Susan Sell gave several examples of ISDS in her guest post in February, which illustrate the dangers well. Eli Lilly had two of its pharmaceutical patents invalidated in Canada; the company appealed both of these decisions to the Canadian Supreme Court, and lost both times. Then the company turned to investor-state dispute settlement under NAFTA to receive $500 million in compensation for the Supreme Court decisions. . In an example also noted by Wikileaks, Sell points out that U.S. tobacco maker is using ISDS against Australia because the country mandated plain packaging on cigarettes to make them look less attractive. The Obama administration continues to seek “fast track” negotiating authority from Congress for the TPP. This would allow the agreement to be voted on only as negotiated, with no amendments allowed. Note that this also means that the TPP would be incorporated as a U.S. law rather than as a treaty. As a law, it only needs a majority in both Houses of Congress. If it were to be offered for approval as a treaty, it would need a 2/3 majority in the Senate, with no House vote. Both NAFTA and the World Trade Organization agreements were passed as laws rather than treaties.

Thoughts About the Trans-Pacific Partnership -- During a recent Amy Goodman interview of Lori Wallach, director of Public Citizen’s Global Trade Watch, on her Democracy Now show, Wallach neatly summarized the problems of progressives with the TPP: Well, fast-tracking the TPP would make it easier to offshore our jobs and would put downward pressure, enormous downward pressure, on Americans’ wages, because it would throw American workers into competition with workers in Vietnam who are paid less than 60 cents an hour and have no labor rights to organize, to better their situation. Plus, the TPP would empower another 25,000 foreign corporations to use the investor state tribunals, the corporate tribunals, to attack our laws. And then there would be another 25,000 U.S. corporations in the other TPP countries who could use investor state to attack their environmental and health and labor and safety laws. And if all that weren’t enough, Big Pharma would get new monopoly patent rights that would jack up medicine prices, cutting off affordable access. And there’s rollback of financial regulations put in place after the global financial crisis. And there’s a ban on “Buy Local,” “buy domestic” policies. And it would undermine the policy space that we have to deal with the climate crisis—energy policies are covered. Basically, almost any progressive policy or goal would be undermined, rolled back. Plus, we would see more offshoring of jobs and more downward pressure on wages. So the big battle is over fast track, the process. And right now, thanks to a lot of pushback by activists across the country, actually, they don’t have a majority to pass it. But there’s an enormous push to change that, and that’s basically where we all come in.

Trans-Pacific Partnership Seen as Door for Foreign Suits Against U.S. — An ambitious 12-nation trade accord pushed by President Obama would allow foreign corporations to sue the United States government for actions that undermine their investment “expectations” and hurt their business, according to a classified document.   The Trans-Pacific Partnership — a cornerstone of Mr. Obama’s remaining economic agenda — would grant broad powers to multinational companies operating in North America, South America and Asia. Under the accord, still under negotiation but nearing completion, companies and investors would be empowered to challenge regulations, rules, government actions and court rulings — federal, state or local — before tribunals organized under the World Bank or the United Nations.   Backers of the emerging trade accord, which is supported by a wide variety of business groups and favored by most Republicans, say that it is in line with previous agreements that contain similar provisions. But critics, including many Democrats in Congress, argue that the planned deal widens the opening for multinationals to sue in the United States and elsewhere, giving greater priority to protecting corporate interests than promoting free trade and competition that benefits consumers. The chapter in the draft of the trade deal, dated Jan. 20, 2015, and obtained by The New York Times in collaboration with the group WikiLeaks, is certain to kindle opposition from both the political left and the right. The sensitivity of the issue is reflected in the fact that the cover mandates that the chapter not be declassified until four years after the Trans-Pacific Partnership comes into force or trade negotiations end, should the agreement fail.

Corporate Sovereignty Provisions Of TPP Agreement Leaked Via Wikileaks: Would Massively Undermine Government Sovereignty - For years now, we've been warning about the problematic "ISDS" -- "investor state dispute settlement" mechanisms that are a large part of the big trade agreements that countries have been negotiating. As we've noted, the ISDS name is designed to be boring, in an effort to hide the true impact -- but the reality is that these provisions provide corporate sovereignty, elevating the power of corporations to put them above the power of local governments. If you thought "corporate personhood" was a problem, corporate sovereignty takes things to a whole new level -- letting companies take foreign governments to special private "tribunals" if they think that regulations passed in those countries are somehow unfair. Existing corporate sovereignty provisions have led to things like Big Tobacco threatening to sue small countries for considering anti-smoking legislation and pharma giant Eli Lilly demanding $500 million from Canada, because Canada dared to reject some of its patents noting (correctly) that the drugs didn't appear to be any improvement over existing drugs.  The US has been vigorously defending these provisions lately, but with hilariously misleading arguments. The White House recently posted a blog post defending corporate sovereignty, with National Economic Council director Jeff Zients claiming the following:  ISDS has ome under criticism because of some legitimate complaints about poorly written agreements. The U.S. shares some of those concerns, and agrees with the need for new, higher standards, stronger safeguards and better transparency provisions. Through TPP and other agreements, that is exactly what we are putting in place. There's something rather hilarious about saying that there needs to be "greater transparency" and promising that the secret agreement you're negotiating behind closed doors and won't share with the public has those provisions in them somewhere.

TPP vs. Democracy: Leaked Draft of Secretive Trade Deal Spells Out Plan for Corporate Power Grab -- Newly leaked classified documents show that the secretive Trans-Pacific Partnership deal, if it goes through as written, will dramatically expand the power of corporations to use closed-door tribunals to challenge—and supersede—domestic laws, including environmental, labor, and public health, and other protections. The tribunals, made infamous under NAFTA, were exposed in the "Investment Chapter" from the TPP negotiations, which was released to the public by WikiLeaks on Wednesday. "The TPP has developed in secret an unaccountable supranational court for multinationals to sue states," said Julian Assange, WikiLeaks editor. "This system is a challenge to parliamentary and judicial sovereignty. Similar tribunals have already been shown to chill the adoption of sane environmental protection, public health and public transport policies." Responding to the leak, Lori Wallach, director of Public Citizen’s Global Trade Watch, declared: "With the veil of secrecy ripped back, finally everyone can see for themselves that the TPP would give multinational corporations extraordinary new powers that undermine our sovereignty, expose U.S. taxpayers to billions in new liability, and privilege foreign firms operating here with special rights not available to U.S. firms under U.S. law." The document reveals that negotiators plan to recycle language from past trade agreements to create the controversial "investor-state dispute settlement" system (ISDS). Under this framework, multinationals would be granted a parallel legal system in which they can sue governments, and therefore taxpayers, for loss of "expected future profit," with the power to overrule national laws and judicial systems. The language included in this draft is even worse than previously thought, because it excludes a minor safeguard included in a version leaked in 2012.

The secretive TPP scam - The real deal is in the 24 other chapters that create a supranational scheme of secretive, private tribunals that corporations from any TPP nation can use to challenge and overturn our local, state and national laws. All a corporate power has to do to win in these closed proceedings is to show that a particular law or regulation might reduce its future profits. This is big stuff, amounting to the enthronement of a global corporate oligarchy over us. Yet it's been negotiated among trade officials of the 12 countries in strict secrecy. Even members of Congress have been shut out – but some 500 corporate executives have been allowed inside to shape the “partnership.” Now that President Obama and his corporate team intend to spring it on us and start ramming TPP through Congress. He recently arranged a briefing of two House Democrats to support it – but he even classified the briefing as a secret session, meaning the lawmakers are not allowed to tell you, me or anyone else anything about what they were told. A gag order on Congress? Holy Thomas Paine! The only reason Obama is desperate to hide his oligarchic scheme from us is because he knows the people would overwhelmingly oppose it. So he's resorting to government by sucker punch. It's cowardly ... and disgraceful. So the TPP, by far the largest trade flim-flam in history, is written in legalistic gobbledygook and was negotiated by corporate lobbyists and government lawyers. Even Congress doesn't know what's in it – yet the plan is to hustle TPP into law through a super-rushed, rubber-stamp process called “fast-track.”

TPP Corporate Insiders - Below is a list of 605 corporate advisers who have been allowed access to the TPP text, while the public and members of congress have been kept in the dark.

Thoughts About the Trans-Pacific Partnership -- Yves Smith -Concern about the toxic misnamed trade deals known as Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership are finally breaking out of the blogosphere ghetto as the Obama administration is making another push to get so-called fast track approval from Congress. Note that Obama failed in the last Congress due mainly to considerable opposition in the Democratic party, along with some resistance among Republicans as well.  What may have torched the latest Administration salvo is a well-timed joint publication by Wikileaks and the New York Times of a recent version of the so-called investment chapter. That section sets forth one of the worst features of the agreement, the investor-state dispute settlement process (ISDS). As we’ve described at length in earlier posts, the ISDS mechanism strengthens the existing ISDS process. It allows for secret arbitration panels to effectively overrule national regulations by allowing foreign investors to sue governments over lost potential future profits in secret arbitration panels. Those panels have been proved to be conflict-ridden and arbitrary. And the grounds for appeal are limited and technical.  So the significance of this particular document release cannot be overstated. For the first time, Congress can do a decent review of this critical section. Not surprisingly, they are finding a lot not to like. For instance, from the New York Times: “This is really troubling,” said Senator Charles E. Schumer of New York, the Senate’s No. 3 Democrat. “It seems to indicate that savvy, deep-pocketed foreign conglomerates could challenge a broad range of laws we pass at every level of government, such as made-in-America laws or anti-tobacco laws. I think people on both sides of the aisle will have trouble with this”…Senator Brown contended that the overall accord, not just the investment provisions, was troubling. “This continues the great American tradition of corporations writing trade agreements, sharing them with almost nobody, so often at the expense of consumers, public health and workers,” he said…

The New York Times Covers the TPP: A Commentary -- Wikileaks did us all another service yesterday by releasing the “Trans-Pacific Partnership Agreement (TPP): Investment Chapter Consolidated Text,” and collaborating with the New York Times to get the word out. Jonathan Weisman wrote the story for the New York Times. Apart from providing a very high level and very selective summary of what the chapter says, the article contains talking points used by proponents and opponents of the TPP. I think a close commentary on the article and associated issues would be useful. So here it is. An ambitious 12 nation trade accord pushed by President Obama would allow foreign corporations to sue the United States government for actions that undermine their investment “expectations” and hurt their business, according to a classified document. Why are we negotiating the TPP at all? Why is it the business of the Representatives of the people of the United States in Congress to support agreements that will mitigate the political risks borne by American businesses who chose to invest in other nations, as well as the political risks borne by foreign corporations, who choose to invest in the United States? Why is it their business to provide protection against such risks to foreign corporations beyond the protections we provide to our own corporations?The “expectations” of business investors are their own business, not the public’s business; and there’s no reason why either the government of the United States or the governments of other nations should have to accommodate themselves to these expectations. If it is the will of the people of a nation as expressed through their representatives to pass legislation that destroys the “expectations” of business investors, then that’s just too bad for the investors. Private businesses have no right to expect that their governments will protect them against risks that they alone choose to take, and that they alone will profit from. Risk is part of the game of investing. It’s business.

Bill Black: The Lessons Richard Bowen’s FCIC Testimony Should Have Taught the Nation - This is the first of three columns prompted by Richard Bowen’s interview this morning on Bloomberg.  Richard Bowen, a Citi SVP, blew the whistle within Citi on Citi’s massive fraudulent sales of fraudulently originated mortgages, primarily to Fannie and Freddie.  Even Attorney General Eric Holder now repeatedly labels these mortgages “toxic.”  Had Citi’s leadership been honest, Bowen’s warnings could have substantially reduced the three fraud epidemics driving the financial crisis and Bowen would be one of Citi’s most senior leaders.  No spoiler alert is required because even my readers who know anything about Bowen know how the story actually ended.  Citi’s senior managers did not ignore Bowen’s warnings – they actively made the frauds he documented worse and they destroyed Bowen’s distinguished career in banking.  Citi, Fannie and Freddie, and Treasury lost billions of dollars and Citi’s senior officers were made wealthy by the “sure thing” of the accounting control fraud “recipe.”  This first column is unapologetically long and technical.  Indeed, its technical nature is a large part of the point I am making.  The financial crisis was driven by history’s three most destructive epidemics of financial fraud:  appraisal fraud, liar’s loans, and the sale of fraudulently originated mortgages to the secondary market through fraudulent reps and warranties.  One cannot understand, effectively investigate, or prosecute the senior financial officers who led these fraud epidemics without a detailed technical understanding of the fraud schemes and the financial markets.  This first column is intended as a resource for those willing and able to make the investment towards achieving that understanding.  Because people like me and Bowen no longer train FBI agents and prosecutors, and because the Obama administration’s most senior officials have been unremittingly opposed to prosecuting the financial officers that led the three fraud epidemics, no FBI agent or prosecutor has the necessary technical understanding.  My second column explains why this makes the FBI, the SEC, and the Department of Justice’s (DOJ) failure to draw on Bowen’s expertise all the more harmful and indefensible.  My third column will discuss how Bowen’s testimony before the Financial Crisis Inquiry Commission (FCIC) was stripped of some of his most damning evidence.

Bill Black: The DOJ and the SEC Spurn their Ace in the Hole – Richard Bowen -  Yves Smith - This is the second post in a devastating series on why major banks and their executives got away with large-scale, systematic fraud in the runup to the crisis. Bill Black uses Citigroup whistleblower Richard Bowen as a case example of how derelict the DOJ and SEC were in the performance of their duties. Here, Black describes how historically frauds and criminal conduct were pursued primarily by regulators and the FBI. However, not only were regulations were weakened, but the Bush Administration ended criminal referrals: "References to the criminal referral coordinators disappeared or were removed from the bank examiners’ manuals." FBI staffing for white collar crime was cut drastically as the war on terror was given precedence. That meant, as Black describes, whistleblowers became more important than ever as not just a source of information for civil and criminal prosecutions, but as key witnesses. Yet in many cases they are problematic. They are often disaffected former employees who call out the bad conduct they saw after they were terminated, or were so badly roughed up by their former employer for becoming an internal dissident that they were traumatized and don't hold up well on the stand. Hence, as Black explains, the failure to take advantage of a stellar whistleblower like Richard Bowen. As Bowen put it, "Not only did they bury my testimony, they locked it up."

Regulatory Capture, Captured on Video - Taibbi - That story blew up recently in a remarkable public appearance by Bowden, in which the would-be enforcement official cravenly compliments the industry he supposedly polices and then — get this — jokingly puts forward his own son as a candidate for a job in private equity. On video. You won't see a more brazen example of regulatory capture anywhere.  Just a little under a year ago, Bowden, the SEC's Director of Compliance Inspections and Examinations, gave a speech that was remarkably, unusually critical of the Private Equity field. Bowden had conducted a study of the Private Equity business and found that over half of the companies they looked at were guilty of ripping off their clients: By far, the most common observation our examiners have made when examining private equity firms has to do with the adviser's collection of fees and allocation of expenses. When we have examined how fees and expenses are handled by advisers to private equity funds, we have identified what we believe are violations of law or material weaknesses in controls over 50 percent of the time.  To fully explain what Bowden is talking about here would require a much longer article, but the basics go something like this.  Private Equity reptiles like Mitt Romney make their living borrowing huge sums of money, millions and billions, from investors called "limited partners." They then take that borrowed money and acquire companies with that cash, sometimes with the company's consent, sometimes without it.  The ostensible object of the exercise (at least, this is the way folks in the Private Equity business would describe it) is to make money for the limited partners by acquiring flawed firms, turning them around, and channeling the profits from the reborn target firm back to the investors. 

How FCIC Spurned Its One Chance at Greatness - William K. Black - This is the third column in what I intended to be my three-part series about Citi’s most famous whistleblower, Richard M. Bowen, III.  In this column I discuss Bowen and Citi’s senior (but not controlling) officers’ presentations before the Financial Crisis Inquiry Commission (FCIC).  Upon further research I realize that a fourth column is required to bring in the related story of Bowen’s estimable colleague and fellow-whistleblower, Sherry Hunt.  Hunt’s story is not simply important and necessary to understand the scandals of the Department of Justice (DOJ) and the SEC and Citi’s top managers the FCIC’s spurning its one chance at greatness – it also deserving of a movie.  It’s too complex and rich to add it to this column.  Hunt also deserves full length treatment devoted to her attempted service to Citi, her service to the Nation, and to DOJ’s and the SEC’s failure to act against any of Citi’s fraudulent officers despite her offering them up tied with a bow.

Bitcoin’s lien problem - Izabella Kaminska - At cryptocurrency and fintech conferences, FT Alphaville often hears Bitcoin enthusiasts make the assertion that Bitcoin is superior to fiat currency because it eliminates debt from the monetary system. But this, of course, is a fallacy. Bitcoin may have the potential to create a fully-funded reserve system, but it certainly doesn’t eliminate debt from any system. At best, Bitcoin’s public ledger records a transfer of digital access rights in the eyes of the clearing network. It does not, however, record or see the terms and conditions of that transfer. Indeed, as far as the clearing network is concerned all it knows is that a transfer has occurred. Party A’s wallet has been debited while party B’s wallet has been credited. This is something akin to witnessing a physical coin being passed from one hand to the other. Yet what the process doesn’t do is log the conditionality of the transfer — which is still the subject of private agreement and contract law.

Bond market fears liquidity crunch repeat - Liquidity crunch: a phrase that strikes fear into the hearts of investors and traders everywhere — and now looming large once more over global bond markets. Not since the collapse of Lehman Brothers in September 2008 and the freezing of the money markets in August 2007 has there been such widespread concern over the structure of the fixed income markets, say some fund managers. Specifically, regulators are worried about corporate and emerging market bonds where prices have risen appreciably as investors have gorged on debt sold by companies at low interest rates. Should this trade, and one that has flourished during the post-financial crisis era of aggressive central bank easing policies, finally reverse, a “liquidity crunch” could well beckon if investors collectively run for the exit. The bond market has long been a challenging place for investors looking to sell their existing holdings at the best of times. Now, thanks to tougher capital regulations for banks, which traditionally have acted as middlemen for investors buying and selling bonds, heading for the fixed income exit looms as being a trigger for financial turmoil should current bullish sentiment turn.

Strong Dollar Hammers Profits at U.S. Multinationals - WSJ: The soaring dollar is crunching profits at giant U.S. multinationals, prompting Wall Street analysts to make their deepest cuts to earnings forecasts since the financial crisis and boosting the appeal of smaller, domestically focused companies. The dollar has jumped 12% in 2015 against the euro and is up 27% from a year ago. The WSJ Dollar Index, which measures the dollar against a basket of currencies, is up 5.3% this year. The dollar’s surge against the euro has been driven by an aggressive European Central Bank monetary-easing program that has come as the U.S. central bank is preparing to raise interest rates. Analysts, citing the dollar’s strength as a key factor, are predicting that profits at S&P 500 firms for the first quarter will show their biggest annual decline since the third quarter of 2009.

U.S. Fed Reserve Official Warns of Risk of Market Disruption - –A top Federal Reserve official said Tuesday that interest-rate expectations in financial markets need to be better aligned with those of Fed officials, warning that reconciling those views could cause “potentially violent” market disruption. James Bullard, president of the Federal Reserve Bank of St. Louis, told reporters in London that investors are penciling in a later move in interest rates than he expects and a slower pace of tightening in the months and years ahead. His remarks underscore the potential pitfalls that await Fed and other central bank officials as they tiptoe towards calling time on years of ultra-loose monetary policy. Mr. Bullard said investors have misread recent changes to the Fed’s interest-rate forecasts as a signal that members of the Federal Open Market Committee, which sets monetary policy, have become more pessimistic about the economic outlook. “I’m not anymore dovish than I was,” Mr. Bullard said. He explained he had wanted the Fed to raise rates in March but once that date passed he simply switched his preference to June. That doesn’t mean he’s gloomier about the outlook, he said. “People have to be careful when interpreting these dot movements,” he said, referring to Fed charts that show officials’ interest-rate forecasts as dots on a grid. Mr. Bullard said investors’ rate expectations need to be better aligned with what the Fed’s policy-setting panel is expecting, adding he’s hopeful that markets and the committee “can come to a meeting of minds” over what the future path of interest rates should look like.  But he added there’s a risk that achieving that may involve a repeat of the summer 2013 “taper tantrum,” when financial markets swung wildly in response to Fed signals about winding down its bond-buying program.

Central Banks Warn: Investors May Get Crushed When They All Run for the Exits -- Companies are selling bonds like madmen. This year through Tuesday, investment-grade and junk-rated companies have sold $438 billion in new bonds, up 14% from the prior record for this time of the year, set in 2013, according to Dealogic. This quarter is already in second place, nudging up against the all-time quarterly record of $455 billion of Q2 2014.About $87 billion of these bonds funded takeovers, a record for this time of the year, the Wall Street Journal reported. The four biggest bond sales in that batch were for healthcare takeovers, including the Actavis deal whose $21 billion bond sale was the second largest in history, behind Verizon’s $49 billion bond sale in 2013. Actavis had received orders for more than four times the bonds available,   All of the investors chasing after these bonds expect rates to remain low. Or else they wouldn’t chase after these bonds. If rates rise, as the Fed is promising in its convoluted cacophonous manner, these bonds that asset managers are devouring at super-high prices and minuscule yields are going to be bad deals. And their bond funds are going to take a bath.  But companies are selling bonds as if there were no tomorrow. They’re thinking that rates will not remain low. They’re trying to get these things out the door cheaply while they still can. They’re on a feverish mission to take advantage of these ludicrously low rates while they’re still available. And they use this cheap money to buy each other and to repurchase their own shares to pump up share prices and max out executive compensation packages, rather than investing it in productive activities. Corporate issuers interpret these signals to mean that this won’t last, that they need to sell as much cheap debt as possible before rates rise, perhaps sharply. But bond fund managers interpret these signals in their own way, lulling themselves into thinking that rates will stay low forever. One side is misreading the Fed’s signals. Perhaps bond fund managers don’t care; all they have to do is be as good as the market. And when rates go up, the entire market takes a beating, and bond fund managers individually can hide behind that.

Fed’s Lockhart: Regulators Must Watch Shadow Banks Very Closely - Federal Reserve Bank of Atlanta President Dennis Lockhart called on Friday for enhanced oversight of financial firms operating outside of the traditional safety net available to deposit-taking banks. Mr. Lockhart, who didn’t comment on monetary policy or the economy in prepared remarks, was taking stock of efforts to moderate the risks created by so-called shadow banks. These type of firms played a key role in creating and then fanning the flames that caused the financial crisis, and regulators have been devising ways to control these firms’ risk since then. “I feel the authorities responsible for preserving financial stability must monitor the [shadow banking] sector very closely with ever-improving techniques,” Mr. Lockhart said in the text of a speech prepared for delivery before an event in Athens, Ga. “A robust regime of monitoring is justified, in my opinion, because of the natural tendency in our economic system for activity to migrate to where it is least regulated,” he said. Mr. Lockhart said the best type of regulation is flexible. “Selective supervision and regulation is both possible and desirable,” he said, adding “the onus falls on regulatory policy makers to identify and respond to developments that threaten the general economy.” Mr. Lockhart warned “too much regulation can threaten the vibrancy of the U.S. economy–although, to be sober about it, not as catastrophically as too little.”

Shadow Banking System Shows Signs of Stabilizing After Collapse - -- The financing markets that help ease most U.S. debt trading are showing signs of stabilizing after shrinking by almost 50 percent since the financial crisis. The amount, known as shadow banking, was $4.124 trillion in February and averaged $4.139 trillion over the past three months, according to data compiled by the Center for Financial Stability, a nonpartisan research group. The measure, which includes money-market funds, repurchase agreements and commercial paper, all adjusted for inflation, peaked at $7.61 trillion in March 2008.   “The damage is done and we still have a long ways to go for there to be re-engagement of market finance in the economy. The economy has been growing substantially below potential, in part because market finance has failed to provide the fuel to the economy.”   Global regulators have focused on reducing the footprint of shadow banking, which was viewed as a catalyst for the collapse of Lehman Brothers Holdings Inc. in 2008 that shook markets worldwide. In the process, market finance contracted to a degree that starved financial markets of liquidity and was detrimental to growth, according to the CFS. Repo agreements are a source of short-term finance for banks, allowing them to use securities as collateral for short-term loans from investors such as other banks or money-market mutual funds. The amount of securities financed through a part of the market known as tri-party repo averaged $1.62 trillion as of Feb. 10, compared with $1.58 trillion in January and down from $1.96 trillion in December 2012, according to data compiled by the Fed.

Big Banks Threaten to Pull Campaign Contributions “Because Warren”  - Alexis Goldstein - In a move that will no doubt backfire SPECTACULARLY, Reuters reports today that Citigroup, JPMorgan, Goldman Sachs and Bank of America are asking Senate Democrats to tone done their rhetoric against the banks…or else! The big banks’ big threat? Cutting off the money spigot. Reuters reports: “Big Wall Street banks are so upset with Democratic Senator Elizabeth Warren’s call for them to be broken up that some have discussed withholding campaign donations to Senate Democrats in symbolic protest, sources familiar with the discussions said.” Of the four banks cited in the article, JPMorgan is making the boldest threats:“JPMorgan representatives have met Democratic Party officials to emphasize the connection between its annual contribution and the need for a friendlier attitude toward the banks, a source familiar with JPMorgan’s donations said. In past years, the bank has given its donation in one lump sum but this year has so far donated only a third of the amount, the source said.” Senator Elizabeth Warren has been wildly successful because most Americans, regardless of their political leanings, are skeptical of the nation’s largest banks. And her approach has proven to gain her not just page views and press, but also widespread success in fundraising. Warren has raised over $44 million from 2011-2014 through individual contributions, according to the Center for Responsive Politics.  That makes Warren’s rhetoric palatable to other politicians. And we’re already seeing others take up a similar mantle—like former Maryland Governor Martin O’Malley, who’s exploring running for President and who, like Warren, has called for breaking up the banks.

Elizabeth Warren To Wall Street: Drop Dead -- As we just learned, the heads of the five families dick-swingers from Citigroup, JPMorgan, Goldman Sachs, and Bank of America have been talking amongst themselves about how to get Warren to pipe down with all her talk about how corrupt they are and how they caused the financial crisis in 2008 that almost broke the country. Their bright ideas include withholding $15,000 per bank in “campaign donations to Senate Democrats in symbolic protest,” or possibly leaving a horse’s head in Sen. Warren’s bed.  20 hours agoLike a typical liberal, Sen. Warren has responded with a blog post: In 2008, the financial sector collapsed and nearly brought down our whole economy. What were the ingredients behind that crash? Recklessness on Wall Street and a willingness in Washington to play along with whatever the big banks wanted. Years have passed since the crisis and the bailout, but the big banks still swagger around town. And when Citigroup and the others don’t quite get their way or Washington doesn’t feel quite cozy enough, they quickly move to loud, public threats. Their latest move is a stunner.

New U.S. Bank Formation Weakest in 50 Years - New U.S. banks are being created at the slowest pace in half a century, according to researchers at the Federal Reserve Bank of Richmond who say this could reduce the availability of credit to small businesses. The rate of new-bank formation has slipped from an average of around 100 per year since 1990 to an average of only about three per year since 2010, write Roisin McCord, Edward Simpson Prescott and Tim Sablik. “This collapse in new bank entry has no precedent during the past 50 years, and it could have significant economic repercussions,” the report says. “In particular, the decline in new bank entry disproportionately decreases the number of community banks because most new banks start small,” the authors say. “Since small banks have a comparative advantage in lending to small businesses, their declining number could affect the allocation of credit to different sectors in the economy.” Why is this happening? The authors offer two competing theories, but don’t settle on a single conclusion. On the one hand, weak bank formation could be the product of weak economic activity and low interest rates, which is making it harder for banks to turn a profit. Another possibility is increased costs and regulatory burdens for starting a bank and maintaining compliance. Time will tell which of the two is the best explanation. If new entrants “are absent due to the low interest rate environment and weak economic recovery, then entry should increase as the economy improves and the Fed raises interest rates,” the authors conclude. “If regulatory costs are the driving force behind low entry rates, then future entry will depend on how those costs change over time.”

Unofficial Problem Bank list decline to 349 Institutions in March, Q1 2015 Transition Matrix -- This is an unofficial list of Problem Banks compiled only from public sources.  Here is the unofficial problem bank list for March 2015.   During the month, the list fell from 357 institutions to 349 after nine removals and one addition. Assets dropped by $2.9 billion to an aggregate $106.2 billion. A year ago, the list held 538 institutions with assets of $174.3 billion. Actions were terminated against First National Community Bank Dunmore, PA, ($969 million Ticker: FNCB); Colorado East Bank & Trust, Lamar, CO, ($769 million); Bay Cities Bank, Tampa, FL ($519 million); The Citizens Bank, Nashville, GA, ($259 million); Grand Bank & Trust of Florida, West Palm Beach, FL ($208 million); The Bank of Washington, Lynnwood, WA, ($152 million); Capitol National Bank, Lansing, MI ($115 million Ticker: CBCRQ); and Fox River State Bank, Burlington, WI ($73 million). With it being the end of the first quarter, we bring an update on the transition matrix. Since the Unofficial Problem Bank List was first published on August 7, 2009 with 389 institutions, a total of 1,691 institutions have appeared on the list at some point. There have been 1,342 institutions have come and gone on the list. Departure methods include 724 action terminations, 391 failures, 213 mergers, and 14 voluntary liquidations. The first quarter of 2015 started with 401 institutions on the list, so the 48 action terminations during the quarter reduced the list by 12 percent. Although it is easier to achieve a high removal percentage given the smaller overall list count, the 12 percent quarterly removal rate is the fastest since the list has been published. Of the 389 institutions on the first published list, 45 still remain nearly six years later. The 391 failures are 23.1 percent of the 1,691 institutions that have appeared on the list. This failure rate is well above the 10-12 percent rate frequently cited in media reports on the failure rate of banks on the FDIC's official list.

Fed Report Finds Growing Use of Mobile Banking - Americans are becoming increasingly comfortable using their cell phones for basic banking and payments, though security concerns still inhibit greater traction in mobile banking, according to a Federal Reserve survey of consumers published Thursday. Of respondents with cell phones and bank accounts, 39% reported they used mobile banking, according to the Fed’s 2014 survey, the fourth yearly poll of its kind. That was up from 33% in 2013. The proportion rises substantially when only smartphones users are counted—52% reported using phone banking services. However, that figure has remained fairly steady since the survey’s inception. “The use of mobile banking has increased substantially in the past year and appears likely to continue to increase as more consumers use smartphones or recognize the convenience of this service, and as more financial institutions offer mobile banking,” the report said. “The most common tasks for mobile banking users continue to be checking account balances and transferring funds. Use of the remote deposit capture feature continues to grow steadily,” the central bank found. The 2014 survey was conducted by online consumer research firm GfK on behalf of the Fed’s board of governors, using a representative, random sample of more than 50,000 adults, the Fed said.

Mortgaging the Future? - SF Fed Economic Letter - Leverage is risky. Purchasing assets with borrowed money can amplify small movements in prices into extraordinary gains or crippling losses, even default. From the mid-1980s to the Great Recession, an unusually rapid increase in the ratio of credit to GDP, or leverage, across the developed world was overshadowed by an equally unusual decline in inflation rates and output volatility. As such, this period is often called the Great Moderation. However, underneath the apparent calm, leverage continued to build. The pressure mounted up along financial fault lines, and in time struck violently in the form of the 2008 global financial crisis. The aftershocks are still being felt today, as policymakers continue to grapple with the resulting economic damage and discern how best to prevent future financial tremors. This Economic Letter explores the channels through which advanced economies have increased their debt and the consequences that this leverage has had for the business cycle. The rapid increase in credit-to-GDP ratios since the mid-1980s was just the final phase of a long historical process. The run-up started at the end of World War II and was shaped by a long boom in mortgage lending. One of the startling revelations has been the outsize role that mortgage lending has played in shaping the pace of recoveries, whether in financial crises or not, a factor that has been underappreciated until now.

Why the Supreme Court Might Actually Rule Against the Corporate Interest - Dave Dayen -- Bank of America v. Caulkett, to be heard Tuesday, is a technical case about the bankruptcy code, but if the bank succeeds, it would make it more difficult for people to start over when debt burdens become unmanageable. “It will affect many people’s pocketbooks,” said Bob Lawless, bankruptcy law professor at the University of Illinois. The Caulkett case has a link to the foreclosure crisis. Under current law, primary residence mortgages cannot be modified in bankruptcy, unlike vacation homes, yachts, car leases, and almost every other form of debt, with the notable exception of student loans. That’s because of a 1992 Supreme Court case called Dewsnup, which barred bankruptcy judges from stripping down an underwater first mortgage to its market value. Liberals wanted the bankruptcy “cram-down” option available to prevent a flood of foreclosures, but a bill to change the law failed in the Senate in 2009. As Dick Durbin famously said, the banks "frankly own the place.” In Caulkett we’ll see if they own the Supreme Court too, and if they can extend that prohibition on modifying primary mortgages in bankruptcy to a prohibition on extinguishing second mortgages in one part of the bankruptcy code. Second mortgages, often home equity loans, use the home as collateral, but the secured claim is junior to the first mortgage. So if the house is worth $200,000, and the first mortgage is owed $250,000—a phenomenon known as an “underwater” home—that second mortgage will receive no money in a foreclosure sale. Right now, in a Chapter 13 bankruptcy, you can “strip off” a second mortgage on an underwater home, but you weren’t allowed to do it in a Chapter 7 bankruptcy. The 11th Circuit Court of Appeals, using an old case in its circuit as precedent, said that stripping off the second mortgage was allowed under Chapter 7, and did so for Mr. David Caulkett of Melbourne, Florida.

Black Knight: Mortgage Delinquencies Declined in February, Lowest since August 2007 - According to Black Knight's First Look report for February, the percent of loans delinquent decreased 3.7% in February compared to January, and declined 10% year-over-year. The percent of loans in the foreclosure process declined 2% in February and were down about 29% 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 5.36% in February, down from 5.56% in January.  The normal rate for delinquencies is around 4.5% to 5%.  This is the lowest level of delinquencies since August 2007. The percent of loans in the foreclosure process declined in February to 1.58%.  This was the lowest level of foreclosure inventory since December 2007. The number of delinquent properties, but not in foreclosure, is down 453,000 properties year-over-year, and the number of properties in the foreclosure process is down 315,000 properties year-over-year. Black Knight will release the complete mortgage monitor for February in early April.

Freddie Mac: Mortgage Serious Delinquency rate declined in February -  Freddie Mac reported that the Single-Family serious delinquency rate declined in February to 1.81%, down from 1.86% in January. Freddie's rate is down from 2.29% in February 2014, and the rate in February was the lowest level since December 2008. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.  These are mortgage loans that are "three monthly payments or more past due or in foreclosure".   Although the rate is declining, the "normal" serious delinquency rate is under 1%. The serious delinquency rate has fallen 0.48 percentage points over the last year - and the rate of improvement has slowed recently - but at that rate of improvement, the serious delinquency rate will not be below 1% until late 2016. Note: Very few seriously delinquent loans cure with the owner making up back payments - most of the reduction in the serious delinquency rate is from foreclosures, short sales, and modifications. So even though distressed sales are declining, I expect an above normal level of Fannie and Freddie distressed sales for 2 more years (mostly in judicial foreclosure states).

Lawler: Updated Table of Distressed Sales and Cash buyers for Selected Cities in February - Economist Tom Lawler sent me the updated table below of short sales, foreclosures and cash buyers for several selected cities and areas in February. On distressed: Total "distressed" share is down in most of these markets mostly due to a decline in short sales (Mid-Atlantic is up year-over-year because of an increase foreclosure as lenders work through the backlog). Short sales are down in these areas. Foreclosures are up in several areas, especially in Florida.  The All Cash Share (last two columns) is declining year-over-year. As investors pull back, the share of all cash buyers will probably continue to decline.

MBA: Mortgage Applications Increase in Latest Weekly Survey - From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey Mortgage applications increased 9.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 20, 2015. ... The Refinance Index increased 12 percent from the previous week. The seasonally adjusted Purchase Index increased 5 percent from one week earlier to its highest level since January 2015...The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.90 percent, its lowest level since February 2015, from 3.99 percent, with points decreasing to 0.37 from 0.40 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index. 2014 was the lowest year for refinance activity since year 2000. 2015 will probably see a little more refinance activity than in 2014, but not a large refinance boom. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 3% higher than a year ago.

Freddie Mac: 30 Year Mortgage Rates decrease to 3.69% in Latest Weekly Survey -- From Freddie Mac today: Mortgage Rates Move Down Again Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates moving down again across the board. Average fixed rates that continue to run below four percent will help keep affordability high for those in the market to buy a home as we head into the spring homebuying season. ...30-year fixed-rate mortgage (FRM) averaged 3.69 percent with an average 0.6 point for the week ending March 26, 2015, down from last week when it averaged 3.78 percent. A year ago at this time, the 30-year FRM averaged 4.40 percent.  15-year FRM this week averaged 2.97 percent with an average 0.6 point, down from last week when it averaged 3.06 percent. A year ago at this time, the 15-year FRM averaged 3.42 percent

Mortgage News Daily: Mortgage Rates increased Today -- Earlier I posted the results of the weekly Freddie Mac survey that showed rates declined recently. However mortgage rates increased today.From Matthew Graham at Mortgage News Daily: Mortgage Rates Increase Rapidly. Mortgage rates rose rapidly today, almost completely erasing the improvement following last week's Fed Announcement. This is especially ironic considering most major media outlets are running Freddie Mac's weekly mortgage rate survey headline. Because that survey receives most of its responses on Monday and Tuesday, it fully benefited from the stronger levels earlier in the week after having totally missed out on last Wednesday and Thursday's big move lower. As such, the headlines suggest that rates are significantly lower this week. That was certainly true on Tuesday afternoon, but rates have risen roughly an eighth of a point since then. That's a big move considering we've gone entire months without moving more than an eighth. Specifically, what had been 3.625 to 3.75% is now 3.75 to 3.875% in terms of the most prevalently-quoted conventional 30yr fixed rates for top tier scenarios. The upfront costs associated with moving down to 3.75 from 3.875% are still quite low.  Here is a table from Mortgage News Daily: Home Loan Rates

The Rise of Mortgages: Too Much House? - Economists sometimes argue that more choices must either be neutral or good. The logic is that if you don't want any of the additional choices, then don't take them, and you are equally well off. If you do want one of the additional choices, you are then better off.  Of course, this argument is not airtight. It assumes that there are no costs of evaluating more choices, and it presumes that the chances of choosing wisely and well are not diminished as the number of choices rises.  For one case in which these issues arise, consider the many changes in financial markets and government regulations that have made it vastly easier for people to take out a mortgage loan and buy a house. I certainly view the option to take out a mortgage loan as beneficial to me, because rather than spend years saving up enough money to buy a house outright, I can live in the house while paying down the mortgage over time. But this additional choice also brings dangers. People are often notably bad at evaluating situations where the costs and benefits are spread out over time. We find ourselves in situations where we would like to save money, or start exercising more, or eating healthier--but always starting tomorrow, never today. Many people find themselves running up credit card bills to have the benefits of consumption now, with the costs of paying shoved into the future. Thus, it wouldn't be surprising to find that when the option to take out a long-term mortgage becomes available, people are tempted to over-borrow.

U.S. Home Prices Are Surging 13 Times Faster Than Wages - For most people, buying a home is no cheap venture. That's especially the case when the growth in U.S. home prices is beating wage increases 13 to 1.  Wages climbed by 1.3 percent from the second quarter of 2012 to the second quarter of 2014, compared to a 17 percent increase in home prices around that time, according to a new report from RealtyTrac. The real-estate data provider used the Labor Department's weekly earnings data to measure wage growth, while home prices were derived from sales-deed data in December 2014 and compared to December 2012 on the hypothesis that a change in average wages would take at least six months to affect home prices.  Using localized earnings data, RealtyTrac also found that 76 percent of housing markets posted increases in home prices that exceeded the wage growth there during that time frame, led by the regions of Merced, California; Memphis, Tennessee; Santa Cruz, California; andAugusta, Georgia. Others include the Detroit, Houston and Miami regions. (To be fair, some of these areas are still considered affordable and experienced massive price drops during the housing bust and recession.)In many markets, the housing recovery has "largely been driven over the last two years by buyers who are not as constrained by incomes -- namely the institutional investors coming in and buying up properties as rentals,  and international buyers coming in and buying, often with cash," Daren Blomquist, vice president at RealtyTrac and author of the report, said in an interview.

The US Housing Bubble In One Chart: Home Prices Outpace Wage Growth 13:1 - If there is one chart that most clearly captures the unsustainable US home price appreciation bubble, it is the following which was released overnight from RealtyTrac: it is based on an analysis of wage growth and home price appreciation during the U.S. housing recovery of the past two years and has found home price appreciation has outpaced wage growth in 76 percent of U.S. housing markets during that time period. The conclusion: home price appreciation nationwide has outpaced wage growth by a 13:1 ratio! Some of the other RealtyTrac report's findings: "Those markets with the biggest disconnect between price growth and wage growth during the last two years are most likely to see plateauing home prices in 2015 until wages catch up,” Blomquist continued. “Meanwhile, markets where wage growth has outpaced home price appreciation during the last two years are poised to see at least steady growth in home prices in 2015 in most cases.” The math is well known to frequent readers. Nationwide, median wages have increased 1.3 percent between the second quarter of 2012 –when home prices bottomed out and started rising again — and the second quarter of 2014. Meanwhile home prices have increased 17 percent in the two years ending in December 2014, outpacing wage growth by a 13:1 ratio.

Existing Home Sales in February: 4.88 million SAAR, Inventory down slightly Year-over-year --The NAR reports: Existing-Home Sales Slightly Improve in February, Price Growth Gains SteamTotal existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.2 percent to a seasonally adjusted annual rate of 4.88 million in February from 4.82 million in January. Sales are 4.7 percent higher than a year ago and above year-over-year totals for the fifth consecutive month. ...Total housing inventory at the end of February increased 1.6 percent to 1.89 million existing homes available for sale, but remains 0.5 percent below a year ago (1.90 million). For the second straight month, unsold inventory is at a 4.6-month supply at the current sales pace.  This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993. Sales in February (4.88 million SAAR) were 1.2% higher than last month, and were 4.7% above the February 2014 rate. The second graph shows nationwide inventory for existing homes. According to the NAR, inventory increased to 1.89 million in February from 1.86 million in January. Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Existing Home Sales Bubble Up 1.2% from the February Northeast Frozen Tundra -- NAR's existing home sales bounced up slightly for February with a 1.2% sales increase.  This is surprising sales increased at all, even with seasonality adjustments, considering America's East was stuck in either a snow bank or an ice cube for the month..  This makes sales 4.7% higher than February of last year.  Sales by volume was 4.88 million in February.  Existing home sales have been above their year previous amounts for five months now.  Prices are soaring in unaffordable territory as the median home price has increased for 36 months in a row.  The national median existing home sales price, all types, is $202,600, a 7.5% increase from a year ago.  The average existing sales price for homes in February was 248,400, a 5.0% increase from a year ago.  Below is a graph of the median price.  NAR Economist Yun finally observed what we have for some times, wages are much too low to support these types of home prices.  We often wonder how anyone is getting by with rents and homes being so expensive.  People must be sacrificing food in order to make rent and mortgage payments. With all indications pointing to a rate increase from the Federal Reserve this year – perhaps as early as this summer – affordability concerns could heighten as home prices and rents both continue to exceed wages.  Distressed home sales are now only 11% of all sales.  Distressed sales have declined -16% from a year ago.   Foreclosures were 8% while short sales were 3% of all sales.  The discount breakdown was 15% for foreclosures and short sales were a 15% price break.  So called investors were 14% of all sales and 67% of these investors paid cash.  A year ago investors were 21% of all sales.  All cash buyers were 26% of all sales.  A year ago all cash buyers were 35% of all existing home sales.  First time home buyers were 29% of the sales, the first increase since November 2014. The median time for a home to be on the market was 62 days.  Short sales by themselves took 120 days.  Housing inventory from a year ago has decreased -0.5% but is up 1.6% from the previous month.  Current the 1.89 million homes available for sale are a 4.6 months supply.

Existing Home Sales Miss (Again); Weather & "Unsuitably High Price Levels" Blamed -- Following January's disastrous dive in Existing Home Sales (which must be weather, right? Nope!) to a SAAR 4.82 million homes, February (with its even worse weather) saw a 4th month of missed expectations with a 4.88mm print against 4.90 mm expectations. As always, weather was blamed - which is odd given that the only drop in sales that occurred happened in The Northeast which accounts for just 12% of total transactions. Perhaps more worrisome is NAR's Larry Yun noting  "unsuitable price levels" as a reason for weak sales due to low inventories (despite inventories rising 1.6% in February?!). May be it's time to blame The Fed... for not creating more rich people to buy more houses...

A Few Comments on February Existing Home Sales - Inventory is still very low (down 0.5% year-over-year in February). This will be important to watch over the next month at the start of the Spring buying season. Also, the NAR reported total sales were up 4.7% from February 2014, however normal equity sales were up even more, and distressed sales down sharply.  From the NAR (from a survey that is far from perfect):  Distressed sales – foreclosures and short sales – were 11 percent of sales in February, unchanged for the third consecutive month and down from 16 percent a year ago. Eight percent of February sales were foreclosures and 3 percent were short sales. Foreclosures sold for an average discount of 17 percent below market value in February (15 percent in January), while short sales were discounted 15 percent (12 percent in January).  Last year in February the NAR reported that 16% of sales were distressed sales. A rough estimate: Sales in February 2014 were reported at 4.66 million SAAR with 16% distressed.  That gives 746 thousand distressed (annual rate), and 3.91 million equity / non-distressed.  In February 2015, sales were 4.88 million SAAR, with 11% distressed.  That gives 537 thousand distressed - a decline of about 28% from February 2014 - and 4.34 million equity.  Although this survey isn't perfect, this suggests distressed sales were down sharply - and normal sales up around 10%.  If total existing sales decline a little, or move side-ways - due to fewer distressed sales- that is a positive sign for real estate. The following graph shows existing home sales Not Seasonally Adjusted (NSA).

New Home Sales at 539,000 Annual Rate in February - The Census Bureau reports New Home Sales in February were at a seasonally adjusted annual rate (SAAR) of 539 thousand. January sales were revised up from 481 thousand to 500 thousand, and December sales were revised down slightly from 482 thousand to 479 thousand. "Sales of new single-family houses in February 2015 were at a seasonally adjusted annual rate of 539,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 7.8 percent above the revised January rate of 500,000 and is 24.8 percent above the February 2014 estimate of 432,000."  The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate. Even with the increase in sales over the previous two years, new home sales are still close to the bottoms for previous recessions. The second graph shows New Home Months of Supply. The months of supply was declined in February at 4.7 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 third graph shows the three categories of inventory starting in 1973. The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low. The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate). In February 2015 (red column), 44 thousand new homes were sold (NSA). Last year 35 thousand homes were sold in February. This is the highest for February since 2008.

New Home Sales Data Goes Full Retard With Report Frozen Northeast Saw 153% Surge - This is how ridiculous goverment data has become: in the same month in which both Housing Starts and Existing Home sales significantly missed expectations, misses which were promptly blamed on the weather, the Census Bureau moments ago released a stunner of a New Home Sales number, which supposedly rose from an upward revised 500K to 539K, a 25% spike from a year ago and up 7.8% from January, which incidentally is also the highest number since February 2008, even as the median home price dropped to the lowest since September.  All of this would be great... if it was remotely credible. It isn't.

Comments on New Home Sales --  The new home sales report for February was above expectations at 539 thousand on a seasonally adjusted annual rate basis (SAAR).  Also, sales for January were revised up (sales for November and December was revised slightly). Sales in 2015 are off to a solid start, although this is just two months of data. The Census Bureau reported that new home sales this year, through February, were 81,000, Not seasonally adjusted (NSA). That is up 19% from 68,000 during the same period of 2014 (NSA). This is very early - and the next six months are usually the strongest of the year NSA - but this is a solid start. Sales were up 24.8% year-over-year in February. This graph shows new home sales for 2014 and 2015 by month (Seasonally Adjusted Annual Rate). The year-over-year gain will be strong in Q1 (the first half was especially weak in 2014), and I expect the year-over-year increases to slow later 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 few years. The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through February 2015. This graph starts in 1994, but the relationship has been fairly steady back to the '60s. Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales. I expect existing home sales to move sideways (distressed sales will continue to decline and be partially offset by more conventional / equity sales). And I expect this gap to slowly close, mostly from an increase in new home sales.

New Home Prices: More homes priced in the $200K to $300K range  - Here are two graphs I haven't posted for some time ...  As part of the new home sales report, the Census Bureau reported the number of homes sold by price and the average and median prices. From the Census Bureau: "The median sales price of new houses sold in February 2015 was $275,500; the average sales price was $341,000."  The following graph shows the median and average new home prices.The average price in February 2015 was $341,000 and the median price was $275,500.  Both are above the bubble high (this is due to both a change in mix and rising prices), but are below the recent peak.  The second graph shows the percent of new homes sold by price.Less than 5% of homes sold were under $150K in February 2015.  This is down from 30% in 2002 - and down from 20% as recently as August 2011.  The under $150K new home is probably going away. However there has been a pickup in homes sold in the $200K to $300K range (Up to 37.8% of homes in February 2015).

Where Construction Continues to Struggle Years After the Bust -  Nationwide, construction’s contribution to the economy has leveled out. The industry’s swift decline after the housing bust and unspectacular reemergence since are reasons broad economic expansion has been mired between 2.2% and 2.4%. In prior recoveries, housing has been a much bigger contributor to overall growth. A new state-by-state breakdown by the Associated Builders and Contractors, a trade group, finds both pockets of strength and continued weakness. The analysis looks at the value added by the private construction industry as a percentage of national gross domestic product. The energy boom—from fracking to refineries and ports—has helped lift Mississippi, Louisiana, North Dakota and Montana’s construction sectors. Those four states and Hawaii are the top five for construction as a percentage of GDP. A resurgence in tourism and defense spending benefited Hawaii, according to Bernard Markstein, president of Markstein Advisors and author of the study. The so-called sand states—Arizona, California, Florida and Nevada—are still well below boom-era activity. “Nevada is the one that really continues to struggle,” Mr. Markstein notes. “They just went crazy back there in terms of construction.”

In Texas Oil Towns, Price-Crash Shows Up in Slowing Rent Growth - The crash in oil prices is seeping into high-octane real estate markets. Since the end of last year, energy companies have announced hefty reductions in capital spending, and major layoffs. Outplacement firm Challenger, Gray & Christmas this month said falling oil prices have been responsible for 39,621 job cuts in the first two months of the year, more than one-third of all nationwide workforce reductions in that period. That’s been rippling through the economy, with new evidence showing rental markets are taking a hit. An analysis by real estate database Zillow finds the median estimated monthly rental price for single-family homes, condominiums, cooperatives and apartments in oil-dependent metropolitan areas is rapidly slowing. “Growth in rents per square foot in Texas’ previously booming oil-dependent markets began to rapidly cool off at the tail end of last summer, coinciding with a marked downward turn in oil prices,” said Svenja Gudell, Zillow’s director of economic research. “In August, rents per square foot were growing by about 8% per year in and around oil-dependent markets, compared to 6 percent currently.”

Fed: Q4 Household Debt Service Ratio near Record Low - The Fed's Household Debt Service ratio through Q4 2014 was released Friday: Household Debt Service and Financial Obligations Ratios. I used to track this quarterly back in 2005 and 2006 to point out that households were taking on excessive financial obligations. These ratios show the percent of disposable personal income (DPI) dedicated to debt service (DSR) and financial obligations (FOR) for households. Note: The Fed changed the release in Q3 2013.  The household Debt Service Ratio (DSR) is the ratio of total required household debt payments to total disposable income. The DSR is divided into two parts. The Mortgage DSR is total quarterly required mortgage payments divided by total quarterly disposable personal income. The Consumer DSR is total quarterly scheduled consumer debt payments divided by total quarterly disposable personal income. The Mortgage DSR and the Consumer DSR sum to the DSR. This data has limited value in terms of absolute numbers, but is useful in looking at trends.

RadioShack puts customer personal data up for sale in bankruptcy auction - For years, RadioShack made a habit of collecting customers’ contact information at checkout. Now, the bankrupt retailer is putting that data on the auction block. A of RadioShack assets for sale includes more than 65 million customer names and physical addresses, and 13 million email addresses. Bloomberg reports that the asset sale may include phone numbers and information on shopping habits as well. The auction is already over, with Standard General—a hedge fund and RadioShack’s largest shareholder—reportedly emerging as the victor. But a bankruptcy court still has to approve the deal, and RadioShack faces a couple legal challenges in turning over customer data.

BLS: CPI increased 0.2% in February, Core CPI increased 0.2% - From the BLS:  The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in February on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index was unchanged before seasonal adjustment. The seasonally adjusted increase in the all items index was broad-based, with increases in shelter, energy, and food indexes all contributing. The energy index rose after a long series of declines, increasing 1.0 percent as the gasoline index turned up after falling in recent months. The food index, unchanged last month, also rose in February, though major grocery store food group indexes were mixed. The index for all items less food and energy rose 0.2 percent in February, the same increase as in January.

February Headline Consumer Price Index: First Increase in Five Months -  The Bureau of Labor Statistics released the February CPI data this morning. Year-over-year unadjusted Headline CPI came in at -0.03% (rounded to 0.0%), up from -0.09% (rounded to -0.1%) the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.70% (rounded to 1.7%), up from the previous month's 1.65% (rounded to 1.6%). The non-seasonally adjusted month-over-month Headline number was up 0.43% (rounded to 0.4%), and the Core number was up 0.35% (rounded to 0.3%). The February nonseasonally adjusted headline number is the first increase in five months. Here is the introduction from the BLS summary, which leads with the seasonally adjusted data monthly data: The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in February on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index was unchanged before seasonal adjustment.   The seasonally adjusted increase in the all items index was broad-based, with increases in shelter, energy, and food indexes all contributing. The energy index rose after a long series of declines, increasing 1.0 percent as the gasoline index turned up after falling in recent months. The food index, unchanged last month, also rose in February, though major grocery store food group indexes were mixed. The index for all items less food and energy rose 0.2 percent in February, the same increase as in January. In addition to shelter, the indexes for used cars and trucks, apparel, new vehicles, tobacco, and airline fares were among those that increased. The medical care index was unchanged, while the personal care index declined.  The all items index was unchanged over the past 12 months, after showing a 0.1-percent decline for the 12 months ending January. Over the last 12 months the food index rose 3.0 percent and the index for all items less food and energy increased 1.7 percent. These increases were offset by an 18.8-percent decline in the energy index.   [More…]  The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. I've highlighted the two percent level, which the Federal Reserve targets as the Core inflation target for the CPI's cousin index, the BEA's Personal Consumptions Expenditures (PCE) price index.

CPI Increases on Higher Gas Prices for February 2015 - The Consumer Price Index increased 0.2% for February as gasoline prices rose.  It looks like the party is over for cheap gas and once again inflation is back on the rise.  Gasoline prices increased 2.4%.  Inflation without food or energy prices considered increased 0.2% for the month.  From a year ago overall inflation is unchanged and this is due to the incredible drop in gasoline prices in comparison to last year.   CPI measures inflation, or price increases. Yearly inflation is now flat as shown in the below graph. Core inflation, or CPI with all food and energy items removed from the index, has increased 1.7% for the last year. Core CPI is one of the Federal Reserve inflation watch numbers and 2.0% per year is their target rate. While all are predicting interest rates will rise, Federal Reserve Chair Janet Yellen has testified that the low inflation numbers are a a concern since increased interest rates would lower economic activity. Graphed below is the core inflation change from a year ago. Core CPI's monthly percentage change is graphed below. This month core inflation increased 0.2%. Energy overall came back from last month's plunge and increased 1.0% for the month. Energy costs are now down -18.8% from a year ago. The BLS separates out all energy costs and puts them together into one index. Gasoline alone increased 2.4% for the month and has declined -32.8% for the year. Fuel oil increased 1.9% for the month, yet is still down -31.2% for the year. Natural gas is down -6.5% from a year ago with a monthly decline of -2.0 %. Electricity increased 0.3% for the month and is up 3.2% for the year. Graphed below is the overall CPI energy index. Graphed below is the CPI gasoline index only, which shows gas prices wild ride and new ascent. Core inflation's components include shelter, transportation, medical care and anything that is not food or energy.  The shelter index is comprised of rent, the equivalent cost of owning a home, hotels and motels.   Shelter increased 0.2% and is up 3.0% for the year%.  Rent increased 0.3% for the month, 3.5% for the year.  This is the national average,, rents in some areas of the country are just soaring.  Home prices are increasing as reflected in the cost for home owners increased 2.7% for the past year as well.  Graphed below is the rent price index. Medical care services actually declined -0.2%, the first time since November 1975.  Graphed below is the overall medical care index change of 2.3% from a year ago.

CPI Ticks Up, Led by Rise in Energy; CPI Still Negative Year-Over-Year - Following three months of declines (primarily due to to falling energy prices), today the BLS Consumer Price Index for February shows that month-over-month, the CPI is back in positive territory.  From October to November the CPI declined -.3 percent, so this rise follows three straight month-over-month declines. Year-Over-Year Seasonally Adjusted Percent Change Year-Over-Year the CPI is negative for the second month. From December to January the year-over-year CPI was -0.45%. Today, it's a barely negative 0.17%. Year-Over-Year Components Of course, your prices will vary greatly. Take for example medical care. Did you costs only go up by 1.8%? Your food basket by 3%? The above tables are partial. The BLS has many more categories in the link at the top.

Consumer Prices Rise Most Since May 2014, Led By Gas Prices & Shelter Costs - Following the first YoY deflation since 2009 in January, February's CPI YoY data managed to scrape its way back to unchanged (very modestly better than the 0.1% drop expected). Consumer prices rose 0.2% MoM - the most since May 2014 with gas prices up MoM for the first time since June. So what is the narrative now: if tumbling gas prices didn't get consumers to spend, rising gas costs will? Ex food and energy, prices rose 0.2% MoM (slightly hotter than the 0.1% rise expected) led by the shelter index (which increased 0.2 percent) accounting for about two-thirds of the monthly increase. The rent continues to be too damn high for most, and finally the BLS is starting to realize this.

Michigan Consumer Sentiment at 93.0, An Improvement from the March Preliminary - The University of Michigan final Consumer Sentiment for March came in at 93.0, up from the 91.2 March preliminary reading but down from the final reading of 95.4 in February and the 98.1 level in January. had forecast 92.0 for the March final. See the chart below for a long-term perspective on this widely watched indicator. I've highlighted recessions and included real GDP to help evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy. To put today's report into the larger historical context since its beginning in 1978, consumer sentiment is now 9 percent above the average reading (arithmetic mean) and 11 percent above the geometric mean. The current index level is at the 70th percentile of the 447 monthly data points in this series. The Michigan average since its inception is 85.2. During non-recessionary years the average is 87.4. The average during the five recessions is 69.3. So the latest sentiment number puts us 23.7 points above the average recession mindset and 5.5 points above the non-recession average. Note that this indicator is somewhat volatile with a 3.1 point absolute average monthly change. The latest data point was a 2.4 point change. For a visual sense of the volatility, here is a chart with the monthly data and a three-month moving average.

UMich Consumer Sentiment Drops For 2nd Month In A Row, First Time Since Oct 2013 -- For the first time since October 2013, UMich Consumer Sentiment dropped for consecutive months (printing a final 93.0 for March down from 95.4 in Feb, but above the flash print earlier in the month). Under the surface there are concerns with an increasing number of respondents noting that household finance are worse than 5 years ago, and an increasing number of people seeing now as a "bad time to buy" a house or car.

Do Energy Prices Drive the Long-Term Inflation Expectations of Households? - Cleveland Fed - Household inflation expectations are measured in a national survey. Each month, the Survey Research Center at the University of Michigan surveys about 500 households and asks them questions about economic conditions. One survey question asks consumers about their inflation expectations five to ten years ahead. (“By about what percent per year do you expect prices to go (up/down) on average, during the next 5 to 10 years?”) We study the median response. Each month, the Federal Reserve Bank of Cleveland estimates inflation expectations at various horizons. These estimates are based upon inflation swap data in conjunction with nominal Treasury yields and survey information from professional forecasters. Using the published five-year and ten-year inflation expectations estimates, one can construct inflation expectations that match the implied horizon of the UM Survey. We examine the potential influence of seven different variables on long-term inflation expectations. Examining the role of these seven variables simultaneously allows us to properly determine the role played by energy-price inflation. To conduct the analysis, we use a particular type of statistical model that is used to inform forecasting and policy analysis at the Cleveland Fed, a structural Bayesian vector autoregression (SBVAR). This is a statistical model which simultaneously measures the cross-correlations between many different variables—including their cross-correlations across time—and entails assumptions about contemporaneous influences between variables. (For details, see Binder, Higgins and Verbrugge, forthcoming.) In our analysis, we assume that energy prices are not contemporaneously influenced by any other variable within the current month. This is the conventional assumption.

Oil Price Drop Hurts Spending on Business Investments - Prospects for an uptick in business investment this year are facing a major drag: The collapse in oil prices is spurring significant cutbacks by the energy-production industry, which had been a standout in an otherwise lackluster U.S. economic expansion. Business capital spending rose 6% last year due to gains from a broad base of U.S. industries. The drag from energy this year could cut that growth rate in half in 2015, according to economists at Goldman Sachs.Moreover, equity analysts at the bank estimate capital spending globally by energy companies in the S&P 500 will fall 25%, leading to the first annual decline in overall capital investment by big businesses in many sectors since 2009. Already, energy companies in the S&P 500 have announced about $8.3 billion in spending cuts. The energy cutbacks come when exporters and manufacturers more broadly face headwinds from a strengthening dollar, which makes U.S. goods more costly abroad. The U.S. economy still comes out a big winner with cheaper oil. Consumers who spend less on gasoline generally spend more at retailers and restaurants. Companies also benefit from lower materials costs.

Hotels: On Pace for Best Year on Record  - From STR: US hotel results for week ending 21 March The U.S. hotel industry recorded positive results in the three key performance measurements during the week of 15-21 March 2015, according to data from STR, Inc. In year-over-year measurements, the industry’s occupancy rose 3.2 percent to 69.3 percent. Average daily rate increased 6.6 percent to finish the week at US$122.46. Revenue per available room for the week was up 10.0 percent to finish at US$84.89.  Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average. Hotels are now in the Spring travel period and business travel will be solid over the next couple of months.

Vehicle Sales Forecasts: Best March since 2005 -- The automakers will report March vehicle sales on Wednesday, April 1st. Sales in February were at 16.2 million on a seasonally adjusted annual rate basis (SAAR), and it appears sales rebounded in March to close to 17.0 million SAAR.  March sales (SA) will probably be the best since 2005.  There were 25 selling days in March, one less than last year.  Here are a couple of forecasts: From WardsAuto: Forecast: March Sales Spring Forward A WardsAuto forecast calls for U.S. automakers to deliver 1.52 million light vehicles this month. The forecasted daily sales rate (DSR) of 60,935 over 25 days represents a 3.5% improvement from like-2014 (26 days). ... The report puts the seasonally adjusted annual rate of sales for the month at 16.9 million units, compared with year-ago’s 16.4 million and February’s 16.2 million mark. From J.D. Power: J.D. Power and LMC Automotive Report: New-Vehicle Sales Rebound in March to Highest Levels for the Month since 2005 After winter storms stymied sales in February, total new light-vehicle sales in March 2015 are expected to reach 1,539,600 units, a 4 percent increase on a selling-day adjusted basis compared with March 2014 and their highest levels for the month since March 2005 when 1,572,909 new vehicles were sold.  [17.0 million SAAR[

DOT: Vehicle Miles Driven increased 4.9% year-over-year in January, Rolling 12 Months at All Time High  -- With lower gasoline prices, vehicle miles driven have reached a new high on a rolling 12 month basis. The Department of Transportation (DOT) reported:

◦Travel on all roads and streets changed by 4.9% (11.1 billion vehicle miles) for January 2015 as compared with January 2014.
◦Travel for the month is estimated to be 237.4 billion vehicle miles.
◦The seasonally adjusted vehicle miles traveled for January 2015 is 257.9 billion miles, a 5.1% (12.5 billion vehicle miles) increase over January 2014. It also represents a -0.2% change (-0.5 billion vehicle miles) compared with December 2014.
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, 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 had been below the previous peak for 85 months - an all time record. The second graph shows the year-over-year change from the same month in the previous year.In January 2015, gasoline averaged of $2.21 per gallon according to the EIA.  That was down significantly from January 2014 when prices averaged $3.39 per gallon.

Record traffic is boosting U.S. fuel demand - Traffic on U.S. highways has hit a new record as the economy recovers and the lower cost of gasoline and diesel encourages more travel. Cars and trucks drove a record 3.050 trillion miles on U.S. highways in the 12 months ending in January, passing the previous peak of 3.039 trillion set in the 12 months to November 2007, according to the Federal Highway Administration. In January, traffic was 4.9 percent higher than in the corresponding month in 2014, the agency said on Tuesday. Information on traffic volumes is collected from 4,000 roadside monitoring stations across the country and published with a two-month delay. Traffic fell more than 3 percent between November 2007 and November 2011, as the increased cost of fuel coupled with the recession and increased unemployment to produce the most sustained drop in motoring since World War Two. Traffic volumes have been gradually recovering since the end of 2011 as the economy has grown and joblessness has fallen. Since March 2014, however, there has been a marked acceleration. Traffic volumes have grown more in the last 12 months than in the previous two and a half years.

ATA Trucking Index declined in February - Here is an indicator that I follow on trucking, from the ATA: ATA Truck Tonnage Index Fell 3.1% in February American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index decreased 3.1% in February, following a revised gain of 1.3% during the previous month. In February, the index equaled 131.6 (2000=100), the lowest level since September 2014. Compared with February 2014, the SA index increased 3%, although this was the smallest year-over-year gain since June of last year and below the 2014 annual increase of 3.7%. ...“The February drop in truck tonnage was not a surprise,” said ATA Chief Economist Bob Costello. “Retail sales, manufacturing output and housing starts were all off during the month, so the tonnage decline fits with those indicators. The surprise would have been had tonnage increased with all of those sectors falling.” Costello added that the winter weather that impacted a large portion of the country during February had a negative impact on truck tonnage as well as industries that drive tonnage, like retail, manufacturing and housing starts. Trucking serves as a barometer of the U.S. economy, representing 69.1% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 9.7 billion tons of freight in 2013. Motor carriers collected $681.7 billion, or 81.2% of total revenue earned by all transport modes.

The Energy Bust: How Much Like Tech in 2001? - The drop in oil prices over the last six months has already produced the swiftest drop in the number of U.S. oil rigs in the ground, according to an analysis by Goldman Sachs. Given the potential for a pullback from one sector to spill into others, economists at Wells Fargo explored in a recent research note whether the collapse in oil prices might, like the collapse in technology stocks 15 years ago, prove a harbinger of a downturn in the U.S. economy later this year. Their answer: Not really. The tech sector at the height of the 2000 stock bubble was around three times as important to the U.S. job market as energy is today, wrote Jay Bryson, an economist at Wells Fargo. Capital expenditures for the tech sector, meanwhile, rose to 25% of total business investment in 2000 from 20% in 1995 before falling 17% over 2001 and 2002. Energy investment in 2013, by contrast, rose to around 6% of total business spending from 2% one decade earlier, Wells Fargo said in its note. What about the potential for shocks on financial markets? Here, too, the energy blow looks likely to be significantly smaller than for tech. The Nasdaq index enjoyed a seven-fold increase between 1995 and 2000, Wells Fargo said. Energy stocks, by contrast, gained 144% in the five year period ended last June—an increase that actually lagged the S&P 500 index. The energy sector, meanwhile, accounts for around 14% of outstanding corporate debt. Assuming that it accounts for a similar share of bank lending, for which data isn’t as readily available, there would be roughly $900 billion in debt outstanding for the sector. That sounds like a lot, but it isn’t. In an economy with $41 trillion in credit outstanding, that’s about 2%.

The Fuzzy, Insane Math That’s Creating So Many Billion-Dollar Tech Companies - Snapchat, the photo-messaging app raising cash at a $15 billion valuation, probably isn't actually worth more than Clorox or Campbell Soup. So where did investors come up with that enormous headline number?  Here's the secret to how Silicon Valley calculates the value of its hottest companies: The numbers are sort of made-up. For the most mature startups, investors agree to grant higher valuations, which help the companies with recruitment and building credibility, in exchange for guarantees that they'll get their money back first if the company goes public or sells. They can also negotiate to receive additional free shares if a subsequent round's valuation is less favorable. Interviews with more than a dozen founders, venture capitalists, and the attorneys who draw up investment contracts reveal the most common financial provisions used in private-market technology deals today.  The backroom agreements are becoming more common as tech companies stay private longer, according to the interviews and financial documents obtained by Bloomberg Business. The practice obfuscates the meaning of a valuation, which can become dangerous down the road because private investors aren't taking the same risks a public-market shareholder would. By the time a company does go public, the valuation it got from VCs may not align with its balance sheet. Just ask Box.

These Are the Companies Profiting the Most From War - Worldwide military expenditure shrunk in 2013 for the second consecutive year, falling by 1.9% to $1.75 trillion. The 100 largest arms-producers sold a combined $402 billion worth of arms and military services in 2013, also down — for the third consecutive year. However, not all countries are spending less. Military spending in North America and in Western and Central European countries has continued to decline, while other countries such as Brazil and Russia have increased their arms investments.Despite the global drop, weapons producers generated massive profits from arms sales, and U.S. and European companies continued to dominate the top 10 global companies in terms of arms deals. Lockheed Martin was the global leader with $36 billion in arms sales in 2013, according to the Stockholm International Peace Research Institute (SIPRI).These are the companies profiting the most from war. 

Durable Goods Orders Unexpectedly Decline, Business Spending Declines 6th Month - The durable goods report for February was released today. Once again economists missed their optimistic estimates by a mile. Apparently the weather has been bad for six straight months because this is the sixth consecutive decline in overall business spending. The Bloomberg Consensus Estimate was for a 0.7% rise. The actual number was a 1.4% decline.  Durables orders fell 1.4 percent in February after rebounding 2.0 percent the month before. Market expectations were for a 0.7 percent gain.   Excluding transportation, the core declined 0.4 percent, following a 0.7 percent drop in January. Analysts projected a 0.3 percent gain in February. With those estimates in hand, let's dive into the Commerce Report on durable goods. New orders for manufactured durable goods in February decreased $3.2 billion or 1.4 percent to $231.3 billion, the U.S. Census Bureau announced today.  This decrease, down three of the last four months, followed a 2.0 percent January increase. Shipments of manufactured durable goods in February, down four of the last five months, decreased $0.5 billion or 0.2 percent to $244.0 billion. This followed a 1.4 percent January decrease.  Primary metals, down five consecutive months, led the decrease, $0.3 billion or 1.1 percent to $26.1 billion.  Unfilled orders for manufactured durable goods in February, down three consecutive months, decreased $5.6 billion or 0.5 percent to $1,156.9 billion.  This followed a 0.3 percent January decrease. Transportation equipment, also down three consecutive months, led the decrease, $4.6 billion or 0.6 percent to $731.6 billion.  Inventories of manufactured durable goods in February, up twenty-two of the last twenty-three months, increased $1.1 billion or 0.3 percent to $413.0 billion.  This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 0.3 percent January increase.

February Durable Goods Plunge -- The March Advance Report on February Durable Goods released today by the Census Bureau was quite disappointing. Here is the Bureau's summary on new orders:  New orders for manufactured durable goods in February decreased $3.2 billion or 1.4 percent to $231.3 billion, the U.S. Census Bureau announced today. This decrease, down three of the last four months, followed a 2.0 percent January increase. Excluding transportation, new orders decreased 0.4 percent. Excluding defense, new orders decreased 1.0 percent.  Transportation equipment, also down three of the last four months, led the decrease, $2.5 billion or 3.5 percent to $69.5 billion. Download full PDF  The latest new orders headline number at -1.4 percent was well below the estimate of 0.4 percent. This series is up only 0.6% percent year-over-year (YoY). However, if we exclude transportation, "core" durable goods came in at -0.4 percent MoM and has contracted for five consecutive months.  On a brighter note, if we exclude both transportation and defense for an even more fundamental "core", the latest number was up 0.2 percent MoM, snapping five months of contraction. The Core Capital Goods New Orders number (nondefense capital goods used in the production of goods or services, excluding aircraft) is an important gauge of business spending. It posted a -1.4% decline, and with the downward revision to the previous month, it has contracted for six consecutive months. The downward trend can be attributed to Dollar strength and weakening global demand. The first chart is an overlay of durable goods new orders and the S&P 500.  An overlay with unemployment (inverted) also shows some correlation. We saw unemployment begin to deteriorate prior to the peak in durable goods orders that closely coincided with the onset of the Great Recession, but the unemployment recovery tended to lag the advance durable goods orders.

Durable Goods Orders Drop And Miss In Worst Run Since Lehman -- For the 3rd of the last 4 months, Durable Goods Orders fell and missed expectations (the worst run since Lehman). A 1.4% drop (against expectations of a 0.2% rise) is made worse by downward revisions of the last month's modest bounce. Across the board the numbers are a disaster - Ex-Trans fell 0.4%, Ex-defense fell 1%, Capital Goods Shipments fell 1.4% with capital goods ex-air dropping a stunning 7.6% YoY. Paging negative Q1 GDP print expectations...

Weak Demand? Strong Dollar? U.S. Businesses Aren’t Investing Much -  It’s increasingly looking like another ugly winter for the U.S. economy. Whether the main culprit is nasty weather, a limping global economy or woes in the U.S. energy sector, this much is clear: Companies aren’t doing much investing. Wednesday’s Commerce Department report on durable goods showed a 1.4% decline in orders for big-ticket items—refrigerators, cars, bulldozers–in February from January. The overall figure includes products like airplanes that don’t say much about underlying demand in the economy. The more-telling detail is a measure within the report that reflects how much businesses are spending to invest and expand their operations—demand for things like computers, equipment and software. That gauge–orders for nondefense capital goods excluding aircraft—also fell 1.4% from January, and is flat this year compared to the first two months of 2014. Such orders have been falling on a monthly basis since August. The year-over-year trend, used to even out volatility, shows that growth in capital spending by businesses has slowed substantially since October: It’s unclear from Wednesday’s report which industries are cutting back the most. But the decline in business investment has coincided with rise in the dollar and the sharp drop in oil prices since last summer. Wednesday’s report showed machinery posted a particularly big decline last month, likely reflecting lower demand for drilling and construction equipment. Capital spending “is being swamped by the speed of the oil cutbacks,”

American manufacturing: Worrying signs - IN RECENT years there has been much talk of a “renaissance” in American manufacturing. A few things seemed to be on the side of the makers. For instance, until recently the dollar was weak. American wages were stagnant, but those in China were booming. Cheap shale oil and gas gave factories a spurt. But as we argued recently, talk of a renaissance is overblown. And new data, released today, adds to the mounting pile of evidence saying that manufacturing growth is starting to slow. We argued before that although there has been a recovery in American manufacturing in recent years, it is not a sustainable one. Employment in the sector is still lower than before the crash. So is one important measure of output: real value added (see first set of charts). In short, America has not got better at producing stuff. Also, much of the recovery in American manufacturing seems to be based on a cyclical boom in “durable” goods—things that you expect to last a long time, like cars and fridges. During the recession, orders for durable goods plunged (see second chart). That’s because it is quite easy to put off such purchases. On the other hand, it is more difficult to put off purchases of non-durable goods, like medicines, because people tend to consume them more frequently.

As Dollar Heats Up Overseas, U.S. Manufacturers Feel a Chill - The dollar’s sharp rise in recent months has left Robert Stevenson and Eastman Machine, his family’s 127-year-old Buffalo company, feeling the heat on both sides of the Atlantic.Confronted with a steep drop in the value of the euro against the dollar, customers in Europe warn that they can no longer afford to buy Eastman’s American-made cutting equipment without deep discounts. Buyers in America, meanwhile, are demanding lower prices from Mr. Stevenson, too, as European-based rivals take advantage of the suddenly stronger dollar, which allows them to reduce prices on the machines they export to the United States without squeezing profits. Indeed, the sharp rise of the dollar threatens to undercut one of the principal drivers of the recovery in recent years: strong export growth for American companies. At the same time, it is also raising concerns among policy makers at the Federal Reserve. Last week, Janet L. Yellen, the Fed chairwoman, warned that the stronger dollar was likely to weigh on exports, producing “a notable drag this year on the outlook.” On Tuesday, McCormick & Company, the spice producer, said the robust dollar would hurt results in the months ahead; other well-known American companies like Tiffany and Oracle made similar pronouncements last week. More warnings are expected as companies begin to report earnings for the first quarter of 2015, which ends on Tuesday. Although the euro has rebounded slightly in recent days, with one euro now worth just under $1.10, the shared currency used by 19 countries in Europe is down sharply from $1.25 in December. Other currencies from different parts of the world, including the British pound, the Australian dollar, the Japanese yen and the Brazilian real, have followed a similar trajectory.

US Manufacturing Activity Perks Up In March - The case for expecting trouble for the US economy looks a bit weaker in light of today’s update on manufacturing activity in March. Markit’s flash estimate of its purchasing managers index (PMI) for this cyclically sensitive sector ticked higher for this month. Score one for the optimists who say that the recent run of soft numbers is only a temporary affair born of a harsh winter. The theory that spring will revive forward momentum certainly got a boost today. The US Manufacturing PMI rose modestly to 55.3 for March vs. 55.1 in the previous month — well above the neutral 50.0 mark that separates growth from contraction. Yes, it’s a slight increase, but the main message is that moderate growth remains intact, “with output, new business and employment all rising at an accelerated pace in March,” according to Markit’s press release. “Higher levels of employment have now been recorded for 21 months in a row, and the latest increase was the fastest since last November.”

US Manufacturing PMI 'Survey' Defies Every Hard Data Print In Last 7 Weeks, Jumps To 5-Month Highs - Markit just issued the results of their Manufacturing PMI survey... and it shows everything is awesome again. Printing at 55.3 - the highest since October 2014 - it is utterly incredulous that this represents any reality as US macro data has completely collapsed in the last 2 months. Exports are down for the first time since November, but Markit is very excited, pitching deflation as good and careful to not be too sanguine about the rise for fear of sparking some Fed action...

Richmond Fed Manufacturing Composite: Activity Declined in March 00 The Fifth District includes Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia. The Federal Reserve Bank of Richmond is the region's connection to the nation's Central Bank. The complete data series behind the latest Richmond Fed manufacturing report (available here) dates from November 1993. The chart below illustrates the 21st century behavior of the diffusion index that summarizes the individual components. The March update shows the manufacturing composite at -8, down from 0 last month. Above zero indicates expanding activity; below zero indicates contraction. Today's composite number was well below the forecast of 2.  Because of the highly volatile nature of this index, I like to include a 3-month moving average, now at -0.7, to facilitate the identification of trends. Here is a snapshot of the complete Richmond Fed Manufacturing Composite series.

Kansas City Fed: Regional Manufacturing Activity Declined in March - From the Kansas City Fed: Tenth District Manufacturing Activity Declined  The Federal Reserve Bank of Kansas City released the March 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 declined in March, and producers’ expectations moderated somewhat but remained slightly positive. “We saw our first monthly decline in regional factory activity in over a year," said Wilkerson. “Some firms blamed the West Coast port disruptions, while producers of oil and gas-related equipment blamed low oil prices.” The month-over-month composite index was -4 in March, down from 1 in February and 3 in January. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The overall slower growth was mostly attributable to declines in plastics, food, and chemical production and continued weakness in metals and machinery. Looking across District states, the largest decline was in Oklahoma, with moderate slowdowns in Kansas and Nebraska. ... the employment and new orders for exports indexes inched higher but remained negative. Some of this decline was due to lower oil prices (Oklahoma was especially weak), however overall, lower oil prices will a positive for the economy.   This was another weak regional manufacturing report (the Richmond Fed survey released earlier this week also showed contraction in March).  The Dallas Fed survey for March will be released this coming Monday and will probably show contraction too.

Kansas Fed Plunges To 2-Year Lows, New Orders Crash: "Economy Not As Strong As Media Portrays" - How can it be? Services PMI was at 6-month highs. The Kansas City Fed Index tumbled to -4 in March (against expectations of +1) and was last below this level in Feb 2013. KC Fed has now missed for 6 of the last 8 months and the report is a disaster across the board. New orders plunged to -20 (2nd lowest print since Lehman), order backlogs imploded, average workweek collapsed to -17 (lowest since Lehman), and future capex expectations fell to a five-year low. As one respondent noted, "we do not see the economy as being as strong as a portrayed in the national media reports."

US Services PMI Surges To 6-Month Highs, Decouples From Hard Data Reality -- Who could have seen that coming? Markit reports that US Services PMI surged to 58.6 in March (considerably better than the 57.0 exp) and the highest in 6 months. Despite the total collapse in US Macro data, the survey says... everything is awesome.

Weekly Initial Unemployment Claims decreased to 282,000  -  The DOL reported: In the week ending March 21, the advance figure for seasonally adjusted initial claims was 282,000, a decrease of 9,000 from the previous week's unrevised level of 291,000. The 4-week moving average was 297,000, a decrease of 7,750 from the previous week's unrevised average of 304,750. There were no special factors impacting this week's initial claims.  The previous week was unrevised. The following graph shows the 4-week moving average of weekly claims since January 2000.

Philly Fed: State Coincident Indexes increased in 46 states in January - From the Philly FedThe Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for January 2015. In the past month, the indexes increased in 46 states, decreased in two, and remained stable in two, for a one-month diffusion index of 88. Over the past three months, the indexes increased in 48 states and decreased in two, for a three-month diffusion index of 92.  Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:  The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.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 January, 47 states had increasing activity (including minor increases). This measure has been moving up and down, and is in the normal range for a recovery. 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 almost all green again.

As Job Rate Rises, Older Workers Are Often Left Behind - Despite some indications here and there that the baby boom generation is working longer, few workers were hurt as badly as those over 50 in the years after the economic crisis that began unfolding in 2008. Many were forced to take jobs at lower pay, with fewer hours and less generous benefits — or no job at all. To gauge the toll the recession took on older workers, the AARP Public Policy Institute questioned 2,492 people who had been jobless in the previous five years and will release the report, “The Long Road Back: Struggling to Find Work After Unemployment,” on Monday. Long-term unemployment among older workers has been a major concern. On average, 45 percent of job seekers age 55 and older, like Mr. Collins, have been looking long term, according to the federal Bureau of Labor Statistics, which defines long term as 27 or more weeks without work. To address the reluctance of employers to consider such workers, the Obama administration last year started an initiative to encourage private and public companies to hire the long-term unemployed. “Although the general unemployment rate is falling, that can be misleading for people who are 55 and older who are long-term unemployed,” said Gary Koenig, who wrote the AARP report with Lori Trawinski and Sara Rix. The survey was conducted in October 2014 and included people 45 to 70 years old. Mr. Koenig, an economist, said that the study’s results were “a mixed bag. You have about half who remain unemployed or have dropped out of the labor force, and the other half who have been able to find new employment, but conditions of that employment vary.” The occupations growing the fastest, according to the Bureau of Labor Statistics, are personal care and home health aides. Other growing job areas, which require specialized training, are nearly all in the health field and include occupational and physical therapy assistants, physician assistants and genetic counselors.

Hiring Qualified Workers: Is it Really That Hard? -The Conference Board - In the past year, indicators of the perceived difficulty in recruiting qualified workers have suggested that it has become as hard to recruit qualified workers now as during 2007, the last pre-recession year, in which the U.S. labor market was quite tight. These measures are somewhat surprising, since most indicators related to labor market tightness, such as the unemployment rate, quit rates, and wage growth suggest that the labor market is not as tight as it was around 2007.   For example, in the National Federation of Independent Business (NFIB) monthly survey, two questions were asked about the difficulty of hiring qualified workers. Chart 1 reveals the percent of businesses with few or no qualified applicants for job openings and the percent of firms with positions they are unable to fill.  For both of these measures, the most recent reading is as high as it was in 2007. These trends are not only among small businesses, which make up most of the NFIB respondents. A SHRM/Rutgers survey of employers shows that the difficulty in recruiting in the manufacturing and service sectors is at least as challenging now as it was in 2007. In addition, the Dice-DFH Vacancy Duration measure shows that the average number of days that it takes to fill a position is much higher now than in 2007.   A potential additional reason for the perceived difficulty of hiring qualified workers could be related to results of a recent study by Modestino et. al. They found that as a result of the Great Recession and the high unemployment rate that followed, employers raised the skill requirements within specific types of jobs. They called this trend “opportunistic upskilling.”

Is Jobless Growth Inevitable? – Ever since the industrial revolution, humans have been ambivalent about technological progress. While new technology has been a major source of liberation, progress, and prosperity, it has also fueled plenty of agony – not least owing to the fear that it will render labor redundant. So far, experience has seemed to discredit this fear. Indeed, by boosting productivity and underpinning the emergence of new industries, technological progress has historically fueled economic growth and net job creation. New innovations accelerated – rather than disrupted – this positive cycle. But some are claiming that the cycle is now broken, especially in technologically savvy countries like the United States. Indeed, machines are becoming smarter, with innovations like advanced robotics, 3D printing, and big data analytics enabling companies to save money by eliminating even highly skilled workers. As a result of this “productivity paradox” (sometimes called the “great decoupling”), jobless growth is here to stay. We can no longer take human prosperity for granted, however rosy the aggregate indicators for profitability and GDP growth may be. But are we really in the throes of a Frankenstein’s dilemma, in which our own creations come back to haunt us? Or can we beat the productivity paradox by harnessing the power of machines to support development in ways that benefit more than the bottom line?

The Long-Distance Relationship Between Americans and Jobs - For more Americans, jobs are moving out of reach, literally. The number of “nearby jobs”–jobs within a typical commute for residents in a major metropolitan area–dropped 7% between 2000 and 2012, according to a new study of census data by the Brookings Institution. Minorities and poor Americans, who have moved to the suburbs in droves, fared worse. The number of nearby jobs fell 17% for Hispanic residents and 14% for blacks over this time period, compared with a drop of 6% for whites. Typical poor residents saw a drop in job proximity of 17%, versus 6% for the nonpoor. The growing distance between Americans and job opportunities is a discouraging trend amid what’s become the strongest job creation in two decades. People near jobs are more likely to work, and have shorter job searches and periods of joblessness—especially black Americans, women and older workers, Brookings says. Among the poor, being near a job increases the chances of leaving welfare.

The Shut-In Economy -- Five months ago I moved into a spartan apartment where dozens of startups and thousands of tech workers live. Outside my building there’s always a phalanx of befuddled delivery guys who seem relieved when you walk out, so they can get in. Inside, the place is stuffed with the goodies they bring: Amazon Prime boxes sitting outside doors, evidence of the tangible, quotidian needs that are being serviced by the web. The humans who live there, though, I mostly never see. And even when I do, there seems to be a tacit agreement among residents to not talk to one another. I floated a few “hi’s” in the elevator when I first moved in, but in return I got the monosyllabic, no-eye-contact mumble. It was clear: Lady, this is not that kind of building. Back in the elevator in the 37-story tower, the messengers do talk, one tells me. They end up asking each other which apps they work for: Postmates. Seamless. EAT24. GrubHub. A woman hauling two Whole Foods sacks reads the concierge an apartment number off her smartphone, along with the resident’s directions: “Please deliver to my door.” “They have a nice kitchen up there,” Angel says. The apartments rent for as much as $5,000 a month for a one-bedroom. “But so much, so much food comes in. Between 4 and 8 o’clock, they’re on fire.” I start to walk toward home. En route, I pass an EAT24 ad on a bus stop shelter, and a little further down the street, a Dungeons & Dragons–type dude opens the locked lobby door of yet another glass-box residential building for a Sprig deliveryman: “You’re…” “Jonathan?” “Sweet,” Dungeons & Dragons says, grabbing the bag of food. The door clanks behind him. And that’s when I realized: the on-demand world isn’t about sharing at all. It’s about being served. This is an economy of shut-ins.

Oil Patch Jobs Resistant to Price Plunge For Now -  Midland, Texas, a symbol of the American oil boom that has recent run into shaky ground, still has the lowest unemployment rate in the nation at just 2.6% in January, according to figures from the Labor Department published Friday. The Texan oil town was followed by Lincoln, Neb., a consistently stable employer, at 2.8%. That’s the same jobless rate as that of the state of North Dakota, also at the center of the energy sector’s expansion and still the lowest rate of any state in the nation, a separate report recently showed. Oil prices have plunged by more than 50% in the last eight months, raising concerns about the financial condition of some energy producers and refiners. In contrast, El Centro, Calif., has a startlingly high jobless rate, comparable to the elevated rates seen after the financial crisis in Southern Europe: 21.3%. Yuma, Ariz., was second highest at 19.8%. The broader national trend was fairly encouraging, mirroring solid improvements in the national job market during 2014 and early 2015. The national jobless rate stood at 5.5% in February. “Unemployment rates were lower in January than a year earlier in 339 of the 387 metropolitan areas, higher in 38 areas, and unchanged in 10 areas,” the report said. “…Over the year, nonfarm employment rose in all of the 51 metropolitan areas with a 2010 Census population of 1 million or more.”

BLS: Twenty-Six States had Unemployment Rate Decreases in February - From the BLS: Regional and State Employment and Unemployment Summary Regional and state unemployment rates were little changed in February. Twenty-six states had unemployment rate decreases from January, 6 states and the District of Columbia had increases, and 18 states had no change, the U.S. Bureau of Labor Statistics reported today.... Nebraska had the lowest jobless rate in February, 2.7 percent, followed by North Dakota, 2.9 percent. Nevada had the highest rate among the states, 7.1 percent. The District of Columbia had a rate of 7.8 percent.This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession.The size of the blue bar indicates the amount of improvement.   The yellow squares are the lowest unemployment rate per state since 1976. The states are ranked by the highest current unemployment rate. Nevada, at 7.1%, had the highest state unemployment rate although D.C was higher. North Dakota had had the lowest unemployment rate for 75 consecutive months, however Nebraska was the lowest in February.

February State Job Numbers Continue the Positive Trend - The February State and Regional Employment and Unemployment report released today by the Bureau of Labor Statistics was another sign that the economy is headed in the right direction. While unemployment is still above pre-recession rates in 39 states and the District of Columbia, the number of jobs is growing and at a faster rate than a year ago in nearly every state. From November 2014 to February 2015, 48 states and the District of Columbia added jobs, with Idaho (2.0 percent), Utah (1.8 percent), and Colorado (1.1 percent) experiencing the largest gains. While states benefiting from the shale oil and gas boom—primarily North Dakota—have received the most attention for their job numbers, these three states, along with their Northwest companions Washington and Oregon, have seen notable job growth recently. They have combined steady gains in healthcare with more recent upticks in manufacturing and construction, to realize substantial job growth over the past year. It is important to also note that these states, in contrast to much of the rest of the country, chose largely to either preserve or expand state and local government employment in the wake of the Great Recession. Over the same period, unemployment rates fell or remained unchanged in essentially all states. The largest declines in unemployment were in Oregon (-1.0 percentage points), Rhode Island (-0.6 percentage points), Idaho (-0.6 percentage points), and Michigan (-0.6 percentage points).

North Dakota’s Jobless Rate Is the Lowest No Longer - For the first time since the depths of the U.S. financial crisis, North Dakota no longer boasts the nation’s lowest jobless rate, a potential hint of trouble for energy-rich states bolstered by an oil boom that has since gone bust. The shale-rich state was replaced by Nebraska, whose unemployment rate fell to 2.7%. North Dakota’s rate rose to 2.9% from 2.8% in what the Bureau of Labor Statistics called “the only significant over-the-month rate increase” for any state. The last time the state did not have the lowest rate in the nation was October 2008, the Labor Department said.  Recent data on metro area unemployment showed jobs in the oil patch are still resistant to the 60% plunge in oil prices that began last summer, with Midland, Texas, showing the lowest jobless rate at 2.6%. At the opposite extreme among states, Nevada had the highest jobless rate in February at 7.1%, while the nation’s capital suffered even worse employment conditions with an unemployment rate of 7.8%. Broader trends mirrored the national data showing an improved but still mixed picture. Nonfarm payroll employment in February increased in 36 states, fell in 13 states and was unchanged in Wyoming, the report said. The Midwest had the lowest regional jobless rate at 5.1%, while the West had the highest at 6.1%. Over the past year, employment increased in all 50 states and Washington, D.C.

Recession’s Ebb Fuels a Slow Return to the Suburbs - With the recession’s impact fast receding, Americans are finally returning to the suburbs—and beyond. The population of U.S. counties that represent the “urban cores” of large metropolitan areas—inner cities and dense, inner suburban areas—grew just 0.73% between July 2013 and July 2014, down from a growth rate of 0.90% the previous year, according to an analysis of new data from the Census Bureau by William Frey, a demographer at the Brookings Institution. The year before, this growth rate also dropped, from 0.97%. Suburbs of large metro areas, by contrast, are seeing their growth rates increase. The population of newer suburbs grew 1.20% last year, Mr. Frey’s analysis shows, up from 1.11% and 1.01% in the two prior years. Perhaps most interesting: So-called exurbs—the peripheral parts of metro areas far from inner cities—saw population growth of 0.87% last year, up from 0.56% the previous year. This rate is now higher than the growth rate for inner cities. (Mr. Frey studied U.S. counties in metro areas with at least 500,000 people.) “The recession’s influence on migration is diminishing,” said Ken Johnson, a demographer at the University of New Hampshire, who analyzed the data and found similar trends. “Migration patterns may be reverting to those common before the recession.” Suburban counties of big metro areas, including fringe areas that tend to contain newer suburbs, are seeing significant inflows of domestic migrants, Mr. Johnson says— a trend more consistent with what prevailed during the 2000s.

Where’s the wage growth? Goldman Sachs has an answer -- Goldman Sachs is out with a great report on wages — as in, “Where’s the wage growth?” The GS economics team notes the following: “Nominal wage growth as measured by our “wage tracker”—a weighted average of the employment cost index, average hourly earnings, and compensation per hour— has remained broadly flat at around 2%. In contrast, a normal rate of wage growth would be in the range of 3%-4%, as Fed Chair Janet Yellen explained at her first FOMC press conference in March 2014.” So wage growth as been pretty anemic. Remember, those are nominal numbers. Would a tighter labor market boost wages? Perhaps. But just how tight is the US labor market right now? Sure, the jobless rate has dropped a lot, and it is now at the high end of the Fed’s so-called natural rate. But there is more to this story (as reflected in the above chart): The “total employment gap”— counting the unemployed, involuntary part-timers, and an estimate of the number of people who dropped out of the labor force for cyclical reasons—still shows about 2pp of remaining slack. From this perspective, the current rate of wage growth appears roughly in line with historical norms. Then again, it appears that “even clear signs of a tight labor market” in Germany “have produced only a modest increase in wage growth at best.” This perhaps suggests that broader, structural  factors — globalization, automation — may be at play there and here. Still, Goldman says, “the most compelling explanation is the most mundane one: substantial slack remains in the labor market.”

Income Inequality Is Wider in Atlanta Than in San Francisco or Boston - The gap between rich and poor has expanded in U.S. cities, and nowhere is that chasm wider than Atlanta. The top 5% of households earn nearly 20 times the income in the Georgia capital than the bottom 20%. That spread makes Atlanta the city with the highest degree of income inequality, ranking it ahead of San Francisco, Boston and Miami, according to a Brookings Institution study ranked released this week. Overall, there is wider income inequality in the nation’s 50 largest cities compared with the country as a whole. In cities, the top 5% earn 11.6 times the average household income of the bottom 20%. The gap is 9.3 times in the U.S. Both margins widened slightly in 2013 compared with 2012, according to the Brookings study. Income inequality did narrow in a few cities, including Nashville, Tenn., and Oklahoma City. Each of those rank among the cities with the smallest gap in earnings, but richer households still earn eight times their poorer neighbors.

Do Senators Lee and Rubio Have a Secret Plan to Help Poor Families? -- In its analysis of the tax reform plan proposed recently by Senators Marco Rubio (R-FL) and Mike Lee (R-UT), the Tax Foundation assumed the proposal would make the new personal credit ($2,000 for singles and $4,000 for married couples) fully refundable. This assumption helps explain why the group concluded the Lee-Rubio plan would be highly progressive. Full refundability would be a significant departure from an earlier plan put forward by Senator Lee that the Tax Policy Center found would raise taxes on poor families. It would be equivalent to a cash transfer payment that every adult could receive even if they had no income or tax liability– they’d just need to file a return and claim it. This change would be very advantageous for low-income households compared with the original Lee plan and, to a lesser extent, current law.  However, the staffs of senators Lee and Rubio have not confirmed to us that the plan would make the credit refundable and there is no indication in the official document that this is true. In contrast, the document describes in detail the portion of the proposed additional child tax credit that is refundable. A fully refundable personal credit would be a radical change. It would cause millions of Americans with no earnings and no other reason to file to become tax filers purely for purposes of claiming the credit.  (Such a credit also would create the potential for significant tax fraud since people would only need to possess a Social Security Number to be eligible.  Without third-party reporting to establish eligibility for the credit, this provision would be very difficult for the IRS to enforce. That said, while such a refundable personal credit has no precedent in US tax law, large unconditional cash payments have been proposed before.  Conservative icon Milton Friedman advocated a negative income tax—basically a flat tax with a large refundable tax credit—as a replacement for welfare programs that discouraged work.

Housing The Homeless Not Only Saves Lives -- It's Actually Cheaper Than Doing Nothing: It's cheaper to give homeless men and women a permanent place to live than to leave them on the streets. That’s according to a study of an apartment complex for formerly homeless people in Charlotte, N.C., that found drastic savings on health care costs and incarceration. Moore Place houses 85 chronically homeless adults, and was the subject of a study by the University of North Carolina Charlotte released on Monday. The study found that, in its first year, Moore Place tenants saved $1.8 million in health care costs, with 447 fewer emergency room visits (a 78 percent reduction) and 372 fewer days in the hospital (a 79 percent reduction). The tenants also spent 84 percent fewer days in jail, with a 78 percent drop in arrests. The reduction is largely due to a decrease in crimes related to homelessness, such as trespassing, loitering, public urination, begging and public consumption of alcohol, according to Caroline Chambre, director the Urban Ministry Center’s HousingWorks, the main force behind Moore Place. One tenant, Carl Caldwell, 62, said he used to go to the emergency room five to seven times a week, late at night, so he could spend the night there. “You wouldn’t believe my hospital bills,” Caldwell, who hasn’t had health insurance for years, told The Huffington Post. Caldwell was a teacher for 30 years and became homeless five years ago, when he lost his job and his roommate moved out.

Culture of brutality reigned at state prison in Florida Panhandle - During 14 years as a corrections officer, Kirkland was repeatedly accused — and not just by inmates, but by fellow corrections officers — of abusing inmates at the Northwest Florida Reception Center in Chipley. They said he contaminated inmates’ food, sprayed them with chemicals for no reason and threatened to break their fingers and to kill them, according to Florida Department of Corrections and court documents obtained by the Miami Herald. These practices flourished under former Warden Samuel Culpepper, a tough disciplinarian brought in to clean up the troubled institution. Under Culpepper, inmates in confinement at Northwest Florida said they were stripped naked or down to their boxers at the whim of guards and had all their belongings and their mattresses taken away, then left around the clock on a cold metal bunk for 72 hours or more, with nothing to hold, not even a Bible. DOC policy allows that to occur if an inmate in confinement — housed away from the general population — is impeding the institution’s normal operations. But inmates said the policy was taken to unheard-of extremes under Culpepper. Inmates complained that they would shiver, cold and petrified, waiting to be gassed.“They wait until you are naked and they spray you,’’ one inmate told a DOC investigator in 2009. According to prisoners, the guards would sometimes heat up the gas canisters before activating them, making the chemicals more potent and stick more stubbornly to inmates’ skin.

S.F. jail inmates forced to fight, public defender says -- San Francisco sheriff’s deputies arranged and gambled on battles between County Jail inmates, forcing one to train for the fights and telling them to lie if they needed medical attention, the city’s public defender said Thursday. Since the beginning of March, at least four deputies at County Jail No. 4 at 850 Bryant St. threatened inmates with violence or withheld food if they did not fight each other, gladiator-style, for the entertainment of the deputies, Public Defender Jeff Adachi said. Adachi said the ringleader in these fights was Deputy Scott Neu, who was accused in 2006 of forcing inmates to perform sexual acts on him. That case was settled out of court.  “I don’t know why he does it, but I just feel like he gets a kick out of it because I just see the look on his face,” said Ricardo Palikiko Garcia, one of the inmates who said he was forced to fight. “It looks like it brings him joy by doing this, while we’re suffering by what he’s doing.”

Missed pension payments sink DPS deeper in debt: Detroit Public Schools is $53 million behind in pension payments, costing the cash-strapped district $7,600 a day in interest penalties — or the equivalent of one child's annual state funding grant. Based on its minimal payments, the Detroit school district would be $81 million behind in mandatory pension contributions by July 1, state records show. The cost is exacerbated by $78,000 in fees for each month DPS remains delinquent — depriving the city schools of the equivalent of one teacher's annual salary and benefits. The sporadic pension payments, which date to October 2010, are the latest sign of worsening finances for Michigan's largest school system as it continues to rack up debts and hemorrhage students and cash. Forgoing required contributions for pension payments mirrors a cash-hoarding tactic the city of Detroit pursued in November 2012 — nine months before declaring bankruptcy. By most measures, Detroit's school system remains in a financial free-fall, with a projected deficit of $166 million this year. Enrollment has sunk to 47,238 students this year, down from 150,000 a decade ago, despite state oversight for 12 of the past 15 years and the recent arrival of its fourth emergency manager.

Divergent bond results for Chicago and Philadelphia schools (Reuters) - Two of the nation's most distressed big-city school districts issued general obligation bonds this week, with very different results. The junk-rated Philadelphia School District borrowed at investment-grade levels thanks to a state intercept program. But the higher-rated Chicago Board of Education paid a whopping 4 percent over the SIFMA Index on variable rate bonds - about five times more what it paid than two years ago. On Tuesday, PNC Capital Markets and BMO Capital Markets priced two series of unlimited tax GO refunding bonds totaling $178.1 million for the Chicago school district. The bonds priced "like distressed merchandise," said Municipal Market Data analyst Randy Smolik. The initial 4 percent over SIFMA floating rate is locked in for two years, according to the official statement. Two years ago, the district's bonds were priced at only 75 basis points and 83 basis points over SIFMA.All three Wall Street credit rating agencies downgraded Chicago schools in March, with Fitch Ratings and Moody's Investors Service knocking it down several notches, to one notch above junk. The school system, the nation's third largest, also plans to sell about $372 million of new and refunding GO bonds.

Philly schools counting on an extra $264 million next year: The Philadelphia School District is projecting a budget of $2.9 billion next year - a forecast that banks on $264 million in new city and state money that is not assured. The School Reform Commission unanimously adopted a "lump sum" financial statement Thursday that would pump more money into city classrooms rocked in recent years by cuts. It would represent a 10 percent increase over last year's spending plan. But the plan relies on $159 million in new money from the state and $105 million from the city, sums proposed by Gov. Wolf and Mayor Nutter, respectively, but that would have to be approved by skeptical lawmakers. Without the new city and state money, the district would face an $85 million deficit, due largely to fixed costs such as charter-school payments, pensions, and health-care costs rising faster than revenues.Chief financial officer Matthew Stanski said before Thursday's meeting that the district was aiming high. "Our target is not to balance the budget - our target is to get to $264 million in new revenue," Stanski said. "We desperately need it. The status quo is just not adequate for our students."

9 Billionaires Are About to Remake New York’s Public Schools—Here’s Their Story - The consensus that New York public schools do not require more funding is curious, given the landmark 2006 Campaign for Fiscal Equity court ruling and subsequent statewide resolution ordering the state to correct its inequitable school-funding formula to provide every student their constitutional right to “sound basic education.” In 2007, Governor Spitzer and the New York State Legislature enacted a statewide resolution, creating one statewide school aid formula based on student poverty concentration and district wealth and promising to add $5.5 billion in schools’s operating aid over four years. Yet in 2009, after two years of more equitable funding, the state froze school aid, citing the financial crisis. Over the next two years, New York State actually cut school funding, including $2.1 billion in classroom cuts. Zakiyah Ansari, a parent and public schools advocate with the labor-backed Alliance for Quality Education, called such reasoning shameful, “Why do Cuomo and these hedge funders say money doesn’t matter? I’m sure it matters in Scarsdale. I’m sure it matters where the Waltons send their kids. They don’t send their kids to schools with overcrowded classrooms, over-testing, no art, no music, no sports programs, etc. Does money only ‘not matter’ when it comes to black and brown kids?” But the coalition to remake New York’s education system isn’t hearing it. A few years ago, such blunt threats against public schools, the state’s formidable teachers’ union, NYSUT, not to mention the majority of Cuomo’s own party, would have been unthinkable. Yet over the last year, a dark-money charter-school advocacy group, Families for Excellent Schools, smashed almost all lobbying records in Albany and a Super PAC, New Yorkers’ for a balanced Albany poured $4.3 million into six Senate races, helping tip the Senate Republican in a state with six times as many registered Democrats as Republicans. Thus, with the infusion of five business-friendly senators, Governor Cuomo’s radical education reform bill is suddenly a real political possibility.

Goodbye, math and history: Finland wants to abandon teaching subjects at school - Finland already has one of the best school education systems. It always ranks near the top in mathematics, reading, and science in the prestigious PISA rankings (the 2012 list, pdf) by the Organisation for Economic Co-operation and Development. Teachers in other countries flock to its schools to learn from a country that is routinely praised as just a really, really wonderful place to live. But the country is not resting on its laurels. Finland is considering its most radical overhaul of basic education yet—abandoning teaching by subject for teaching by phenomenon. Traditional lessons such as English Literature and Physics are already being phased out among 16-year-olds in schools in Helsinki. Instead, the Finns are teaching phenomena—such as the European Union, which encompasses learning languages, history, politics, and geography. No more of an hour of history followed by an hour of chemistry. The idea aims to eliminate one of the biggest gripes of students everywhere: “What is the point of learning this?” Now, each subject is anchored to the reason for learning it. Many teachers in Finland, many of whom have been teaching single subjects their whole careers, oppose the changes. It is not hard to see why. The new system is much more collaborative, forcing teachers from different areas to come up with the curriculum together.  Marjo Kyllonen, Helsinki’s education manager and the person responsible for reforming the system in the capital, calls this “co-teaching” and teachers who agree to it get a small bonus on top of their salaries.

Why College Isn’t (and Shouldn’t Have to be) for Everyone - Robert Reich - I know a high school senior who’s so worried about whether she’ll be accepted at the college of her choice she can’t sleep. The parent of another senior tells me he stands at the mailbox for an hour every day waiting for a hoped-for acceptance letter to arrive. Parents are also uptight. I’ve heard of some who have stopped socializing with other parents of children competing for admission to the same university. Competition for places top-brand colleges is absurdly intense. With inequality at record levels and almost all the economic gains going to the top, there’s more pressure than ever to get the golden ring. A degree from a prestigious university can open doors to elite business schools and law schools – and to jobs paying hundreds of thousands, if not millions, a year. So parents who can afford it are paying grotesque sums to give their kids an edge. They “enhance” their kid’s resumes with such things as bassoon lessons, trips to preserve the wildlife in Botswana, internships at the Atlantic Monthly. They hire test preparation coaches. They arrange for consultants to help their children write compelling essays on college applications. They make generous contributions to the elite colleges they once attended, to which their kids are applying – colleges that give extra points to “legacies” and even more to those from wealthy families that donate tons of money.  Excuse me, but this is nuts. The biggest absurdity is that a four-year college degree has become the only gateway into the American middle class. But not every young person is suited to four years of college. They may be bright and ambitious but they won’t get much out of it. They’d rather be doing something else, like making money or painting murals. They feel compelled to go to college because they’ve been told over and over that a college degree is necessary. Yet if they start college and then drop out, they feel like total failures.

No, You Can’t Work Your Way Through College Anymore -- It’s a popular trope, especially among baby boomers, to lecture students to “just work your way through college! That’s what I did!” But it turns out, it’s nearly impossible to do that today. Randy Olson, a PhD candidate in Michigan State University’s Computer Science program, crunched the numbers, and found that students today need to work five times more hours than students did three decades ago: “The average university student in 1979 only had to work 182 hours per year (a part-time summer job) to pay for tuition, whereas the average 2013 student had to work 991 hours (a full-time job for half the year). That’s over 5x as many hours worked for the same education!” Olson also provided a chart of the trend through 2010, which makes for a pretty stunning visualization of the rising cost of higher education:  But what about financial aid, you might ask? Well, as Olson notes, that’s lower, too:“If the Federal aid trends in the past 30 years are any indication, students actually have less of their tuition costs paid for by financial aid nowadays than 30 years ago!” If you want to work your way through school these days, the only way to do that seems to be to alternate between 6 months in a full-time job, and 6 months in school. Paying for school while simultaneously working a part-time job is pretty much impossible these days.

Manual Labor, All Night Long: The Reality of Paying for College —  McLin, 21, is training to be a teacher, and so after she got off work and had some breakfast, she drove to an elementary school at 7:40 a.m and observed classes for four hours. That afternoon she attended a parent-teacher conference, capping off more than 24 hours straight of work and school with no sleep.  It wasn’t an unusual day for McLin, who is attending the University of Louisville for free through a program that pays her tuition if she works the overnight shift at UPS and keeps her grades above a C. The program, called Metropolitan College, has been held up as a model of a public-private partnership, helping students pay for school while filling holes in the workforce. Indeed, McLin, a chipper redhead whom I interviewed at the UPS facility at two in the morning last week, told me this was the only way she could attend college, as her family can’t afford the tuition. But even her family is incredulous at the hours she keeps. Tour the UPS facility between midnight and 4 a.m. Monday through Friday and you’ll see many students like McLin sorting mail envelopes, dragging heavy containers full of packages to and from airplanes, and unloading carts of mail onto conveyor belts, 155 miles of which chug around the facility. Of the 6,000 people working there on any given night shift, about 2,000 of them are in the Metropolitan College program, which gives in-state tuition to the night-shift workers to attend either the University of Louisville or Jefferson Community and Technical College during the day.

House Budget Committee Plan Cuts Pell Grants Deeply, Reducing Access to Higher Education — The House Budget Committee budget plan calls for large cuts in Pell Grants, which help more than 8 million students from low- and modest-income families afford college. These are among the plan’s $5 trillion in cuts in non-defense programs, 69 percent of which would come from programs that help families with low or modest incomes.[1]  The plan’s cuts in Pell Grants and other education programs would make it more difficult for these students to afford college at a time when those costs are rising quickly. The plan freezes the maximum Pell Grant for ten years, even as tuition and room and board costs will continue to rise. It also eliminates Pell Grant funding on the mandatory side of the budget (Pell Grants receive both mandatory and discretionary funding, as explained below), likely forcing further cuts in eligibility and benefits. In addition, it would make student loans more expensive and cut other education and training programs (see box). The plan justifies its Pell Grant cuts by raising questions about the program’s finances and impact on the cost of higher education. These claims, however, are without merit.

International Students Stream Into U.S. Colleges - WSJ: American universities are enrolling unprecedented numbers of foreign students, prompted by the rise of an affluent class in China and generous scholarships offered by oil-rich Gulf states such as Saudi Arabia. Cash-strapped public universities also are driving the trend, aggressively recruiting students from abroad, especially undergraduates who pay a premium compared with in-state students. There are 1.13 million foreign students in the U.S., the vast majority in college-degree programs, according to a report to be released Wednesday by the Department of Homeland Security. That represents a 14% increase over last year, nearly 50% more than in 2010 and 85% more than in 2005. Students from China account for the largest share—331,371 of all international students, or 29%. Nearly 81,000 subjects of the Saudi kingdom are studying in the U.S. this school year, up from about 5,000 in 2000-01. Nearly three-quarters of Saudi students are enrolled in bachelor’s programs or English-language programs that precede starting undergraduate studies here. Of the top five campuses for international students, two are public universities: Purdue, at No. 2, and the University of Illinois Urbana-Champaign, at No. 4. The No. 1 school is the University of Southern California, with 12,480 students, according to the report. Columbia ranks No. 3. and New York University comes in at No. 5.

The Capitalist Takeover of Higher Education -- The great under-reported crime against education by corporate America is not the buying and selling of schools by for-profit corporations; that this is a significant threat to education is indubitable and well-documented. But the little-discussed threat to education is the deliberate “hollowing-out” of education from within—i.e. by the philosophy which views education, especially at and up through the community-college level, as preparing students to take jobs in the business world upon their graduation, rather than to learn the art of deepening their distinctly human character by engaging in learning and reflection through courses and content that cannot be bought or sold in the business world, such as philosophy, art, humanities, the history of human cultures, logic and critical thinking, ethical decision-making, etc. These are all activities the deepening of which has traditionally been seen as part of the very definition of a college-level education. These are the activities usually called “academic,” and their function was to deepen and expand the humans who engaged in them, in what, for many students, would be a once-in-a-lifetime experience. There are three ways in particular in which this hollowing out is being done: emphasis on and money thrown into “basic skills” courses, used to get students to levels of reading and writing they need for jobs; emphasis on “student success,” defined as the numbers of students who pass a given course; and deliberately starving, reducing, and eliminating programs that widen student’s views and teach them to rationally reflect on and analyze their society and its trends.  The focal point of this corporate shift in educational philosophy is clearly reflected in President Obama’s so-called “community college initiative.” That Obama’s plan is not advocating academic education, but turning college-level education into job training, was put succinctly in a news story on PBS, which characterized Obama’s community college proposal as “a plan to better connect the training of students at community colleges with specific types of jobs in the marketplace.”

How The Education System Destroys Social Networks - I was at a restaurant for lunch and had time to visit with the waitress, who turns out to be a college graduate from a good institution. She has a degree in European languages. Here she is waiting tables with nondegreed people, some five years her junior, some 10 years her elder. She is making good money, but so are her co-workers. You have to wonder: given her position, what was the professional advantage to her of those four hard years in school and the $100K spent on them? What were the opportunity costs? This is not another article to disparage the value of a college degree. I would like to raise a more fundamental question. It concerns the strange way in which our education system has overly segmented our lives into a series of episodic upheavals, each of which has little to do with the other, the value of one accomplishment being oddly disconnected from the next stage, and none of them directly connecting to our professional goals except in the unusual case.  Instead of drawing down on accumulated capital, they end up starting fresh at age 22. Even after years of building social capital, they are drawing down on a nearly empty account. There is something seriously wrong with this system. Shouldn’t our investments in our friendship networks extend across and beyond the stages of our development to make more of a difference in our lives? Many students find themselves devastated to lose the only social group and friendship network they’ve ever known. They worked for years to cultivate it, and in an instant, it is blown apart. They are left with a piece of paper, a yearbook of memories, a transcript, and, perhaps a few recommendation letters from teachers — recommendations that do them little good in the marketplace.

Valuing college on a risk-reward basis - Another study, “US university degrees: High cost, high reward,” showing that completing college is a good financial deal. But this one is a bit different in that it looks at the return of investment on a risk-reward basis. As researchers Jeffrey Brown, Chichun Fang, and Francisco Gomes explain, “College-educated workers are less likely to experience unemployment than workers without a high school diploma, but they also face much higher uncertainty in their career paths and lifetime earnings.” From the study: It is nevertheless important to point out that even in the most conservative estimates the value of college education is still positive even after we account for the (direct and indirect) cost.  The rate of return to attend a public (private) college is 76% to 353% (74% to 180%), depending on individual risk preference. Hence, the value of college education is still quite large and our results suggest that college education still a worthy investment. And again, completing college is a lot different than merely attending college. AEI’s Andrew Kelly: For me, a more effective message would be to tell a prospective student that yes, completing college is, on average, worth the time and money. But not all postsecondary options are created equal, so choose the one that reflects your talents and abilities and gives you the best chance of success. And if you choose to go, work your tail off to make sure you finish.

Sen. Ron Johnson on slashing student aid: Federal loans are a waste because ‘college is fun’: Senator Ron Johnson (R-WI) suggested on Saturday that students were taking out loans because “college is fun.” While speaking to a group of constituents at a town hall event in Verona, Johnson was asked about the high cost of higher education. Johnson said that he had been trying “to make the point that a lot of government’s well intentioned programs have a very negative unintended consequence.” “Starting about mid-60s, one year of college cost about $1,000,” he explained. “Had the cost of college just increased by the rate of inflation, today, one year of college should cost a little over $7,000. But instead, it costs over $18,000.” According to Johnson, the cost of college sky-rocketed because “the federal government got involved.” “It threw money at the problem,” he declared. “It also created a bunch of band-aids. You know, regulations also drives up the cost. So we have not only given hundreds of billions of dollars worth of grant money… but we have also enticed our children — by subsidising loans — we’ve enticed them to incur $1.3 trillion worth of debt.”

Student Loan Debt Is the Enemy of Meritocracy in the US - Piketty ---...the amount of household debt and even more recently of student debt in the U.S. is something that is really troublesome and it reflects the very large rise in tuition in the U.S. a very large inequality in access to education. I think if we really want to promote more equal opportunity and redistribute chances in access to education we should do something about student debt. And it's not possible to have such a large group of the population entering the labor force with such a big debt behind them. This exemplifies a particular problem with inequality in the United States, which is very high inequality and access to higher education. So in other countries in the developed world you don't have such massive student debt because you have more public support to higher education. I think the plan that was proposed earlier this year in 2015 by President Obama to increase public funding to public universities and community college is exactly justified.This is really the key for higher growth in the future and also for a more equitable growth..., you have the official discourse about meritocracy, equal opportunity and mobility, and then you have the reality. And the gap between the two can be quite troublesome.  So this is like you have a problem like this and there's a lot of hypocrisy about meritocracy in every country, not only in the U.S., but there is evidence suggesting that this has become particularly extreme in the United States. ... So this is a situation that is very troublesome and should rank very highly in the policy agenda in the future in the U.S.

College-Savings Accounts Could Be a Key Tool For Reducing Student Debt, New Research Says - College-savings accounts became a flash point in the national debate over how to help the middle class last month when President Barack Obama’s budget proposed gutting a popular version of them.  New research suggests such accounts could be a key tool for helping Americans afford college while avoiding student debt. A paper published in the current issue of the Federal Reserve Bank of St. Louis Review finds that having a college-savings account established by parents substantially lowered a student’s probability of taking on student debt. The study, conducted by economists at the University of Kansas and Washington University in St. Louis, tracked 2,992 students who were high-school sophomores in 2002 and graduated college by 2012. The authors, using data from the Educational Longitudinal Survey through the National Center for Education Statistics, controlled for variables such as race, ethnicity, gender and household income. Their conclusion: College graduates “whose parents had college savings for them as high school sophomores are about 39 percent less likely to have student loan debt than graduates whose parents did not have college savings for them as high school sophomores.” The study also finds that among those who took on debt, having a college-savings account led to lower debt burdens. College grads whose parents had college-savings accounts had $3,208.88 less student debt than graduates whose parents did not, the study says.

Pension Funds Seek Shelter From Dollar’s Rise - The soaring U.S. dollar is driving pension funds into the currency markets, in part to protect their overseas investments but also to take advantage of some of the biggest price swings in the financial world. In January, the California State Teachers Retirement System, the nation’s second-largest public pension fund with $190.8 billion under management, handed $500 million to a pair of specialist currency funds as part of an effort to limit losses on their international investments, which fall in value as the dollar rises against other currencies. Late last year, the $150.2 billion Florida State Board of Administration expanded its currency investments by more than 10%, to $2.25 billion. Last June, the $29 billion Connecticut Retirement Plans & Trust Funds hired two managers to help reduce the foreign-currency risks in its international stock investments. And the $14.3 billion Kansas Public Employees Retirement System is now looking to hire a currency manager. The clamor to protect against currency swings marks a return to a strategy that pension funds have tried on and off for years, with mixed results. While it is good news for the money managers that provide the strategies, which stand to reap tens of thousands of dollars in fees for every pension plan that signs up, it also adds to the risks taken on by pensions. Currency markets are among the most volatile, raising the potential for big profits, but also big losses.

Phoenix, other Valley cities reel from pension spikes: Valley cities are experiencing sticker shock over a $28.6 million spike in police and fire pension bills for next fiscal year. Seven cities will fork over more money, with Mesa taking the biggest hit, an $8.7 million increase, and Phoenix coming in second, at $6 million. Tempe and Glendale will experience the next-highest spikes of $4.2 million and $3.3 million, respectively, followed by Chandler at $2.7 million, Scottsdale at $2.6 million and Gilbert at $1.1 million. Cities have seen their pension costs rise steadily in recent years, but next year they will experience the additional bump mostly due to the Arizona Supreme Court's decision to strike down part of a 2011 state law crafted to rein in pension costs.  As part of the February 2014 ruling, the court ruled the state's Public Safety Personnel Retirement System must repay retirees $40 million for previous cost-of-living increases and set aside $335 million in a reserve fund for future increases.

Significant pension cuts loom for retirees - Since Whitley Wyatt retired in 2000 after 33 years as a trucker, he’s collected a pension of $3,300 a month. Now, the 71-year-old says as much as $2,000 of his monthly check is at risk because of legislation passed by Congress last year that is meant to help underfunded multiemployer pension plans bolster their finances by giving them a way to cut benefits for some retirees. “We definitely will have to adjust our lifestyle,” he said of him and his wife if there is a cut that big. “We have ongoing and increasing medical expenses. It could be catastrophic just from the respect of the money we contribute to charity and church (and) money we contribute to our grandkids for their future education.” The legislation affecting the retirees was added at the last minute. It is targeted at companies that enter into pension plans with other companies. There are about 10 million workers and retirees in 1,400 multiemployer plans, according to the Pension Rights Center in Washington. About 150 to 200 plans covering 1.5 million workers and retirees could run out of money within the next 20 years. The measure would affect nearly 48,000 retired, inactive or active workers in Ohio.

The Retirement Crisis -- Yves Smith - This interview, with Teresa Ghilarducci, who the Wall Street Journal called “the most dangerous woman in America,” discusses how and why pensions are under stress, and what can be done to fix them. While she agrees that the retirement crisis is real, she also argues that it is eminently fixable, particularly since there really is no free lunch. The alternative, of widespread poverty among the aged, also imposes costs on government and society.   Ghilarducci also points out that the biggest reason that pensions are coming up short is due to how much the managers are extracting in feed. Ghilarducci’s dangerous idea, which she discusses here, is that of lowering the Medicare age to 60. She contends that it will pull in older workers that are un or underinsured, but also generally healthier than the over 65 Medicare pool. The combination of intervening earlier for some long-term ailments, most important of all diabetes, plus getting a broader set of risks into the pool, will lower overall costs.

Freedom of choice is less important than a pension free of risk - Liberty has its limits. This is nowhere more true than in the tedious and technical task of providing people with a pension in their retirement. Politicians and industry practitioners in the US and the UK must remember that as they wrestle with this issue once more. The question of freedom of choice has bedevilled pensions provision for decades, since the US and the UK embarked on the shift from defined benefit pensions, where employers guarantee a pension in retirement and bear the risk that the investments they put aside to fund it will fall short, to defined contribution pensions, where the risk of poor returns is taken by pensioners. Some countries, such as Canada, the Netherlands or Japan, still leave almost all pension provision to defined benefit plans. But globally, the US has shifted the balance to defined contributions. If we are to bear the risk ourselves, how much freedom should we have? In the UK, the government announced this week that it will allow pensioners to sell their annuities — the stream of guaranteed income that the government required them to buy with the proceeds of their pension fund when they retired. This continues a series of such reforms, and would allow them to reinvest it somewhere or to spend it. In the US, politicians and the investment industry are tearing themselves apart over the issue of whether advisers who sell pensions should have a fiduciary responsibility — or, in other words, whether they should be required to act in line with the interests of the client. The White House has announced an intention to enforce this, to protect consumers, over vocal criticism from the investment industry.

Diabetes Diagnoses Surge in States Which Expanded Medicaid - The big news is that expanded access to Medicaid causes increased diagnosis of diabetes which presumably causes better health in the not so distant future. Google is impressed. I quote Sabrina Tavernise in The New York TimeThe number of new diabetes cases identified among poor Americans has surged in states that have embraced the Affordable Care Act, but not in those that have not, a new study has found, suggesting that the health care law may be helping thousands of people get earlier treatment for one of this country’s costliest medical conditions. One in 10 Americans have diabetes, and nearly a third of cases have not been diagnosed. The disease takes a toll if it is caught too late, eventually causing heart attacks, blindness, kidney failure and leg and foot amputations. The Centers for Disease Control and Prevention estimates that the disease accounts for $176 billion in medical costs annually. The poor and minorities are disproportionately affected. In the new study by Quest Diagnostics, a medical testing company, researchers analyzed laboratory test results from all 50 states in the company’s large database over two six-month periods. In the states that expanded Medicaid, the number of Medicaid enrollees with newly identified diabetes rose by 23 percent, to 18,020 in the first six months of 2014, from 14,625 in the same period in 2013. The diagnoses rose by only 0.4 percent — to 11,653 from 11,612 — in the states that did not expand Medicaid. This is important news, but it shouldn’t surprise anyone. The reason is that we already know that expanded access to Medicaid causes more diagnosis of diabetes. This was an extremely statistically significant result of the New England Journal of Medicine study of the Oregon Medicaid lottery. Somehow, the study was interpreted as showing small (or for the statistically illiterate zero) benefits from Medicaid.  I love to say I told you so, but I told you so.

I think a pig just flew by my window -- I’ve been on record, both here and on Twitter, being skeptical a doc fix might ever pass. I’ve also been skeptical, both at the Upshot and in talks, that this Congress could pass a CHIP extension. Evidently, the House is doing everything in its power to prove me wrong: The House overwhelmingly approved sweeping changes to the Medicare system on Thursday, in the most significant bipartisan policy legislation to pass through that chamber since the Republicans regained a majority in 2011. The measure, which would establish a new formula for paying doctors and end a problem that has bedeviled the nation’s health care system for more than a decade, has already been blessed by President Obama, and awaits a vote in the Senate. The bill would also increase premiums for some higher income beneficiaries and extend a popular health insurance program for children. The legislation, which passed on a 392-to-37 vote, embodies a rare and significant agreement negotiated by Speaker John A. Boehner and the House Democratic leader, Representative Nancy Pelosi of California, two leaders who are so often at odds with each other. It’s been so long since I’ve see a bipartisan effort to pass anything substantial that I really don’t know how to process it. I’m literally stunned.

Medicare Doc Fix is Fixed — Sort of — for Now -- The House overwhelmingly approved sweeping changes to the Medicare program (voting 392 to 37) which would establish a new formula for paying doctors and increasing premiums for Medicare beneficiaries.  The John Boehner-Nancy Pelosi measure would replace a 1997 formula that linked doctor pay to economic growth with a new one that is more focused on "quality of care and performance" by rewarding them for higher-quality work, rather than on the volume of their services. According to Forbes (who isn't happy with the plan): "Medicare payments to doctors would rise by 0.5% in each of the next four years—a rate that is likely to be well below inflation. Then, payments would be frozen for the next six years. After that, physicians would get modest annual increases again. After 2019, doctors would receive financial incentives to participate in two alternative payment systems that would tie their compensation to performance. Potentially, this could improve the quality of care for seniors. That, in turn, could reduce their acute health episodes and hospitalizations and might even save Medicare money."

The Medicare “Doc Fix” That Isn’t -- As you listen to House Democrats and Republicans sing kumbaya  over their bipartisan agreement to fix the Medicare physician payment system, keep one thing in mind: The doc fix doesn’t fix much, and what it does repair likely will add hundreds of billions of dollars to the debt in coming years. The bill would accomplish one big thing: It would repeal a Medicare payment formula that was supposed to cut physician compensation, but which Congress has blocked every year since 2003. This fantastical payment method would result in an impossible 21 percent cut for Medicare docs this year, a threat that is driving congressional action. But beyond repealing that formula, the House’s doc fix is an amalgam of temporary solutions to a host of health policy issues, special interest subsidies, and a promise of better health care for seniors—but not for at least five years. It may improve the way Medicare reimburses docs for the services they provide, but it won’t fix the problem. Equally troubling, the House bill would add $141 billion to the deficit over the next 10 years, according to the official Congressional Budget Office score, and $500 billion by 2035, according to the Committee for a Responsive Federal Budget.

Under Health Care Act, Many Tax Filers Are Discovering Costly Complications - When he signed up for health insurance through the Affordable Care Act last fall, J. C. Ciesielski estimated his income at $19,400, qualifying him for a federal subsidy that cut his premiums in half. But Mr. Ciesielski, an actor, earned an extra $2,340 from a voice-over job in December, and that welcome bit of income proved problematic when he did his taxes this month.A tax preparer told Mr. Ciesielski that because he had not informed the federal health insurance marketplace,  Under the Affordable Care Act, people who remained uninsured last year must either pay a penalty with their taxes, one of the most contentious elements of the law, or claim an exemption. The Obama administration has said up to six million people would owe a penalty of $95 or 1 percent of their household income, whichever is greater. But as many as 30 million people are getting exemptions, mainly because they are too poor to afford health insurance or because they live in a state that refused to expand Medicaid last year under the health law.And people who did get insurance but, like Mr. Ciesielski, underestimated their income for 2014 — the figure on which subsidies are calculated — are being required to pay back part of their subsidy. In late February, H & R Block reported that its uninsured clients had paid an average penalty of $172. The money comes out of refunds, while people who do not get refunds are required to pay the Internal Revenue Service by April 15.

Hidden Healthcare Horrors - Paul Krugman - One of the odder subplots of the health reform saga has been the almost pathetic efforts of Republicans to come up with Obamacare horror stories. You might think that given the complexity of the law and the almost unlimited resources of the propaganda machine, they’d be able to come up with someone to serve as the poster child of the law’s terrible effects on innocent Americans. As far as I know, however, we have yet to see a single credible example — all the characters featured in Koch brothers ads or GOP speeches have turned out to be potential beneficiaries of the Affordable Care Act, if only they were willing to look at their actual options. So Cathy McMorris Rodgers went on Facebook to ask for Obamacare horror stories — and instead got an avalanche of testimonials from people who got essential insurance and care thanks to the ACA. Why can’t the GOP find the horror stories it knows, just knows, must be out there? Matthew Yglesias gets at most of it by noting that Obamacare does, in fact, redistribute from the few to the many: [O]ne of the main things it does is raise taxes rather dramatically on a pretty small number of high-income people in order to give subsidized health insurance policies to a substantially larger number of low-income people. Indeed, this is one of the main things Republicans don’t like about it! Millionaires paying higher taxes aren’t the only people hurt, at least slightly, by the law. If you are a young. healthy person (especially if you’re male), living in a state that didn’t have community rating pre-ACA, you may have had a cheap policy that went up in price once the law went into effect; and if you’re affluent as well, you don’t receive subsidies. So there are victims out there.  The problem for the GOP is that they’re the wrong kind of victims.

Taming Health Costs by Keeping High-Maintenance Patients Out of the Hospital - Jerome Pate, a homeless alcoholic, went to the emergency room when he was cold. He went when he needed a safe place to sleep. He went when he was hungry, or drunk, or suicidal.“I’d go sometimes just to have a place to be,” he said.  He made 17 emergency room visits in just four months last year, a costly spree that landed him in the middle of an experiment to reinvent health care for the hardest-to-help patients here in Hennepin County. More than 11 million Americans have joined the Medicaid rolls since the major provisions of the Affordable Care Act went into effect, and health officials are searching for ways to contain the costs of caring for them. Some of the most expensive patients have medical conditions that are costly no matter what. But a significant share of them — so-called super utilizers like Mr. Pate — rack up costs for avoidable reasons. Many are afflicted with some combination of poverty, homelessness, mental illness, addiction and past trauma.  A patchwork of experiments across the country are trying to better manage these cases. The Center for Health Care Strategies, a policy center in New Jersey, has documented such efforts in 26 states. Some are run by private insurers and health care providers, while others are part of broader state overhaul efforts. The federal government is supporting some, too, through its $10 billion Innovation Center, set up under the Affordable Care Act. “We had this forehead-smacking realization that poverty has all of these expensive consequences in health care,” said Ross Owen, a county health official who helps run the experiment here. “We’d pay to amputate a diabetic’s foot, but not for a warm pair of winter boots.”

Ted Cruz signs up for Obamacare after vowing to repeal ‘every word’ of it  - Republican Senator Ted Cruz, who has vowed to repeal “every word” of Obamacare if elected president next year, will soon be signing up for coverage under the plan. Cruz, according to media reports, had been covered under the health plan of his wife, Heidi, who is taking a leave of absence from Goldman Sachs to help his campaign.“We will presumably go on the exchange and sign up for health care, and we’re in the process of transitioning over to do that,” the Texas lawmaker told the Des Moines (Iowa) Register on Tuesday.

Obamacare Is Spurring Startups and Creating Jobs - -- More than 90 new health-care companies employing as many as 6,200 people have been created in the U.S. since Obamacare became law, a level of entrepreneurial activity that participants say may be unprecedented for the industry. Zenefits, which provides human-resources software and acts as a health-insurance broker for small employers, wouldn’t exist without the law, said Parker Conrad, the firm’s chief executive officer. Since the Affordable Care Act’s inception in April 2013, the San Francisco-based company has grown to more than 900 employees. That makes it the largest firm among dozens that have sprouted in the law’s wake, according to PricewaterhouseCoopers, which issued a report on the trend this week. The health law, which took full effect in 2014, represents the most dramatic change to the U.S. health system in 50 years. Entrepreneurs, including some from within President Barack Obama’s administration, have founded companies that target employers, health insurers, hospitals, doctors and consumers looking to navigate new requirements and possibilities.

Five things Americans still don’t understand about Obamacare - Five years after President Obama signed the Affordable Care Act into law, many Americans still misunderstand key aspects of the landmark legislation and the impact it has had on the health insurance marketplace, a new poll shows. While a majority of Americans – 60 percent – correctly assume that more Americans have been able to secure health insurance since the passage of the Affordable Care Act, misconceptions remain about who qualifies for subsidies and how much they are costing the federal government, according to a survey of 1,067 US adults conducted by PerryUndem Research/Communication for Vox Media. Some 57 percent of respondents reported that they did not have enough information to sufficiently understand the law. That, in itself, is unsurprising. Americans' confusion with the individual policies of the ACA have been well-documented. For example, a Kaiser Family Foundation survey released in March found that just over half of respondents were aware that the penalty for not purchasing health insurance takes effect this year. Two in 10 respondents thought it would go into effect in 2016, while one in 10 thought the penalty was rolled out last year – and about one in 6 respondents said they didn't know when the penalty would take effect. "Taken overall, the poll paints a frustrating picture for Democrats: most Americans aren't changing their opinion; those who are have mostly become more negative; and some widely held beliefs about the Affordable Care Act are far from accurate," wrote Sarah Kliff of Vox. "But it's not all good news for Republicans, either: though most Americans dislike Obamacare, more want to see it improved than repealed."  Here are five misconceptions that persist:

Hospitals Are Wrong About Shifting Costs to Private Insurers - To hear some hospital executives tell it, they have to make up payment shortfalls from Medicaid and Medicare by charging higher prices to privately insured patients. How else could a hospital stay afloat if it didn’t? But this logic is flawed. Study after study in recent years has cast doubt on the idea that hospitals increase prices to privately insured patients because the government lowers reimbursements from Medicare and Medicaid.  Indeed, one recent study found that from 1995 to 2009, a 10 percent reduction in Medicare payments was associated with a nearly 8 percentreduction in private prices. Another study found that a $1 reduction in Medicare inpatient revenue was associated with an even larger reduction — $1.55 — in total revenue. This would be impossible if hospitals were compensating for lower Medicare revenue by charging private insurers more. (Under different market conditions in prior eras, but not today, a few studies found some evidence that hospitals made up shortfalls from one payer with higher prices charged to another. Some are reviewed in a paper by me in Milbank Quarterly, and older ones are summarized in work by Michael Morrisey.) The theory that hospitals charge private insurers more because public programs pay less is known as cost shifting. What underlies this theory is that a hospital’s costs — those for staff, equipment, supplies, space and the like — are fixed. A procedure or visit simply takes a certain amount of time and requires a specific set of resources. Therefore, if Medicare, say, does not pay its full share of those costs, a hospital is forced to offset the loss with higher prices demanded of private insurers.

Cancer drug prices rise with no end in sight - March 2015 has been a big month for cancer drugs and the pharmaceutical industry. The US Food and Drug Administration (FDA) granted Bristol-Myers Squibb approval to use the PD-1 inhibitor, Opdivo, in the treatment of advanced squamous non-small cell lung cancer.1 The drug was approved on the basis of results from a clinical trial suggesting patients who received Opdivo lived an average of 3.2 months longer than those who received standard care. Abbvie announced its intention to buy Pharmcyclics for approximately $21 billion – a move largely motivated by the prospect of bringing Imbruvica, a drug used to treat chronic lymphocytic leukaemia, into the company’s portfolio.2 Total US prescription drug spending rose 13% in 2014, the biggest increase in a decade.3 Driving this trend is spending on branded specialty drugs – spending on drugs to treat inflammatory diseases, hepatitis C, multiple sclerosis, and cancer rose an unprecedented 31%. This column discusses recent research into the relationship between inflation-adjusted launch prices and survival benefits and approval year for 58 anticancer drugs approved in the US between 1995 and 2013. The authors find that launch prices are going up by $8,500 per year, approximately 12% year over year.

California bill that would allow assisted suicide passes Senate panel - Physician-assisted suicide would be legal for terminally ill patients in California under a bill passed on Wednesday by a committee of the state Senate. The bill, passed by the Senate Health Committee, would allow patients who are mentally competent and have fewer than six months to live to obtain prescriptions for medication to end their lives. “This end-of-life decision should remain with the individual, as a matter of personal freedom and liberty without criminalize those who help to honor our wishes,” said state Senator Lois Wolk, a Democrat representing suburbs east of San Francisco and the state's wine country and one of the bill's authors. The California bill is moving through the legislature at a time when the issue of assisted suicide has sparked public attention following the death of brain cancer patient Brittany Maynard last fall. Maynard, who was diagnosed with brain cancer at 29, moved from California to Oregon, where physician assisted suicide is legal, dying there because California forbids the practice. Before she died, Maynard recorded testimony in favor of passing such a law in California, which was played for the committee on Wednesday.

Kentucky’s New Heroin Law Marks A ‘Culture Shift’ - On Tuesday night, Kentucky lawmakers passed wide-ranging legislation to combat the state’s heroin epidemic. The bipartisan measure represents a significant policy shift away from more punitive measures toward a focus on treating addicts, not jailing them.  The state will now allow local health departments to set up needle exchanges and increase the number of people who can carry naloxone, the drug that paramedics use to save a person suffering an opioid overdose. Addicts who survive an overdose will no longer be charged with a crime after being revived. Instead, they will be connected to treatment services and community mental health workers. At a Wednesday morning press conference before he signed the bill into law, Gov. Steve Beshear (D) said the legislation sent a simple message to addicts across Kentucky: "We’re coming to help you. Work with us. Help us to help you to get on the road to recovery." In the past, help along the road to recovery in Kentucky typically meant an abstinence-only program that barred the use of medically assisted treatments -- the very treatments the broader medical establishment deems essential to an opiate addict’s survival. In January, a Huffington Post investigation chronicled how this approach was failing opiate addicts. It found that the vast majority of heroin addicts in Northern Kentucky who suffered fatal overdoses in 2013 had some experience with 12-step or other abstinence-only treatment.

Ethics Rules Keep DeCode Genetics From Revealing Cancer Risks - The CEO of an Icelandic gene-hunting company says he is able to identify everyone from that country who has a deadly cancer risk, but has been unable to warn people of the danger because of ethics rules governing DNA research. The company, DeCode Genetics, based in Reykjavík, says it has collected full DNA sequences on 10,000 individuals. And because people on the island are closely related, DeCode says it can now also extrapolate to accurately guess the DNA makeup of nearly all other 320,000 citizens of that country, including those who never participated in its studies. That’s raising complex medical and ethical issues about whether DeCode, which is owned by the U.S. biotechnology company Amgen, will be able to inform members of the public if they are at risk for fatal diseases. Kári Stefánsson, the doctor who is founder and CEO of DeCode, says he is worried about mutations in a gene called BRCA2 that convey a sharply increased risk of breast and ovarian cancers. DeCode’s data can now identify about 2,000 people with the gene mutation across Iceland’s population, and Stefánsson said that the company has been in negotiations with health authorities about whether to alert them. “We could save these people from dying prematurely, but we are not, because we as a society haven’t agreed on that,” says Stefánsson. “I personally think that not saving people with these mutations is a crime. This is an enormous risk to a large number of people.”

Are smartphones making our children mentally ill? -  Julie Lynn Evans has been a child psychotherapist for 25 years, working in hospitals, schools and with families, and she says she has never been so busy. “In the 1990s, I would have had one or two attempted suicides a year – mainly teenaged girls taking overdoses, the things that don’t get reported. Now, I could have as many as four a month.” And it’s not, she notes, simply a question of her reputation as both a practitioner and a writer drawing so many people to the door of her cosy consulting rooms in west London where we meet. “If I try to refer people on, everyone else is choc-a-bloc too. We are all saying the same thing. There has been an explosion in numbers in mental health problems amongst youngsters.” The floodgates of desperate youngsters opened, she recalls, in 2010. “I saw my work increase by a mad amount and so did others I work with. Suddenly everything got much more dangerous, much more immediate, much more painful.”  Official figures confirm the picture she paints, with emergency admissions to child psychiatric wards doubling in four years, and those young adults hospitalised for self-harm up by 70 per cent in a decade.  “Something is clearly happening,” she says, “because I am seeing the evidence in the numbers of depressive, anorexic, cutting children who come to see me. And it always has something to do with the computer, the Internet and the smartphone.”  “It’s a simplistic view, but I think it is the ubiquity of broadband and smartphones that has changed the pace and the power and the drama of mental illness in young people.”

The Toxins That Threaten Our Brains - Forty-one million IQ points. That’s what Dr. David Bellinger determined Americans have collectively forfeited as a result of exposure to lead, mercury, and organophosphate pesticides. Bellinger calculates a total loss of 16.9 million IQ points due to exposure to organophosphates, the most common pesticides used in agriculture. Last month, more research brought concerns about chemical exposure and brain health to a heightened pitch. Philippe Grandjean, Bellinger’s Harvard colleague, and Philip Landrigan named 12 chemicals—substances found in both the environment and everyday items like furniture and clothing—that they believed to be causing not just lower IQs but ADHD and autism spectrum disorder. Pesticides were among the toxins they identified. Grandjean estimates that there are about 45 organophosphate pesticides on the market, and “most have the potential to damage a developing nervous system.” “These are the chemicals I really worry about in terms of American kids, the organophosphate pesticides like chlorpyrifos.” For decades, chlorpyrifos, marketed by Dow Chemical beginning in 1965, was the most widely used insect killer in American homes. Then, in 1995, Dow was fined $732,000 by the EPA for concealing more than 200 reports of poisoning related to chlorpyrifos. It paid the fine and, in 2000, withdrew chlorpyrifos from household products. Today, chlorpyrifos is classified as “very highly toxic” to birds and freshwater fish, and “moderately toxic” to mammals, but it is still used widely in agriculture on food and non-food crops, in greenhouses and plant nurseries, on wood products and golf courses.

San Diego’s New Lawsuit Shows Just How Hard It Is To Hold Polluters Accountable  In a 1970 internal memo, agrochemical giant Monsanto alerted its development committee to a problem: Polychlorinated Biphenyls — known as PCBs — had been shown to be a highly toxic pollutant. PCBs — sold under the common name Aroclor — were also huge business, raking in some $10 million in profits. Not wanting to lose all of these profits, Monsanto decided to continue its production of Aroclor while alerting its customers to its potentially adverse effects. Monsanto got out of the PCB business altogether in 1977 — two years before the chemicals were banned by the EPA — but just because the company no longer produces the toxic substances doesn’t mean it can forget about them completely.Nor can the areas impacted by PCB pollution. On March 13, the city of San Diego, California filed a lawsuit against Monsanto for the company’s role in the production of PCBs. “PCBs manufactured by Monsanto (specifically, Aroclor compounds 1254 and 1260) have been found in Bay sediments and water and have been identified in tissues of fish, lobsters, and other marine life in the Bay,” the suit reads. “PCB contamination in and around the Bay affects all San Diegans and visitors who enjoy the Bay, who reasonably would be disturbed by the presence of a hazardous, banned substance in the sediment, water, and wildlife.” To Noah Sachs, professor of law at the University of Richmond and a scholar at the Center for Progressive Reform in Washington, D.C., the accusation of nuisance is what makes the San Diego case so interesting.  “What they’re saying is that there’s a product out there that is so dangerous that when it gets into the environment, it causes a nuisance by being there,” Sachs told ThinkProgress. “It’s certainly a novel lawsuit.”

Cloudy With a Chance of Cholera - A suspected bout of avian cholera struck more than 2,000 Snow Geese so quickly over the weekend that they likely died mid-flight. The geese remains were discovered with no tracks near them, suggesting they just “plopped in marsh mud,” says Gregg Losinski of the U.S. Department of Fish and Wildlife. The mass die-off occurred as the flock crossed Idaho on their way home to Northern Alaska after spending the winter south. Volunteers and employees spent the weekend scouring Idaho’s Mud Lake and Market Lake Wildlife Management Areas for carcasses. Once collected, the bodies were immediately burned to contain the disease—if they had been allowed to rot, maggots and flies could catch it and pass the disease to other birds through the food chain. Losinski says his team succeeded in collecting more than 1,700 complete carcasses, but the other 300 or so incomplete ones had already been scavenged. Mammals who consumed the geese aren’t at risk for cholera, but some birds, including Bald Eagles, hawks, and ravens, may have eaten some of them, and they could catch avian cholera.

Obama Unveils $1.2 Billion Plan to Fight Superbug Crisis, But Is It Enough? -- President Obama is waging war against the superbug crisis, one of the “most pressing public health issues facing the world today,” causing tens of thousands of deaths and millions of illnesses every year in just the U.S. alone, the President said.  Today, the White House announced its first-ever National Action Plan for Combating Antibiotic Resistant Bacteria. The 63-page document outlines five specific goals to control the spread of superbugs over the next five years:

  • slow the emergence of resistant bacteria and prevent the spread of resistant infections;
  • strengthen national surveillance efforts;
  • advance development and use of rapid and innovative diagnostic tests;
  • accelerate basic and applied research and development;
  • and improve international collaboration and capacities.

According to estimates from the national Centers for Disease Control and Prevention (CDC), more than half the antibiotics used in the U.S. are prescribed unnecessarily or used improperly. The Obama administration is also tackling the rampant use of antibiotics in livestock. “We can help slow the emergence of resistant bacteria by being smarter about prescribing practices across all human and animal health care settings, and by continuing to eliminate the use of medically-important antibiotics for growth promotion in animals,” the White House said.

Can a New White House Plan Catch Up to the “Superbug” Threat? - With the global health community increasingly on edge about the threat from potentially deadly bacteria that are immune to many of today’s most common antibiotics, the White House on Friday released an ambitious plan to stem the spread of such so-called superbugs. The primary challenge of the superbug threat is that the more modern medicine makes use of antibiotics, the more resistant many germs can become to the drugs. Under the administration’s National Action Plan for Combating Antibiotic-Resistant Bacteria, the government would have until 2020 to meet five broad objectives. The plan calls for slowing the spread of drug-resistant bacteria; improving the tracking of outbreaks; speeding the development of tests designed to cut unnecessary antibiotic use; getting new drugs to the market faster; and strengthening international cooperation around the issue. “ The Centers for Disease Control and Prevention (CDC) estimates that drug-resistant bacteria cause 2 million illnesses in the U.S. every year, and kill another 23,000. In May, the World Health Organization characterized the problem as “so serious that it threatens the achievements of modern medicine.”

The Antibiotics Problem in Meat —I’m out of antibiotics. She’s going to die.”  The quote is from a real doctor at UCLA-Harbor Medical Center, who was treating a real patient—a 20-something Spellberg calls “B.”  B had leukemia, and she developed an infection that built up resistance to the hospital’s most powerful antibiotics even as she was being pumped full of them. She died the day after Spellberg told her husband the hospital had nothing left to try. Antibiotic resistance may make cases like B's much more common in the future. One of the biggest culprits is the widespread use of antibiotics in livestock. Industrial farms feed animals low doses of the drugs in order to promote growth and ward off infections within densely packed herds. From there, natural selection does its job: The bacteria that can overpower the drugs survive and multiply, and they make their way out into the environment through water, urine, and feces. In the U.S., 80 percent of antibiotics are used in animals, though the industry is moving away from the practice. A new study published in the Proceedings of the National Academy of Sciences forecasts the geography of antibiotic overuse in the future. According to the study authors, the next big threat will come from middle-income countries like Brazil, Russia, India, and China, where a burgeoning consumer class is starting to prefer more meat in their diets, and where large-scale farms will try to meet this demand as cheaply as they can.

For The Love Of Pork: Antibiotic Use On Farms Skyrockets Worldwide -- Sorry bacon lovers, we've got some sad news about your favorite meat.To get those sizzling strips of pork on your plate each morning takes more antibiotics than it does to make a steak burrito or a chicken sausage sandwich. Pig farmers around the world, on average, use nearly four times as much antibiotics as cattle ranchers do, per pound of meat. Poultry farmers fall somewhere between the two. That's one of the conclusions of a study published Thursday in the Proceedings of the National Academy of Sciences. It's the first look at the amount of antibiotics used on farms around the world — and how fast consumption is growing. The numbers reported are eye-opening. In 2010, the world used about 63,000 tons of antibiotics each year to raise cows, chickens and pigs, the study estimated. That's roughly twice as much as the antibiotics prescribed by doctors globally to fight infections in people. "We have huge amounts of antibiotic use in the animal sector around the world, and it's set to take off in a major way in the next two decades," says the study's senior author, Ramanan Laxminarayan, who directs the Center for Disease Dynamics Economics & Policy in Washington, D.C. With half of the world's pigs living in China, the country tops the list as the biggest antibiotic consumer in farming.

Gates Foundation's Seed Agenda in Africa 'Another Form of Colonialism,' Warns Protesters - Food sovereignty activists are shining a light on a closed-door meeting between the Bill and Melinda Gates Foundation (BMGF) and the United States Agency for International Development (USAID), which are meeting in London on Monday with representatives of the biotechnology industry to discuss how to privatize the seed and agricultural markets of Africa. Early Monday, protesters picketed outside the Gates Foundation's London offices holding signs that called on the foundation to "free the seeds." Some demonstrators handed out packets of open-pollinated seeds, which served as symbol of the "alternative to the corporate model promoted by USAID and BMGF." Others smashed a piñata, which they said represented the "commercial control of seed systems;" thousands of the seeds which filled the pinata spilled across the office steps.   The meeting was convened to discuss a report put forth by Monitor-Deloitte, which was commissioned by BMGF and USAID to develop models for the commercialization of seed production in Africa, especially "early generation seed," and to identify ways in which the African governmental sectors could facilitate private involvement in African seed systems. The study was conducted in Ethiopia, Ghana, Nigeria, Tanzania and Zambia on maize, rice, sorghum, cowpea, common beans, cassava and sweet potato. However, food sovereignty activists are sounding the alarm over the secret meeting. Heidi Chow, food sovereignty campaigner with Global Justice Now, which organized Monday's protest, warned that the agenda being promoted by these stakeholders will only increase corporate control over seeds. "This is not 'aid' - it's another form of colonialism," said Chow.. "We need to ensure that the control of seeds and other agricultural resources stay firmly in the hands of small farmers who feed the majority of the population in Africa, rather than allowing big agribusiness to dominate even more aspects of the food system."

New Report Shows That The Most Popular Weed-Killer In The U.S. Probably Causes Cancer - The most popular weed-killer in the United States — and possibly the world — “probably” causes cancer, according to a new report from the World Health Organization (WHO).Published Thursday in the journal The Lancet Oncology, the report focuses on a chemical called glyphosate, invented by Monsanto back in 1974 as a broad-spectrum herbicide. It’s the active ingredient in Roundup, a popular product used mostly in commercial agriculture production. Roundup is particularly good for genetically modified crops, which can be bred to resist damage from the product while it kills the weeds surrounding it.  In the U.S., glyphosate is not considered carcinogenic. The Environmental Protection Agency’s current position is that “there is inadequate evidence to state whether or not glyphosate has the potential to cause cancer from a lifetime exposure in drinking water.” In the wake of Thursday’s report, however, the EPA said it “would consider” the U.N. agency’s findings. The new report, crafted by the WHO’s International Agency for Research on Cancer (IARC), puts glyphosate at the second-highest level of the agency’s classifications for cancer. There are four classifications for things that could cause cancer: known carcinogens, probable or possible carcinogens, not classifiable, and probably not carcinogenic. It noted that glyphosate has been detected in the blood and urine of agricultural workers, indicating that it is absorbed by the human body.

World Health Organization: GM-Crop Herbicide a Probable Carcinogen - The World Health Organization (WHO) apparently has not gotten the memo about the supposed consensus on GMOs being safe. On March 20, 2015 the WHO’s International Agency for Research on Cancer (IARC) released a new analysis of the evidence on five organophosphate pesticides, including glyphosate, the herbicide in Monsanto’s Roundup weed-killer. The international scientific body concluded that glyphosate is “probably carcinogenic to humans.” The WHO findings, summarized in an accessible two-page monograph and in The Lancet Oncology, raise alarms. Glyphosate is by far the most widely used herbicide because it is the weed-killer that genetically modified corn and soybeans are engineered to “tolerate.” With GM varieties now accounting for 90 percent or more of the U.S. market for corn and soybeans, glyphosate is being liberally sprayed over ever-more-vast tracts of farmland with farmers secure in the knowledge that their crops won’t be harmed by the herbicide. Apparently humans may not be so tolerant, and animals in feeding trials certainly aren’t. The WHO found, “For the herbicide glyphosate, there was limited evidence of carcinogenicity in humans for non-Hodgkin lymphoma.” By WHO protocols, “limited evidence” means some evidence but not conclusive evidence. The expert panel cited studies that glyphosate “caused DNA and chromosomal damage in human cells, although it gave negative results in tests using bacteria. One study in community residents reported increases in blood markers of chromosomal damage (micronuclei) after glyphosate formulations were sprayed nearby.” Because there have been no long-term human feeding trials, the evidence is limited, mainly to studies of agricultural exposures.  Human feeding trials are considered unethical, so the gold standard for epidemiological research is the animal study. WHO found, in its year-long expert scientific review of the evidence from government and peer-reviewed studies, that “there is convincing evidence that glyphosate also can cause cancer in laboratory animals.” That finding makes glyphosate a “probable carcinogen” for humans, according to accepted WHO standards.

Monsanto Demands World Health Organization Retract Report That Says Roundup Is Linked to Cancer -- Last week, the UN’s World Health Organization (WHO) released a report, compiled by a team of scientists, that said glyphosate—sold by Monsanto in the herbicide Roundup—was probably linked to cancer.  This week, Monsanto is demanding the WHO retract the report, essentially repudiating years of research by multiple scientists. Monsanto is claiming the report was biased and that glyphosate products like Roundup are safe when the directions are followed. The company says that the WHO report contradicts regulatory findings, which can, of course, be influenced by politics and lobbying. So far, WHO has not responded. “We question the quality of the assessment,” Philip Miller, Monsanto vice president of global regulatory affairs, told Reuters. “The WHO has something to explain.” Miller claimed that the WHO’s International Agency for Research on Cancer (IARC) was provided by Monsanto with information on glyphosate’s safety, and that it ignored Monsanto’s input.

Stop Making Us Guinea Pigs - The issues surrounding G.M.O.s — genetically modified organisms — have never been simple. They became more complicated last week when the International Agency for Research on Cancer declared that glyphosate, the active ingredient in the widely used herbicide Roundup, probably causes cancer in humans. Two insecticides, malathion and diazinon, were also classified as “probable” carcinogens by the agency, a respected arm of the World Health Organization. Roundup, made by Monsanto for both home and commercial use, is crucial in the production of genetically engineered corn and soybean crops, so it was notable that the verdict on its dangers came nearly simultaneously with an announcement by the Food and Drug Administration that new breeds of genetically engineered potato and apple are safe to eat. Which they probably are, as are the genetically engineered papayas we’ve been eating for some time. In fact, to date there’s little credible evidence that any food grown with genetic engineering techniques is dangerous to human health — unless, like much corn and soybeans, it’s turned into junk food. But, really, let’s be fair. Fair, too, is a guess that few people are surprised that an herbicide in widespread use is probably toxic at high doses or with prolonged exposure, circumstances that may be common among farmers and farmworkers. Nor is it surprising that it took so long — Roundup has been used since the 1970s — to discover its likely carcinogenic properties. There is a sad history of us acting as guinea pigs for the novel chemicals that industry develops. For this we have all too often paid with our damaged health. Rarely is that damage instantaneous, but it’s safe to say that novel biotechnologies broadly deployed may well have unexpected consequences. Yet unlike Europeans, Canadians, Australians and others, we don’t subscribe to the precautionary principle, which maintains that it’s better to prevent damage than repair it.

A Top Weedkiller Could Cause Cancer. Should We Be Scared? - An international committee of cancer experts shocked the agribusiness world a few days ago when it announced that two widely used pesticides are "probably carcinogenic to humans." The well-respected International Agency for Research on Cancer published a brief explanation of its conclusions in The Lancet and plans to issue a book-length version later this year. The announcement set off a wave of feverish reaction, because one of these chemicals, glyphosate, is a pillar of large-scale farming. Better known by its trade name, Roundup, glyphosate is the most popular weedkiller in the world. Farmers like it because many crops, including corn, soybeans and cotton, have been genetically modified to tolerate the chemical. Farmers can spray it across entire fields, killing weeds while their crops survive. The IARC also classified the insecticide malathion as a probable human carcinogen. Malathion is often used to control mosquitoes. In the 1980s, it was sprayed across parts of California, including entire suburban communities, in an effort to eradicate the Mediterranean fruit fly. Monsanto, the company that invented both glyphosate and "Roundup Ready" crops, was indignant, calling the IARC's assessment "junk science." Monsanto's chief technology officer, Robb Fraley, said in a statement that "this result was reached by selective 'cherry picking' of data and is a clear example of agenda-driven bias." Fraley pointed out that the IARC assessment did not result from any new scientific data, and that regulatory authorities in many countries have repeatedly evaluated these studies and concluded that glyphosate is safe. In fact, the IARC's assessment leaves many questions unanswered, including how much risk glyphosate poses.

Pesticides in Produce - Consumer Reports - Experts at Consumer Reports believe that organic is always the best choice because it is better for your health, the environment, and the people who grow our food. The risk from pesticides in produce grown conventionally varies from very low to very high, depending on the type of produce and on the country where it’s grown. The differences can be dramatic. For instance, eating one serving of green beans from the U.S. is 200 times riskier than eating a serving of U.S.-grown broccoli. “We’re exposed to a cocktail of chemicals from our food on a daily basis,” says Michael Crupain, M.D., M.P.H., director of Consumer Reports’ Food Safety and Sustainability Center. For instance, the Centers for Disease Control and Prevention reports that there are traces of 29 different pesticides in the average American’s body. “It’s not realistic to expect we wouldn’t have any pesticides in our bodies in this day and age, but that would be the ideal,” says Crupain. “We just don’t know enough about the health effects.” If you want to minimize your pesticide exposure, see the chart below. We’ve placed fruits and vegetables into five risk categories—from very low to very high. (Download our full scientific report, "From Crop to Table.") In many cases there’s a conventional item with a pesticide risk as low as organic. Below, you’ll find our experts’ answers to the most pressing questions about how pesticides affect health and the environment. Together, this information will help you make the best choices for you and your family.

SA Agriculture Minister says soil program proves utilising 'God's gifts' can boost yields better than GM technology - ABC Rural (Audio): The South Australian Agriculture Minister says the "amazing" results of a soil improvement program prove grain producers do not need genetic modification technology. Media player: "Space" to play, "M" to mute, "left" and "right" to seek.   Minister Leon Bignell announced results of the Government's 'New Horizons' program trial sites, highlighting that some crops recorded a 300 per cent yield increase. Describing it as an "evolution in science", Mr Bignell said the program was about taking "what God has given us with soils and using them in a different way". "Instead of using the top five centimetres of the soil, you go down to 50cm or even deeper," he said. "You put clay in it when it's needed, you put organic matter where it's needed as well. "We're seeing [yield] increases of 50 per cent, 100 per cent, even 300 per cent in some of the cases." Mr Bignell said the trials had strengthened his view that South Australia should maintain a moratorium on GM technology, which he said gave the state's produce a "market edge". "I've just come back from Qingdao [in China] … and they love the fact that we're GM free," he said. "That's the way of the future, that's the way that we'll increase the value of what we produce here in South Australia."

China Wants Peak Coal, Peak Steel and… Peak Fertilizer - Fresh from declaring war on coal and steel consumption, China is now turning its guns on chemical fertilizers as part of a state campaign to clean up its industry. Scientists and officials say chemical fertilizers are heavily overused on Chinese farms. Last year, the government said one-fifth of the country’s arable land is contaminated by industrial pollution. Runoff from chemical fertilizers has been blamed for one of the country’s most damaging environmental phenomena: thick, viscous algae blooms that have in some areas ruined agriculture, beaches and aquatic ecology. Beijing now wants growth in consumption of chemical fertilizers to fall to zero in five years,  The current growth rate is around 9.2%, according to official data.  China is the world’s biggest consumer of pesticides and fertilizers. Eschewing fertilizers might put a strain on the government’s other big goal: to maintain annual grain production at a minimum of 550 million metric tons. But Beijing is mulling other means of boosting grain output to feed rising middle-class meat demand, such as using more effective planting techniques or eventually allowing genetically modified food to be marketed domestically for human consumption.  Worried by waste and overcapacity, the government has taken measures that last year caused the first annual reduction in coal consumption in 14 years – the likely start of a long-term consumption decline termed “peak coal.” Steel consumption, another culprit for environmental pollution, likely flatlined or declined slightly last year, potentially signaling another “peak” event for a key industrial commodity, officials say.

We’re treating soil like dirt. It’s a fatal mistake, because all human life depends on it -  Monbiot - Even if everything else were miraculously fixed, we’re finished if we don’t address an issue considered so marginal and irrelevant that you can go for months without seeing it in a newspaper. It’s literally and – it seems – metaphorically, beneath us. To judge by its absence from the media, most journalists consider it unworthy of consideration. But all human life depends on it. We knew this long ago, but somehow it has been forgotten. As a Sanskrit text written in about 1500BC noted: “Upon this handful of soil our survival depends. Husband it and it will grow our food, our fuel and our shelter and surround us with beauty. Abuse it and the soil will collapse and die, taking humanity with it.” The issue hasn’t changed, but we have. Landowners around the world are now engaged in an orgy of soil destruction so intense that, according to the UN’s Food and Agriculture Organisation, the world on average has just 60 more years of growing crops. Even in Britain, which is spared the tropical downpours that so quickly strip exposed soil from the land, Farmers Weekly reports, we have “only 100 harvests left”. To keep up with global food demand, the UN estimates, 6m hectares (14.8m acres) of new farmland will be needed every year. Instead, 12m hectares a year are lost through soil degradation. We wreck it, then move on, trashing rainforests and other precious habitats as we go. Soil is an almost magical substance, a living system that transforms the materials it encounters, making them available to plants. That handful the Vedic master showed his disciples contains more micro-organisms than all the people who have ever lived on Earth. Yet we treat it like, well, dirt.

Some San Diego Farmers Shut Off Water In Prolonged Drought - Part of Gov. Jerry Brown’s $1 billion drought relief package will help struggling agriculture workers and their families in the Central Valley.  San Diego’s 4,000 farms have also been hit hard — not because farmers have run out of water, but because water is squeezing their budgets.  Farmers rely on rain during the winter months so they don’t have to spend as much money on water. Most growers in San Diego County are municipal water customers and pay approximately $1,400 per acre-foot of water. “Several hundred have made the decision to shut the water off on their farms,” said Eric Larson, executive director of the San Diego County Farm Bureau.  “In many of those cases, they’re likely to be an older farmer who has been in the business for a long time and they just cannot rationalize the reinvestment of the farm,” he added. The losses include 10,000 acres of avocado groves.  Cattle ranchers also have suffered. Nearly 200,000 acres in the region’s backcountry are dedicated to nearly 17,000 cows. Many ranchers have sold part of their herds because there’s not enough grass to go around, Larson said.

California Farmers Are Selling Water To The State Instead Of Growing Crops - California's drought is so bad that farmers in Northern California are finding that their crops aren't their most valuable asset anymore—it's their water rights. So they're selling their water back to the state at crazy-high prices.California is in trouble. According to a much-discussed recent L.A. Times article, the state has only about a year’s worth of water in its reservoirs, which, if depleted, would leave the state reliant on groundwater and praying for heavy snows in winter. Already, the state is tightening water use restrictions, especially for uses like watering lawns, but many think that won’t nearly be enough to dig California out of its dry, parched, cracked hole.Weirdly, this is opening a new avenue of revenue for California farmers. In the Sacramento Valley, northeast of San Francisco, farmers are actually selling water to the state, for exorbitant fees. That’s due to the way the drought-prone state deals with allocating water.Farmers are given “water rights,” essentially rations of water, based on size and output. When California analyzes how dire its drought situation is, it doesn’t count the water allocated to farmers; that water is no longer California’s to give. That means instead of growing crops, the farmers in the region have decided to actually sell about 20 percent their water to the state, at the price of $700 per acre-foot of water. An acre-foot is a unit of volume; imagine a swimming pool that’s the size of an acre and a foot deep. It’s equal to about 325,000 gallons of water. It’s obviously dangerous to encourage farmers to cease growing in order to make sure the state has water, but what’s the alternative? And at least this way, the farmers are guaranteed to have a pretty good year.

While California dries up, leaders fiddle -- California is in its fourth abysmally dry year, with the possibility of mega-drought growing with every rainless day. But the latest action by the State Water Resources Control Board to further tighten water restrictions seems almost laughable in its timidity. And the $1 billion “emergency drought package” announced last week by Gov. Jerry Brown and legislative leaders fails to live up to its billing. Despite the here-and-there rainstorms of this winter, water-supply conditions in California have grown more dire. Reservoirs, the snowpack in the Sierra and groundwater levels are all at or near historic lows. The senior water scientist at NASA’s Jet Propulsion Laboratory in Pasadena wrote in the Los Angeles Times this month that the state has only about one year of water left in its reservoirs. One year. And groundwater is being pumped so rapidly for agriculture in the Central Valley that the land in some areas is literally sinking at the rate of a foot or more per year. So what did the water board do? It said we should limit watering our lawns to twice a week, we should only wash our cars at home if we use a hose with a shut-off valve, restaurants should not serve water unless a customer asks for it and hotels should give guests the option to decline fresh towels and sheets every day. Even the water board’s chairwoman described the restrictions as “quite modest.” And water officials in Los Angeles and San Diego said the new rules won’t mean much because those restrictions were pretty much already in place. And, anyway, there is no statewide enforcement mechanism for the new rules.

California Statewide Snowpack Now Below Record Low Benchmark: Snowpack in California has reached a new low milestone that has not been seen in more than 30 years. It's just the latest chapter in the dire drought now entering its fourth year. According to the California Nevada River Forecast Center, snowpack statewide was just nine percent of average as of March 23. That figure breaks the previous snowpack record for this point in the snow season, set back during the 1976 to 1977 season. "That's not a typo, it's now in single digits," the River Forecast Center said in a Facebook post announcing the new low.  This snow water content is very important for the water supply in California. As the snow melts later in the spring, it helps to replenish reservoirs in the state. As of March 23, all reservoirs near the Sierra Nevada and in northern California were at 60 percent or less capacity, according to the California Department of Water Resources. Although northern California reservoirs got a boost from heavy rainfall in February, snow was confined to the highest elevations. This means the moisture-laden storm systems did very little to help the mountain snowpack.

It's The End Of March And 99.85% Of California Is Abnormally Dry Already -- With NASA scientists warning about California only having one year of water left, it appears The Kardashians and March Madness continue to distract Americans from the ugly looming reality of water shortages. With summer around the corner, the US Drought Monitoring service reports today that a stunning 99.85% of California is "abnormally dry," and 98.11% of the state is in drought conditions leaving over 37 million people in harm's way.

PHOTOS: Drought-Stricken California Community Close To Running Out of Water -- These startling photos are more evidence of the severity of California's drought, now going into its fourth year. Located about a three-hour drive east of San Francisco in the foothills of the southern Sierra Nevada, Lake McClure currently holds only 8 percent of its capacity as of late March, according to the Merced Irrigation District. More than 3,000 residents in the Sierra Nevada foothill community of Lake Don Pedro who rely on water from the 26-mile long lake could run out of water in the near future if the severe drought continues. Residents are under mandatory 50 percent water use restrictions. This past week, California's snowpack dipped below a previous record low for late March set in 1977. This is more bad news, since California's reservoirs are typically replenished by spring snowmelt from the mountains. According to, a hiker found an old railroad line right-of-way while hiking along the lake bed in early February.

California megadrought: It's already begun. -- As California limps through another nearly rain-free rainy season, the state is taking increasingly bold action to save water. On Tuesday, the California state government imposed new mandatory restrictions on lawn watering and incentives to limit water use in hotels and restaurants as part of its latest emergency drought regulations. On Thursday, California Gov. Jerry Brown announced a $1 billion plan to support water projects statewide and speed aid to hard-hit communities already dealing with shortages. Last month federal water managers announced a “zero allocation” of agricultural water to a key state canal system for the second year in a row, essentially transforming thousands of acres of California farmland into dust. This week’s moves come after the state has fallen behind targets to increase water efficiency in 2015 amid the state’s worst drought in 1,200 years.  Last week, a pair of op-eds, one in the Guardian, the other in the Los Angeles Times, spoke with urgency about the West’s growing water crisis.“California has no contingency plan for a persistent drought like this one (let alone a 20-plus-year mega-drought), except, apparently, staying in emergency mode and praying for rain,” wrote NASA water scientist and University of California-Irvine professor Jay Famiglietti. A better plan, he said, was for “immediate mandatory water rationing” across the state. Famiglietti’s work has focused on the shocking recent declines in groundwater across the West, where excessive pumping has caused the ground to sink at rates up to a foot per year and a measurable rise in global sea levels. Underlying the frantic, short-term search for water is an ominous underlying trend that threatens to fundamentally transform America’s most important agricultural state. Climate change may have already initiated a new megadrought.

Is Drought Risk In The American West An Economic Threat? --The historic and ongoing drought in California is getting harder to ignore in terms of its potential impact on the US economy down the road. The Golden State, after all, boasts the country’s largest GDP among the 50 states, representing a bit more than 13% of US output, based on 2013 data via the US Bureau of Economic Analysis. That’s well above the nearly 9% share for Texas, the second-biggest state economy. But as the dry spell persists, now in its fourth year, it’s reasonable to wonder if California’s growth prospects will suffer. In turn, if the biggest state wilts due to drought, what are the implications for the US?  At the moment, it’s hard to say. The drought-inflicted pain so far has been minimal in terms of the broad macro trend for the state. On a US level, it’s virtually undetectable. Meantime, this month’s UCLA Anderson Forecast for California “calls for continued steady gains in employment through 2017.” The group’s senior economist, Jerry Nickelsburg, says that “the increase in U.S. growth rates from construction, automobiles, and business investment, as well as higher consumer demand, will continue to fuel our local economy.” The question, of course, is how or if this relatively rosy view could change if the drought rolls on? It’s hard to estimate this risk with any accuracy at this stage, but it’s fair to say that the potential for trouble is inching upward. A recent report from scientists writing for the online journal ScienceAdvances warns of an “unprecedented 21st century drought risk in the American Southwest and Central Plains.”

What if California’s drought is permanent? -- California’s prolonged drought drew a bit of official attention last week. The state Water Resources Control Board tightened, ever so slightly, water conservation rules on local water agencies and users. Two days later, Gov. Jerry Brown and legislative leaders announced a $1.1 billion drought response plan, mostly old wine in new bottles with little immediate effect. Underlying these tepid responses are assumptions that the drought is still a temporary condition and that mild steps will suffice without major economic or social disruptions. Related But what if the drought continues for many years or is even permanent? Shouldn’t we be thinking about alternatives? They’d begin with some form of permanent rationing affecting all users but probably hitting farmers the hardest. Agriculture ordinarily uses three-quarters of the state’s developed water, so farmers must be part of any doomsday scenario. We may have to reverse the industry’s recent shift from row crops to more orchards, particularly almonds, and vineyards, both of which require water to stay alive and cannot be fallowed like row crop fields. Such a reversal would most likely require a major overhaul of the state’s convoluted water rights structure, repricing water to reflect its true value, and tightly regulating groundwater, which is already in the works. Would that diminish California’s largest-in-the-nation agricultural economy? Perhaps, and fair compensation for those whose water rights are reduced would be necessary. But as visible and water-intensive as it may be, farming is a relatively tiny part of the state’s overall economy. Shifting water from farms could be an interim step as we embark on a crash program of increasing supply.

Las Vegas Water Grab a 'Poster Child' for Urban vs. Rural Resource Conflict - In what has been described as a "poster child" for future water showdowns in the west, local interests in Las Vegas are attempting a water grab from ranch land 275 miles north of the city. "It’s Mammon versus Mormon as Las Vegas and its glittering towers of glass and greed seek to quench their growing thirst by draining billions of gallons of water from under the feet of ranchers whose cattle help feed the church’s poor," reports Edvard Pettersson. "The surface of Las Vegas’s main source of water, Lake Mead, sits more than 100 feet below Hoover Dam’s spillways after reaching the lowest mark last summer since the dam was filled. As it seeks new sources, the city’s water supplier is waging a court fight over plans to suck as much as 27 billion gallons a year from the valley that is home to the Mormon ranch and its 1,750-head herd, as well as three other rural valleys." The location in question is Spring Valley, near Route 50, where the Southern Nevada Water Authority would claim the 7,000-acre Cleveland Ranch owned by the Mormon church. The Spring Valley aquifer is one of four that the Southern Nevada Water Authority would connect to a 263-mile pipeline approved in 2007 and again in 2012, but currently delayed by ongoing litigation.

FEMA to deny funds to warming deniers: The Federal Emergency Management Agency is making it tougher for governors to deny man-made climate change. Starting next year, the agency will approve disaster-preparedness funds only for states whose governors approve hazard-mitigation plans that address climate change. This may put several Republican governors who maintain that the Earth isn't warming due to human activities, or prefer to take no action, in a political bind. Their position may block their states' access to hundreds of millions of dollars in FEMA funds. In the last five years, the agency has awarded an average $1 billion a year in grants to states and territories for taking steps to mitigate the effects of disasters. "If a state has a climate denier governor that doesn't want to accept a plan, that would risk mitigation work not getting done because of politics," said Becky Hammer, an attorney with the Natural Resources Defense Council's water program. "The governor would be increasing the risk to citizens in that state" because of his climate beliefs. The policy doesn't affect federal money for relief after a hurricane, flood, or other disaster. Specifically, beginning in March 2016, states seeking preparedness money will have to assess how climate change threatens their communities. Governors will have to sign off on hazard-mitigation plans. While some states, including New York, have already started incorporating climate risks in their plans, most haven't because FEMA's 2008 guidelines didn't require it.

Senate Votes To Help States Sell Off Public Lands - The new chair of the powerful Senate Energy and Natural Resources Committee secured a vote Thursday afternoon in the U.S. Senate on a controversial proposal to sell off America’s national forests and other public lands.   U.S. Senator Lisa Murkowski’s (R-AK) amendment to Congress’s budget resolution passed by a vote of 51-49. The legislation would support and fund state efforts — which many argue are unconstitutional — to seize and sell America’s public lands. These include all national forests, wildlife refuges, wilderness areas, historic sites, and national monuments.  Murkowski’s amendment follows a similar proposal from House Natural Resources Committee Chair Rob Bishop (R-UT) to spend $50 million of taxpayer dollars to fund the sale or transfer of U.S. public lands to states. The land grab proposals in Congress this year appear to echo the calls of outlaw rancher Cliven Bundy, best known for his armed standoff with federal officials last year, who has infamously refused to recognize the authority of the federal government, including over public lands.  Murkowski’s proposal to sell off public lands, however, is meeting stiff opposition from other western senators. On a conference call yesterday, Senators Martin Heinrich (D-NM) and Michael Bennet (D-CO) said that they are determined to turn back legislative attacks on the outdoors. Bennet called efforts to sell off lands to reduce the federal deficit “an assault on our public lands.”

U.N. warns world could have 40 percent water shortfall by 2030: (AP) – The world could suffer a 40 percent shortfall in water in just 15 years unless countries dramatically change their use of the resource, a U.N. report warned Friday [The United Nations World Water Development Report 2015]. Many underground water reserves are already running low, while rainfall patterns are predicted to become more erratic with climate change. As the world's population grows to an expected 9 billion by 2050, more groundwater will be needed for farming, industry, and personal consumption. The report predicts global water demand will increase 55 percent by 2050, while reserves dwindle. If current usage trends don't change, the world will have only 60 percent of the water it needs in 2030, it said. Having less available water risks catastrophe on many fronts: crops could fail, ecosystems could break down, industries could collapse, disease and poverty could worsen, and violent conflicts over access to water could become more frequent. "Unless the balance between demand and finite supplies is restored, the world will face an increasingly severe global water deficit," the annual World Water Development Report said, noting that more efficient use could guarantee enough supply in the future.

World faces 40% water shortfall in 15 years: U.N. - As the global economy grows, the world is going to get a lot more thirsty in 2030 if steps aren’t taken to cut back on fresh water use now, the United Nations says. At current usage rates, the world will have 40% less fresh water than it needs in 15 years, according to the United Nations World Water Assessment Program in its 2015 report, which came out ahead of the U.N.’s World Water Day on Sunday. “Strong income growth and rising living standards of a growing middle class have led to sharp increases in water use, which can be unsustainable, especially where supplies are vulnerable or scarce and where its use, distribution, price, consumption and management are poorly managed or regulated,” the report said. Factors driving up demand for water include increased meat consumption, larger homes, more cars and trucks on the road, more appliances and energy-consuming devices, all staples of middle -class life, the report noted. Population growth and increased urbanization also contribute to the problem. Water demand tends to grow at double the rate of population growth, the report said. The global population is expected to grow to 9.1 billion people by 2050, up from the current 7.2 billion. More people living in cities also put strain on water supplies. The report estimates that 6.3 billion people, or about 69% of the world’s population, will be living in urban areas by 2050, up from the current 50%.

Strongest MJO Event on Record Boosts El Niño Odds -  The Madden Julian Oscillation (MJO) is a pattern of increased thunderstorm activity near the Equator that moves around the globe in 30 - 60 days, and has many important impacts on weather patterns world-wide. For example, when the area of increased thunderstorms associated with the MJO is located in a particular ocean basin, the odds of tropical cyclone formation increase there. Scientists use the Wheeler-Hendon MJO index to monitor how strong the MJO is, and this week, the amplitude of the MJO set a new all-time record for the strongest MJO event observed since record keeping began in 1974 (with no data available from 3/17/1978-12/31/1978 due to satellite problems). The MJO index hit 4.09 on March 15, 2015, beating the old record of 4.01 set on February 14, 1985.  On March 16, 2015, the MJO index set an even higher mark--4.67.  As a result of having two counter-rotating storms on either side of the Equator, very strong west-to-east blowing winds formed along the Equator, opposing the usual east-to-west blowing equatorial trade winds. The westerly winds from the counter-rotating tropical cyclones were strong enough and persistent enough that they boosted the odds of the current weak El Niño event staying on through the summer and into fall, since these "westerly wind bursts" tend to move warm water from the Western Pacific into the Eastern Pacific (the presence of warmer-than-average water in the Eastern Pacific is needed for an El Niño event to occur.)

Welcome to the 'Double El Niño' — and more extreme weather == We’re about to experience a “double El Niño” — a rare weather phenomenon that climatologists had warned about several months ago.  That means two consecutive years of the concentration of warm water in the Pacific Ocean that brings West Coast storms, quiet hurricane seasons in the Atlantic and busy ones in the Pacific. The danger is that this could mean more than a few months of odd weather, but instead usher in a new phase of climate change. Last year was the warmest year on record; 2015 looks set to be even warmer. Normally, the warm water from an El Niño spreads across the Pacific and cools as it evaporates. The increased moisture in the air leads to thunderstorms and tropical storms. That hasn’t happened as much as anticipated over the last year. “The moisture in the atmosphere triggers a lot of thunderstorms and tropical storms, but in general that atmospheric connection has not been anything like as strong as we normally expect in El Niño events, and as a result, the warm water is sort of sitting there, and it hasn't petered out,” Trenberth explains. “The energy has not been taken out of the ocean, and there's a mini global warming, so to speak, associated with that.” What kind of temperature increase are we talking about? Trenberth says it could mean a rise of two- or three-tenths-of-a-degree Celsius, or up to half a degree Fahrenheit. The change could occur “relatively abruptly,” but then stick around for five or 10 years.

Quelle suprise! UAH low-balling satellite temperature data by a factor of three -- A new study suggests that the University of Alabama at Huntsville is lowballing the warming of the atmosphere -- A very important study was just published in the Journal of Climate a few days ago. This paper, in my mind, makes a major step toward reconciling differences in satellite temperature records of the mid-troposphere region. As before, it is found that the scientists (and politicians) who have cast doubt on global warming in the past are shown to be outliers because of bias in their results. The publication, authored by Stephen Po-Chedley and colleagues from the University of Washington, discusses some major sources of error in satellite records. It is known that there is a problem because there are multiple groups that create satellite temperature records, for instance: NOAA, Remote Sensing Systems (RSS), and the University of Alabama Huntsville (UAH). The problem is that their results don’t agree with each other. In particular, the UAH team, led by Dr. John Christy and Dr. Roy Spencer (who have discounted the importance and occurrence of climate change for years), presents results that differ quite a bit from the others. In fact, in the current paper, it is stated that “Despite using the same basic radiometer measurements, tropical TMT trend differences between these groups differ by a factor of three.”  An important aspect to this issue is that, for many reasons, it is expected that the tropospheric temperatures in the tropics will warm more than surface temperatures. This is called “tropospheric amplification.” According to two satellite groups, there is in fact such amplification. According to the UAH team, there is no amplification. The presence or absence of amplification is often used by some skeptics to discount the importance of global warming.  Why are there differences? Well, that’s part of what this paper tries to answer.

Australia's Farmers Challenged by Climate Change - From tasteless carrots to sunburned apples, a new report by two University of Melbourne researchers paints a challenging picture for Australia's agricultural sector and the impacts of climate change in the decades to come. Through the examination of 55 food commodities and a breakdown of the ways each of the country's multiple climate regions will be affected by climate change, the study concludes the quality of beef, chicken and even kangaroo will suffer. The biggest challenge to come from climate change is a hotter, drier country. And how Australia responds might present a road map for agriculture elsewhere as the Earth's climate warms.

Australia Floats Plan to Save Great Barrier Reef - WSJ: —Australia’s government has unveiled a 35-year plan it says will protect the Great Barrier Reef and avoid having one of its top tourist attractions placed on the United Nations’ list of endangered heritage sites. Prime Minister Tony Abbott on Saturday pledged 100 million Australian dollars (US$77.76 million) in additional funding and said his government was putting in place plans and targets to improve water quality along the reef, including reducing sediment and pesticides. “At the highest level, this is a subject where Australia is telling our international partners, Australia is telling the international agencies, that we are utterly committed as an entire nation to the protection of the Great Barrier Reef, which is one of the natural wonders of the world,” Mr. Abbott said from Hamilton Island, off tropical Queensland state. The efforts build on a federal government plan to ban the dumping of dredged mud and rock within the reef’s 344,000-square-kilometer marine park, reversing a decision last year to allow millions of tons of dredged material from a nearby coal-port development to be dumped there. The U.N.’s World Heritage Committee has warned it might put the reef on its list of at-risk sites at its June meeting if Australia hasn’t done enough to protect the fragile ecosystem. Such a blacklisting would be a major blow to Australia’s environmental reputation, and could damage tourism.

Slaves kept in locked cages catch seafood that ends up in global supply chain: ‘I want to go home. We all do’ (AP) — The Burmese slaves sat on the floor and stared through the rusty bars of their locked cage, hidden on a tiny tropical island thousands of miles from home. Just a few yards away, other workers loaded cargo ships with slave-caught seafood that clouds the supply networks of major supermarkets, restaurants and even pet stores in the United States.  Here, in the Indonesian island village of Benjina and the surrounding waters, hundreds of trapped men represent one of the most desperate links criss-crossing between companies and countries in the seafood industry. This intricate web of connections separates the fish we eat from the men who catch it, and obscures a brutal truth: Your seafood may come from slaves. The men the AP interviewed on Benjina were mostly from Myanmar, also known as Burma, one of the poorest countries in the world. They were brought to Indonesia through Thailand and forced to fish. Their catch was then shipped back to Thailand, where it entered the global stream of commerce. Tainted fish can wind up in the supply chains of some of America’s major grocery stores, such as Kroger, Albertsons and Safeway; the nation’s largest retailer, Wal-Mart; and the biggest food distributor, Sysco. It can find its way into the supply chains of some of the most popular brands of canned pet food, including Fancy Feast, Meow Mix and Iams. It can turn up as calamari at fine dining restaurants, as imitation crab in a California sushi roll or as packages of frozen snapper relabeled with store brands that land on our dinner tables.

Global warming is now slowing down the circulation of the oceans — with potentially dire consequences - Washington Post - Welcome to this week’s installment of “Don’t Mess with Geophysics.” Last week, we learned about the possible destabilization of the Totten Glacier of East Antarctica, which could unleash over 11 feet of sea level rise in coming centuries.  And now this week brings news of another potential mega-scale perturbation. According to a new study just out in Nature Climate Change by Stefan Rahmstorf of the Potsdam Institute for Climate Impact Research and a group of co-authors, we’re now seeing a slowdown of the great ocean circulation that, among other planetary roles, helps to partly drive the Gulf Stream off the U.S. east coast. The consequences could be dire – including significant extra sea level rise for coastal cities like New York and Boston. A vast, powerful, and warm current, the Gulf Stream transports more water than “all the world’s rivers combined,” according to the National Oceanic and Atmospheric Administration. But it’s just one part of a larger regional ocean conveyor system – scientists technically call it the “Atlantic meridional overturning circulation” — which, in turn, is just one part of the larger global “thermohaline” circulation (“thermohaline” conjoins terms meaning “temperature” and “salty”). For the whole system, a key driver occurs in the North Atlantic ocean. Here, the warm Gulf Stream flows northward into cooler waters and splits into what is called the North Atlantic Current. This stream flows still further toward northern latitudes — until it reaches points where colder, salty water sinks due to its greater density, and then travels back southward at depth. This “overturning circulation” plays a major role in the climate because it brings warm water northward, thereby helping to warm Europe’s climate, and also sends cold water back towards the tropics. Here’s a helpful visualization, from Rahmstorf and the Potsdam Institute, of how it works:

Exceptional twentieth-century slowdown in Atlantic Ocean overturning circulation - Abstract: Possible changes in Atlantic meridional overturning circulation (AMOC) provide a key source of uncertainty regarding future climate change. Maps of temperature trends over the twentieth century show a conspicuous region of cooling in the northern Atlantic. Here we present multiple lines of evidence suggesting that this cooling may be due to a reduction in the AMOC over the twentieth century and particularly after 1970. Since 1990 the AMOC seems to have partly recovered. This time evolution is consistently suggested by an AMOC index based on sea surface temperatures, by the hemispheric temperature difference, by coral-based proxies and by oceanic measurements. We discuss a possible contribution of the melting of the Greenland Ice Sheet to the slowdown. Using a multi-proxy temperature reconstruction for the AMOC index suggests that the AMOC weakness after 1975 is an unprecedented event in the past millennium (p > 0.99). Further melting of Greenland in the coming decades could contribute to further weakening of the AMOC.

New measurements confirm extra heating from our carbon dioxide - New measurements from Alaska and Oklahoma have confirmed that recent increases in carbon dioxide (CO2) in the air, caused mostly by burning coal, oil and gas, are indeed heating up Earth's surface by making the greenhouse effect stronger. This was already beyond all reasonable doubt: satellites, computer simulations tested with measurements from planes, and other ground experiments confirmed that more CO2 is making us hotter. This new study is still important though. Unlike satellites, these measurements were taken from Earth's surface. And unlike the previous surface measurements, this experiment combines a decade-long experiment with the right instruments to be able to untangle the causes of heating.  Rather like a tuning fork humming to the right note, greenhouse gases like CO2 respond to specific frequencies of light. The Earth glows constantly in the infrared (a bunch of colours we can't see) and greenhouse gases respond. They absorb very specific fractions of some frequencies and then recycle the energy they absorbed, sending some of it back down to Earth to warm us up. In this study, instruments called spectrometers were pointed at the sky to watch this recycled infrared. They split light into its different frequencies (or colours, if you prefer) like a rainbow or a prism does. The brightness of each frequency is measured, the whole spectrum is put back together and patterns in the spectrum tell us what's going on. Measurements and simulations were only done when the sky was clear of clouds to make comparison easier. For the frequencies where CO2 is most active, the computer model predicted the spectrum to within a few tenths of a percent in most cases, so it's reliable.

Amazon rainforest soaking up less carbon as trees die young: study (Reuters) - The Amazon rainforest's ability to soak up greenhouse gases from the air has fallen sharply, possibly because climate change and droughts mean more trees are dying, an international team of scientists said on Wednesday. The world's biggest rainforest has soaked up vast amounts of carbon dioxide. Plants use the heat-trapping gas to grow and release it when they rot or burn, but the report said that role in offsetting global warming may be under threat. The study, of 321 plots in parts of the Amazon untouched by human activities, estimated the net amount of carbon dioxide absorbed by the forest had fallen by 30 percent, to 1.4 billion tonnes a year in the 2000s from 2.0 billion in the 1990s. "Forest growth has flatlined over the last decade," lead author Roel Brienen of the University of Leeds told Reuters of the findings in the journal Nature. At the same time "the whole forest is living faster - trees grow faster, die faster." "The net carbon uptake of forests has significantly weakened," he said of the study by almost 100 experts. Human carbon emissions in Latin America are overtaking amounts absorbed by the Amazon for the first time..

Amazon Forest Becoming Less of a Climate Change Safety Net - The ability of the Amazon forest to soak up excess carbon dioxide is weakening over time, researchers reported last week. That finding suggests that limiting climate change could be more difficult than expected.For decades, Earth’s forests and seas have been soaking up roughly half of the carbon pollution that people are pumping into the atmosphere. That has limited the planetary warming that would otherwise result from those emissions.The forests and oceans have largely kept up even as emissions have skyrocketed. That surprised many scientists, but also prompted warnings that such a robust “carbon sink” could not be counted on to last forever.In a vast study spanning 30 years and covering 189,000 trees distributed across 321 plots in the Amazon basin, researchers led by a group at the University of Leeds, in Britain, reported that the uptake of carbon dioxide in the Amazon peaked in the 1990s, at about 2 billion tons a year, and has since fallen by half. Initially, the researchers postulated, the Amazon may have responded well to rising carbon dioxide levels, which are known to increase plant growth, but that response appears to be tapering off. Drought and other stresses could be playing a role, but the main factor seems to be that the initial acceleration of growth sped up the metabolism of the trees.“With time, the growth stimulation feeds through the system, causing trees to live faster, and so die younger,” Oliver L. Phillips, a tropical ecologist at the University of Leeds and one of the leaders of the research, said in a statement.Further research is needed, but the scientists say that climate forecasting models that assume a continuing, robust carbon sink in the Amazon could be overly optimistic.

Annual greenhouse gas emissions from forests drop by a quarter, U.N. says: - Yearly carbon emissions from the world's forests have dropped by more than 25 percent in the last 15 years, a U.N. agency said on Friday. The decrease in annual emissions, which cause global warming, is largely due to slowing rates of global deforestation, the Food and Agriculture Organisation (FAO) reported. Forests hold about three quarters as much carbon as the atmosphere and preserving them is crucial for combating climate change. "Deforestation and forest degradation increase the concentration of greenhouse gases in the atmosphere, but forest and tree growth absorbs carbon dioxide, the main greenhouse gas emissions," FAO director-general Jose Graziano da Silva said in a statement. Emissions from deforestation decreased to 2.9 Gigatonnes of carbon dioxide from 3.9 Gigatonnes between 2001 and 2015, the FAO said. Brazil, Chile, China, Cape Verde, Costa Rica, the Philippines, Turkey, Korea, Uruguay and Vietnam have all seen net decreases in deforestation, da Silva said. Africa, Asia and Latin America and the Caribbean all continued to release more carbon than they absorb, the study said. Total emissions from Africa and Latin America, however, decreased between 1990 and 2015, the FAO said.

Overpumping of groundwater is contributing to global sea level rise - Pump too much groundwater and wells go dry – that’s obvious. But there is another consequence that gets little attention as a hotter, drier planet turns increasingly to groundwater for life support. So much water is being pumped out of the ground worldwide that it is contributing to global sea level rise, a phenomenon tied largely to warming temperatures and climate change. It happens when water is hoisted out of the earth to irrigate crops and supply towns and cities, then finds its way via rivers and other pathways into the world’s oceans. Since 1900, some 4,500 cubic kilometers of groundwater around the world – enough to fill Lake Tahoe 30 times – have done just that. “Long-term groundwater depletion represents a large transfer of water from the continents to the oceans,” Konikow wrote earlier this year in one article. “Thus, groundwater depletion represents a small but nontrivial contributor to SLR [sea-level rise].” Sea levels have risen 7 to 8 inches since the late 19th century and are expected to rise more rapidly by 2100. The biggest factors are associated with climate change: melting glaciers and other ice and the thermal expansion of warming ocean waters. Groundwater flowing out to sea added another half-inch – 6 to 7 percent of overall sea level rise from 1900 to 2008, Konikow reported in a 2011 article in Geophysical Research Letters. “That really surprised a lot of people,”

Jump in NW Atlantic Sea Level Driving Gulf Stream Water into Arctic, Sea Ice Collapsing - Sea level has jumped off the east coast of north America since March 2013. The warmest and saltiest water ever seen in the northwest Atlantic is mixing with icy water drained from the Arctic ocean and sinking to the bottom of the Labrador Sea. AVISO's global map of sea-surface height departure from normal for March 14, 2015, shows a huge rise in sea level off the east coast of north America. This water has the highest levels of heat and salt ever measured in this region. Sea-surface heights were relatively low off the east coast on March 14, 2013, when the polar vortex split and deep water formation in the Labrador Sea collapsed. Arctic sea ice staged a major recovery because cold fresh water stayed in the Arctic and the Gulf Steam and Norwegian currents weakened. March 1995 had the most similar sea-surface-height pattern to 2015 in AVISO's 22-year, on-line record. March 1995 was when deep water formation in the Labrador sea was at a 50-year maximum Sea-surface heights offshore of North America's east coast have risen to the highest levels ever measured in March, when it is usually at an annual minimum because the water column is at its coldest. The saltiest and warmest waters ever found in this region have spawned a series of extreme storms which have spun up both the polar vortex and the North Atlantic Ocean's currents and deep-water formation. Cold, relatively fresh water is draining from the Canadian side of the Arctic and sinking in the Labrador Sea as it mixes in the stormy waters with dense salty Gulf Stream water cooled by Arctic air.

Warm Arctic winter starts sea ice off at a record low -- Even though the entire globe has warmed over the last few decades, the Arctic has seen the greatest changes in temperatures. One of the clearest readouts of that change has been the sea ice that fills the Arctic ocean each winter. Although the exact extent of its summer time melting varies from year to year, there's been a sharp downward trend in the amount of ice left each September. But, as the Arctic enters all-day darkness in the winter, most of the ocean freezes over again—all the excitement's in the summer. This year, however, unusual winter warmth at the fringes of the icepack have led to a very odd freeze-up, and a record low for the maximal ice extent. The largest extent of ice coverage, 14.54 million square kilometers, was over a million square kilometers below the long-term average. Normally, the peak of the freeze-up occurs in March; this year, ice extent started dropping in late February before stabilizing over the last two weeks. That excursion took it outside of two standard deviations of the 1980-2010 average ice extent. The National Snow and Ice Data Center, which tracks these things, says that there may be further freezing at this time of year. But, unless that freeze is extreme, ice levels are unlikely to get back to where they were in February. What caused the drop? Temperatures above a large region of the Arctic were unusually warm. In the Barents Sea, many locations saw temperatures that were a full 10°C above average. Ice extent was lower there, in the Bering Sea, and saw a large drop in Russia's Sea of Okhotsk.What does this mean for this summer's melt? Nothing in particular. If you compare the graph above to one of recent summer melts, you'll see there's very little correlation.

Global warming’s scary new record: Arctic sea ice peaked at an all-time low this winter - Arctic sea ice peaked early this winter, and at its lowest maximum since record keeping began in 1979 — yet another sign that global warming is already wreaking havoc on the planet. The National Snow and Ice Data Center reports that on February 25, the ice reached a likely maximum of 5.61 million square miles, which is 425,000 square miles below the 1981-2010 average. It’s also 50,200 square miles below the previous record, set back in 2011.  The decline in sea ice is “one of the most visible impacts we see as a result of climate change,” Margaret Williams, managing director of the WWF’s Arctic program, told Salon last year. The Arctic is heating up at about twice the rate of lower latitudes. And it’s the victim of a vicious feedback loop: when there’s less ice to reflect it, the sun’s rays are instead absorbed into the dark abyss of the ocean, leading to even more warming and even more ice melt.

Arctic Death Spiral: Sea Ice Extent Hits Record Winter Low As Thickness Collapses - The 2015 Arctic sea ice maximum is the lowest on record. Here it’s compared to the 1979-2014 average maximum shown in yellow. A distance indicator shows the difference between the two in the Sea of Okhotsk north of Japan. Via NASA. Arctic sea ice has been in a virtual death spiral for over three decades now with serious implications for extreme weather, sea level rise, and permafrost melt. Not only has the surface area or extent of sea ice declined sharply, but so has the ice thickness during the summer minimum (when the melt season ends in September) — dropping a remarkable 85 percent from 1975 to 2012, according to a recent study.  The extent of Arctic sea ice hits a winter maximum in early March. This year, the National Snow and Ice Data Center (NSIDC) — along with NOAA and NASA — said the maximum extent was likely reached on February 25. This was not only the second earliest maximum, “it is also the lowest in the satellite record.” NASA explains what happened in this short video:

Antarctic ice shelves rapidly thinning - A new study led by Scripps Institution of Oceanography at UC San Diego researchers has revealed that the thickness of Antarctica's floating ice shelves has recently decreased by as much as 18 percent in certain areas over nearly two decades, providing new insights on how the Antarctic ice sheet is responding to climate change. Data from nearly two decades of satellite missions have shown that the ice volume decline is accelerating, according to a study published on March 26, 2015, in the journal Science and supported by NASA. Scripps graduate student Fernando Paolo, Scripps glaciologist Helen Amanda Fricker, and oceanographer Laurie Padman of Earth & Space Research (a non-profit institute specializing in oceanography research) constructed a new high-resolution record of ice shelf thickness based on satellite radar altimetry missions of the European Space Agency from 1994 to 2012. Merging data from three overlapping missions, the researchers identified changes in ice thickness that took place over more than a decade, an advancement over studying data from single missions that only provide snapshots of trends. Total ice shelf volume (mean thickness multiplied by ice shelf area) across Antarctica changed very little from 1994 to 2003, then declined rapidly, the study shows. West Antarctic ice shelves lost ice throughout the entire observation period, with accelerated loss in the most recent decade. Earlier gains in East Antarctic ice shelf volume ceased after about 2003, the study showed. Some ice shelves lost up to 18 percent of their volume from 1994 to 2012.

Antarctic Ice Shelves Melting at Accelerating Rate -- Antarctica is pretty much covered with glaciers. Glaciers are dynamic entities that, unless they are in full melt, tend to grow near their thickest parts (that’s why those are the thickest parts) and mush outwards towards the edges, where the liminal areas either melt (usually seasonally) in situ or drop off into the sea. Antarctic’s glaciers are surrounded by a number of floating ice shelves. The collapse or disintegration of an ice shelf is thought to lead to the more rapid movement of the corresponding glacial mass towards the sea, and increased melting.   Most likely, Antarctic glacial melting over the coming decades will involve occasional catastrophic disintegration of an ice shelf, followed by more rapid glacial melting at that point. Unfortunately, the ice shelves are generally becoming more vulnerable to this sort of process, a new study just out in Science shows. From the abstract: The floating ice shelves surrounding the Antarctic Ice Sheet restrain the grounded ice-sheet flow. Thinning of an ice shelf reduces this effect, leading to an increase in ice discharge to the ocean. Using eighteen years of continuous satellite radar altimeter observations we have computed decadal-scale changes in ice-shelf thickness around the Antarctic continent. Overall, average ice-shelf volume change accelerated from negligible loss at 25 ± 64 km3 per year for 1994-2003 to rapid loss of 310 ± 74 km3 per year for 2003-2012. West Antarctic losses increased by 70% in the last decade, and earlier volume gain by East Antarctic ice shelves ceased. In the Amundsen and Bellingshausen regions, some ice shelves have lost up to 18% of their thickness in less than two decades.

Massive Antarctic glacier more vulnerable than previously thought - The effect that the expansion of warming ocean water has on sea level is easy to predict.  The contributions from melting glacial ice, however, are much trickier to divine. It depends heavily on fine-scale details, like the shape of the surface beneath the ice, which controls the glacier’s flow toward the sea. Those fine-scale details aren’t easy to come by—not least because of the difficulty of accessing what can be remote and frigid places. The biggest individual outlet glacier for East Antarctic ice is the Totten Glacier. On its own, the ice behind Totten could raise global sea level more than three meters if it were to melt completely. These frozen giants are generally slow to stir, but like most glaciers around the world, Totten is shrinking. The large floating ice shelf in front of Totten, which holds back the flow of ice like a buttress, is thinning at a rate in the neighborhood of 10 meters per year. The first surprise came near the front of the ice shelf. We knew there is a broad, low, ridge that parallels the coast there, and it was thought that this might shield the water beneath the shelf from bottom currents. However, some low spots in the ridge revealed by the new work appear to provide a path through which the bottom water can reach the ice.They also discovered a skinny trench, open toward the sea and extending inland along the main body of the ice shelf. That trench is separated from the main part of the shelf by a sharper ridge—but it, too, seems to have a gap that would allow water to flow through.

A glacier area the size of the entire South is melting away — and it could swallow your house: he news on climate change is rarely good. While governments worldwide struggle to curb the combustion of fossil fuels, the climate keeps warming, and the biggest gamechangers — ice sheets and glaciers — are disappearing more rapidly than we thought. A new study by scientists from the United States, Britain, France and Australia has found the world’s largest thinning ice sheet, the Totten Glacier in East Antarctica, is now melting from below. To put it in perspective, the Totten Glacier’s catchment area (the ice it holds in) is larger than the entire southeastern United States (at 538,000 square kilometers). If it were to melt, scientists say, the global sea level could rise eleven feet — or more than three meters worldwide. Let me repeat: the global sea level could rise eleven feet just because of this one glacier. (Equally terrifying is melting on the West Antarctica ice sheet, which, melted, would also raise the sea level a similar level.) Eleven feet is a scary figure, and it could take hundreds of years. But it could also take less. The problem, the study’s authors say, is that part of the glacier is holding back a larger catchment of ice. The floating ice shelf of the Totten glacier is a smaller size, some 90 miles by 22 miles. At the moment, it’s losing seventy gigatons of water per year, “equivalent to 100 times the volume of Sydney’s harbor every year,” according the Australian Antarctic Division. And that’s “a conservative lower limit,”  The Post drew up a handy graphic to show the size of the glacier’s catchment area. Here’s a thumbnail (a larger version is available at the Post.)

Antarctica Just Got Hotter Than Has Ever Been Recorded, Twice - The coldest place on Earth just got warmer than has ever been recorded.  According to the weather blog Weather Underground, on Tuesday, March 24, the temperature in Antarctica rose to 63.5°F (17.5C) — a record for the polar continent. Part of a longer heat wave, the record high came just a day after the previous record was set at 63.3°F.  Tuesday’s temperature was taken at the Argentina’s Esperanza Base, located near the northern tip of the Antarctic Peninsula. The Monday record was from Marambio Base, about 60 miles southeast of Esperanza. Both are records for the locations, however the World Meteorological Organization is yet to certify that the temperatures are all-time weather records for Antarctica. Before these two chart-toppers, the highest recorded temperature from these outposts was 62.8°F in 1961. Setting a new all-time temperature record for an entire continent is rare and requires the synthesizing of a lot of data. As Weather Underground’s weather historian, Christopher C. Burt, explains, there is debate over what exactly is included in the continent Antarctica, and by the narrowest interpretation, which would include only sites south of the Antarctic Circle, Esperanza would not be part of the continent.  According to the WMO, the official keeper of global temperature records, the all-time high temperature for Antarctica was 59°F in 1974. As Mashable reports, the verification process for these new records could take months as the readings must be checked for accuracy.

BEIJING: China fishing plan in Antarctica alarms scientists — Scientists studying the Antarctic’s marine life received some unexpected news this month: China plans to vastly increase fishing for Antarctic krill – small crustaceans that are a critical food for the continent’s penguins and other creatures.China currently harvests about 32,000 metric tons of krill annually from Antarctica’s waters, topped by only Norway and South Korea. Under China’s plans, detailed in a March 4 story in the state-run China Daily, the world’s most populous country would increase those catches 30 to 60 times, harvesting up to 2 million metric tons yearly. Rodolfo Werner, a marine scientist and adviser to Antarctic conservation groups, said he doubts China can ramp up its catches to that level. But the fact that China has announced such ambitious plans worries him, partly because other countries might follow suit.“I’m concerned – very concerned,” said Werner in a telephone interview from his home in San Carlos de Bariloche, Argentina. “If they invest big money in their fishing fleets, it will push the system to relax the current (Antarctic) catch limits.”

France decrees new rooftops must be covered in plants or solar panels  - Rooftops on new buildings built in commercial zones in France must either be partially covered in plants or solar panels, under a law approved on Thursday. Green roofs have an isolating effect, helping reduce the amount of energy needed to heat a building in winter and cool it in summer.  They also retain rainwater, thus helping reduce problems with runoff, while favouring biodiversity and giving birds a place to nest in the urban jungle, ecologists say. The law approved by parliament was more limited in scope than initial calls by French environmental activists to make green roofs that cover the entire surface mandatory on all new buildings. The Socialist government convinced activists to limit the scope of the law to commercial buildings. The law was also made less onerous for businesses by requiring only part of the roof to be covered with plants, and giving them the choice of installing solar panels to generate electricity instead.

Beijing to Shut All Major Coal Power Plants to Cut Pollution - - Beijing, where pollution averaged more than twice China’s national standard last year, will close the last of its four major coal-fired power plants next year. The capital city will shutter China Huaneng Group Corp.’s 845-megawatt power plant in 2016, after last week closing plants owned by Guohua Electric Power Corp. and Beijing Energy Investment Holding Co., according to a statement Monday on the website of the city’s economic planning agency. A fourth major power plant, owned by China Datang Corp., was shut last year. The facilities will be replaced by four gas-fired stations with capacity to supply 2.6 times more electricity than the coal plants. The closures are part of a broader trend in China, which is the world’s biggest carbon emitter. Facing pressure at home and abroad, policy makers are racing to address the environmental damage seen as a byproduct of breakneck economic growth. Beijing plans to cut annual coal consumption by 13 million metric tons by 2017 from the 2012 level in a bid to slash the concentration of pollutants. Shutting all the major coal power plants in the city, equivalent to reducing annual coal use by 9.2 million metric tons, is estimated to cut carbon emissions of about 30 million tons, said Tian Miao, a Beijing-based analyst at North Square Blue Oak Ltd., a London-based research company with a focus on China. ‘Clear Impact’ “Most pollutants come from burning coal, so the closure will have a clear impact to reduce emissions,” Tian said. “The replacement with natural gas will be much cleaner with less pollution, though with a bit higher cost.”

Japan uses $1 billion climate change fund for coal plants in India, Bangladesh –(AP) — Despite mounting protests, Japan continues to finance the building of coal-fired power plants with money earmarked for fighting climate change, with two new projects underway in India and Bangladesh, The Associated Press has found. The AP reported in December that Japan had counted $1 billion in loans for coal plants in Indonesia as climate finance, angering critics who say such financing should be going to clean energy like solar and wind power. Japanese officials now say they are also counting $630 million in loans for coal plants in Kudgi, India, and Matarbari, Bangladesh, as climate finance. The Kudgi project has been marred by violent clashes between police and local farmers who fear the plant will pollute the environment. Tokyo argues that the projects are climate-friendly because the plants use technology that burns coal more efficiently, reducing their carbon emissions compared to older coal plants. Also, Japanese officials stress that developing countries need coal power to grow their economies and expand access to electricity. “Japan is of the view that the promotion of high-efficiency coal-fired power plants is one of the realistic, pragmatic and effective approaches to cope with the issue of climate change,” said Takako Ito, a spokeswoman for the Foreign Ministry.

The $6.8 Billion Great Wall Of Japan: Fukushima Cleanup Takes On Epic Proportions: More than four years after the catastrophic tsunami that crippled several nuclear reactors in Fukushima, the Japanese utility that owns the site is struggling to deal with a continuous flood of radioactive water.  The ongoing release of radioactive material has prevented anyone from entering parts of the complex. But getting a handle on the mess, let alone permanently cleaning up the site, has been extraordinarily difficult. The problem is the daily flood of rainwater that flows downhill towards the sea, rushing into the mangled radioactive site. An estimated 300 tons of water reaches the building each day, and then becomes contaminated. TEPCO, the utility that owns the site, has been furiously building above ground storage tanks for radioactive water. Storing the water prevents it from being discharged into the sea, but this Sisyphean task does nothing to ultimately solve the problem as the torrent of water never ends. TEPCO has already put more than 500,000 tons of radioactive water in storage tanks. To reduce the 300 tons of newly created radioactive water each day, TEPCO must cut off the flow of groundwater into the nuclear complex. To do that, it plans on building an ice wall that will surround the four reactors. TEPCO plans on building an intricate array of coolant pipes underneath the reactors, freezing the soil into a hardened ice wall that will block the flow of water. The ice wall will stretch one and a half kilometers around the reactors.Great plan, except that it has never been done before. TEPCO may be able to freeze the soil, but there is no telling if it can build an ice wall without any holes that could allow water to seep into the reactor building.

Fukushima's Nuclear Reactor Fuel Is "Missing" - In the same week as Japan unveils its Pacific-Rim-esque anti-tsunami wall public works project, and Japanese government auditors say the operator of the Fukushima Dai-ichi nuclear plant has wasted more than a third of the 190 billion yen ($1.6 billion) in taxpayer money allocated for cleaning up the plant after it was destroyed by a March 2011 earthquake and tsunami; Science Journal reports, Fukushima won't be truly safe until engineers can remove the reactors' nuclear fuel. But first, they have to find it... And so, in February of this year two muon detectors were installed outside the Fukushima Daiichi unit-1 ruins at reactor vessel height for the purpose of finding that ‘missing’ reactor fuel.

The Supreme Court Is About To Decide If Coal Plants Can Keep Emitting Unlimited Mercury -- The Supreme Court is scheduled to hear oral arguments on Wednesday on a case that will decide the immediate future of mercury and arsenic pollution in the United States.  The case, Michigan v. Environmental Protection Agency, surrounds the legality of a rule that would for the first time limit heavy metal pollution from oil- and coal-fired power plants. The EPA has been trying to implement a rule like this for more than two decades. If all goes well for the agency, the Mercury and Air Toxics Standard will finally go into effect this spring.  But if all does not go well for the EPA, the much-anticipated rule will go back to the drawing board. Power plants will continue being allowed to emit unlimited amounts of mercury, arsenic, chromium, and other toxins until another EPA rule goes through the regulatory approval process, which often takes years.  “[A ruling against the EPA] would set back the regulations a lot,” said Jim Pew, an attorney at the environmental law firm Earthjustice. “It would be another chance for the industry to delay things and try to stop [EPA] politically, which is what they’ve been trying to do for 20 years.” Right now, coal and oil-fired power plants have no requirements to limit their toxic metal emissions. As a result, they are the largest industrial source of toxic air pollution in the country. Coal plants, for example, are responsible for 50 percent of all U.S. emissions of mercury, a neurotoxin particularly dangerous to unborn children. Other toxic metals emitted from power plants, such as arsenic, chromium, and nickel, can cause cancer.

The Real Cost of Coal - Congress long ago established a basic principle governing the extraction of coal from public lands by private companies: American taxpayers should be paid fair value for it. They own the coal, after all.... Studies by the Government Accountability Office, the Interior Department’s inspector general and nonprofit research groups have all concluded that taxpayers are being shortchanged.This is no small matter. In 2013, approximately 40 percent of all domestic coal came from federal lands. ... Headwaters Economics estimates that various reforms to the royalty valuation system would have generated $900 million to $5.6 billion more overall between 2008 and 2012.This failure by the government to collect fair value for taxpayer coal is made more troubling by the climate-change implications of burning this fossil fuel. ... The price for taxpayer-owned coal should reflect, in some measure, the added costs associated with the impacts of greenhouse gas emissions. ... Industry is sure to oppose this, even though coal is the planet’s most carbon-intensive energy source. Others will argue that an across-the-board carbon tax is a more efficient way to account for climate impacts. With no near-term prospects for such legislation, however, the Interior Department should set a royalty that provides fair value to taxpayers by addressing the climate costs of burning coal. ...

Dirty Energy Taxes And Clean Energy Innovation - I am and have long been an unabashed advocate of carbon taxes and gas taxes, but… I have a concern that not enough attention is being paid to the innovation function for clean energy. Right now clean energy prices are marching steadily downward in the form of declining solar costs, my question is: would a carbon tax slow this innovation trend?A simplified view of the future of energy is this: when the total cost of solar energy goes below the cost of dirty energy like coal, it will be a huge deal and will lead to widespread adoption of solar. While this threshold varies greatly by geography, think of dirty energy costs as a line to cross that when a solar company gets below it they can take a huge chunk of market share and supplant existing dirty energy. This means economic benefits of getting below this threshold are big, and this gives the market strong incentives to innovate to push costs down right now. However, once we go below that threshold and solar is cheaper than dirty energy, the incentives to push costs further down will be reduced. This matters for policy, because what a carbon tax does is push the required cost threshold up. This would allow solar to become the more profitable source of energy in the US sooner and increase the speed of its dominance here. However, a carbon tax would raise the threshold in the US relative to the threshold for developing countries. In other words, the race for solar companies in the U.S. becomes to be cheaper than dirty energy + a carbon tax, which is a higher threshold than being cheaper than dirty energy alone, which is the threshold in many developing countries. It is easy to see how this could cause downward march in solar costs to slow, and as a result solar would reach the threshold for China, India, and other developing countries perhaps much much later.

A $600-Million Fracking Company Just Sued This Tiny Ohio Town For Its Water - A tiny town in eastern Ohio is being sued by an Oklahoma-based oil and gas company that bought more than 180 million gallons of water from the town last year. That water use, combined with a dry fall, prompted the village to temporarily shut off water to Gulfport Energy. Now, a second company has a water agreement, and there might not be enough water to go around. Gulfport Energy alleges in the lawsuit that the village of Barnesville, population 4,100, violated its agreement to provide water from its reservoir by entering into a contract with oil and gas company Antero Resources. Gulfport says the village’s contract with Antero allows for withdrawals beyond what Gulfport is allowed to take. Gulfport’s water supply can be shut off whenever water levels in the reservoir create a risk to the health and safety of the village residents and businesses. Last fall, the reservoir was down three feet below average when village officials stopped all outside withdrawals. “We felt like we had to shut everyone off to protect the regular users,” said village solicitor Marlin Harper. “We don’t have unlimited water.” But here’s the catch: Only Gulfport pumped water out of the reservoir last year. So even though, as Harper admits, the Antero contract has “a little bit of a priority” over the Gulfport contract, that’s not the reason Gulfport’s water supply was shut off. During the unusually dry fall, water withdrawals by Gulfport alone were too much for the reservoir to sustain. Environmentalists stress how valuable water is in the area, and particularly how valuable the reservoir at the heart of the lawsuit is. The water being sold to Gulfport comes from the Slope Creek Reservoir, which supplies water to all the town’s residents as well as another 8,000 people in neighboring areas, said John Morgan, a spokesman for Concerned Barnesville Area Residents.

Fracking Company Sues Ohio Town for its Water - Here in Ohio, the fracking industry can get water from just about anywhere for their thirsty drilling endeavors. Apparently, that’s still not enough for this water-intensive industry. Yesterday, the Oklahoma-based Gulfport Energy sued Barnesville, Ohio to bully them into allowing continued withdrawals from the Slope Creek Reservoir. The fracking process uses up to 4.1 million gallons per gas well, and 2 million gallons per oil well, and that number is expected to grow. This intensive water use, combined with Ohio’s dry fall, would not leave enough water for Barnesville residents. That’s why officials stopped water withdrawals for any other purposes besides municipal use last fall due to abnormally low water levels. As Village Solicitor Marlin Harper told Think Progress, “We felt like we had to shut everyone off to protect the regular users…” because “We don’t have unlimited water.” There is no shortage of options for oil and gas companies in terms of buying water. And thanks to multiple sweetheart deals with the Muskingum Watershed Conservancy District (MWCD), oil and gas companies can purchase it on the cheap. Out-of-state companies have purchased hundreds of millions of gallons of water over the last couple of years from reservoirs in the largest watershed within Ohio’s borders. This year, frackers plan to take billions of gallons from the Muskingum Watershed at the rate of less than ten dollars per 1,000 gallons. The special treatment for fracking companies must end, especially when it means depriving people of water. The water crisis in Toledo last summer should be warning enough of the importance of access to water, and Barnesville took a step to avoid their own crisis and stood up for their citizens when they put their drinking water first.

Chesapeake Energy cuts 2015 capital spending, will drill fewer wells - Chesapeake Energy Corp. is cutting its 2015 capital budget by $500 million due to low prices for natural gas and liquids. The Oklahoma-based company, the No. 1 player in Ohio’s Utica Shale, made its latest adjustment Monday. That means Chesapeake intends to spend $3.5 billion to $4 billion and to operate 25 to 35 rigs in 2015. Earlier, the company had said it intended to spend $4 billion to $4.5 billion. It operated an average of 64 rigs in 2014. Chesapeake intends to drill and connect to sales between 520 and 650 gross operated wells in 2015. That would be a reduction of about 50 percent from 2014. In  Doug Lawler, Chesapeake’s chief executive officer, said, “We entered 2015 with a strong liquidity position and we intend to manage it prudently.” The company said it expects to produce 231 million to 236 million barrels of oil equivalent in 2015, representing a growth of 1 percent to 3 percent from 2014. That revised forecast is down from last month when Chesapeake said it expected to produce 235 million to 240 million equivalent barrels in 2015, which would have represented a growth of 3 percent to 5 percent from 2014.

Government response to fracking concerns still inadequate -- With Ohio's judicial approval striking down community rights, the world's wealthiest industry, drilling, will barrel along like a freight train with no grassroots efforts coming close to stopping it. The municipal zoning regulations to prevent fracking within city limits mean nada now. Here in Pennsylvania the municipalities are slow to act, perhaps due to fear of lawsuits, but local home rule is still in effect. However, it appears the Federal Energy Regulatory Commission, the state Department of Environmental Protection and other agencies that are supposed to protect us and our drinking water are laying out the red carpet for the industry. At least the frustrated voice of the grassroots is still being heard in opposition. We say the industry is poorly regulated on all sides, that fracking results in air and water pollution and that the aging infrastructure is a ticking time bomb for leaks and explosions. In September 2014 Yale University found "increased reporting of upper respiratory symptoms" and "dermal" problems in southwest Pennsylvania, which is dotted with wells. With all the talk about profit and jobs, there's no room for any consideration of what happens when the wells dry up or with accidents or the health damage done to the populace. If our government will not protect us, then it has stopped being legitimate.

Utica well activity in Ohio - Activity in the Utica has gone up a tiny bit when compared to our last Utica well report published on March 19th.  During the week ending on the 21st, a total of ten horizontal permits were issued and 26 rigs were up and running in the shale formation. While production numbers have fluctuated up and down the past few weeks, there is talk about the potential for another gas boom in the Utica Shale located in Pennsylvania.  Seneca Resources, a subsidiary of National Fuel Gas Company, announced that it successfully completed a well on state forest land in Tioga County, Pennsylvania.  According to test reports, the well will produce 22.7 million cubic feet of natural gas per day.  Two other success stories in the Utica Shale formation come from Range Resources and Royal Dutch Shell.  Back in December, Range Resources completed a well located in Washington County with a daily flow rate of 59 million cubic feet of natural gas.  Last September, Shell completed two wells also located in Tioga County. The following information is provided by the Ohio Department of Natural Resources and is through the week ending on March 21st.. DRILLED 304 - DRILLING 267 - PERMITTED 464 - PRODUCING 829 - TOTAL 1,864

Marcellus horizontal well activity in Ohio - While Marcellus well activity in Ohio is about the same as it has been the last few weeks, things in Pennsylvania are heating up when it comes to drilling regulations. Last week, during a meeting of the State Department of Environmental Protection’s Oil and Gas Technical Advisory Board (TAB), Marcellus Shale industry representatives called out the Wolf administration’s efforts in handling the revision of drilling regulations.  Several groups challenged the level of transparency regarding new draft rules, which have been in revision since 2011. The Chapter 78 regulations, which manage the oil and gas industry, were available for public comment and nine hearings regarding the rules were held during 2013.  Shortly after Governor Tom Wolf took office, the DEP made numerous serious changes to the regulations, including stricter rules on waste, noise and streams. The issue that industry representatives are wrangling with pertain to detailed comments from the Macellus Shale Coalition (MSC) regarding the rules being completely ignored and a sudden change in TAB members. However, the DEP’s Deputy Secretary for Oil and Gas Scott Perry has stated that the governor typically appoints new members when elected into office and that is part of the process. The DEP plans to release the newly revised regulations on April 4th for 30 days for public comment but will not hold any more hearings or extend the public comment period. The regulations must be completed by March 2016 or the revision process will start over. The following information is provided by the Ohio Department of Natural Resources and is through the week ending on March 21st. PERMITTED: 15 DRILLED: 15 PRODUCING: 13 INACTIVE: 1 TOTAL: 44

Shale Gas: "An Orgy of Over-Production" - Spending cuts for oil-directed drilling have dominated first quarter 2015 energy news but rig counts for shale gas drilling are too high. Investors should pay attention to this growing problem. Bank of America fears sub-$2 gas prices now that winter heating worries are over. Low natural gas prices affect the economics for gas-rich oil production in the Eagle Ford Shale and Permian basin plays as well as for the shale gas plays. Meanwhile, an orgy of over-production is taking place in the Marcellus Shale. Well head prices are now below $1.50 per thousand cubic feet of gas because of limited take-away capacity and near-saturation of regional demand. Even companies in the Wyoming, Susquehanna, Allegheny and Washington County core areas of the Marcellus play are losing money at these prices. The rig count for shale gas plays has decreased by only half as much as for the tight oil plays. The reason appears to be that most shale gas companies do not have significant positions in the tight oil plays and must continue to drill to maintain production levels. Shale gas rig counts have dropped only 19% for horizontal rigs and 25% for all rigs from 2014 highs. The corresponding decrease for tight oil plays is 41% and 46%, respectively, as shown in the table below.  This has puzzled me because the shale gas plays are not commercial at less than about $6/mmBtu except in small parts of the Marcellus core areas where $4 prices break even. Natural gas prices have averaged less than $3/mmBtu for the first quarter of 2015 and are currently at their lowest levels in more than 2 years. Most shale gas producers either do not have positions in the tight oil plays or are strongly gas-weighted in their production mix. These companies must continue to drill in shale gas plays despite poor economics in order to avoid the consequences of falling production levels. The only criterion that seems to matter to investors these days is production guidance. If production drops, stock value will fall even farther than it has already. This will trigger loan covenants if asset values fall below thresholds set out in the loan agreements. When that happens, the loans will be called unless the companies can come up with more cash. This might result in bankruptcy. So, the drilling must continue as long as there is capital.

Statoil, West Virginia agree on deal for drilling under Ohio River - FuelFix (AP) — West Virginia and Statoil have agreed on a deal for natural gas and oil drilling under the Ohio River. The Intelligencer and Wheeling News-Register ( ) reports that Norway-based Statoil plans to drill on about 474 acres of state-owned land under the river in Marshall and Wetzel counties.  Statoil has agreed to pay an average price of $8,732 per acre. The state also will receive 20 percent production royalties.  Department of Commerce spokeswoman Chelsea Ruby tells the newspaper that the state is still finalizing drilling agreements with Gastar Exploration and Noble Energy.  Leasing state-owned land for hydraulic fracturing, a drilling technique commonly called fracking, is a new venture for West Virginia.

Pipeline would carry natural gas liquids through 18 Kentucky counties under controversial plan - A company’s proposal to change the product flowing through an existing natural gas pipeline, and to reverse the flow through that interstate line, is drawing increasing concern and comment from Kentuckians. Of particular concern to people in Lebanon and Marion County is the possibility of an explosion in the underground line or a leak and resulting contamination of the Rolling Fork River, a drinking water supply for Marion and parts of Taylor and LaRue counties, . “A breach of that line anywhere in that pathway could really jeopardize — who knows for how long? — the long-term water supply of this community,”  Residents have similar questions in neighboring Danville and Boyle County. There, a segment of pipeline now suspended over Dix River and Herrington Lake — which provides drinking water for Boyle, Garrard and Mercer counties — will be put underground by boring beneath the lake, said Boyle County Judge-Executive Harold McKinney. A leak could happen where 70-year-old pipe joins new pipe above the lake surface.  At issue is Tennessee Gas Pipeline’s proposal to “repurpose” a natural gas pipeline that runs 256 miles through 18 Kentucky counties, from Greenup County in the northeastern corner through Simpson County on the Tennessee state line. In an application filed in February with the Federal Energy Regulatory Commission, the company seeks to abandon a 964-mile section of line that runs from Natchitoches Parish, La., to Columbiana County, Ohio. The natural gas line would be sold to Utica Marcellus Texas Pipeline LLC or UMTP, a subsidiary of Tennessee Gas Pipeline. The subsidiary would convert the line for transportation of natural gas liquids instead of natural gas.

Obama’s Trade Deals Could Overturn New York’s Fracking Ban and Accelerate Climate Change -  Thanks to a recent Wikileaks’ leak, certain truly onerous provisions of President Obama’s secret trade deals are no longer secret. As reported this week in the New York Times, the Transpacific Partnership (TPP) would “grant broad powers to multinational companies operating in North America, South America and Asia. Under the accord, still under negotiation but nearing completion, companies and investors would be empowered to challenge regulations, rules, government actions and court rulings—federal, state or local—before tribunals organized under the World Bank or the United Nations.” As terrible as this sounds for the rule of law, and democracy, it’s even worse. Long-time consumer advocate, Ralph Nader describes how the Investor State Tribunals would work: Suppose that Brazil sues the U.S. and says “your food labeling laws are too restrictive and they are keeping out our exports to your country.” Then we send our Attorney General to Geneva before the Tribunal. There can be no press, no public disclosure of what happens behind closed doors. If we lose, as we almost certainly will, there is no independent appeal. It circumvents our courts, legislative and regulations. Foreign corporations can take our food, health and safety protections and bring us before these tribunals and if they lose, we pay millions of dollars in compensation. The cases are argued, tried and judged by a small, revolving group of elite corporate attorneys, taking turns playing the role of judge and prosecutor. The potential for conflicts of interest and secret handshakes exceeds even the current regulatory revolving door, in which industry lawyers, officials and consultants move into key positions in public agencies, alter governmental regulations in industry’s favor and then return to their bespoke industry.

EXPOSED! Crestwood Uses Smoke and Mirrors to Claim Support in the Finger Lakes -  Last week, Crestwood’s PR firm sent out a news release (attached) declaring that it has support for its gas storage-transport project in the heart of the Finger Lakes. But here is what we found:

  • -The owner of “Munroe Vineyards” isn’t really a “vinter” (sic), because “Munroe Vineyards” is really JM trucking– a company that hauls propane.
  • -The “grape inspector” isn’t exactly a grape inspector, she is the secretary for JM Trucking, the company that hauls propane.
  • -The farmer, George Zemak, actually owns a trucking company too:

And he sold his land to Crestwood in Savona for a good price. (After you listen to the podcast, you might agree that if Mr. Zemak is the best spokesperson Crestwood can find for the project, they have a problem.) Hear all about it on Evan Dawson’s Connections podcast from earlier today.

Anti-pipeline activist: Gas battle isn't over yet - Since state leaders decreed in December that hydraulic fracturing for natural gas won’t be permitted in New York, those battling the Constitution Pipeline have seen attrition from “NIMBY” (not in my backyard) protesters, though most activists remain engaged, an opposition leader said Wednesday. “I have seen no diminishment in involvement on the part of people who really oppose the pipeline,” said Anne Marie Garti, an environmental lawyer who helped organize Stop the Pipeline. “But the NIMBY crowd was really not committed to anything in the first place. So of course they have dropped out of everything since the state’s announcement because it is not in their nature to be involved.” The $700 million Constitution Pipeline project has received conditional approval from federal regulators and now awaits crucial decisions on water permit requests to the state Department of Environmental Conservation and the U.S. Army Corps of Engineers.   Garti said some activists suspect that the state ban on fracking was “just a way of defusing the opposition to the pipeline.” She cautioned that it is entirely possible future state leaders will allow fracking once natural gas prices rise. “The New York fracking ban is a moment in time,” she said. “Pipelines last for decades. Some of them are over 100 years old. So in five years or whenever the price of gas goes up they could approve fracking, and this pipeline will be in place, and the whole area will get fracked to death.”

Maryland Senate Passes Bill To Declare Fracking An ‘Ultrahazardous Activity’ --On Tuesday, Maryland legislators passed legislation that would place strong limits on the extraction of natural gas in the state.The Maryland House of Delegates passed a three-year moratorium on hydraulic fracturing — or fracking — in the Western part of the state, while the Maryland Senate approved a bill that would impose strict financial liabilities on fracking companies and would declare fracking an “ultrahazardous and abnormally dangerous activity.” The bills must pass through the other chambers before heading to the desk of Republican Governor Larry Hogan for approval.Maryland has been under a de facto fracking ban for more than three years, following former Democratic Governor Martin O’Malley’s hold on permits while the state conducted studies of the fracking industry. The results of those inquiries were mixed, with one study raising concern over fracking’s impact on air quality and another finding that, under best practices, fracking would pose no threat to Maryland’s drinking water. The just-passed House bill fills in what proponents of the bill claim were gaps in these previous studies.“We’ve got to get this right, because if we get this wrong, it is unfixable,” Del. Dereck Davis (D) said during the House debate. “You cannot undo this.”The bill passed 93-45, mainly along party lines, facing staunch opposition from Western Maryland delegates and Republicans from Baltimore county, who argue that fracking would only impact a small portion of the state’s residents who are already willing to accept the industry.

Regulators Issue Tougher Disposal Well Directives as Oklahoma's Quake Risk Rises -- (document imbedded) As earthquakes continue to surge in Oklahoma and seismologists warn of more frequent and more damaging shaking, the state’s oil and gas regulator is issuing new orders to companies operating wells in seismically active regions of the state. The Oklahoma Corporation Commission’s new requirements, known as directives, were mailed March 18 to 92 people or companies operating 347 Arbuckle formation disposal wells in quake-prone regions of the state. The directives expand the definition of “areas of interest” — a term the agency uses to describe locations of concentrated seismic activity — and require operators to prove to the commission that their wells aren’t in contact with granite basement rock. Fluid injection into basement rock has been identified by researchers as a major risk factor for triggering earthquakes. “This is a way of quickly getting our hands around the issue, particularly in those areas that have seen huge increases in seismicity,” says commission spokesman Matt Skinner.  The Arbuckle is a deep rock formation that underlies most of Oklahoma and is known for its ability to absorb and hold fluid — a characteristic that has made it a popular target for wastewater disposal. More recently, the commission has revised its permitting process to scrutinize disposal wells and has employed a “traffic light” system to manage wells in quake-prone areas which, under the previous system, included wells located within 6 miles of a magnitude-4.0 or greater earthquake. The new orders were written to take into account “swarms” of earthquakes, and define areas of interest as any region within 6 miles of locations containing at least two earthquakes within a quarter-mile of each other, with at least one of the quakes registering a 3.0 or greater magnitude. The new directives issued this month are more strident than previous quake-related commission actions and put on oil companies the onus of proving their wells aren’t capable of injecting fluid into basement rock. To do this, operators are given 30 days to supply the commission with well logs or gamma ray tests to verify a well’s depth.

Don’t Frack with Denton: A Community’s Fight to Defend Home Rule - Citizens of Denton, Texas are still fighting to keep fracking banned within city limits despite the vote last November in favor of the ban. Ever since the vote, state lawmakers in cahoots with the oil and gas industry and the American Legislative Exchange Council, or ALEC, have attempted to strip municipalities like Denton of home rule authority to override the city’s ban, according to Frack Free Denton. The town is the first municipality in Texas to ban fracking and has consequently become ground zero for the fracking debate. Yesterday, Denton Mayor Chris Watts and City Attorney Anita Burgess traveled to Austin to testify at a hearing on two bills that have emerged in response to Denton’s fracking ban, according to Frack Free Denton. In solidarity with grassroots organizers from the Frack Free Denton movement and other residents from small Texas towns who also testified in Austin, documentary filmmaker and Denton resident Garrett Graham released a new trailer for his forthcoming film. With the help of Frack Free Denton, Graham made a film that “chronicles Denton’s uphill battle against oil and gas interest deep in the heart of the gas patch,” said Frack Free Denton. The oil and gas industry is working hard to undo Denton’s ban and to keep other cities from following Denton’s example but residents of Denton are speaking out.

Editorial: Overreaching bill could bring fracking to your doorstep - Oil and gas operators have economic rights, and it seems some Austin lawmakers think those are the only rights that matter. HB 40, sponsored by Rep. Drew Darby, R-San Angelo, would strip the authority of cities to regulate oil and gas drilling on the grounds that the state has the sole authority to regulate oil and gas and mineral rights. This bill is an all-out assault on local control, seemingly designed to punish cities like Dallas and Denton that dared exercise their home-rule rights to protect their residents. It is a bad bill. If enacted, say goodbye to Dallas’ drilling ordinance and Denton’s ban on fracking within its city limits. Such local decisions wouldn’t be honored, because economic rights would trump the rights of homeowners to protect property values, health, safety and overall quality of life. This bill is the creation of lawmakers who don’t have to live with the consequences. We would expect North Texas lawmakers to stand up for local rights on this issue that touches all their constituents, so vital in the heart of the Barnett Shale. Cities have to live with the noise, traffic and fumes, for sure. And the jury is still out on whether fracking or a related disposal process is causing an increase in earthquakes. Don’t cities and their residents deserve a voice in this issue?

Texas Frack Anywhere HB 40 Hearing  Or How to Frack Texas Cities Without Really Trying.  Joined The Calvin, The Sharon and The Marc in Austin yesterday to testify against Texas House Bill 40 Frack Anywhere. About 100 people turned out to testify, 80% against, the rest were the usual assortment of fracking lobbyists, Man Camp followers and some Judas Goat mayors.  My take on it – a crudely crafted attempt to gut local zoning ordinances – and replace them with frack all: (embedded text, picture...

Texas Frack Anywhere Test Fail - Texas Frack Anywhere Bill imposes a “commercially reasonable” test on any municipal oil and gas ordinance – such as a setback.  The sponsors think that Dallas’s 1,500 foot setback is “too long” – when the average length of a lateral in the Barnett Shale is a mile, 5,280 feet. And the average spacing unit is a section, 640 acres. If the well pad is in the middle of the spacing unit, the lateral would be 2,640 feet long. In fact, it couldn’t be much less than 2,000 feet in order to worth drilling. So the standard for a “commercially reasonable” setback – based on spacing unit sizes –  is a lot more than 1,500 feet. Maybe Dallas should increase its setback to make it more “commercially plausible.” (includes embedded document)

Texas bill to limit local anti-fracking ordinances advances -  A bill that would limit cities and towns from passing local ordinances restricting oil and gas drilling and exploration is headed to the full Senate. The Senate Committee on Natural Resources and Economic Development voted 8-0 on Tuesday to advance a proposal by its chairman, Horseshoe Bay Republican Sen. Troy Fraser. The bill is among the most-watched of nearly a dozen bills that seek to limit local regulations in the wake of a ban on hydraulic fracturing that voters in Denton overwhelmingly approved in November. The measures have been cheered by energy companies who worry about local bans crimping key segments of Texas’ economy, but municipal groups fear the state may impede local authority too much. A similar bill in the House was considered in committee Monday but left pending.

Train cars hauling methanol derail in central Texas - — Texas authorities say a dozen train cars have derailed near Valley Mills, including five tanker cars carrying methanol. Department of Public Safety spokesman Trooper D.L. Wilson says no injuries or fires have been reported from the Saturday evening accident. He says one or two of the methanol-hauling tanks have small leaks. Wilson says about 10 nearby homes were evacuated as a precaution. Residents were allowed to return around 9 p.m.  Wilson says it’s unclear what caused the derailment, but says heavy rain has been falling in the area. He says the weather was making it difficult for vehicles to get to the scene to unload material from the derailed cars, which also include seven flatbeds carrying oil-well pipes. He says a hazardous materials crew is on the scene.

Manchin among senators urging tighter safety rules for rail tankers - Following a number of train derailments hauling crude oil, U.S. Sen. Joe Manchin, D-W.Va., was among 21 senators who sent a letter to the Senate Appropriations subcommittee Tuesday supporting funding for a program aimed at improving coordination between various agencies with the U.S. Department of Transportation. The proposed program would consolidate the regulatory units within each agency to allow the Secretary of Transportation to develop uniform safety standards for the transportation of crude and other energy products, said a spokesperson for the senator. The agencies affected would including the Federal Railroad Administration, the Pipeline and Hazardous Materials and Substances Administration and the Federal Motor Carrier Safety Administration. “As you know, five years ago, our nation’s railroads hauled very little crude oil by rail. Now, railroads transport approximately one-tenth of U.S. crude oil output — approximately 1.1 million barrels per day,” the letter reads. It continues that since 2007 crude-by-rail is driven largely by the vast natural gas and oil developments in the Bakken oilfields in North Dakota and Montana. “In light of several tragic accidents involving crude-by-rail trains — including the most recent derailments and explosions of tanker cars carrying crude oil in West Virginia and Illinois — communities stretching across our country from the Midwest to coastal ports and refineries are rightly concerned about the safe movement of these combustible products,

As oil trains roll across America, volunteer firefighters face big risk -- Volunteers at the Galena, Illinois, fire department were hosing down the smoldering wreck of a derailed BNSF oil train on the east bank of the Mississippi River on March 5 when a fire suddenly flared beyond their control. Minutes later, the blaze reached above the treetops, visible for miles around. “They dropped the hoses and got out” when the flames started rising, said Charles Pedersen, emergency manager for Jo Daviess County, a rural area near the Iowa border which includes Galena. “Ten more minutes and we would have lost them all.” No one was hurt in the fire, which burned for days, fed by oil leaking from the ruptured tank cars. But an increase in explosive accidents in North America this year highlights the risks that thousands of rural fire departments face as shipments of oil by rail grow and regulators call for improved train car standards. Nearly two years after a crude oil train derailed, exploded and killed 47 people in the Canadian town of Lac-Megantic, Quebec, in 2013, there are no uniform U.S. standards for oil train safety procedures, and training varies widely across the country, according to interviews with firefighters and experts in oil train derailments and training. About 2,500 fire departments are adjacent to rail lines transporting oil in North Dakota, Minnesota, Wisconsin, Illinois and Iowa alone, according to figures provided by the Department of Transportation, but no nationwide statistics exist. The DOT does not know which of these fire departments are in need of training, a spokesman said. The scenario concerns experts who say more needs to be done for sparsely equipped, rural, mostly volunteer-run fire departments to prepare as oil train accidents increase.

North American Railroads Caught by Speed of Crude-Oil Collapse - -- The slowdown that North American railroad companies had been bracing for in crude oil shipments has turned into a rout, with volumes falling faster than executives had predicted. With energy companies scaling back drilling after prices for the commodity fell about 50 percent since July, industry executives and analysts anticipated that demand for hauling crude and extraction materials such as frac sand and pipes would slow after a four-year surge. They didn’t expect it to slow this much this fast. “The impact is occurring more quickly than the rails originally projected to investors,”   “The consensus view was that very high double-digit growth would moderate to low double digits, and as we have seen in recent weeks we’ve broken that floor and in some cases gone negative.” Rail stocks and tank-car leasing are reflecting the dwindling traffic. The Standard & Poor’s 500 Railroads Index posted its biggest weekly decline since October and lessors’ rates for oil cars have fallen by about a third in the last six months, Cowen & Co. said in a report on Friday. “We would not be surprised if the downward trend continues as long as oil prices remain depressed,” Jason Seidl, a New-York-based Cowen analyst, said in the report. As recently as January, companies including CSX Corp. and Canadian Pacific Railway Ltd., were forecasting that even with prices below $50 a barrel, oil projects already under way would buoy production and keep trains hauling even more crude than last year. Instead carloads of U.S. petroleum products fell 2.8 percent in the last four weeks after growing 13 percent last year.

Rail industry's improved tank cars failing to prevent spills — In the short time since the derailment of a CSX train here hauling 109 tankers of crude oil last month, a number of similar accidents have occurred across the nation, despite federal and industry officials’ assurances that transporting the hazardous liquid is safer than ever. On Saturday, the derailment cleanup was complete. A mile or so from the site, residents sat in their colorful former coal camp houses and talked of that day and their worries that it might happen again. Something biblical, wrath-of-God, is how some described it. Others used a similar word — apocalyptic. Many said they know little if anything about rail or tanker regulations, but they now know what happens when things don’t work like they are supposed to. Incidents like the Feb. 16 spill, followed by fireballs along the banks of the Kanawha River, are becoming common, federal documents show. A search of federal records indicates that last month’s derailment was not unusual, and that the number of incidents involving derailments of oil tankers is increasing. This leaves many wondering why the sturdier train cars built specifically to carry crude oil have failed to prevent major spills.

Reroute oil trains? History suggests it's a long shot — Last week, U.S. Sen. Al Franken asked the Federal Railroad Administration to consider rerouting trains carrying volatile Bakken crude oil from North Dakota so they do not pass through Minnesota’s biggest cities. For Franken, the possibility of rerouting is an integral part of a comprehensive response to a recent rash of fiery oil train derailments that also includes stabilizing Bakken crude before it is loaded into stronger tanker cars. For the nation’s powerful railroad lobby, however, rerouting is an unwarranted intrusion into a rail safety system that the industry says works. Government-ordered rerouting of private rail traffic is not exactly a snowball in hell. It is more like a blizzard in Bahrain — possible, but unprecedented. In Minnesota and around the country, “rerouting issues ought to be high on everyone’s agenda,” said rail safety expert Fred Millar, who fought unsuccessfully against railroads to move chlorine trains out of the District of Columbia. “But rerouting has been pushed off the table.”  Congress created the Federal Railroad Administration in 1966. In nearly half a century it does not appear to have forced any railroads to reroute trains around big cities for safety reasons, despite computer modeling that estimates routing changes could lower citizens’ risks to hazardous materials derailments by 25 to 50 percent and reduce casualties in an actual derailment by half.

Crews working to clean up Colorado coal train derailment - — Crews are working to clean up a stretch of railroad where a coal train jumped the tracks in eastern Colorado, spilling tons of coal. The 120-car Burlington Northern Santa Fe train derailed Sunday near the town of Hudson. At least 27 freight cars derailed and lost their cargo as the train was traveling from Gillette, Wyoming to La Junta, Colorado. Railroad spokesman Joe Sloan said it hopes to have the line connecting Denver to Brush back open later Monday so no trains have been re-routed. Both BNSF and the Federal Railroad Administration are investigating the derailment. Neither has speculated on a possible cause. BNSF carries a variety of the freight on the line but not large quantities of oil from the Bakken region of North Dakota, according to state regulators.

Boulder researchers take to sky for look at emissions' impact on air quality -  -based scientists on Monday are launching a study to determine how gas emissions from shale oil and natural gas basins in the western United States affect air quality. Using over a dozen state-of-the-art chemical instruments, a team of seven scientists will measure trace gas emissions as they fly a research aircraft over production sites in various stages of development located across the West. The project, dubbed SONGNEX 2015, is expected to conduct 15 research flights out of Colorado and Texas between March and May. The collaborative study is a joint project of the Cooperative Institute for Research in Environmental Sciences at the University of Colorado and the National Oceanic and Atmospheric Administration. Sites of interest in the study include the Bakken oil fields of North Dakota, the Niobrara shale formation of northern Colorado and Wyoming, and the Four Corners area. "Some [hydraulic fracturing] areas are quite remote. But here in the Front Range, you've got major metropolitan areas right next to the oil and gas production region," said Joost de Gouw, a research physicist and lead scientist on the project. "Denver has a long-standing air quality concern — everybody knows about the brown cloud."

Feds offer tradeoff for gas drilling in northwest Colorado - A new plan for oil and gas development in energy-rich northwestern Colorado would ease restrictions on what time of year drilling rigs can operate on federal land if well sites are consolidated to minimize disruptions to the environment. The federal Bureau of Land Management released a proposal Friday for drilling on about 2,700 square miles in Rio Blanco County and parts of Moffat and Garfield counties. The BLM says the area could yield more than 7.5 trillion cubic feet of natural gas, enough to heat 7.5 million homes for 15 years. The agency reviewed the possible impacts if more than 15,000 wells were drilled on 1,100 sites over 20 years. The release of the plan triggers a 30-day period for public protests. A final decision is expected later this year.

Nebraskans: We don’t want your wastewater - If Nebraska’s Oil and Gas Conservation Commission’s public hearing Tuesday is any indication, Nebraskans are adamant in their objection to a proposed oil field disposal well in Sioux County. Unable to reach a conclusion, the commission will continue to deliberate on the matter. The Omaha World-Herald reports that of the 50 residents to speak at the six-hour hearing, only three spoke in favor of Terex Energy Corp., the company planning the disposal well. Opponents expressed concern over the well’s potential negative impacts such as increased truck traffic and aquifer contamination.   Other concerns came from Sen. Ken Haar, who worried about oilfield waste water’s role in causing earthquakes. Haar also relayed a statement from Sen. John Stinner outlining his plans for a legislative study of the commission’s authority in oil field water regulation. “What we oppose is accepting waste products of other states, who should have their own disposal facilities,” Jenny Hughson said. Broomfield, Colorado-based company Terex submitted an application last fall to convert a dormant well site into a disposal site. The company’s plans illustrate what would not only be the state’s largest disposal site, but take in the most waste as well. The company expects to dispose of 10,000 barrels of waste every day.

New regulations bring additional costs to over half of NM well sites - – More than half of New Mexico’s oil and gas wells are going to be affected by new regulations that were announced by the Department of the Interior on Friday. Any new well to be drilled in New Mexico will need to get new permits from the Bureau of Land Management before production on the well sites can start. The new regulations are targeted at all hydraulic fracturing on public and American Indian Lands. “This updated and strengthened rule provides a framework of safeguards and disclosure protocols that will allow for the continued responsible development of our federal oil and gas resources,” said Secretary of the Interior Sally Jewell. Wally Drangmeister, New Mexico Oil and Gas Association vice president and director of communications, said the new rule is similar to already existing regulations. “In general, these are just redundant regulations that are already being effectively done by the state of New Mexico,” Drangmeister said. “More than half of oil and gas produced in New Mexico is on federal land.”

Say It Ain’t So: Is Brown Really a Fracking Whore? « Calbuzz: Gov. Jerry Brown is dedicated to preserving the environment and leading the fight against climate change. He’s fearless enough to slap Senate Majority Leader Mitch McConnell as a a “disgrace” for trying to incite the states to reject White House efforts to reduce carbon emissions. And he’s deft enough to label Sen. Ted Cruz, a climate-change-denying GOP presidential candidate, as “absolutely unfit to be running for office.” All of which renders Brown’s persistent defense of fracking – the environmentally dangerous and water polluting practice of drilling for oil by hydraulic fracturing – such a huge disappointment. On the one hand, he calls for – and even leads – a “crusade to protect our climate”; on the other he allows oil companies to engage in a practice that science and common sense insist is destructive, wasteful and unsafe to the environment and to Californians. So, more in sadness than in anger, we must ask: Why is Brown acting a fracking whore? Quid Pro Quo? Oh No. Surely, it can’t be that Occidental Petroleum gave $500,000 in 2012 to help Brown pass his crucial Proposition 30, which raised taxes on wealthy Californians and increased spending on public education. That would seem oh too quid quo pro for this political Jeremiah who self-righteously thunders that climate change denial “borders on the immoral.” And yet, whenever he is challenged on his approval of fracking – he called it a “fabulous economic opportunity” in May 2013 – Brown slips the punch by citing all the other good stuff he’s set in motion to combat climate change.

ND oil rig count drops below 100 for first time in 5 years — The number of drill rigs in western North Dakota’s oil patch has slipped below 100 for the first time in five years due to the sagging price of crude. There were 98 rigs drilling in North Dakota on Wednesday. That’s exactly 100 fewer than on the same day one year ago and the lowest since March 2010. North Dakota is the nation’s No. 2 oil producer behind Texas. North Dakota has been producing about 1.2 million barrels of oil daily. Industry officials say about 115 rigs need to be drilling to keep that level of production.

Oil, saltwater contained following spill in Williams County — North Dakota oil regulators say hundreds of gallons of oil and saltwater have been contained following a spill at a disposal well in the northwestern part of the state.  Landtech Enterprises, LLC, reported Friday that about 630 gallons of oil were released at contained at Foss SWD 1 near Ray. The company said all but 210 gallons of oil had been recovered.  The Minot Daily News reports nearly 29,500 gallons of saltwater were released, contained and recovered on site.  The North Dakota Oil and Gas Division was notified, and a state inspector visited the disposal well. A failed valve reportedly caused the spill.

Prospects minimal to recover more oil from Yellowstone spill — State and federal regulators say the response to a 30,000-gallon oil spill into Montana’s Yellowstone River is shifting from emergency crude recovery to long-term monitoring and remediation. Paul Peronard with the U.S. Environmental Protection Agency said Wednesday that about 2,500 gallons of oil were recovered. That’s just over 8 percent of the amount spilled. Because there are minimal prospects for further oil recovery, Peronard says his agency no longer has jurisdiction over the spill. That means the Montana Department of Environmental Quality will become the lead agency in the response. The Jan. 17 pipeline breach temporarily contaminated the water treatment plant downstream in Glendive. State officials say they will negotiate with pipeline owner Bridger Pipeline LLC of Casper, Wyoming, in coming months over a penalty for water pollution violations.

Report: Canada’s Government Is Allowing Its Oil Industry To Pollute Rivers And Lakes -- Canada’s federal government, under the leadership of Prime Minister Stephen Harper, is systematically removing regulations and putting the country’s water at risk, according to  a new report released this week by the Council of Canadians.  “Blue Betrayal,” written by Maude Barlow, a former UN adviser on water and national chairperson of the Council of Canadians, states that the Harper government has allowed mining companies to dump toxic waste into lakes, exempted oil and gas pipelines from environmental review, and allowed for-profit companies to sue for the right to use clean, potable water in fracking and other commercial applications.  The oil and gas industry in Canada is booming. Since 2008, when Harper took office, Canadian tar sands production has nearly doubled, according to an industry report. This has huge implications for water. Alberta’s tar sands alone could eventually use 20 million barrels of water each day, scientists estimate. Already, according to the report, nearly 3 million gallons of “toxic water” enters Canada’s watershed every day. Water used for oil and gas extraction is contaminated with a variety of toxic chemicals that are difficult, if not impossible, to remove. “There is a clear and intimate link between energy policy and fresh water protection,” Emma Lui, a representative for the Council of Canadians, told ThinkProgress. Environmentalists say the drastic reductions in regulatory oversight for Canada’s waterways are largely due to pressure from the oil and gas industry.

US drillers scrambling to thwart OPEC threat - OPEC and lower global oil prices delivered a one-two punch to the drillers in North Dakota and Texas who brought the U.S. one of the biggest booms in the history of the global oil industry. Now they are fighting back. Companies are leaning on new techniques and technology to get more oil out of every well they drill, and furiously cutting costs in an effort to keep U.S. oil competitive with much lower-cost oil flowing out of the Middle East, Russia and elsewhere.Spurred by rising global oil prices U.S. drillers learned to tap crude trapped in shale starting in the middle of last decade and brought about a surprising boom that made the U.S. the biggest oil and gas producer in the world. The increase alone in daily U.S. production since 2008 — nearly 4.5 million barrels per day — is more than any OPEC country produces other than Saudi Arabia. But as oil flowed out and revenue poured in, costs weren’t the main concern. Drilling in shale, also known as “tight rock,” is expensive because the rock must be fractured with high-pressure water and chemicals to get oil to flow. It became more expensive as the drilling frenzy pushed up costs for labor, material, equipment and services. In a dash to get to oil quickly, drillers didn’t always take the time to use the best technology to analyze each well. When oil collapsed from $100 to below $50, once-profitable projects turned into money losers. OPEC added to the pressure by keeping production high, saying it didn’t want to lose customers to U.S. shale drillers. OPEC nations can still make good profits at low oil prices because their crude costs $10 or less per barrel to produce.

How American frackers plan to beat OPEC - Gary Evans, CEO of Houston-based energy firm Magnum Hunter Resources (MHR), has a blunt message for OPEC oil ministers hoping to force down prices and drive American competitors out of business. “OPEC is making a huge mistake,” he says. “We made a lot of money with oil at $100 (per barrel), and we’ll become more efficient and make a lot of money at $50.” For now, the U.S. energy industry is reeling from oil prices that have plummeted from about $105 a barrel last summer to $50 or so now. The profits and stock prices of energy firms are plunging, with job losses beginning to mount. The global supply of oil has outstripped demand for several reasons, but a big one is the unexpected move by Saudi Arabia—lead member of the OPEC oil cartel—to keep pumping oil amid the glut, a change from its usual practice of curtailing production during soft spells to boost prices. Many analysts believe the Saudis are deliberately undercutting their new competitors in North America, who have been producing record amounts of oil thanks to new hydraulic fracturing technology, or fracking. The Saudis are right when it comes to costs: Extracting so-called tight oil from shale deposits in America is considerably more expensive than Saudi Arabia’s own drilling costs, which by some estimates is as low as $10 per barrel. What the Saudis may not have counted on, however, is extreme cost-cutting underway at many drillers, which is making them far more efficient and pushing down the price at which they can turn a profit. The Saudis’ market-share move could even backfire, as U.S. frackers become more efficient competitors. “We will figure out how to operate in a lower price environment,” Evans says. “Anybody who thinks our costs are too high – that’s absolute bull crap.”

U.S. refiners turn to tanker trucks to avoid 'dumbbell' crudes - In a pressing quest to secure the best possible crude, U.S. refiners are increasingly going straight to the source. Firms such as Marathon Petroleum Corp and Delek U.S. Holdings are buying up tanker trucks and extending local pipeline networks in order to get more oil directly from the wellhead, seeking to cut back on blended crude cocktails they say can leave a foul aftertaste. While the business of hauling crude from individual oil wells to bulk storage depots or pipeline hubs has become a lucrative niche in recent years thanks to the shale oil revolution, refiners are getting into the “first mile” game for a different reason: taking control of their supply chains to secure a more predictable, consistent stream of crude. Phillips 66, the nation’s fourth-largest refiner, has added trucks and offloading equipment at several of its refineries to help reduce its reliance on oil coming from Cushing, Oklahoma, the nation’s biggest crude oil crossroads and storage hub. Here, a growing volume of Canadian oil sands is often mixed with lighter domestic shale crude, resulting in blends that can be less profitable than similar oil fresh from the field. Phillips 66 executives say operations at its 200,000-barrel-per-day refinery in Ponca City, Oklahoma, only 62 miles (100 km) from Cushing, have improved since it began getting more of its crude directly from wells in the Mississippian Lime shale patch nearby.

Pipelines, trade pacts would push U.S. energy forward: If the U.S. wants to keep boosting its oil and gas industry, it needs better pipelines and better trade pacts, U.S. Rep. Charles Boustany Jr., R-Lafayette, said Monday. Speaking after a public forum at Lafayette City Hall, Boustany said some of the "headwinds" the industry faces includes insufficient pipelines to move oil and gas from oil-producing sites in Canada, Pennsylvania and Ohio to market. He said that includes not only the Keystone XL pipeline, which would have aided moving oil from Canada to the Gulf Coast, but other pipelines as well. "To achieve market efficiency we need more pipelines," he said, citing what he was as a "logjam" of oil at Cushing, Oklahoma. Boustany also said that new and enhanced trade agreements in the Pacific rim would enable U.S. producers to move products like liquefied natural gas to Asian markets but would also enable Louisiana service companies to share in emerging oil production sites in places like Vietnam. "If we had the trade agreements in place, it would open new markets for suppliers and for service companies, instead of them being locked into situations where they have to lay people off," Boustany said. Boustany said trade agreements might be an area where Congress and President Obama could work more closely. He suggested the president "seems to be in line" with Congress in wanting more treaty agreements.

America split dead even on hydraulic fracturing -- On the coat tails of the recent hydraulic fracturing regulation for federal and tribal lands, a recent Gallup poll has given some insight to America’s general perception on fracking operation in general. The recent poll found a 40 to 40 percent even split between those who favor the procedure to those who oppose it. While a substantial 19 percent have no opinion on the matter at all. The Gallup survey was taken March 5-8, prior to the U.S. Interior Department final unveiling of the new national fracking regulations. According to Gallup, The survey asked Americans whether they favor or oppose “hydraulic fracturing or ‘fracking.'” The survey did not further define the process, list pros or cons or measure the degree to which the public has been following the issue. But eight in 10 Americans are willing to give an opinion, with the results split evenly, along with 19 percent who explicitly said they didn’t have an opinion.  As one could imagine, the opinions of hydraulic fracturing are very politically charged. When Democrats were asked about fracking, 26 percent voted in favor while a majority of 54 percent opposed. A predictable flip-flopped position was observed among conservatives where about two thirds (66 percent) answered in favor of fracking while only 20 percent opposed. Additionally, younger responders where more likely against the operations of fracking. Again this is in line with what we know about members of generation Y, who are more likely to vote based on environmentalist policies. However, nearly one quarter of respondents who were in favor of fracturing operations were also self-proclaimed “active participants” in Environmentalists movements.  You can check out a full summation of the recent national Gallup poll by Art Swift here.

T. Boone Pickens defends fracking in Monterey talk: A week after Monterey County supervisors rejected a temporary ban on fracking, one of the biggest proponents of the technology was in town defending it. Oilman T. Boone Pickens, in Monterey for a Panetta Institute talk on energy, said hydraulic fracturing — a controversial oil extraction technique known as fracking — was safe. “I’ve fracked over a thousand wells,” Pickens said at the Monterey Conference Center. “I’ve never had a failure on one of them. ... Texas, Oklahoma lead in fracking wells and it has been a great success for both those states.” Pickens, chairman of BP Capital Management, was joined on the panel by Carol Browner, former director of the White House Office of Energy and Climate Change Policy, Sen. Joe Manchin, D-West Virginia, and Steven Chu, former secretary of energy. Chu said there have been mistakes made in fracking and there are questions about extracting natural gas safely. “I, personally, think, like everything else we’ve learned to do — oil drilling, mining, everything — it can be done more safely,” Chu said. Pickens countered that at his ranch in Roberts County, Texas, which sits on top of the Ogallala Aquifer, he has drilled 44 wells for fracking and will drill 62 more. “We’ve had no problems with any of those wells,” he said. Pickens has a vested interest in the aquifer because he intends to sell much of the water below his ranch, according to Bloomberg Business News.

Obama's controversial new fracking rules, explained - On Friday, the Bureau of Land Management unveiled its new fracking rules. There are a few key parts:

  • Oil and gas companies operating on federal and Indian lands will have to publicly disclose the chemicals they use 30 days after fracking a well. They'll use FracFocus, an industry website for self-disclosure.
  • Drillers will have to conduct well integrity tests on every well they drill to ensure that the cement is holding up and nothing can leak out to nearby groundwater.
  • Companies will have to store the wastewater that flows back out after fracking in tanks — they won't be allowed to use pits.

Interior Secretary Sally Jewell argued that these rules were necessary to keep up with new drilling techniques: "Current federal well-drilling regulations are more than 30 years old and they simply have not kept pace with the technical complexities of today's hydraulic fracturing operations," she said in a statement. These rules will only apply to federal lands — not state or private lands. There are currently about 92,000 wells operating on federal lands, most of them fracking wells, accounting for about 11 percent of gas drilling and 5 percent of oil drilling. That doesn't sound like much. But many states are expected to use these federal standard as a minimum when setting their own rules. It's a sign that the federal government is slowly moving toward creating a single nationwide standard on fracking.

The Obama administration strikes the right balance on fracking regulations - Washington Post Editorial -- AFTER MORE than four years of effort, on Friday the Obama administration finalized new rules on hydraulic fracturing, also known as “fracking,” on federal lands . Critics on both sides of the fracking wars descended immediately, picking the regulations apart for being either too tough or too lax. Industry groups filed lawsuits within an hour of the rules coming down, and their Republican allies submitted a bill to stop the standards. Left-wing politicians and pressure groups complained that the administration didn’t take their advice and issue tighter restrictions . One side wants a harsh regulatory crackdown or ban on fracking, while the other side opposes any additional federal requirements. Instead of accepting either flawed mind-set, the Interior Department staked out the sensible place in the debate: Fracking has valuable economic and environmental benefits, and it can be done with relative safety, as long as the right rules are in place.  Energy companies are now unlocking vast reserves of fuel, accessing much of it from wells on the 700 million subsurface acres that the Interior Department’s Bureau of Land Management oversees. Daily production on these parcels has increased 81 percent since 2008. There are now about 2,800 fracking operations on federal land every year.  The Interior Department understandably wants to ensure that its standards for oil and gas operations conducted on public land, which haven’t been updated in decades, reflect the reality of the fracking boom and allay concerns about water contamination near well sites. The department will require that the cement meant to separate wells from groundwater is thoroughly tested before operations begin, for example. It will also require that water flowing back to the surface be collected in above-ground storage tanks rather than in lined pits, and it will insist that drillers list which chemicals they used on an industry Web site within 30 days. Interior reckons that the requirements will cost a measly $11,400 per well, a fraction of a percentage of total drilling costs.

Nobody's Happy About the U.S. Government's New Fracking Rules - The U.S. government just laid down new rules that substantially increases the requirements for hydraulic fracturing, a.k.a. “fracking,” a move that has somehow managed to upset people on both sides of the controversial topic.  The United States fracking industry promises that fracking is a safe and essential source of oil and natural gas that helps to decrease our countries’ dependency on foreign oil. Opponents claim that fracking is one of the dirtiest energy extraction methods on earth, a process that poisons surrounding water and soil and requires more than its fair share of natural resources, including water, a scarce commodity in states like California, now facing its fourth year of drought.  Last week the Obama administration announced that it is requiring companies that drill for oil and natural gas on federal and most Indian tribal lands to disclose chemicals used in hydraulic fracturing, plus adhere to new rules concerning well construction and the disposal and reporting of fracking related fluids. According to the new rules, which are outlined in the Dept. of the Interior’s document Oil and Gas; Hydraulic Fracturing on Federal and Indian Lands released last week, companies operating on federal land are required to disclose chemicals they use in fracking fluid within 30 days of the fracking operation on the independent website, or another Bureau of Land Management (BLM)-designated database, or directly. was formed by industry and intergovernmental groups in 2011 and allows states to track the chemicals used in fracking operations across the country.  Assuming all goes according to plan, the new rules are due to become effective June 24, 2015. The final rule does not preempt any State or Tribal law on hydraulic fracturing and makes clear that more stringent laws would continue to apply, including those that require different reporting or disclosure requirements.

Lawmakers unhappy with new fracking rules — Republican and Democratic lawmakers in the House have found something in common. Many have issues with the Obama administration's new regulations requiring companies that drill for oil and natural gas to disclose chemicals used in hydraulic fracturing. Republicans say the new regulations, announced last week, will delay new drilling projects and take marginal lands out of production. Democratic lawmakers say the regulations are so mild that they won't change current operating standards. The lawmakers' complaints were aired Thursday during a House subcommittee hearing called to review the Bureau of Land Management's budget for the coming fiscal year. Bureau Director Neil Kornze (KORN'-zee) says fracking is taking place in 32 states, and the new regulations were aimed primarily at those states with limited or no regulation of the practice.

North Dakota may sue federal government over fracking rule: — The state of North Dakota may sue the federal government over its new rules regulating hydraulic fracturing on federal lands in the state. The rules, the federal government’s first regulation of fracking, are unnecessary or inapplicable to North Dakota’s geology and are duplicative of existing state rules, Department of Mineral Resources Director Lynn Helms told the North Dakota Industrial Commission on Tuesday. The Independent Petroleum Association of America and the Western Energy Alliance already have filed a lawsuit against the Bureau of Land Management and Interior Secretary Sally Jewell in federal court in the district of Wyoming. The rules, in slowing down permitting, could “very negatively” affect oil production in the Bakken, where 32 percent of multi-well pads drill on federal land, mostly in the Fort Berthold Indian Reservation, Helms said. He said after the meeting that the state’s own lawsuit would be the best course of action because it would be “more North Dakota-centric.” The rules go into effect June 1, leaving the state little time to act. The NDIC members -- Attorney General Wayne Stenehjem, Gov. Jack Dalrymple and Agriculture Commissioner Doug Goehring, voted to have Stenehjem’s office look at all the legal options for fighting the new rules. “We need to take action,” Dalrymple said.

Consumers and Industry Both Hurt by Toothless Fracking Rules - After five years of planning, 1.5 million comments, intense lobbying from the oil and gas industry, and innumerable photos of tap faucets on fire, the Bureau of Land Management has finally announced new regulations for fracking. The promise of the rules is robust: we can continue to reduce carbon in the atmosphere, transition from coal to a cleaner burning fuel, and continue to drastically reduce our dependence on imported energy -- while, thanks to the new rules, eliminating ground and water contamination from fracking. Industry is forced to behave well and thereby forestalls its most serious opposition.The rules only cover federal and tribal lands, representing just 11 percent of the natural gas the U.S. consumes, with the hope that operators on state and private lands will follow suit. But still, whatever the regulations do cover should be a satisfying start, shouldn't it? In fact, the rules satisfy no-one. News reports from both sides of the issue claim the regulations are deeply flawed. As reported in The Huffington Post, environmental groups call it "toothless," faulting the exceptions loophole and inspections that are delayed until 30 days after fracking wells are in place. A Harvard Law School study found that the reporting mechanism stipulated by the regulation called "FracFocus," a chemicals tracking registry used voluntarily by Exxon Mobil and other drillers, fails as a fracking disclosure tool. On the other side, The Wall Street Journal reports that that the industry was so outraged that it "filed a lawsuit to block the rules just minutes after they were announced."

Fracking by the rules: What will it cost drillers? -- The United States released new regulations for fracking on federal and Indian lands that it said would put minimal costs on the booming American oil and gas sector, but some estimates place the actual impact of the rules as much as 84 times larger—and that cost isn't even the industry's biggest worry.  The Bureau of Land Management estimates that the compliance cost for its new policies will run about $11,400 per well, or roughly $32 million per year to the industry in total, the agency wrote in its nearly 400-page final rule, released Friday. On the other hand, an analysis of a draft rule from research and consulting firm Advanced Resources International estimated total annual costs associated with the regulation could range anywhere from $30 million to $2.7 billion in total. And at least one industry group leader puts the cost higher than that. Erik Milito, director of upstream and industry operations for the American Petroleum Institute, told CNBC that his energy trade association is still assessing costs of the new regulation, but that some elements of the final rule could prove more expensive than what's come out in a draft. 

Will Fracking Rules Impact Energy Costs? - The US Department of the Interior (DOI) has issued rules for hydraulic fracturing (“fracking”) on federal lands that aim to protect groundwater from contamination, reported the Business Journals’ Washington Bureau last week. The legislation would affect 90 percent of the more than 100,000 wells on federal lands. The American Petroleum Institute (API) said the rules are unnecessary since states already have fracking regulations of their own. API suggested the rules will hamper development on federal lands, which has already seen a 22 percent drop in production since 2009. It should be noted that there is a major glut of natural gas supply on the market, as Retail Energy Buyer reported last week. The glut has led to lower prices, and in turn producers have dramatically cut spending on exploration efforts, which makes it questionable the extent to which drillers would increase fracking activities on federal lands regardless of regulations.

Low returns drag down US shale oil industry - In the boom years of the US shale oil industry, profitability was something of an optional extra. Companies were focused on growth, it was easy to raise capital, and making a decent return on investment could be put off for another day. Now that growth is grinding to a halt because of the slump in oil prices, investors may become less tolerant of persistently low returns.  The industry’s poor record of returns on investment was highlighted in a presentation last month from EOG Resources, the largest shale oil producer and one of the most efficient. EOG said it made a return on capital employed of 12.4 per cent in 2013 and 13.7 per cent last year, but noted that comparable US exploration and production companies had done far worse — making just 3.4 per cent on average in 2013 and 4.3 per cent in 2014. Given that those low returns were made with US benchmark crude prices averaging about $98 per barrel in 2013 and about $93 last year, prospects for profitability at today’s price of about $47 a barrel look dire. “People said the oil industry was doing great, and it was, in terms of growth and activity and feeling good about it. But when you looked under the covers, it wasn’t really,” Generally low returns across the industry meant that oil companies had to keep attracting fresh capital to finance their investment programmes. In 2013 and 2014 the US E&P sector raised $34.2bn in new equity, $62.6bn from bond sales and $191bn from syndicated loans, according to Dealogic. Even the most successful companies were spending more on drilling and completing wells than they booked in cash revenue.

US oil industry needs capital to keep flowing - The world may run on oil, but the oil industry runs on money. The US shale boom would not have been possible without a huge inflow of capital: the small to midsized companies that led the revolution raised $875bn from syndicated loans, bonds and equities in 2007-14, 83 per cent of it in debt, according to Dealogic. The critical question for the industry, and for the future of US oil production, is whether that financial lifeblood will continue to flow.  It is clear that some sources are drying up. E&P companies are still raising funds through equity issues: Noble Energy announced a $1bn-plus share sale last week, and Goodrich Petroleum a $49m issue on Monday. But equity is a more expensive source of capital now than it was in August, after a 35 per cent-plus drop in the S&P 500 E&P sector index. Bond issuance by smaller independent companies has slowed to a trickle, with only two sales in January and February, according to Dealogic. At the same time, bank lending is also facing constraints. Smaller US independents generally use reserve-based lending, with their borrowing secured against valuations of their oil and gas assets, which are linked to market prices. The borrowing bases are typically calculated twice a year, with one round of valuations going on about now. The plunge in both crude and US natural gas in the past six months will curb the amount that companies can borrow. So given those constraints, where will the industry find the capital it needs? One answer is through larger companies, including ExxonMobil and Chevron, swallowing up the smaller, buying both assets and entire businesses. With its triple A credit rating — better than the US government’s — Exxon has ample access to cheap capital, as its $7bn bond sale on Tuesday showed. Even Exxon, though, will want to be selective about its acquisitions. Management capacity is finite, and it cannot buy everything. Market valuations are also a disincentive to making acquisitions for shares. Anadarko Petroleum, for example, is often talked about as a takeover target, but its shares are trading at about 40 times 2016 earnings, while Exxon’s are at 16 times. A takeover would dilute Exxon’s earnings unless it can improve Anadarko’s performance dramatically. The best value deals will be available only from companies that are forced sellers.

Oil & gas debt issuance up despite crude slump -  Oil and gas producers are still raising debt after the slump in the oil price, but it helps a lot if they've got an investment grade rating. Companies with an investment grade rating have raised 88 per cent of all the debt oil and gas companies have issued this year, according to data provider Dealogic. That's the highest proportion since 2009. The 54 per cent tumble in WTI, the US oil benchmark, since late June has strained the finances of highly leveraged producers and hurt the ability of those companies without an investment grade to raise debt. However, the overall volume of debt raised globally by oil and gas companies in 2015 is 25 per cent higher from a year ago at almost $74bn, according to Dealogic. WTI was little changed at $46.66 in mid-afternoon trading in New York.

Oil majors pile on record debt to plug cash shortfalls - The world’s biggest energy groups have sold record amounts of debt this year, taking advantage of historically low interest rates to plug cash shortfalls with borrowing, after a 50 per cent plunge in oil prices. The total debt raised in the first two months of 2015 by large US and European oil and gas companies has jumped by more than 60 per cent from the final three months of 2014. It outstrips the previous quarterly record set six years ago after the last price collapse, Morgan Stanley research shows. Sales by half a dozen of these companies, which include multibillion dollar bond offerings from ExxonMobil, Chevron, Total and BP, reached $31bn in January and February, accounting for almost half the $63bn raised by oil and gas groups globally. The dominance of the majors also reflects the increasing difficulties faced by the smaller oil explorers, whose borrowing costs are rising. Gulf Keystone recently put itself up for sale and EnQuest had to renegotiate its banking covenants. Martijn Rats, analyst at the US bank, says some of the so-called oil “majors” could be preparing the ground for acquisitions, borrowing now to be able to act quickly should smaller, weakened groups become vulnerable to take over. Mr Rats said that mergers and acquisitions could pick up as early as the second half of this year: “As a result, it would seem reasonable for integrated oil companies to lock in extremely competitive rates of financing,” he said. Another reason for the high levels of issuance is that debt remains a relatively cheap way to cover spending on big projects and fund dividends as cash flow dwindles due to lower prices.

US shale oil firms raise enough equity to avoid loan reset squeeze – Despite a 50 percent slide in crude prices since last summer, U.S. shale oil producers are enjoying remarkably easy access to capital markets and this will allow them to avoid getting squeezed when banks reset their loans in April. A surge in equity issuance so far this year by oil and gas companies has surprised many who in December thought the price drop would hurt the ability of producers to tap capital markets. But investor appetite has held up in the first quarter, amounting to a vote of confidence in the ability of shale oil companies to weather the storm by relying on hedges and slashing spending to show a commitment to capital discipline. “Because the capital markets are so good companies that are more worried about their borrowing base are able to … raise either debt or equity, take those proceeds, and reduce their borrowing base,” said Timothy Perry, a managing director for energy investment banking at Credit Suisse in Houston. He said one client had reduced its borrowing base by two-thirds after doing a capital market deal. According to Thomson Reuters Deals Intelligence, there have been 29 U.S. oil and gas equity deals so far this year that raised $13.9 billion, the highest volumes for that period in 15 years. Banks typically reassess loans in October and April, and some have started to trim the value of reserves tied to credit lines by $10 to $20 a barrel from the mid-$70s.

Oil council: Shale won't last, Arctic drilling needed now — The U.S. should immediately begin a push to exploit its enormous trove of oil in the Arctic waters off of Alaska, or risk a renewed reliance on imported oil in the future, an Energy Department advisory council says in a study to be released Friday. The U.S. has drastically cut imports and transformed itself into the world’s biggest producer of oil and natural gas by tapping huge reserves in shale rock formations. But the government predicts that the shale boom won’t last much beyond the next decade. In order for the U.S. to keep domestic production high and imports low, oil companies should start probing the Artic now because it takes 10 to 30 years of preparation and drilling to bring oil to market, according to a draft of the study’s executive summary obtained by the Associated Press. “To remain globally competitive and to be positioned to provide global leadership and influence in the Arctic, the U.S. should facilitate exploration in the offshore Alaskan Arctic now,” the study’s authors wrote. The study, produced by the National Petroleum Council at the request of Energy Secretary Ernest Moniz, comes at a time when many argue the world needs less oil, not more. U.S. oil storage facilities are filling up, the price of oil has collapsed from over $100 a barrel to around $50, and prices are expected to stay relatively low for years to come. At the same time, scientists say the world needs to drastically reduce the amount of fossil fuels it is burning in order to avoid catastrophic changes to the earth’s climate.

Steve Horn: Industry-Stacked Energy Department Committee: Shale Running Dry, Let's Exploit the Arctic - A report assembled by an industry-centric US Department of Energy committee recommends the nation start exploiting the Arctic due to oil and gas shale basins running dry.   In the just-submitted report, first obtained by the Associated Press, the DOE's National Petroleum Council — many members of which are oil and gas industry executives — concludes that oil and gas obtained via hydraulic fracturing (“fracking”) will not last beyond the next decade or so, thus the time is ripe to raid the fragile Arctic to feed our fossil fuel addiction.  The NPC just launched a website and executive summary of the report: Arctic Potential: Realizing the Promise of U.S. Oil and Gas Resources. Confirming the thesis presented by the Post Carbon Institute in its two reports, “Drill Baby, Drill” and “Drilling Deeper,” the National Petroleum Council believes the shale boom does not have much more than a decade remaining. The NPC report appears to largely gloss over the role of further fossil fuel dependence on climate change, or the potentially catastrophic consequences of an oil spill in the Arctic. The first mention of climate change appears to refer to “concern about the future of the culture of the Arctic peoples and the environment in the face of changing climate and increased human activity,” but doesn't mention the role of fossil fuels in driving those changes. Instead, the report immediately pivots to focus on “increasing interest in the Arctic for tourist potential, and reductions in summer ice provide an increasing opportunity for marine traffic.” ExxonMobil CEO Rex Tillerson, a National Petroleum Council member, chimed in on the study in an interview with the Associated Press.   “There will come a time when all the resources that are supplying the world's economies today are going to go in decline,” remarked Tillerson. “This is will [sic] be what's needed next. If we start today, it'll take 20, 30, 40 years for those to come on.”

Canada’s New Brunswick province bans fracking, plans study — — Lawmakers in New Brunswick voted on Thursday to prohibit fracking in the eastern Canadian province, committing to study the controversial method of extracting oil and gas for one year before reconsidering the ban in 2016.The province’s Liberal-led government said it will require five conditions be met before the moratorium is lifted. These include beefed-up environmental and health regulations, a plan for waste water disposal, consultations with aboriginal groups, a royalty structure, and the establishment of a “social license,” which is the approval by local communities and stakeholders.“It is responsible and prudent to do our due diligence and get more information regarding hydraulic fracturing,” said Energy and Mines Minister Donald Arseneault.The province is the latest of several in eastern Canada, including Quebec, Labrador and Newfoundland, and Nova Scotia, to stop companies from fracking while they study its impact.New Brunswick is believed to sit atop one of the thickest shale gas reservoirs in North America, although much of it is trapped in unconventional and hard-to-reach deposits.Local environmental and indigenous groups worry hydraulic fracturing, or fracking, a method that involves pumping water, sand and chemicals deep into a well to extract oil or gas, could contaminate local water supplies.Industry advocates say the technique is safe and boosting gas output will create jobs in New Brunswick, whose sluggish economy consistently ranks near the bottom of the Canadian provinces.  Questions about supply have dogged the progress of four export terminals proposed in New Brunswick and neighboring Nova Scotia, which plan to liquefy then ship North America’s natural gas bounty to energy markets overseas.“For anyone anticipating a domestic supply from New Brunswick, yeah, this is a major problem,” 

Canada's Biggest Oil Casualty To Date: Calgary's Nexen Shutters Oil Trading Desk -- Last December, traditionally permabullish energy trader Andy Hall shocked the world when he became the first casualty of the oil crash after Phibro, his 113 year old employer then owned by Occidental Petroleum after its sale by Citigroup, would liquidate in the US after it failed to buy a buyer. He wouldn't be the last. Overnight, Nexen Energy, a wholly owned subsidiary of China's CNOOC Ltd, reported it too would close its crude oil trading division following a round of job cuts announced last week, four market sources said on Monday.

API Signals Fastest Inventory Build In At Least 34 Years -- Against expectations of a 4.75 million barrel build (according to Bloomberg), API reported a 4.8 mm barrel build overall but the Cushing build (2mm barrels) was less than last week's 3mm build. This is the 11th weekly build in a row - the longest streak of builds since October 2004. The last 11 weeks have seen inventories build over 20% - the fastest pace on record.

Tank tops? Cushing isn't the whole oil market  - - Traders do not appear worried that rising oil stocks in the United States will cause storage space to run out in the next few months, despite the rapid accumulation of inventories at Cushing in Oklahoma. The term structure of futures contracts has remained broadly stable since the end of January. Stocks “may soon test storage capacity limits,” the International Energy Agency worried in its latest monthly Oil Market Report. “That would inevitably lead to renewed price weakness,” it added. The view is shared by many bearish hedge fund managers and oil analysts, who have watched the steady climb in U.S. oil inventories for 15 consecutive weeks. Crude stockpiles at the Cushing storage hub hit a record 54 million barrels on March 13, according to the latest Weekly Petroleum Status Report from the U.S. Energy Information Administration (EIA). Tank farms at Cushing are now 77 percent full, the EIA said on Monday (“Crude oil storage at Cushing, but not storage capacity utilization rate, at record level” March 23). But the stock build at Cushing does not represent the storage situation across the United States as a whole or the state of the global oil market. A closer look at the structure of futures prices suggests the market as a whole is much less concerned about oil stockpiles hitting “tank tops” in the next few months.

Too Much Oil - We tend to associate oil and crisis with high prices and scarcity. Yet when prices plummet — as they have over the last few months — it creates a different kind of problem for oil producers. As this shock reverberates through the state coffers of Russia and Venezuela, and the oil fields of Texas and North Dakota, how might the Left respond? Certain provinces of the Left are no doubt befuddled by the development, long confident that humans were exhausting the earth’s oil supply. From Michael Klare to John Bellamy Foster, many during the 2000s also assumed peak oil and scarcity underpinned American imperialist adventures in Iraq and beyond. In this view, powerful corporations and states collude to secure access to dwindling oil reserves and the attendant money and power. The insatiable drive to extract more oil, in other words, is the primary concern. But as the radical left collective Retort observed a decade ago: “The history of twentieth-century oil is not the history of shortfall and inflation, but of the constant menace — for the industry and the oil states — of excess capacity and falling prices, of surplus and glut.” The problem right now — for oil producers and those of us concerned with climate change — is that there is too much oil. What of peak oil? The Energy Information Agency (EIA) recently estimated that in 2015, the US will reach an oil production level of 9.3 million barrels per day — a mere 300,000 barrels shy of the 1970 zenith that peak oil proponent M. King Hubbert famously predicted in 1956. It is possible that the massive boom in fracked “tight oil” from shale formations will “reset” US peak oil nearly fifty years after it supposedly occurred. But peak oil proponents consistently underestimate the capacity of capital to revolutionize the technical capacity to profitably access new deposits.

Cheap oil, complexity and counterintuitive conclusions -  It is a staple of oil industry apologists to say that the recent swift decline in the price of oil is indicative of long-term abundance. This kind of logic is leading American car buyers to turn once again to less fuel efficient automobiles--trading efficiency for size essentially--as short-term developments are extrapolated far into the future. The success of such argumentation depends on a disability in the audience reading it. The audience must have amnesia about the dramatic developments in the oil markets in the last 15 years which saw prices reach all-times highs in 2008 and then after recovering from post-crash lows linger at the highest average daily price ever from 2011 through most of 2014. And, that audience must have myopia about the future. It is an audience whose attention has narrowed to the present which becomes the only reference point for decision-making. History is bunk, and what is, always will be. The alternative narrative is much more subtle and complex. As I've written before, the chief intellectual challenge of our age is that we live in complex systems, but we do not understand complexity. How can cheap oil be a harbinger of future supply problems in the oil market? Here's where complexity, history and subtle thinking all have to combine at just the right intellectual temperature to reveal the answer. Cheerleaders for cheap oil only seem to consider the salutary effects of low-priced oil on the broader economy and skip mentioning the deleterious effects of high-priced oil. They seem to ignore the possibility that the previously high price of oil actually caused the economy to slow and thereby dampened demand--which then led to a huge price decline.

Three Triggers That Will Send Oil Crashing Again -- Oil prices bounced back on March 24 on a sliding U.S. Dollar, but the pain may not be over yet. Oil storage capacity continues to deplete. Storage levels at Cushing, Oklahoma, home to the crucial WTI benchmark, are at record levels. As of March 13, Cushing oil inventories hit 54.4 million barrels, the highest ever, according to the Energy Information Administration. That means that Cushing’s storage is now 77 percent full, up from just 27 percent in October 2014. The glut of oil has led to a flood of crude being diverted into storage tanks. As storage nears capacity, it becomes more likely that prices could drop significantly below current levels. That, of course, depends on if drillers cut back production enough to slow the storage build.  Yet another reason to suggest that oil prices could fall over the next two to three months is the annual planned maintenance that takes place at many U.S. refineries. Spring maintenance often leads to a significant volume of refining capacity temporarily closed down for several months. As that occurs, demand for domestic crude in the United States will decline, potentially pushing down prices. That also would force more output into storage, again exacerbating the shrinking ability for U.S. storage to handle more oil.

The Perfect Storm For Oil Hits In Two Months: US Crude Production To Soar Just As Storage Runs Out -- At the current rate of record oil production, storage will be exhausted in under two months, some time in mid-May. At that point, with no more storage to buffer the record oil production, the open market dumping begins and prices of WTI will crater as every barrel will have to be sold at any clearing price, since the producers will have no other choice than to, literally, dump the oil. In other words, a perfect storm is shaping up for oil some time in late May, early June. And then we learned something even more startling.  As the Platts oil blog reports, even as oil prices continue to fall amid flat demand and near-record supply, "North Dakota is likely to see a “big surge” in production this June, potentially besting another supply record even if prices continue to crater, according to Lynn Helms, director of the state’s Department of Mineral Resources." What make things worse is that this time the production "surge" will have nothing to do with game theory, or beggaring thy oil producing neighbor in hopes that the other, more levered guy goes bankrupt first.  This surge will be largely propelled by two factors: a state-mandated time limit on drilling and the expected trigger of a major oil tax incentive, Helms said.

Don’t panic about Cushing yet -- It’s the EIA’s take on the US crude system’s “l’embarass de richesses” problem.  Inventory levels at Cushing may be at a record high, they note, but not as a percentage of total working storage capacity.   The great thing about the Cushing storage system is that it’s a private market. That means whenever storage gets tight the incentive to build new capacity increases for commercial operators. Due to that market dynamic, there’s way more storage around than there was in 2008/2009.  Here are the charts from the EIA that tell the story nicely: As the EIA notes: Capacity utilization at Cushing is now 77%, a large increase from a recent low of 27% in October 2014. However, utilization reached 91% in March 2011, soon after EIA began surveying storage capacity twice a year, starting in September 2010. For those interested, John Kemp at Reuters provided some Google pictures of what the facilities at Cushing actually look like: As he noted in a Tuesday column:  If the market was concerned about space at Cushing and onshore more generally, the contango would have widened even further as stocks rose to make it profitable to use more expensive offshore storage. However the term structure of futures prices has remained essentially unchanged for the past two months – implying traders are not particularly concerned about storage issues and do not foresee the need for more expensive options like floating storage. Markets are not infallible: the current view about storage space and inventories could prove to have been complacent. But right now physical traders do not seem worried about storage space running out. What we’d really like to know is what operators are charging in storage fees. We’ve heard monthly tank storage rental rates have nearly doubled in the last six months. It would be nice to have this corroborated from the main providers who are Enbridge, Plains and Magellan.

WTI Tumbles After Crude Inventories Rise For 11th Straight Week - Longest Streak On Record - Crude prices rallied this morning - on the back of absolutely nothing - ahead of this morning's DOE inventory/production data. Following last night's bigger than expected 4.8 mm barrel API inventory build, DOE reports a huge 8.17mm barrel build (against expectations of a 4.91mm build) - the 11th consecutive week and longest streak on record. Cushing inventories rose for the 16th consecutive week, up 1.91mm barrels (against a 2.1mm barrel build expectation). Crude production hit a new record high. Oil prices are giving back this morning's gains...

US Oil Stockpiles >25% Above 5-Year Average - Another Record High - US oil stockpiles have risen for the 11th consecutive week, hitting yet another record. The EIA reported Wednesday that oil inventories increased 8.2 million barrels, or 1.8%, to 466.7 million barrels last week. US production also continued to rise- to a rate of 9.42 M/bd- marking the 7th straight weekly increase. Stockpiles are now more than 25% above their 5-year average. Though inventories are not likely to max out, even the potential of nearing this threshold is exerting further pressure on the oversupplied oil market. According to a note released by Morgan Stanley Wednesday, "US crude stocks will build through May, but there is plenty of storage. The system is more flexible than most realize." The bank also said that tank farm utilization in the US could peak at 73%. "However, record builds should support bearish sentiment for now," Morgan Stanley said.

Oil production growth means no quick price fix - Oil prices were in recovery Wednesday after a three-week slide that took West Texas Intermediate crude to a six-year low last week. But a new report today warns that oil prices are unlikely to bounce back as quickly as they did in 2009, when they plunged to $33 US a barrel but recovered within three years.   That's because both Canada and the U.S. continue to produce more oil in the face of a global glut in crude production. WTI was trading up $1.46 at $48.97 a barrel on Wednesday. That's down 7.6 per cent since the beginning of the year and less than half the $107 it hit last June. But the price bounce defies news from the U.S. Energy Information Administration today that crude inventories rose by 8.2 million barrels last week, setting an 80-year high.  The nine-month slide in oil prices has been caused by a worldwide oversupply of oil, while demand remains soft. U.S. fracking technology has opened a new source of oil and shale oil producers have responded to the current slump by finding cheaper ways to get their oil out of the ground. That's one reason why oil won't return to triple digits in the near term, according to a the Conference Board of Canada. The other reason is an increase in oilsands oil. The Conference Board predicts oil may creep back towards $60 by the end of this year, but is unlikely to surpass $80 by 2019.

Saudis Up The Pressure On Oil Markets: This week started badly for oil prices, and the chief culprit seems to be Saudi Arabia and its drive to produce more and more oil. Brent crude, the European benchmark from the North Sea, fell below $55 per barrel on March 23 in London, while WTI, the American light, sweet crude dropped under $46 per barrel in New York. This was no coincidence. The day before, Saudi Oil Minister Ali al-Naimi said his country was now producing about 10 million barrels of crude per day, the most since July when an oil glut more than halved the price of oil from an average of more than $110 per barrel. Related: Oil Price Speed Limit Presaging An Age Of Austerity? Part of the reason for the plunge in prices was the virtual flood of oil from the boom in US shale production. As prices kept falling, OPEC was urged to cut production at its November meeting in Vienna to shore them up. But under Saudi leadership the cartel decided to keep its combined production limits at what are now 4-year-old levels of 30 million barrels a day. At first al-Naimi didn’t explain his strategy, but in January he said the reason was to regain market share from the US shale drillers and others who were contributing to the oversupply of oil. At a conference in Riyadh on March 22, he said the cartel would have lost even more market share if it had decided to cut production at the November meeting.

Oil below $56 as Saudi output near record, China activity slows (Reuters) - Brent crude oil held below $56 a barrel on Tuesday on signs of slowing growth in China and as Saudi Arabia said its production was close to an all-time high. Factory activity in China, the world's second-largest economy and top oil importer, slipped in March with the flash HSBC/Markit Purchasing Managers' Index (PMI) reading at 49.2, below the 50-point level that separates growth from contraction. Economists polled by Reuters had forecast a reading of 50.6. Brent futures for May delivery were trading down 20 cents at $55.72 at 0856 GMT, while U.S. crude dropped 31 cents to $47.14 a barrel. Its discount to Brent widened to $8.58 a barrel. The Chinese data followed comments from OPEC kingpin Saudi Arabia that it is pumping around 10 million barrels of crude per day, close to an all-time high and some 350,000 bpd above the figure it gave OPEC for its February output. OPEC's decision to fight for market share rather than cutting output has contributed to a halving in oil prices since June as the global surplus of oil supplies has grown. The market is expected to be at its weakest in the second quarter as winter fuel demand wanes while peak summer driving activity is yet to kick in. Energy consultancy FGE forecasts a global surplus of 2 million barrels per day between April and June.

Protecting the message on petroleum --  Fresh out of Riyadh… Saudi Oil Minister Ali Al-Nuaimi Sunday proposed establishment of an association dedicated for petroleum media, which comprised of Gulf and Arab journalists covering energy affairs. Saudi Arabia is ready to support the establishment of this association with the objective of boosting transparency among GCC countries and prepare oil strategies of the Arab Gulf countries… Similar thoughts from Kuwait’s Minister of Oil, Dr Ali Al-Omair, at the 2nd GCC Petroleum Media Forum: Al-Omair, also Minister of State for parliament affairs, said media have been influencing economic policies including the oil ones. Media in the region should defend Gulf oil producers and defend their policies, said Al-Omair, but petroleum media should be “credible, transparent and influential.” In fact, there seems to be full agreement amongst higher-ups across the Gulf that an association aimed at improving reporting around the oil price is a must… Suhail Al-Mazroui, UAE’s oil minister, said there were many oil consultants in the GCC countries who could help in the establishment of the petroleum media association.

Saudi Production Comments Send WTI Sliding To $45 Handle -- Following Friday's manic quad-witching melt-up in oil (and everything else), the exuberance (surprise surprise) is fading as fundamental reality is slapped back onto the face of the energy complex by Saudi Arabia. As Reuters reports, Saudi oil minister Ali al Naimi also said the kingdom was now pumping a record high 10 million barrels per day (bpd), and would only cut if non-OPEC countries cut production. The 'supply' weakness in crude has been tempered somewhat by a tumbling USD (EUR surging) for now (and also by news from Sinopec of major capex cuts).

US oil and natural gas rig count drops by 21 to 1,048 | — Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. declined by 21 this week to 1,048 amid falling oil prices. Houston-based Baker Hughes said Friday 813 rigs were seeking oil and 233 exploring for natural gas. Two were listed as miscellaneous. A year ago, 1,809 rigs were active. Among major oil- and gas-producing states, Alaska, Louisiana, Oklahoma and Texas each lost three rigs while California, Colorado, New Mexico and North Dakota were down two apiece. Wyoming was off by one. Kansas and Pennsylvania each gained one rig. Arkansas, Ohio, Utah and West Virginia were unchanged.

U.S. oil rig decline smallest since December - Baker Hughes - The number of rigs drilling for oil in the United States declined by 12 this week to 813, the smallest decline since December, oil services firm Baker Hughes said in its closely watched survey on Friday. That compares with declines of 41 and 56 rigs in the prior two weeks and is a sign the collapse in drilling over the past few months has slowed. With the decline this week, the number of oil rigs has fallen for a record 16th week in a row to the lowest level since 2011, according to Baker Hughes data going back to 1987. Despite the reduction in oil-directed rigs by about 49 percent since hitting a record high of 1,609 in October, the more than 50 percent decline in oil prices since the summer have forced U.S. energy firms to slash spending and idle wells but have not yet slowed oil output. U.S. oil production hit 9.4 million barrels per day (bpd)last week, the highest since the early 1970s, according to the U.S. government data, as drillers focus on their most productive acreage, become more efficient at extracting oil from existing wells and complete previously drilled wells. U.S. crude futures this week rebounded to over $50 a barrel this week from a six-year low near $42 last week on worries oil supplies from the Middle East could be disrupted due to the Saudi Arabia-led air strikes in Yemen. But by Friday, worries over Middle East disruptions eased and prices were down about 3 percent.

Rig Count Decline Reaches 16 Weeks, Pace Of Decline Drops Dramatically - In 2008/9, the rig count decline 18 weeks straight (dropping 57% overall over a 41 week period). Today's mere 21 rig decline to 1048 marks the 16th straight week of drops (down 45%) and is the smallest drop in 11 weeks. This is the biggest 16-week decline in rig count in 30 years. Crude is not reacting significantly yet but it appears the limits of efficiency gains before production takes a hit.

Saudi Arabia Imposes Naval Blockade On Red Sea Strait, Deploys 150,000 Troops As Iran Condemns Military Action -- As noted earlier, the biggest significance of any Yemen conflict has little to do with its own domestic oil production, which at 133,000 bpd is negligible, but due to its location, which not only shares a border with Saudi Arabia, but more importantly due to the Bab el-Mandeb strait which connects the Red Sea with the Gulf of Aden: it is the fourth-biggest shipping chokepoint in the world by volume (3.8 million barrels a day of oil and petroleum products flowed through it in 2013) and is just 18 miles wide at its narrowest point. It’s located between Yemen, Djibouti, and Eritrea, and connects the Red Sea with the Gulf of Aden and the Arabian Sea. And since to Saudi Arabia preserving the logistics of oil supply is critical, it is hardly surprising that as Egypt's Ahram Gate reported earlier, the Saudi-led Firmness Storm coalition imposed a naval blockade on Bab El-Mandab strait earlier today. The Saudi navy's western fleet has also secured Yemen's main ports including Aden and Midi. It is not just Saudi Arabia: moments ago Reuters reported that four Egyptian naval vessels have crossed the Suez Canal en route to Yemen to secure the Gulf of Aden, maritime sources at the Suez Canal said on Thursday. The sources said they expected the vessels to reach the Red Sea by Thursday evening.  The naval blockade is just part of what so far has been mostly an air-based proxy war. As Al Arabia reported previously, as part of the "Decisive Storm" coalition against the Yemen rebels, Saudi Arabia has deployed at least 150,000 soldiers in preparation for what appears to be a land assault next, an assault that already has the preemptive blessing of the US. As a reminder, Saudi Arabia will be fighting US-armed rebels, but that's a different story.

Oil up after Saudi air strikes in Yemen; dollar limits gains - (Reuters) - Oil prices rallied for a second straight day on Thursday after Saudi Arabia and its Gulf Arab allies began air strikes in Yemen, sparking fears of a bigger Middle East battle that could disrupt world crude supplies. The military operation against Houthi rebels, who have driven the president from Yemen's capital Sanaa, has not yet affected oil facilities of major Gulf producers. But fears the conflict could spread has stoked concerns about the security of Middle East shipments, even as analysts and commentators doubt the probability of an all-out war amid continued signs of crude oversupply. Benchmark Brent oil jumped 5 percent early in the session before giving back some of that in European trade as the dollar rebounded from Wednesday's drop, making commodities denominated in the greenback costlier in other currencies.  In New York, Brent was up $2.30, or 4 percent, at $58.78 a barrel by 12:00 p.m. EDT  as the dollar held its strength, particularly to the euro. U.S. crude rose $1.60 to $50.81. "A lot of times you get the market reacting dramatically right off the bat to events like these, before people begin putting things in perspective after a greater study of the risks involved," "That aside, there is a growing realization that the oversupply in crude may not be the only thing in pricing oil now," Flynn said. Yemen's relatively small oil output has been disrupted for months by the conflict. More importantly, Arab producers have to ship their crude past the Yemen coastline via the Gulf of Aden to get to the Suez Canal, a key passageway to Europe.

Saudi battle for Yemen exposes fragility of global oil supply - The long-simmering struggle between Saudi Arabia and Iran for Mid-East supremacy has escalated to a dangerous new level as the two sides fight for control of Yemen, reminding markets that the epicentre of global oil supply remains a powder keg. Brent oil prices spiked 6pc to $58 a barrel after a Saudi-led coalition of ten Sunni Muslim states mobilized 150,000 troops and launched air strikes against the Iranian-backed Houthi militias in Yemen, prompting a furious riposte from Tehran. Analysts expect crude prices to command a new “geo-political premium” as it becomes clear that Saudi Arabia has lost control over the Yemen peninsular and faces a failed state on its 1,800 km southern border, where Al Qaeda can operate with near impunity. Over 3.8m barrels a day (b/d) pass through the 18-mile Bab el-Mandeb Strait off Yemen, one of the world's key choke points for crude oil supply. While there is little likelihood of disruption to tanker traffic, Saudi Arabia is increasingly threatened by Shiite or Jihadi enemies of different kinds. Shiite Houthi rebels have already seized Yemen’s capital, Sanaa, and pose a potential contagion risk for aggrieved Shia minorities across the Saudi border in the kingdom’s Southwest pocket, never an area friendly to the ruling Wahhabi dynasty in Riyadh.  The Houthis are well-armed with rocket-propelled grenades and surface-to-air missiles that were either caputured or came from Iran. They have been trained by the Lebanese Hezbollah.

The Wahhabis’ War On Yemen - The Saudis have now announced, through their embassy in Washington(!), that a coalition of Sunni led countries will attack Yemen. These include at least nominally Egypt, Morocco, Jordan, Sudan, Kuwait, the United Arab Emirates, Qatar and Bahrain. The Saudis say that 100 of its warplanes and 150,000 soldiers will take part in the campaign. They also announced an air and sea blockade against the country. The U.S. is "supporting", i.e. guiding, the campaign through a coordination cell. The White House statement says: In response to the deteriorating security situation, Saudi Arabia, Gulf Cooperation Council (GCC) members, and others will undertake military action to defend Saudi Arabia’s border and to protect Yemen’s legitimate government. As announced by GCC members earlier tonight, they are taking this action at the request of Yemeni President Abdo Rabbo Mansour Hadi. The United States coordinates closely with Saudi Arabia and our GCC partners on issues related to their security and our shared interests. In support of GCC actions to defend against Houthi violence, President Obama has authorized the provision of logistical and intelligence support to GCC-led military operations. While U.S. forces are not taking direct military action in Yemen in support of this effort, we are establishing a Joint Planning Cell with Saudi Arabia to coordinate U.S. military and intelligence support. While bashing Obama the usual warmongers in Congress support this attack.  There seems to be the idea that Saudi/U.S. selected president Hadi, out now, could be reintroduced through force. The U.S. claims that Hadi was "elected" but with a ballot like this any "election" is a mere joke. There is no way Hadi can be reintroduced by force. The chance to achieve the war's aim is therefore low.

Did Saudi Arabia Just Suffer Its Largest Foreign Capital Flight In 15 Years? - The last few days have been almost the worst for the Saudi Arabian stock market in 4 years. Between low oil prices, a new King's big social welfare budget, and now "war," it appears this year's dead cat bounce from last year's exuberance is dying rather rapidly. However, what is perhaps even more troublesome for The Kingdom than the net worth destruction and potential blowback from instigating war against the Houthis is the fact that this month saw the largest drop in foreign curreny reserves on record (over 15 years) for the Arab nation... somewhat suggesting capital flight on a scale never seen before in one of the richest states in the world.

The World's Greatest Oil Chokepoints, And Why Yemen Matters -- About half the world's oil production is moved by tankers on fixed maritime routes, according to Reuters. The blockage of a chokepoint, even temporarily, can lead to substantial increases in total energy costs and thus, these checkpoints are crucial to global energy security. While Hormuz remains the largest chokepoint (and along with Bab el-Mandeb explains why Yemen matters so much), Malacca (as we noted previously) is quickly becoming another area of potential problems. (maps and graphics)

Just as Global Oil Glut Deepens, China Cuts Oil Imports - “We don’t want to lose our share in the market,” Kuwait Oil Minister Ali al-Omair said on Thursday. OPEC had to maintain production despite the plunge in price since last summer, he said, underscoring Saudi Arabia’s position. OPEC would not cut production to goose prices.  No one wants to cut production. In the US, production is still soaring. Demand is lackluster. What gives? Crude oil is piling up around the globe. Commercial inventories across all OECD countries can now supply 28 days’ of OECD demand, near the very top of the range, the EIA reported. In the US, the amount of oil in commercial storage facilities (not counting the Strategic Petroleum Reserve) is at historic highs. Another 9.6 million barrels were added during the latest week. To put that in perspective: the US produces 9.3 million barrels per day. So in one week, the US added nearly one day’s production to its already high crude oil stocks! According to the EIA, stocks now amount to 458.5 million barrels, up 22% from a year ago. By another measure, at the end of February the US was sitting on 29 days’ supply, the most since the 1980s when the last big oil bust was wreaking havoc in the American oil patch. Speculation is now running wild that the US will run out of crude oil storage capacity. Some voices are claiming that storage in Cushing, Oklahoma, which accounts for 14% of the US total and serves as delivery point for WTI futures contracts, could be full by April. These speculations have dollar signs at the other end. When storage gets scarcer, or when the perception can be stirred up that it will get scarcer, storage fees jump, boosting revenues and profits of the storage companies. There’s money to be made, as long as the speculation can be maintained. And so the insiders came out all guns blazing.

China Lands Hard: Rail Volume Plunges, PMI Tumbles Into Contraction, Employment Worst Since Lehman -- Chinese rail freight collapses 9.1% YoY; China Manufacturing PMI tumbled back to a contractionary 49.2 - lowest in 11 months; and the Employment sub-index plunged to its lowest since Lehman ... yeah but apart from that, everything is awesome. And for those excited about just how disastrous Chinese data is (and thus how huge the next stimulus unleashing will be), think again - China now sees exactly where the last trillion dollar QE went... a de minimus and unsustained blip in the economy and liquidity-fueled rampage in stocks (which is not what a corruption-crackdown politburo wants to encourage).

HSBC March Preliminary China Manufacturing PMI Drops - WSJ: China’s economy is showing further signs of flagging, with an indicator of factory activity this month falling to an 11-month low. The indicator showed new orders, employment and prices all weakening in the manufacturing sector and suggests that fourth-quarter weakness in the world’s No. 2 economy is extending into the beginning of the new year. “The figure is much lower than expected, mainly reflecting weak domestic demand,”  . “That points to weaker economic growth in the first quarter,” she said, adding that Nomura is sticking with its forecast of 6.9% year-over-year first-quarter growth, compared with 7.3% growth in the fourth quarter. The preliminary HSBC China Manufacturing Purchasing Managers Index fell to 49.2 in March, compared with a final reading of 50.7 in February, said lender HSBC Holdings and financial data provider Markit on Tuesday. March’s reading slipped below the key 50 level that separates expansion from contraction compared with the previous month. The last time the index was below 50 was in January this year, when it fell to 49.7.

China Is “One of the Most Unequal Countries in the World,” IMF Paper Says  -A widening gap between China’s rich and poor makes it “one of the most unequal countries in the world,” according to a new working paper published by the International Monetary Fund.  They write that the rich are gleaning most of the fruits of the transition from a system of centrally-planned socialism to a market-oriented economy. Although per-capita income has grown and the number of people living on less than a $1.25 a day has plummeted, income inequality has skyrocketed, the economists said. The top quintile of earners now pull in nearly half of total income while the poorest quintile of earners account for under 5%. “China’s widening income inequality is largely a reflection of faster income growth among the rich, rather than stagnant living standards among the poor,” the two economists said. With an estimated 2.4 million millionaire households, China now has more than any country but the U.S. China’s credit-fueled investment and export-led development model are likely the primary drivers of the sharp increase in income inequality over the last three decades, they said. Beijing’s economic strategy has aimed at higher growth rates. Although that effort may have lifted many Chinese out of poverty, the two economists said there’s mounting evidence that the widening income gap could weigh on future growth. That, they said, could come “with significant social consequences, especially in a country like China aiming to move beyond the ‘middle income’ status.” To relieve those potential pressures, the two economists recommend ramping up taxes to pay for a redistribution of income: raising taxes on higher earners, broadening the personal tax and imposing a value-added tax on services. At the same time, Beijing could lower labor taxes that hit low- and middle-income earners, they said.

China's Demographic Destiny Disaster (In 2 Simple Charts) - China’s economy is slowing, and the debate is raging over whether the country is headed for an abrupt hard landing or whether the slowdown will stabilize into a soft landing that may already be underway. However it plays out, Schwab's Jeff Kleintop notes, one thing is clear: A return to the double-digit growth rates of years past seems unlikely. Demographics are destiny.. and China faces two unstoppable trajectories.  Via Schwab Insights, China’s rise largely stemmed from a surplus of laborers willing to work for lower wages than the competition overseas. This allowed Chinese factories to turn out goods more cheaply than was possible elsewhere. China isn’t the first country rise using this model. In the 1970s and 1980s, Japan relied on low-cost, export-driven economic growth to elevate itself to the second-largest economy in the world. However, Japan eventually had to change gears as the country’s birthrate declined and the number of workers fell. China now faces a similar trajectory, as seen in the chart above. Its working-age population—defined as those between ages 15 and 64—is peaking and is set to decline in the years ahead.

China central bank lowers benchmark money rate (Reuters) - The People's Bank of China (PBOC) lowered its guidance rate for the benchmark seven-day bond repurchase agreement on Tuesday, lowering the rate to 3.55 percent down from 3.65 percent the previous week, the bank announced through its website on Tuesday. This is the third time the central bank has lowered the guidance interest rate for the instrument, considered the best indicator of short-term liquidity conditions in China, since it announced a cut to interest rates at the end of February. The PBOC has been moving to ease tight lending conditions in China, which have remained stubbornly high after the spring festival holiday in late February, showing that easing measures to reserve requirement ratios and lending rates are failing to work their way into real lending rates. true The seven-day repo opened trade at 3.92 percent on Tuesday morning, down from a volume-weighted average of 4.0288 percent on Monday. The contract has been trading above 4 percent - considered indicative of mildly tight money conditions by traders - since Jan 29.

Washington Blinks: Will Seek Partnership With China-Led Development Bank --- As we’ve documented exhaustively over the past week, pressure has been building steadily for the US to strike some manner of conciliatory tone towards China with regard to the Asian Infrastructure Investment Bank, a China-led institution aimed at rivaling the US/Japan-backed ADB. Britain’s decision to join China in its new endeavor has prompted a number of Western nations to throw their support behind the bank ahead of the March 31 deadline for membership application. Because the AIIB effectively represents the beginning of the end for US hegemony, the White House has demeaned the effort from its inception questioning the ability of non-G-7 nations to create an institution that can be trusted to operation in accordance with the proper “standards.” Now, with 35 nations set to join as founders, it appears Washington may be set to concede defeat. Here’s more, via WSJ: The Obama administration, facing defiance by allies that have signed up to support a new Chinese-led infrastructure fund, is proposing the bank work in a partnership with Washington-backed development institutions such as the World Bank.

Lagarde says IMF to co-operate with China-led AIIB bank - BBC News: International Monetary Fund chief Christine Lagarde has said the IMF would be "delighted" to co-operate with the China-led Asian Infrastructure Investment Bank (AIIB). The AIIB has more than 30 members and is envisaged as a development bank similar to the World Bank. Mrs Lagarde said there was "massive" room for IMF co-operation with the AIIB on infrastructure financing. The US has criticised the UK and other allies for supporting the bank.  The US sees the AIIB as a rival to the World Bank, and as a lever for Beijing to extend its influence in the region. The White House has also said it hopes the UK will use "its voice to push for adoption of high standards". Countries have until 31 March to decide whether to seek membership of the AIIB. As well as the UK, other nations backing the venture include New Zealand, Germany, Italy and France. Mrs Lagarde, speaking at the opening of the China Development Forum in Beijing, also said she believed that the World Bank would co-operate with the AIIB, China established the Asian lending institution in 2014 and has put up most of its initial $50bn (£33.5bn) in capital.

US Officially Loses Battle Over China-Led Investment Bank… -- Add the IMF to the (now long) list of those who apparently share the UK’s view that joining the China-led Asian Infrastructure Investment Bank is an “unrivaled opportunity,” as Christine Largarde says her institution not only sees a “massive” opportunity for cooperation with the AIIB but is also “delighted” to explore the possibilities. Here’s more from BBCInternational Monetary Fund chief Christine Lagarde has said the IMF would be "delighted" to co-operate with the China-led Asian Infrastructure Investment Bank... Mrs Lagarde said there was "massive" room for IMF co-operation with the AIIB on infrastructure financing. Meanwhile, Switzerland is now on board and India, Indonesia, and New Zealand are reportedly set to follow. As a reminder, the deadline for applications is the end of this month and it appears that the UK’s move to become a founding member has suddenly made the AIIB the coolest club on the block. Australia is expected to tender a “qualified yes” tomorrow.  From The Australian Financial ReviewThe Asian Infrastructure Investment Bank is expected to receive, in principle, endorsement from Federal Cabinet on Monday but the government will continue to make Australia's full participation dependent on the adoption of appropriate governance standards. The government is set to maintain a common front with Japan and South Korea on how the bank will be run despite backing away from its previous opposition to joining last October, amid divisions in Cabinet. "There will be a decision – but with caveats around governance," a government source said emphasising that no one country should dominate the bank.

Hong Kong actively seeking to join Asian infrastructure bank, says financial secretary - Hong Kong is seeking actively to join the new Asian Infrastructure Investment Bank (AIIB), a China-led regional version of the World Bank that has been attracting more countries to sign up as founding members ahead of the deadline on Tuesday. Chief Executive Leung Chun-ying said he would discuss with Beijing how the city could get in on the act under the principle of "one country, two systems". "Hong Kong's free port policy, efficient customs clearance, strong intellectual property protection and level-playing field provide strong support," he said in Hainan yesterday in a session at the Boao Forum for Asia. The city could also contribute to helping the renminbi become a global currency, he said. In Hong Kong, Financial Secretary John Tsang Chun-wah said: "The government will actively pursue [membership of] the Asian Infrastructure Investment Bank. With our strengths in financial and professional services, we can contribute to the country as well as create opportunities for Hong Kong." The new institution, with a capital target of US$100 billion, will aim to promote infrastructure development in regional states by providing loans. A source familiar with the matter said that, depending on Hong Kong's mode of participation, the city should be prepared to fork out at least several billion Hong Kong dollars.

US risks epic blunder by treating China as an economic enemy - The United States has handled its economic diplomacy with shocking myopia. The US Treasury's attempt to cripple the Asian Infrastructure Investment Bank (AIIB) before it gets off the ground is clearly intended to head off China's ascendancy as a rival financial superpower, whatever the faux-pieties from Washington about standards of "governance". Such a policy is misguided at every level, evidence of what can go wrong when a lame-duck president defers to posturing amateurs in Congress on delicate matters of global geostrategy. Washington has enraged Britain by trying to browbeat Downing Street into boycotting the project. It has forced allies and friendly countries across the Far East to make a fatal choice between the US and China that none wished to make, and has ended up losing almost everybody. Germany, France, and Italy are joining. Australia and South Korea may follow soon. The AIIB is exactly what the world needs. China must recycle its trade surpluses and its $3.8 trillion reserves by one means or another. It can buy US Treasuries, Bunds, or Gilts, perpetuating a global bond bubble. It can make surgical investments abroad to acquire technology for its champions and pursue a narrow national interest. Or it can recycle the money in concert with other members of the AIIB - with a start-up capital of $50bn - for sewage projects, clean energy, ports, roads, and railways in Asia, helping to plug a $700bn shortfall in infrastructure investment that the World Bank is too small to cover and which is of collective benefit to the world. Britain recycled its surpluses in the 19th Century by building the world's railways. America did so in the 1950s through the Marshall Plan. China must do likewise, and it is hard to see why the AIIB is considered such a villainous variant.

The AIIB Debacle: What Washington Should Do Now -- It is time for Washington to take a step back and regroup. Its Asian Infrastructure Investment Bank (AIIB) strategy, ill-considered from the get-go, has now taken a major hit with the announcement this past week by the United Kingdom that it plans to join the Chinese-led AIIB. Washington’s concerns over the AIIB are well-established: the competition the AIIB poses to pre-existing development institutions such as the World Bank and Asian Development Bank; concern over the potential for weak environmental standards and social safeguards within the AIIB; and the opportunity for China to use AIIB-financed infrastructure for greater leverage in the region. From all accounts, the Obama administration has expended serious energy trying to dissuade its allies from joining the bank at least until greater clarity is offered as to the decision-making structure of the institution. With the defection of the U.K., however, it appears likely that Washington’s carefully constructed coalition will gradually unravel—both Australia and South Korea are apparently reconsidering their earlier reluctance to join the bank and could well use the U.K.’s decision as political cover for deciding to join the bank.  At this point, therefore, Washington has three choices:

  • 1) Continue to press its allies not to join the AIIB until governance procedures for the bank are assured;
  • 2) Join the AIIB itself; or
  • 3) Drop the issue.

Li vows reforms to help Yuan be World’s 5th Reserve Currency - Chinese Premier Li Keqiang on Monday asked the International Monetary Fund (IMF) to include the Chinese currency in the special drawing rights (SDR) basket, endorse the yuan as a global reserve currency alongside the dollar and euro. Li met IMF Managing Director Christine Lagarde in Beijing on Monday. State news agency Xinhua quoted Li as saying “China will speed up the basic convertibility of yuan on the capital account and provide more facility for domestic individual cross-border investment and foreign institutional investment in China’s capital market”. Including the yuan in the SDR system would allow the IMF to recognize the ascent of the world’s second-biggest economy while aiding China’s attempts to diminish the dollar’s dominance in global trade and finance. In late 2015, the IMF will conduct its next twice-a-decade review of the basket of currencies its members can count toward their official reserves. SDRs are international foreign exchange reserve assets. Allocated to nations by the IMF, an SDR represents a claim to foreign currencies for which it may be exchanged in times of need. Although denominated in US dollars, the nominal value of an SDR is derived from a basket of currencies, with, specifically, a fixed amount of Japanese yen, US dollars, British pounds and euros, without RMB. China would need to satisfy the Washington-based lender’s economic benchmarks and get the support of most of the other 187 member countries.

Indonesia seeks major role in Chinese-led infrastructure bank (Reuters) - Indonesia wants to play a major role in a new Chinese-led Asian infrastructure bank, with at least the vice-president's position reserved for the Southeast Asian country, the finance minister said. The $50 billion Asian Infrastructure Investment Bank (AIIB), expected to start operations by the end of the year, is attracting a growing list of countries from Britain to India to New Zealand. Under President Joko Widodo, Indonesia is expected to be one of the main beneficiaries of the bank as it seeks significant funding to build new roads, ports and bridges in the vast archipelago. true "We are fighting to get a position in the AIIB ... because most likely we will be the biggest client," Finance Minister Bambang Brodjonegoro told reporters late on Wednesday. "I have been lobbying China in regards to who will be the bank's host, the positions, shareholders and projects." Jakarta is also vying with Beijing to host the AIIB headquarters. However, Chinese Deputy Finance Minister Shi Yaobin said on Wednesday it had already been agreed the bank would have its headquarters in Beijing. At least 35 countries will join the AIIB by the deadline of March 31, the bank's interim chief, Jin Liqun, said on Sunday.

Japan nears deflation as consumer prices stop rising - BBC News: Annual core consumer inflation in Japan, the world's third-largest economy, stopped rising for the first time in nearly two years in February. The core consumer price index (CPI) was flat from a year ago, stripping out the effect of last year's sales tax increase in April. The last time the core CPI did not rise was in May 2013, when it was flat. The latest figures are moving further away from the Bank of Japan's (BOJ) inflation target of 2%. The headline core CPI, which includes oil but not fresh food prices, rose 2% from a year ago, just below market expectations of a 2.1% rise. More stimulus ahead? Japan's economy came out of a recession in the fourth quarter of last year, but its recovery remains fragile on sluggish household and business spending. Economists said the data put more pressure on the central bank to expand its monetary policy as falling oil prices keep inflation subdued. But analysts do not expect the BOJ to add to last year October's stimulus plans until the second half of this year, because officials had been anticipating the cooling inflation. Other data, such as household spending falling 2.9% in February from a year ago while retail sales were down 1.8%, also highlighted the struggle policymakers face in steering the economy towards a recovery.

Japan’s Zero Inflation a Setback for Abenomics - WSJ: The core gauge of Japanese consumer prices was flat from a year earlier in February, deepening worries Japan is heading back toward deflation two years after its central bank launched a radical economic-revival program. The government said Friday the core consumer-price index hit 0%, the lowest level since May 2013 and far from the 2% target that the central bank had pledged to hit by this spring. The index excludes fresh food prices and effects of a tax increase. The price data underscores the ongoing difficulties Prime Minister Shinzo Abe faces in pulling the world’s third-largest economy out of its long slump and eradicating the deflation that had long ailed the nation. Bank of Japan Gov. Haruhiko Kuroda insists he is still on track, albeit on a delayed timetable, to reach his price goal. But he has had much more trouble gathering traction than many economists had hoped for at the outset of his campaign in April 2013. The main reason for price weakness is a drop in global oil prices, something beyond the central bank’s control. Surveys show most BOJ watchers expect Mr. Kuroda to expand his stimulus program this year to push ahead with his fight against deflation. “The BOJ should consider undertaking additional easing in as early as April, or its credibility as a deflation fighter could suffer,” said Goshi Kataoka, chief economist at Mitsubishi UFJ Research and Consulting. Still, Mr. Kuroda faces growing challenges in continuing his quest, as business executives, economists, politicians—even some of his own policy board members–have turned increasingly wary of the side effects from his record-shattering asset-purchases.

Increasing Public Debt: Public Debt Increases to 1.209 Quadrillion Won Despite Public Companies’ Decreased Debt As of the end of last year, the public debt amounted to 1.209 quadrillion won (US$1.098 trillion). Although the debt increase in public enterprises became daunted with the normalization plans of public organizations, general government debt with social security funds, including central and provincial governments and the national pension, increased 9.7 percent from a year ago, affecting the increase of public debt. According to the money-flow tables from the Bank of Korea (BOK) on March 24, the debt of the government and non-financial public companies last year increased 76.3 trillion won (US$69.3 billion) to 1.2088 quadrillion won, up 6.7 percent from a year ago. In particular, the general government debt at the end of last year was 795.6 trillion won (US$722.3 billion), sharply increasing by 70.6 trillion won (US$64.1 billion), or 9.7 percent, from the previous year. The increased debt amount doubled when compared to that in 2013, which is 38 trillion won (US$34.5 billion) with a 5.5 percent increase. However, the debt of public companies increased only 5.6 trillion won (US$5.1 billion), or 1.4 percent, to 413.2 trillion won (US$375.1 billion) as of the end of last year. Although the public enterprise debt led the increase in the public sector during the former Lee Myung-bak administration, the increase rate fell to 3.9 percent in 2013 from 6.4 percent in 2012, as the current government stepped in to lower the public enterprise debt. The sharp increase of general government debt is related with issuing government bonds. The BOK reflects bond prices at the money market price in the money-flow tables, and the reflected additional bond amount reached about 20 trillion won (US$18.2 billion) as the government bond prices rose due to the dropped monetary market interest.

And Vietnam's Largest Foreign Investor is...Samsung - Unbeknownst to many, Vietnam has, in a number of respects, become the "Republic of Samsung." As labor costs in China have gone up as its development continues apace, it was inevitable that MNCs would move on to countries with relatively skilled workers and more competitive wages. Today's case in point is the Korean electronics behemoth Samsung. How reliant has Vietnam become on Samsung? The Nikkei Asia Review points out that Samsung subsidiaries are three of the four largest foreign investors in Korea; these subsidiaries account for about a fifth of all Vietnamese exports; and a slowdown in global smartphone sales could tip Vietnam into a trade deficit [!] If you're a Marxist, you'd say it's Korean imperialism:  [T]he Vietnamese economy has been growing more reliant on Samsung. In 2014, Samsung group companies ranked first, second and fourth in terms of new foreign direct investment projects in the country. In addition, Samsung accounts for nearly 20% of Vietnam's exports by value. The country could incur its first trade deficit in four years in 2015 if sales of Samsung smartphones slow.

Step Back, Think Twice: Trans-Pacific Partnership Would Make Korea Vulnerable to Predations of International Corporations - On Wednesday, Wikileaks, the infamous site that publishes formerly-secret documents anonymously for the public to read, released the Investment Chapter from the until-now secret Trans-Pacific Partnership (TPP) agreement being negotiated between 12 nations in the Americas and Asia. If passed, it would regulate 40 percent of the world's GDP. The South Korean government has frequently expressed its desire to be a part of the TPP, most recently after the signing of the Korea-New Zealand Free Trade Agreement. But after taking a look at how it would be regulated by the agreement, Korea should instead be thankful that they are not yet included, because the TPP would allow corporations to sue governments for interfering in a company's claimed future profits. In detail, the TPP would “create a supra-national court, or tribunal, where foreign firms can 'sue' states and obtain taxpayer compensation for 'expected future profits.'” The implications of this clause would fundamentally hamper South Korea's entire global economic strategy. And, if this clause were to have been implemented 50 years ago, South Korea's Miracle on the Han, the name given to the country's rapid rise in GDP over the last generation, might not have even been possible. Let's take a recent example, South Korea's aggressive stance against Uber, the ride-sharing service that has seen explosive growth in many parts of the world.  But the play would have had a vastly different plot if Korea was party to the TPP. Uber's next move in that case would be to take the Korean government to an investor-state dispute settlement (ISDS) tribunal, where the company would attempt to prove that South Korea's laws affected “the company's future profits.” If the Korean government would be found to have adversely affected Uber's future profits, it would be liable to compensate Uber for said lost future profits.

These TPP safeguards won't protect us from ISDS - Amid increasing calls for transparency in negotiations for the Trans Pacific Partnership (TPP) in Australia and abroad, WikiLeaks today released another draft of the agreement's controversial investment chapter. The draft confirms that Australia's position on investor-state dispute settlements (ISDS) remains in limbo: the Abbott Government has seemingly not yet agreed to ISDS but has also not ruled it out. This is consistent with recent statements made by the Minister for Trade Andrew Robb. In light of this ongoing uncertainty, it is worth scrutinising the detail of the chapter and in particular the so-called 'safeguards' meant to prevent legitimate regulatory actions taken in the public interest from being challenged in ISDS. The question that everyone is asking is whether Australia could be faced with another case like the Philip Morris/plain packaging dispute under the terms of the TPP. This is a particularly salient question given that the TPP would be the first investment treaty that Australia would have with the US - home of the most litigious foreign investors. A close reading of the draft suggests that the TPP investment chapter, while being substantially better written than bilateral investment treaties (BITs) drafted in the 1980s and 1990s, cannot be said to 'safeguard' domestic regulatory authority. The provisions in the chapter largely follow an American model that has proven insufficient to prevent investors from challenging environmental regulation.

World At A Crossroads: Stop The Fast Track To A Future Of Global Corporate Rule | Several major international agreements are under negotiation which would greatly empower multinational corporations and the World Economic Forum is promoting a new model of global governance that creates a hybrid government-corporate structure. Humankind is proceeding on a path to global corporate rule where transnational corporations would not just influence public policy, they would write the policies and vote on them. The power of nation-states and people to determine their futures would be weakened in a system of corporate rule. The Obama administration has been negotiating the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP) over the past five years, and Obama is currently pushing Congress to pass trade promotion authority (known as fast track) which would allow him to sign these agreements before they go to Congress. Then Congress would have a limited time to read thousands of pages of technical legal language, debate the contents and be banned from making amendments. Fast track would drive us down a dangerous path. The TPP and TTIP have been negotiated with unprecedented secrecy. For the first time texts of international agreements have been classified so that members of Congress have had very limited access and are not able to discuss what they’ve read. These are more than trade agreements. The portions that have been leaked show that they will affect everything that we care about from the food we eat to the jobs we have to the health of the planet. The fast track legislation could last seven years, meaning that more agreements could be rushed through Congress without open consideration of their potential impacts, thereby cementing corporate rule.

India’s revival to offset China slowdown: ADB: China's economy is slowing, but Asia will remain a growth hot spot as India and Southeast Asian economies roar ahead, said the Asian Development Bank (ADB). Emerging Asian economies will grow 6.3 percent in both 2015 and 2016, unchanged from last year, ADB wrote in its annual Asian Development Outlook for 2015, published on Tuesday. "Developing Asia is making a strong contribution to global economic growth," said Shang-Jin Wei, chief economist at the ADB. "Falling commodity prices are creating space for policy makers across the region to cut costly fuel subsidies or initiate other structural reforms. This is a key opportunity to build frameworks that will support more inclusive and sustainable growth in the longer term," he said. China's gross domestic product (GDP) growth will continue to diminish to 7.2 percent in 2015 and 7 percent in 2016, as the government proceeds with its structural reform agenda and fixed asset investment slows, ADB said. The world's second largest economy expanded 7.4 percent in 2014, its slowest pace in 24 years, undershooting the government's target for the first time since 1998.India's economy, in contrast, is poised to take off, as the initial phase of government efforts to remove structural bottlenecks lifts investor confidence and external demand picks up. The economy is forecast to grow 7.8 percent in fiscal year 2015-2016, a notable rise from 7.4 percent growth in the previous fiscal year.

Metals Markets Set For Another Shock From This Key Producer: One of the most ground-breaking changes in metals the last year was the Indonesian export ban. The government-mandated halt to shipments of unprocessed concentrates caused widespread disruptions in several global markets. And triggered bull runs for metals like nickel, as buyers worldwide scrambled to find alternate supplies. Now it looks like Indonesia's policies may be shifting again. At least for one metal. Aluminum.  A reversal of the export ban would be huge news for the global aluminum market. In 2013, prior to the ban being implemented, Indonesia was the world's second-largest bauxite producer. As the chart below shows, the difference in output under the new rules in 2014 was striking.

Global Trade Volume Tumbles Most Since 2011; Biggest Value Plunge Since Lehman - Where things get really scary is not only when looking at global trade volume, which is sliding, but the actual value of trade calculated in USD. It is here that the real devastation for a world whose global reserve currency is still the USD, does the recent collapse in global trade, as a result of the soaring value of the US dollar (for all the wrong reasons) become truly apparent.

This Is What The Global Economy Got For $11,000,000,000,000 In QE  -- Eleven trillion dollars: that’s how much of so-called Quantitative Easing the world’s central banks have done since the 2008 crisis. To put that in perspective, with eleven trillion dollars you could pay off pretty much all U.S. household debt – all mortgages, all car and student loans, credit cards – you name it. So what did the global economy get for $11,000,000,000,000 in QE? Following a post-recession pop, we got collapsing world trade growth, and that’s even with prices falling over the past three to four years. Why is this happening? It’s not because this time around things are different. To the contrary, the song remains the same. For a long time, nearly four decades, growth has been getting progressively weaker during each recovery from recession. Of course, the U.S. is a major contributor to world trade and QE, but its trend of weaker growth is present in all major developed economies. There are two key drivers behind this declining trend: demographics and lower productivity growth. Yes, it’s true that we’ve seen pretty good U.S. jobs growth recently, but that comes with productivity growth slamming down to zero. Japan, with its “lost decades,” is at the leading edge of this long-term trend. But make no mistake, Europe, and as we see, even the U.S., are not far behind. Knowing this, will a trillion or so of more QE from the ECB make the trends in these charts turn and go the other way?

Mexican Central Bank Leaves Door Open to Act Before or After Fed - —Bank of Mexico governor Agustin Carstens said on Friday he would like to keep options open to adjust monetary policy either before or an expected interest-rate increase by the U.S. Federal Reserve. Ideally, the Mexican central bank would be able to observe both the Fed’s decision and its impact on markets before itself making a move, Mr. Carstens told a group of reporters at a Mexican bankers convention. But if other factors merit preemptive action, then the bank might also consider the possibility of moving at a different time, he said. The Fed is widely expected to start raising interest rates sometime this year. The Mexican central bank, which is expected to start raising interest rates once the Fed does, kept its overnight lending rate target at a record-low 3% at its January meeting. The next policy meeting is scheduled for March 26. Annual inflation in Mexico slowed to 3%—the central bank’s official target—at the end of February, helped by lower electricity and telephone service costs. The Mexican currency, though, has seen sharp swings recently as the market anticipates Fed action after years of lax monetary policy.

Central Banks Warn of Bad Outcomes as Weak Inflation Goes Global -- -- Central bankers are realizing that what happens abroad matters more than ever to inflation at home. In the past month, policy makers from Ottawa to London have used speeches to highlight how their local inflation rates may be driven by events outside their control, complicating their ability to set the right monetary policy. “There is evidence that fluctuations in global inflation account for a large and growing share of the variation in inflation in individual economies,” Bank of Canada Governor Stephen Poloz said Feb. 24. “How does this affect our ability to target domestic inflation?” Bank of England Governor Mark Carney noted in a March 12 speech that the correlation between inflation rates in major economies grew in the wake of 2008’s financial crisis. If recent weakness persists, there is a risk of “a self-fulfilling fear of a bad outcome,” he said. Carney forecasts U.K. inflation will turn negative this year for the first time in more than five decades. Price growth slowed to 0.1 percent in February from 0.3 percent in January, according to the median forecast of economists before a report on Tuesday. While Federal Reserve Chair Janet Yellen said last week that declining energy and import prices are likely to be a transitory influence on inflation, officials signalled they are finding it trickier than they originally thought to separate U.S. monetary policy from the rest of the world amid a soaring dollar.

Deflation: the modern policy bogeyman - In 2009, the Bank of Japan conducted a public survey on deflation. The results were not what the esteemed central bank wanted or expected – at least not after a “lost decade” of falling prices. Instead of expressing horror at the idea of deflation, 44 per cent of those surveyed deemed it “favourable”; 35 per cent felt neutral about the phenomenon; and just 20.7 per cent described it as “unfavourable”. Although a subsequent survey painted a slightly more negative picture, the pattern was clear. As Kathy Matsui, vice-chair of Goldman Sachs Japan, says: “More Japanese actually feel that deflation is a positive than a negative.”This intriguing finding recently popped back into my mind for two reasons. The first is the fact that most western central banks are now engaged in a startling new fight to prevent deflation, almost at any cost. It is an accepted tenet of modern economics that deflation is a terrible scourge that must be avoided. Deflationary spirals and depressions, of the sort seen in America in the 1930s, are the nightmare that haunts the central banking world. Thus the European Central Bank is unleashing an unprecedented wave of asset purchases, partly sparked by the fact that consumer prices have been sliding steadily lower. In Sweden and Switzerland, similar efforts are under way. So too in Japan. The second reason this Japanese survey has returned to my thoughts is that an institution called the Bank for International Settlements has just published a striking study of the history of deflation. The BIS, as it is known, operates as something of a central bankers’ bank-cum-think-tank. Given its position, you might expect it to echo the orthodox view that deflation is a disaster. But in recent years the BIS has started to pump out some rather subversive research. Its deflation study – like that BoJ survey – goes against the usual grain: it argues that price falls are not always such a disaster, or a reason to panic. Sometimes they can be almost positive. The crucial point is that you cannot assume that falls in the price of goods (such as food or travel) and assets (shares, houses and so on) are the same. Economists typically assume these price falls go hand in hand, and use the “d” word to describe both. But their impact can differ.

"Belief That European QE Will Work Is Far-Fetched," Bill White Warns This Will "End Very Badly" -- "I'm not sure [European QE] is going to do anything - certainly, nothing that's good. The fundamental problem here, as I see it anyway, is that the European banking system is still broken... I think, increasingly, bankers are discomforted more than anything else (it's not just the ex central bankers but increasingly the people that are still holding the levers)... they are starting to ask whether they have somehow been backed into a place where they don't really want to be.... Unfortunately, [it] is getting bigger and bigger. There is a possibility at least that this whole exercise could end very badly."

Global fund managers warn of a bond bubble - A growing number of professional investors are warning that bonds are overvalued as fears grow that a fixed income bubble will collapse in a disorderly sell-off. Four out of five fund managers said bonds were overvalued in a survey of 300 global managers by CFA UK. Corporate bonds are more overvalued than ever before, while government bonds are the most overvalued asset class, the group said. The group, which represents 11,000 investment professionals, says their valuations index, which has been running for three years, is in effect flashing red over the high valuations of bonds. Brad Crombie, head of fixed income at Aberdeen Asset Management, said: “You only know you’re in a bubble when it pops. But this market could pop. There is more tension and anxiety over valuations than for a long while.” John Stopford, head of multi-assets at Investec, said: “There could be a bubble as investors have loaded up on high yield and corporate bonds. If we do see a reverse in the market, there could be price dislocation and a messy unwind.” In the past six years, low interest rates and central bank quantitative easing have spurred a desperate search for yield. This has encouraged investors to buy investment grade, high yield and emerging market bonds to supplement their treasuries and gilts. But bond trading volumes have not expanded as fast as the funds’ bond holdings — new capital rules have made it more expensive for banks to keep large trading books and the new US Volcker rule has barred American banks from trading out their own accounts, known as proprietary trading. As a result investment managers fear that bond markets could seize up if falling prices or a financial crisis prompt investors to pull their money out of bond funds. Without the banks to act as backstops, there may not be enough institutions prepared to buy bonds when the funds have to sell.

Currency concerns everywhere: Currency concerns in the central banking world have come to the fore again. Sweden cut interest rates further into negative territory out of the blue last week, fearing its strong currency will engender deflation. The Swiss National Bank said it would aim to weaken what it sees as a “significantly overvalued” franc. And the Bank of England flagged the risk that sterling could strengthen further and leave inflation below target for longer. Governments around the world dismiss talk of a currency war (so far) but the issue is clearly uppermost in policymakers’ minds. Today, the theme continues with Nigeria’s central bank holding its second policy meeting of the year. It devalued the currency by 8 percent last November and has been struggling to defend the naira in the wake of falling oil prices. The Federal Reserve has markets convinced that a first U.S. interest rate rise will not now come until September rather than June. That probably removes a little of the pressure on emerging markets which have been under the cosh from a soaring dollar. Nigerian President Goodluck Jonathan faces an election this weekend, challenged by former military ruler Muhammadu Buhari in a contest analysts say is the closest since the return of democracy in 1999. A Reuters poll of economists predicted uncertainty about the outcome of the election will prompt the central bank to keep interest rates at 13 percent today, but a rise is likely in the second quarter. The Hungarian central bank is expected to resume interest rate cuts with a 10-20 basis point reduction and flag more policy easing ahead due to anaemic inflation. Morocco’s central bank also has a policy meeting.

Brazil Confidence Plummets To Record Low As Central Bank Admits Currency War Defeat -- Four and a half years after Brazil's FinMin Guido Mantega first re-introduced the world to the term "currency wars," it appears the Brazilians have admitted defeat. Amid what Goldman calls a sharp decline in consumer confidence - to the lowest level in series history - which could also extend the ongoing macroeconomic adjustment processes and therefore delay the recovery of the economy; Brazil's central bank has announced that it will no longer intervene to support the Real via its Dollar-Swap program. In a SNB2.0-esque move, though somewhat anticipated by the market, Brazil enables the devaluation that has occurred to perhaps extend (improving competitiveness) and removing what was becoming a notable fiscal drag. Implicitly, Brazil just followed the Swiss and admitted defeat in the global currency war...

Brazil's economy sputters, grows 0.1% in 2014 - --Brazil's economy grew slightly in 2014 from 2013, a better-than-expected performance, but shrank in the fourth quarter from a year earlier as investment plunged and industry contracted. The country's gross domestic product shrank 0.2% in the fourth quarter from the same period a year earlier, and grew 0.1% in the full year from 2013, Brazil's statistics agency said Friday. GDP product grew 0.3% in the fourth quarter from the third, the agency added. The agency changed the way it calculates GDP starting in the fourth quarter, including activities such as investment in research and development for the first time, in order to bring the methodology more in line with international standards. Investment shrank 5.8% in the fourth quarter from the same period a year earlier, and industry contracted 1.9% in the same period, the statistics agency said. Brazil's GDP in 2014 was worth 5.5 trillion reais (about $1.7 trillion), according to the agency. The sputtering economy represents a big comedown since 2010, when GDP expanded 7.6% and the future for Brazil, and Ms. Rousseff, looked bright. But then the strong real and a weak global economy started to take their toll on growth, and Mr. Rousseff's government responded with a series of measures that resulted in short-term bumps for GDP but finally left investors with the impression that the government had no long-term vision.

Alberta government increases taxes, but still plans to run record deficit - Albertans will pay more to get married, go camping, have a drink, go for a drive or do pretty much anything else as the province fights to get out from under the collapse in oil prices. The 2015-16 budget tabled Thursday increases taxes and fees virtually across the board and runs the largest deficit in Alberta's history at $5 billion. The government is retooling its tax take so the wealthy will pay more. It's also bringing in a health-care levy, boosting the gasoline tax by four cents a litre and increasing sin taxes on cigarettes and booze. "This has been one of the hardest budgets to develop in many years and has required tough decisions," Finance Minister Robin Campbell told reporters. "We're going to get off of oil." Premier Jim Prentice has billed the document as necessary to make up for billions in lost oil revenue and to insulate the province's day-to-day spending from roller-coaster swings in energy prices. The premier has also said he needs a mandate to implement the budget and is expected to call an election soon. The budget details $1.5 billion in hikes and new levies and outlines a new tax model. Albertans will no longer be charged a 10 per cent flat tax. Everyone will still pay that much on the first $100,000 of taxable income, but there will be two tax brackets for anyone earning more than that. There will be a new refundable tax credit and improvements to rules to aid lower-income working families. Fuel taxes will go up to a total of 13 cents a litre Friday — still the lowest in Canada. Traffic fines will rise by an average of 35 per cent. Other increases will hit registration fees, court and land-title searches, marriage certificates and camping costs.

Russia Through Worst Of Economic Troubles Claim Ministers: Russian Finance Minister Anton Siluanov says his country is beginning to shake off the damage that Western sanctions and plummeting oil prices have done to its economy over the past year. He acknowledged at a conference of Russian business leaders on March 19 that gross domestic product fell by an annual rate of 1.5 percent in January, but he said the economy appeared to be steadying. “The end of last year and the beginning of this year were especially difficult when we saw volatility in the foreign exchange market, the value of our assets declining sharply,” the minister said. “These two shocks hit us hard. Now, in general, we see that the worst is over.” Siluanov said Russia, with its one-dimensional energy economy, is emerging from an economic slough caused by the steep drop in oil prices over the past nine months that was only made worse by Western sanctions imposed because of Moscow’s treatment of Ukraine. Related One sign he pointed to is that the value of the ruble, which lost 46 percent of its value in 2014, has been performing better than the currencies of emerging economies during the past month. Also, he said, inflation has stabilized, and Moscow may be able to keep it from moving over 11 percent or 12 percent for the rest of the year. This, in turn, has allowed the Bank of Russia, its central bank, to stimulate the economy further by lowering its chief interest rate for the second time since Jan. 1, and it's indicated that it may relax interest policies even further if inflation continues to decline.

Auction House Bonhams, Sued Over Frauds and Forgeries, Casts Pall Over Russian Art Market - Yves Smith - We've said that fraud is the fastest growing business in the US, but the US is far from having a lock on that market. One of the proofs is the way our Richard Smith has turned chasing international scammers into a full-time activity. Scamming has strong links to money laundering. That seems to have exploded as more and more of the global rich seek to move cash across borders in ways not readily tracked by tax men and border officials. The New York Times, for instance, did a major expose on high end real estate as a money laundering vehicle, focusing on one building, the Time Warner Center in Manhattan. John Helmer looks at another nexus, that of art and very high end collectables, through the lens of auction house Bonhams. However, there are intriguing extra wrinkles with Bonhams which puts it closer to the Graham Greene world of shadowy dealing than is the norm for the art world. And since Bonhams is a major dealer in Russian art, the collateral damage extends to the Russian art market, as well as Bonham's efforts to sell itself.

Russia warns Denmark its warships could become nuclear targets - Russia has gone on the offensive in the Baltic, warning Denmark that if it joins Nato’s missile defence shield, its navy will be a legitimate target for a Russian nuclear attack. “I don’t think that Danes fully understand the consequence if Denmark joins the American-led missile defence shield. If they do, then Danish warships will be targets for Russian nuclear missiles,” said Mikhail Vanin, the Russian ambassador to Denmark, to the Jyllands-Posten newspaper. • How do we protect the Baltic states? “Denmark would be part of the threat against Russia. It would be less peaceful and relations with Russia will suffer. It is, of course, your own decision - I just want to remind you that your finances and security will suffer. At the same time Russia has missiles that certainly can penetrate the future global missile defence system,” Mr Vanin said.

Ukraine Unable to Repay Russian Debt - IMF - Russia will not receive a $3 billion bond owed by Ukraine this year, as International Monetary Fund projections clearly indicate.  The Ukrainian government is squaring up to its international creditors over its plan to restructure the country’s $15 billion debt over the next four years, part of an IMF rescue plan to plug a $40 billion hole in the economically troubled country’s finances, the Financial Times reported. Anna Gelpern, a law professor at Georgetown University who was previously with the US Treasury, calculated that the IMF has already determined that the bond owned by Russia will be included in the restructuring. The IMF’s plan hinges on co-operation from creditors to accept some sort of restructuring on their debt. This includes Russia, who is due to be repaid the $3 billion bond in December. In all, Ukraine’s sovereign debt for last year amounted to a hefty 71 percent of GDP. Ukrainian Finance Minister Natalie Jaresko earlier said she hoped the country would find a way to restructure $16 billion in state debt within the next two months.

What’s $3 Billion Between Enemies? Ukraine and Russia Battle Over Debt Terminology - Of the many battles Ukraine and Russia are fighting, an argument about whether to call the $3 billion Kiev owes Moscow at the end of this year “official” or “private” debt may seem insignificant.  In fact, says Anders Åslund, a Russia expert and senior fellow at the Peterson Institute for International Economics, the verbal skirmish highlights a fundamental problem: Ukraine needs far more cash than Western countries have currently promised to keep the conflict-ridden economy afloat. “It’s under-funded,” said Mr. Åslund. Even though the International Monetary Fund and other creditors just boosted their emergency bailout financing, Mr. Åslund said he expects Europe and the U.S. will have to contribute at least another $10 billion. Russian finance minister Anton Siluanov on Friday declared the $3 billion in eurobonds “official” debt. Ukraine’s finance minister, Natalie Jaresko, has said it could be classified as privately-held debt and included as part of a restructuring Kiev is negotiating. She says it’s unclear exactly who holds that debt and if the Russian government has sold some of its holdings. If the debt is deemed “official” by the IMF, it could nix future payouts from the fund’s $17.5 billion emergency bailout. If Ukraine defaults on the Russian debt when it comes due in December, then IMF rules would technically prevent the fund from lending any more to Kiev.

Sorry Ukraine, You Still Need Russian Gas - Winter may be over, but Ukraine’s energy security is looking shakier than ever as it failed to make much progress on a new gas agreement with Russia. Reuters reports: A preliminary meeting in Brussels on Friday had never been expected to yield major progress, with the two sides still far apart as they jostle for position in the negotiations while European Union officials have set a target date of June for a new accord on how much Ukraine should pay Moscow for its gas. Speaking after the talks, Russian Energy Minister Alexander Novak said Russia would be willing to consider a discount, but a take-or-pay clause that requires Kiev to buy a certain amount of gas whether it needs it or not would apply from April 1. Take-or-pay clauses have long been a sticking point for Gazprom’s European customers who chafe at the notion of being obligated to buy gas regardless of demand, and already Kiev is pushing back against the possibility that it will be forced to pay up next month. As Ukraine’s energy minister Volodymyr Demchyshyn remarked, “At the moment we don’t need to buy Russian gas. We will simply stop buying it.” Ukraine can afford to be a bit more defiant in its rhetoric now that the weather is warming up and demand for natural gas is slackening. Reuters reports that Europe could help Ukraine to a limited extent, but that ultimately Kiev will have to once again turn to Moscow in preparation for next winter: Ukraine can buy cheaper gas through reverse flows from the European Union, but that would not be enough to fill storage adequately over the summer months…The Commission has estimated that Ukraine would need 4-6 billion cubic metres of gas from Russia to boost reserves it says need to be built to 19-20 bcm by around October, from about 7.3 bcm now.

German Support for TTIP Deal Falls Over Fears of US Domination - Germany's deputy economic chancellor has pledged to prevent and stand firm against US protection clauses in the US-EU trade deal. "What the SPD doesn't want, won't happen," Sigmar Gabriel told newspaper Sueddeutsche Zeitung. He said that his party, the Social Democratic Party of Germany, known as Sozialdemokratische Partei Deutschlands (SPD), will prevent any clauses in the US-EU trade deal that go against the ideals of the SPD. This includes protection clauses called for by the US in the Transatlantic Trade and Investment Partnership (TTIP) trade talks. The Transatlantic Trade and Investment Partnership is a proposed free trade agreement between the European Union and the United States. The 'partnership' proposes to reduce barriers in the way for big business trade deals across the Atlantic. The agreement between the European Union and the United States is scheduled to be finalised by the end of 2015. Critics of the TTIP agreement argue that the deal will increase the role and influence big corporations have over smaller states, driving down working conditions and environmental standards.

Rich Man’s Bank Hit by Bank Run, Collapse, “Bail-In” In Europe nary a day seems to go by without some mention or rumor of a bank run or bank closure. Ground Zero of the current troubles is Greece, whose broken financial system is now wholly dependent on regular infusions of euros from the ECB. The moment those infusions stop – something the ECB has warned could happen at any time – the country’s banking system collapses. On Wednesday Greek banks saw deposit outflows of €300 million, the highest in a single day since a February deal with the euro zone that staved off a banking collapse. But it’s not just on Europe’s periphery that banks are experiencing problems. At the beginning of this month, Austria sent shockwaves throughout the old continent’s financial markets when the Austrian government refused to grant the scandal-tarnished, “bottomless pit” bank Hypo Alde another taxpayer-funded bailout. Instead, bondholders, even those with bonds guaranteed by the Austrian state of Carinthia, were made to eat the losses in one of the first cases of bank bail-ins since sweeping changes to EU-wide legislation last year [read… Austria ‘Pulls Ripcord’ on Bailouts, Lets ‘Bottomless Pit’ Hypo Alpe Bank Drag State of Carinthia into Bankruptcy].In recent days the mayhem has spread to Spain’s capital, Madrid, and Andorra, a tiny mountain-ringed tax-haven perched between France and Spain. The initial trigger of the panic was an accusation from the US government of money laundering and a host of other unsavory practices taking place at Andorra’s third largest bank, Banca Privada d’Andorra (BPA). Fears quickly escalated that the bank would be unable to pay the sort of fine that the US treasury might impose, setting off a mini-bank run that culminated in the imposition of capital controls at Andorran branches of BPA as well as the seizure of deposits of 15,000 account holders of the bank’s Banco de Madrid subsidiary.

The success of eurozone QE relies on a confidence trick - The economic equivalent of “famous for being famous” is the idea of a rise in confidence because of a policy whose main transmission channel is confidence. The discussion about quantitative easing is precisely this. It is as self-referential as the statement that it works because it works.  An example of such circularity was the forecast by the European Central Bank this month, which predicts a solid economic recovery in 2016 and 2017 on the grounds that QE would work.  The forecast even suggested that inflation would rise close to the central bank’s target of just under 2 per cent within the next two years. Since the declared rationale for the ECB’s purchase of sovereign bonds was to raise inflation expectations, one might conclude that the programme was already working. What makes this even more amazing is that the ECB had not bought a single bond at the time. The only thing that changed is that everybody was suddenly more confident — because everybody else was. Back in the real economy, this is what really happened: as the world’s largest net importer of oil and gas, the eurozone economy enjoyed a windfall from a falling oil price — an effect that was immediate and large, but prone to dissipating quickly. Think of it as a lottery win. The second factual change has been the fall in the euro’s exchange rate. It is debatable to what extent this is due to QE. In any case, the effect is sizeable but not as big as widely suggested. What matters for the real economy is not the nominal exchange rate, but the currency’s trade-weighted real exchange rate. This fell by about 10 per cent between February 2014 and February 2015, according to the Bank for International Settlements. The exchange rate matters less for the eurozone than for most countries as it is a relatively closed economy. It largely trades with itself. A third positive change, though relatively minor so far, has been a very slow improvement in bank lending. And finally, fiscal policy is still tight, though marginally less so than a year ago. A combination of all of those has temporarily pushed the growth rate up to about an annualised 1.5 per cent. But remember, this was due to the equivalent to a lottery win. You have to win every year to repeat this unless something real happens that changes the trajectory of your growth performance.

Eurozone May Have to Boost Immigration to Avoid Growth Collapse - The eurozone may have little choice but to encourage higher levels of immigration if it is to avoid decades of very low economic growth that will leave it with high levels of debt, according to a paper published Friday by two Irish economists. Kieran McQuinn at the Economic and Social Research Institute, and Karl Whelan at University College Dublin, estimate that without economic reforms, and with the eurozone’s working age population continuing its post-2010 decline, annual economic growth will average just 0.6% over the coming decade, even if unemployment rates and investment spending return to their pre-crisis levels by 2020. And it gets worse—in subsequent decades, the eurozone economy would grow even more slowly, and by just 0.3% between 2044 and 2060. “The euro area is facing a growth crisis as much as it is facing a debt crisis, with the latter perhaps more a symptom of the former,” the two economists write. But even with long-delayed and politically contentious reforms, the currency area’s growth prospects will remain weak. The two economists find that seven eurozone countries would benefit from reforms to their labor markets that would reduce average unemployment rates to 6%. They also take account of pension changes that raise the proportion of older workers staying in the labor force, and regulatory reforms that leave product, labor, taxation and education policies looking more like those of the U.K., a European nation with high levels of total factor productivity, or output per unit of labor and capital.

Spanish Anti-Austerity Party Podemos Wins 15 Seats in Andalusia -- Podemos, the Spanish anti-austerity party, will be a prominent force in Andalusia’s regional parliament after it won 15 seats in the party’s first election since its ally Syriza triumphed in Greece.  The Socialists, who have held power in Andalusia for more than three decades, will continue to govern the region. Lead by Susana Díaz, they won 35% percent of the vote, earning them 47 seats, shy of an outright majority.  The election held up Spain’s two-party system, albeit in a weakened state. The People’s party came in second with 27% of the vote, or 33 seats, but the party of prime minister Mariano Rajoy was the biggest loser on the day as the result was a steep drop from the 50 seats it won in the 2012 elections. The Andalusian election generated considerable interest far outside the region’s boundaries. Spain this year will see municipal, regional and general elections across the country and many saw the Andalusian race as a crucial window into electoral sentiment. The race was also Podemos’s first test since Syriza’s win in the Greek elections. With Andalusia’s unemployment rate sitting at 34% – the highest in Spain – and the Socialists entangled in allegations of misusing hundreds of millions of euros in public funds, the election was widely seen as one of Podemos’s first runs at turning discontent into votes.

Portugal's public debt reaches over 130 pct of GDP last year  (Xinhua) -- Portuguese public debt reached 130.2 percent of Gross Domestic Product (GDP) in 2014, well above the government's forecast of 127.2 percent, the Portuguese National Statistics Institute (INE) said on Thursday. Portugal's public debt stood at over 225 billion euros last year, 5.6 billion euros more than in 2013, the INE said. Portugal public debt registered at 129.7 percent of GDP in 2013. The Portuguese government has been implementing harsh austerity measures since it signed a 78-billion-euro bailout program with the troika of its international lenders -- the European Commission, the International Monetary Fund and the European Central Bank in May 2011. The country had a clean exit from the program in May last year. Although Portugal's economy is improving since the second half of 2013, the country's public debt still remains very high in the past few years.

France is Europe's 'big problem', warns Mario Monti - France has become Europe’s “big problem”, according to the former prime minister of Italy, who warned that anti-Brussels sentiment and the rise of populist parties in the Gallic nation threatened to blow the bloc’s Franco-German axis apart. Mario Monti – who was dubbed “Super Mario” for saving the country from collapse at the height of the eurozone debt crisis – said France’s “unease” with the single currency had already created tensions between Europe’s two largest economies. “In the last few years we have seen France receding in terms of actual economic performance, in terms of complying with all the European rules, and above all in terms of its domestic public opinion – which is turning more and more against Europe,” he told The Telegraph. France's strained relationship with Brussels has been borne out through its persistent defiance of EU budget targets and the rise of Marine Le Pen’s far-right Front National party, “France is the big problem of the European Union because the whole construct has been leveraged on the foundation of a solid Franco-German entente. If it isn’t there then there is a poor destiny for Europe,” said Mr Monti. “We’ve seen that the strong axis is no longer so strong.”

Far-right leads polls heading into French vote  (AFP) - France's National Front, one of the most powerful populist far right parties in Europe, eyed significant gains against President Francois Hollande's ruling socialists in regional elections Sunday. The party appeared set to capitalise on a high abstention rate, as well as on a search by some voters for radical solutions to France's economic woes. "I feel confident," Marine Le Pen, the controversial National Front leader said as she cast her vote at a school in northern France. With turnout at just over 18 percent by midday, Hollande called on the French to vote as he cast his own ballot in central France. "Today, the (key) issue is abstention," he said. The elections are being held across 101 "departments", which control issues such as school and welfare budgets. Some 43 million people are eligible to vote. View gallery France's National Front (FN) leader Marine Le Pen (C) leaves after casting her ballot during the …For the National Front, or FN as it is known in French, it was a chance to punish the Socialists and build up a head of steam for presidential elections in 2017 that some analysts believe could see Le Pen oust the unpopular Hollande.

Nazi Extortion: Study Sheds New Light on Forced Greek Loans - On June 10, 1944, the Germans massacred 218 people in Distomo, including dozens of children. . "We can't forget the Germans," Zisis says. They came to Distomo 71 years ago with their guns. "Today they are exerting power over our village with their banks and policies," he adds.  The massacre, which continues to shape the place today, was one of the most brutal crimes committed by the Nazis in Greece, with the carnage lasting several hours. For decades, a trial over the massacre wound its way through the courts at all levels in Greece and Germany. Greece's highest court, the Areopag, ruled in 2000 that Germany must pay damages to Distomo's bereaved. "But we are still waiting," says Zisis. "There has been no compensation." Last week in Greek parliament, Greek Prime Minister Alexis Tsipras demanded German reparations payments, indirectly linking them to the current situation in Greece. "After the reunification of Germany in 1990, the legal and political conditions were created for this issue to be solved," Tsipras said. "But since then, German governments chose silence, legal tricks and delay. And I wonder, because there is a lot of talk at the European level these days about moral issues: Is this stance moral?" Tspiras was essentially countering German allegations that Greece lives beyond its means with the biggest counteraccusation possible: German guilt. Leaving aside the connection drawn by Tsipras, which many consider to be inappropriate, there are many arguments to support the Greek view. SPIEGEL itself reported in February that former Chancellor Helmut Kohl used tricks in 1990 in order to avoid having to pay reparations.

Looks Like Germany May Have To Pay Up -- It appears clear that the war reparations 'issue' will not go away anymore. Either Berlin pays what legal experts determine should be paid, or it risks becoming a pariah in its own neighborhood. That the Germans in the 1950s and 1960s, at home and in schools, chose not to tell their children anything about their crimes cannot serve as an excuse to silence the children of its victims. It seems the only way to save the European Union, that Germany has made its economy so dependent on, is for Germany to pay up.

In Greece, Syriza Struggles to Deliver Promises as Money Runs Out — Glowering with disdain, Evangelos Venizelos stepped into the well of the Greek Parliament and ridiculed members of the country’s new leftist government. They had vowed to roll back unpopular austerity measures that Mr. Venizelos and the prior government had pushed through. They had promised that Greece would stop kneeling to European creditors. Mr. Venizelos, once a powerful minister given the task of defending austerity, offered a disgusted opinion: Who are you kidding? “You were grossly unprepared and naïve,” Mr. Venizelos boomed during last Friday’s debate over a government amnesty program to collect unpaid taxes. He added: “The government is fooling itself by using double talk. They are saying one thing in the country and another thing to the lenders.” Having promised an anti-austerity revolution, Prime Minister Alexis Tsipras and his Syriza party are now having a taste of comeuppance. Even as Syriza leaders say their program remains on track, the party is struggling to transition from rebel outsiders plotting to wrest Greek’s economic sovereignty back from Berlin and Brussels to running a government that is rapidly running out of money.

Germany Gives Greece One Final Ultimatum After Friday's "Optimistic" Talks Devolve Into Disagreement And Confusion | Zero Hedge: On Friday, the main catalyst that launched the early ramp in the EURUSD, subsequently sending both the Dax over 12,000, and the US stock market soaring, was speculation and hope that the latest round of Greek talks on late Thursday night ahead of tomorrow key meeting between Tsipras and Merkel in Berlin, had gone well, and there was a reason to be optimistic about the near-term for a Greece which increasingly more see as on the verge of expulsion from the monetary union. We explained as much, although we added the provision that at this point it is likely too late to do much if anything about Greece in "German DAX Surges Over 12,000 On Greek Optimism, But The Money Has Run Out." Now, courtesy of reporting by the FT, we can also rule out any of the so-called optimism in the aftermath of Thursday's talks because as Peter Spiegel reports, not only was there no real consensus, but the talks "ended in disarray", and even though "Greece’s prime minister and fellow Eurozone leaders emerged from a meeting early on Friday morning touting a breakthrough agreement to unlock much-needed bailout funds for Athens — only to fall into disagreement hours later about what it all meant."

Leaked Tsipras Letter to Merkel Shows Increased Desperation, Warns of Imminent Default --  Yves Smith -- If the plan of the Troika was to starve the Tsipras government and produce either capitulation or a loss of domestic credibility, their effort appears to be on track. FAZ reported that the Greek government is set to run out of funds by April 8. Tonight, the Financial Times reports that Greek prime minister Alexis Tsipras sent a desperate-sounding letter to Angela Merkel on March 15. That appears to have led Merkel to meet with him at an EU conference last week and arrange for a one-on-one session tomorrow.  From the Financial Times account: Alexis Tsipras, the Greek prime minister, has warned Angela Merkel that it will be “impossible” for Athens to service debt obligations due in the coming weeks if the EU fails to distribute any short-term financial assistance to the country… Mr Tsipras warns that his government will be forced to choose between paying off loans, owed primarily to the International Monetary Fund, or continue social spending. He blames European Central Bank limits on Greece’s ability to issue short-term debt as well as eurozone bailout authorities’ refusal to disburse any aid before Athens adopts a new round of economic reforms.Curiously, the Financial Times story fails to mention that European Commission chief Jean-Claude Juncker offered €2 billion for humanitarian relief. However, there may be less here than meets the eye. If you read the text carefully, the €2 billion is the maximum Greece could get. And Juncker stressed, “That’s not meant to go into the coffers of the Greek state but to support efforts to create growth and social cohesion in Greece.” That would seem to imply that strings are attached or that there will be strict oversight of how the funds are used. And it was not clear how quickly the funds would be released.

'Impossible' for Greece to service debt, Tsipras warns Merkel: FT -- Greek Prime Minister Alexis Tsipras has told German Chancellor Angela Merkel it will be "impossible" for Greece to service its debt in the next few weeks without short-term financial aid from the EU, the Financial Times has reported. "Given that Greece has no access to money markets, and also in view of the 'spikes' in our debt repayment obligations during the Spring and Summer of 2015 (primarily to the IMF), it ought to be clear that the ECB's special restrictions ... when combined with the disbursement delays ... would make it impossible for any government to service its debt obligations," Tsipras wrote in the March 15 letter, obtained by the FT. The Greek leader argues that Athens may have to choose between paying off loans, owed primarily to the International Monetary Fund, or continuing its social spending. Merkel and Tsipras are scheduled to meet in Berlin on Monday afternoon local time.

Tax Credit Certificates to End the Greek Euro-Stalemate - No solution is in sight for the Greek crisis. And while the EU and most of the Greek people do not want a breakup from the Eurozone, Greece and its partners should realize that they are at a dead end and that the time has come for them to consider bold alternatives, including a consensual and orderly exit.[1]  We question that leaving the euro via a break-up is the only option left, and think that another solution is possible, which could help the Greek economy to recover fast, and enable Greece to honor its debt obligations. Greece should issue a special bond, called Tax Credit Certificate (TCC), which would give to its holders the right to a tax reduction in two years from its issuance. The TCC would be a two-year zero coupon bond, which the bearer could use, upon expiration, to pay taxes and whatever financial obligation is due to the Greek public sector at large. The TCCs would be negotiable, so that recipients would be able to convert them in euro at any time, at a market discount, and use the euro proceeds to finance any sort of expenditure. Presumably, the use of TCCs as a mean of exchange for direct transactions would also quickly develop. The TCCs might eventually evolve into a kind of domestic currency, which would not replace the euro but would circulate in parallel with it. The TCCs would be distributed free of charge (helicopter-money-wise) to individuals and companies (based on each company’s gross labor cost bill). In particular, since TCCs would reduce gross labor costs for domestic enterprises, this would enhance their external competitiveness and support the recovery in Greek internal demand without creating foreign trade imbalances. TCCs would also be issued to fund social expenditure, possibly including job-guarantee programs. Annual TCC issues could start from, say, €10 billion and gradually increase thereafter. Assuming a conservative fiscal multiplier of 1.2, annual TCC issues of €50 billion would cause Greece’s GDP to grow – other things being equal – by almost €60 billion, thus offsetting the fall from the pre-crisis € 240 billion to the current €180 billion level.

Merkel and Tsipras in bid to defuse tensions as cash fears rise - Angela Merkel, German chancellor, and Alexis Tsipras, Greek prime minister, pledged to work together on Monday to try to resolve the Greek financial crisis, striking a conciliatory note during their high-profile Berlin summit. But both said that the meeting, which Ms Merkel arranged last week in a bid to defuse escalating tensions, was not the place for detailed talks over the eurozone’s Greek rescue programme. Speaking to journalists in a break in the meeting, Ms Merkel insisted that the responsibility for negotiations remained with the eurozone group working with the institutions checking Greece’s plans — the European Commission, the European Central Bank and the International Monetary Fund. Mr Tsipras said he had not come to Germany to “beg for money”. The Berlin meeting took place amid arguments between the radical Greek government and its eurozone partners — and fears Athens might run out of cash as soon as next month. Recognising the Greek premier’s deep economic worries, Ms Merkel said there was “an appetite for co-operation” despite the differences between the two countries. “We want Greece to be strong economically, we want Greece to grow and above all we want Greece to overcome its high unemployment.” Ms Merkel argued that all EU partners were equal in an apparent bid to allay Greek fears of domination from Berlin. “Although there are 80m people living in Germany and we are the biggest economy in the European Union, this Europe is built on the principle that each country is equally important — no matter how many residents it has,” she said. Mr Tsipras urged Europeans to reject stereotypes, denied Greeks were lazy and said he had accepted the chancellor’s invitation because it was “better to talk with each other than about each other”.

Takeaways From Angela Merkel’s Meeting With Alexis Tsipras - WSJ: Both leaders are calm, level-headed politicians. They’re unlikely to fall out and complain about each other like their finance ministers, the irascible Wolfgang Schäuble and the mercurial Yanis Varoufakis. But cool temperaments can’t hide a political gulf.  From war reparations to the conditions of Greece’s bailout funding, disagreements between Athens and Berlin haven’t been this big since the debt crisis began over five years ago.  The main value of Monday’s meeting, however, may be the message it sends to hotheads in Greece and Germany who see the other side as the embodiment of euro-evil.  By inviting Mr. Tsipras to Berlin, Ms. Merkel has sent a signal: Everybody, calm down and let us cooperate. Mr. Tsipras is clearly determined to talk about Greece’s desire for more World War II reparations from Germany, no matter how unwelcome the topic is in Berlin. The German government insists the issue is settled. Previous Greek governments downplayed the issue to avoid complicating talks over Greece’s bailout financing. The new Greek government prefers to apply pressure rather than to build goodwill. Mr. Tsipras said Greek reparations demands weren’t about the money, but about morality. Ms. Merkel is unlikely to get the checkbook out. Monday’s talks won’t lead quickly to any agreement that solves Greece’s big, imminent problem: its need for billions of euros in financing in coming months, and its rejection of the economic overhauls that its creditors want in return for lending more money. Ms. Merkel insisted she isn’t the right person to negotiate with Greece about those overhauls. Greece needs to convince technocrats from the European Union and International Monetary Fund that its economic and fiscal plans make sense, she said. The problem for Mr. Tsipras is that he probably can’t both please those unforgiving technocrats and his own coalition of radical-left Syriza and rightwing-nationalist Independent Greeks. He has so far played for time, avoiding the choice. Time and money are running out.

Why Greek default looms - I have used the metaphor before of Greece and Germany being a feuding married couple, not really wanting a divorce but so unable ever to understand the other's point of view that terminal rupture remains a significant probability. So for the Greek prime minister, Alexis Tsipras, it must have been personally humiliating to send his "please-send-cash-soon" letter to Angela Merkel, the German chancellor (the letter has been obtained by the FT). He complains that there is no sign, in the conduct of eurozone officials working on the new financial rescue plan, of wanting to make the promised new start in the fraught relationship. Mr Tsipras accuses them of trying to hold the country to a reform and reconstruction programme that his Syriza government has rejected, and which he thought had been dropped, too, by eurozone leaders. Which broadly points to the biggest flaw in the entente reached in February between Greece and eurozone - namely that the agreement they approved disguised a continuing and profound emotional and ideological gulf. Both sides in essence want the other to admit they were wrong in the past and have turned over a new leaf: neither shows the inclination to do that. The clearest manifestation of mutual misunderstanding being a long way off was last week's blog by the finance minister, Yanis Varoufakis.  He makes a point that is both true and incendiary (in the present circumstances): namely that the eurozone's and IMF's original 240bn euro bailout was, in practice, a bailout of the feckless banks and investors who had lent to Greece, rather than of Greece itself.

ECB tells Greek banks not to raise exposure to Greek gov't debt-source  (Reuters) - The European Central Bank (ECB) has asked Greek banks not to increase their holdings of Greek government debt, including Treasury bills, a banking source familiar with the matter told Reuters on Tuesday. Greece's international creditors, including the ECB, have set a 15 billion-euro cap on outstanding Greek T-bills which Athens has already hit. "As supervisors, the ECB and the Bank of Greece are instructing the banks not to increase their exposure to Greek government debt for prudential reasons," the source said. Greece, which lives off aid from the European Union, the International Monetary Fund and the ECB, is running out of cash and has asked the ECB to raise the limit. The central bank has refused to do so. true "The ECB and the Bank of Greece have already made clear that further T-bills could not be accepted as collateral," the source added.

Greece said to run out of cash by April 20 without fresh aid: Greece will run out of money by April 20 unless it receives fresh aid from creditors, a source familiar with the matter told Reuters on Tuesday. Athens is scrambling to send a list of planned reforms to its European lenders in the coming days in the hope of unlocking fresh aid and averting bankruptcy. It has lately relied on repo transactions - where it borrows money from state entities - to cover its cash crunch, but can continue to rely on that only for a few more weeks, the source said. "Although it will be hard, the country can make it without help until about April 20, using the short-term borrowing from public entities," the source said. Specifically, Athens is hoping that if euro zone finance ministers approve the country’s latest reforms list then that would allow for the return of about 1.9 billion euros ($2.07 billion) in profits made by the European Central Bank on Greek bonds, the source said. Athens also expects the return of about 1.2 billion euros in cash left in the Greek bank bailout fund that was taken back by the euro zone last month, the source said. [

Greece runs out of cash by April 20 without new aid: report - -Greece will run out of cash by April 20 unless it receives an infusion of fresh aid from its international creditors, Reuters reported Tuesday, citing an unidentified source. The report said Greece can continue to meet obligations until that date via short-term borrowing from state entities. The report contributed to a pullback by the euro which traded at $1.0901, down from $1.0946 in North American trade late Monday. News reports said the Greek government is prepared to present a revised list of reform measures to its eurozone partners no later than Monday.

Athens raids public health coffers in hunt for cash - Greece’s government has raided the coffers of its public health service and the Athens metro as it widens a hunt for funds to keep itself afloat and service debts. Athens faces a €1.7bn bill for wages and pensions at the end of the month and then a €450m loan payment to the International Monetary Fund on April 9. Greek government and eurozone officials believe Athens does not have funds to cover both. In another constraint on Greece’s ability to raise cash, the European Central Bank decided to impose stricter curbs on the issuance of short-term government debt. EU officials expressed hope that a marathon Monday night meeting between Alexis Tsipras, the Greek prime minister, and his German counterpart, chancellor Angela Merkel, would spark long-stalled talks over economic reforms Greece must implement to unlock €7.2bn in frozen bailout aid. Athens has promised to deliver a list of reforms to eurozone authorities by Monday. But officials cautioned that the list would still have to be agreed with bailout inspectors before eurozone authorities could make progress on any deal to free up new funding. Though Mr Tsipras discussed his reform plans with Ms Merkel on Monday night, there were few signs that talks in Athens with bailout inspectors had become more active following the Berlin meeting. “The big ‘if’ is that they seem to move at such a glacial pace,” said an official involved in the negotiations. Greek authorities have also been seeking €1.2bn in funding that they believe was wrongly taken out of the country’s bank recapitalisation fund by eurozone authorities. But EU officials said a quick decision on the matter was unlikely and even if Athens was awarded the cash it could only go towards bank rescues, not general government coffers.

Greece Raids Public Health Service Kitty as It Scrambles for a Short-Term Lifeline; ECB Refuses to Cut a Break - Yves Smith  --As Greece continues to scramble to raise funds to avert default and keep paying pensioners and government officials, the end game is becoming clearer.  It was mystifying to have a reader of the German press maintain that Tsipras and Merkel had reached a deal in their Monday pow-wow. But George Osborne and George Soros, whom one would imagine each have good inside sources, both warned that the risk of a Greek default had increased after the Tsipras/Merkel talk by virtue of nothing major having been resolved. Soros pegged the odds of a Grexit at 50/50 due to the fact that Greece’s primary surplus is on a trajectory to becoming zero.  Strange at it may seem, these two views may not be incompatible. Tsipras may have gotten a deal from Merkel. But if it is the one being bandied about in the press, all it is is a short-term stopgap. It does not signal any fundamental change in the creditors’ posture towards Greece, which is to keep the pressure high and push the new government to accept the terms on offer: work within the existing structural reform framework (Greece can propose changes in reforms or swapping out reforms for different ones), submit to review by and negotiation with the Troika, allow the Troika inspectors to have access to information.  Greece is now raiding various agency cash stocks, including that of its public health service, to pay its bills. Yesterday, the rumor was that the government would be out of money by April 9; today the estimate is April 20. And Greece might stump up some cash prior to getting access to the so-called bailout funds, the €7.2 billion that it is set to receive when it gets its detailed reforms approved first by the Troika, then by the Eurogroup.

Europe blocks desperate Greek attempt to stay afloat - The Greek government will not receive €1.2bn (£883m) in European rescue funds after officials ruled the Leftist government had no legal claims on the cash. Athens requested the return of money it said was erroneously handed to creditors from Greece's own bank recapitalisation fund, the Hellenic Financial Stability Facility (HFSF). The transfer was originally arranged by the previous Greek administration. But eurozone officials have blocked the claim, saying it is "legally impossible" transfer the money back to the debt-stricken country. "There was agreement that, legally, there was no over payment from the HFSF to the EFSF," said a fund spokesman. Germany's finance ministry also objected, claiming there was "no reason" to make the transfer. The decision is a further blow to the Greek government's attempts to stay afloat over the next few weeks. Athens has been scrambling to make repayments to its creditors while continuing to pay wages and pensions. The government now faces another €2.4bn cash squeeze in April, including a €450m loan repayment to the IMF on April 9.

The Troika’s Leverage Over Greece: The Ongoing Bank Run - Yves Smith - As we’ve argued, Greece was almost certain not to prevail on its own. But outside help has been sorely lacking. While the US expressed concern early on, and argued the Greek case, that the nation needed debt writedowns and pro-growth policies, the Administration quickly abandoned its lobbying effort. The European left similarly has not taken up the Greek cause in a meaningful or consistent manner.  As for the notion that Syriza has been planning to depart the Eurozone, we argued that Finance Minister has long viewed that outcome as an unmitigated disaster for Greece and Europe. And perhaps most important, the government’s actions don’t bear that out. The first order of business should have been to impose capital controls. As reader Ishmael stressed, you declare bankruptcy before you run out of cash. This measure would have reduced the Troika’s leverage over Greece somewhat, and would be an absolutely essential step in preparing for a Grexit. Moreover, imposing those restrictions in response to withdrawals could have been positioned as a necessary protective measure if it had been done early on. Acting now would look like a desperate measure, either a last-ditch effort to protect the banks or an admission that Grexit risk was high. A new story in the Financial Times illustrates what we said early on, that it is the ECB that holds the whip hand. It is the ECB that is keeping the Greek banking system on life support through the backstop of the ELA and also increased pressure on the Greek government by refusing to allowing Greek banks to increase their holdings of Greek government debt (raising the ceiling would have allowed the Greek banks to buy newly-sold government bonds and bills, thus providing the government with a desperately-needed funding mechanism).

Greek Bank Deposits Hit 10-Year Low  Greek bank deposits reached a 10-year low in February as the outflow continues due to the impasse in negotiations between Athens and creditors and the looming threat of a Grexit. According to figures released Thursday by the Bank of Greece, deposits dropped by 5 percent as depositors withdrew 7.6 billion euros during the month, leaving total private sector deposits at 140.5 billion euros, or 14.5 percent less than end-November levels. That was the lowest level since March 2005. In the past three months, Greek households and businesses withdrew a total 23.8 billion euros from the banking system, or 15 percent of the total deposit base. Outflow had slowed down after the February 20th bailout extension deal between Greece and creditors, but it has picked up again in the past week. Greece has until Monday to present a comprehensive list of reforms to lenders for further financial aid to be released. The Emergency Liquidity Assistance (ELA) scheme controlled by the European Central Bank will help Greece stay afloat short-term.

Data show how Greek bank run loomed before bailout extension deal - Greek companies and households pulled €7.6bn out of their bank accounts during the government’s standoff with its international bailout creditors in February, driving deposits down to €140.5bn — the lowest level in 10 years. Although the withdrawals were lower than in January, the €20.4bn pulled out over the two months shows how close Greece came to a full-scale bank run before Athens reached agreement with eurozone authorities to extend its €172bn bailout into June.  The two-month total, reported by the Bank of Greece on Thursday, is even larger than the €15.9bn withdrawn by companies and households in May and June 2012, when back-to-back Greek elections led eurozone officials to prepare actively for a Greek exit from the single currency. Originally, Greece’s EU rescue programme was due to expire at the end of February. Repeated failures by the new Greek government to reach agreement with eurozone creditors led to a rapid speeding up of capital flight. Officials said that in the days before an extension deal was reached, almost €800m was being withdrawn from Greek banks every day. Jeroen Dijsselbloem, the Dutch finance minister who led eurozone negotiations with Athens, told the Financial Times last month that the massive withdrawals were the primary force pushing the Greek government towards an extension deal. “Mainly, the situation in the banks was becoming very urgent, and that was the biggest driver,” said Mr Dijsselbloem. “If you have large outflows from your banks, you can do that for a couple of weeks, but there becomes a point where it becomes too critical.” Greek authorities have said that deposits returned to the banking sector after the deal was reached on February 20. This may have made the newly released data less dire than originally feared. But Greek bankers said withdrawals have picked up again in recent weeks as the prospect of Athens running out of money to pay its bills has returned. Last week, almost €400m per day was being withdrawn, said senior bankers.

Greece Hurries to Hammer Out Policies to Satisfy Creditors - WSJ: Greece is hurrying to compile a list of economic overhauls that satisfies its creditors and secures desperately need bailout aid, as it runs increasingly low on cash and debt payments loom. Key officials in Greece’s new government, led by the leftist Syriza party, were hunkered down in meetings Thursday to flesh out new economic policies with the aim of submitting a list of overhauls by Monday at the latest, senior officials said. Greece hopes that eurozone finance ministers can meet and approve the country’s overhaul program as early as next Wednesday. However, officials from Greece’s European creditor countries said the economic plans would first need a positive response from technocrats representing European institutions and the International Monetary Fund. Greece has accelerated its efforts on the overhaul plans in recent days after German Chancellor Angela Merkel worked hard to convince Greek Prime Minister Alexis Tsipras in Berlin on Monday that there is only one way for Athens to secure the financing it needs: substantive economic overhauls. Greece’s dwindling coffers have the government, and much of official Europe, wondering how much longer the country can pay both its maturing debts in April—including to the IMF—and the pension and public-sector wages of Greeks. Greek officials are eager to focus on issues that are politically palatable for Syriza: tackling tax evasion and corruption as well as income-tax increases for the well-off and new rules for paying off tax debts in installments. Athens officials said the list also could include some privatization plans.

Greek Deputy FinMin Confirms Athens Is "Prepared For Rift" With Europe - Just days after Greek FinMin Yanis Varoufakis' comments about hoping the Greek people will continue to back the government "after the rift," were played down by Syriza; ekathimerini reports that Alternate Finance Minister Euclid Tsakalotos on Friday made waves by seeming to confirm that the Greek government was "always prepared for a rift" with its European creditors - "If you don't entertain the possibility of a rift in the back of your mind then obviously the creditors will pass the same measures as they did with the previous [government]," (which perhaps explains why default risks are soaring back to post-crisis highs).

Greece submits reform proposals to eurozone creditors – with a warning - Greece submitted a long-awaited list of structural reforms to its creditors on Friday as its leftist-led government warned it would stop meeting debt obligations if negotiations failed and aid was not forthcoming. As officials from the EU, the European Central Bank (ECB) and the International Monetary Fund (IMF) prepared to pore over Athens’s latest proposals, the country’s international economic affairs minister, Euclid Tsakalotos, raised the stakes, saying while Greece wanted an agreement it was prepared to go its own way “in the event of a bad scenario”. He told the Guardian: “We are working in the spirit of compromise, we want a solution, but if things don’t go well you have to bear the bad scenario in mind as well. That is the nature of negotiations.” The government, dominated by the anti-austerity Syriza party, had assembled a package of 18 reforms in the hope of unlocking £7.2bn in financial assistance. The desire was for a positive outcome, Tsakalotos said, but Athens’s new administration was not willing to abandon its anti-austerity philosophy. Two months after assuming office, the government’s priority remained to alleviate the plight of those worst affected by Greece’s catastrophic five-year-long crisis. The British-trained economist said: “Our top priority remains payment of salaries and pensions. If they demand a 30% cut in pensions, for example, they do not want a compromise.”

China, Greece vow to advance pragmatic cooperation - (Xinhua) -- Chinese Foreign Minister Wang Yi met his Greek counterpart Nikos Kotzias in Beijing on Wednesday, pledging to advance pragmatic cooperation. Wang said the two countries trust and support each other, which is the foundation of the China-Greece comprehensive strategic partnership. The two sides should make the Chinese-run project at the Greek port of Piraeus "a paradigm of mutually beneficial cooperation between China and Greece," Wang said. Wang spoke highly of the positive role Greece plays in the ties between China and Europe. Kotzias said Greece attaches great importance to the Piraeus port project and is willing to play positive role in the construction of the China-Europe Land-Sea Express Line. Kotzias said the Greek government hopes to sign cooperation plans with China for the medium-and-long term to promote cooperation in various fields.

Europe once more sleep walks towards the abyss - Not for the first time, Europeans are deluding themselves. In Berlin, it is believed that Europe’s currency union is now sufficiently well bullet proofed to withstand a Greek default, and even exit, with only a bare minimum of adverse consequences for everyone else. A similarly naïve mind-set rules in Athens, where it is believed that Greece can both default and still remain in the euro. Both positions are fantasy, and therefore greatly increase the chances of disastrous mishap. Europe is once again sleep walking towards the abyss. There comes a moment in all real life tragedies when the action turns to farce. The never ending economic road crash of the Eurozone debt crisis is no exception; that moment arrived last week with the now infamous “stinkefinger” episode – a video purporting to show the Greek finance minister, Yanis Varoufakis, giving the middle finger to the Germans. Whether he made the gesture or not – despite mounting evidence to the contrary, Mr Varoufakis still claims the video was doctored – scarcely seems to matter; it has become comically symbolic of the way the single currency is once again tearing Europe apart.

Eurobounce - Krugman  A lot of the recent data coming in show a substantial acceleration in European growth. And you know what will be coming next: claims that this (a) vindicates austerity and (b) shows that there is no reason to worry about Japanification.Time, then, for some prophylaxis.First, on austerity: one of the truly amazing and depressing things about the whole fiscal policy debate is the apparent inability of large numbers of supposedly sophisticated commentators to appreciate the distinction between levels and rates of change. Maybe it would help to note that the US economy grew 10.8 percent — that’s right, 10.8 percent — in 1934, but nobody would claim that the Great Depression was over? Nah, it won’t help at all.Still, for what it’s worth: think of Keynesian economics as asserting that GDP = multiplier*government spending + other stuffThen if we’re looking at growthChange in GDP = multiplier*Change in government spending + change in other stuffNow look at euro area fiscal policy, as estimated by the IMF:Photo Credit There was a major tightening after the Greek crisis struck and Germany reverted to type, but there hasn’t been much further tightening recently. So there’s nothing especially troubling about a return to growth.  You really don’t want to take a short-run rise in growth as a sign that secular stagnation is no longer a worry. Right now, I’d argue that Europe is benefiting a lot from the weaker euro, which is coinciding with a de facto, if unacknowledged, pause in austerity. But the downdrafts — shrinking working-age population, a single currency in a distinctly non-optimum currency area, and the intellectual rigidity of too many policymakers — remain.

Double digit unemployment predicted even if eurozone recovers - One in 10 workers in the eurozone will remain unemployed even after the full effects of the European Central Bank’s bond-buying programme have rippled through the economy, according to ECB projections, highlighting the deep scars left by the bloc’s financial and debt crises. ECB president Mario Draghi told the EU parliament on Monday that “growth is gaining momentum” in the eurozone. “The easing of lending conditions is progressing hand-in-hand with a resurgent demand for credit to finance business investment,” Mr Draghi said. “In the longer-term perspective, this will increase potential output.” But there are question marks over how much the recovery will benefit those worst affected by the years of recession and near-stagnation.  Unemployment in the currency area remains at 11.2 per cent and few economists think growth will pick up at a fast enough pace for firms to take on many more workers. The ECB’s latest forecasts suggest the currency area’s crisis has been so severe that the jobless rate will stay close to double figures even after the €1.1tn quantitative easing programme is fully implemented. By contrast, the jobless rate in the US stood at 5.5 per cent in February and is set to go below 5 per cent later this year. “The bottom line is that it’s extremely disappointing that eurozone policy makers continue to tolerate an unacceptably high and dangerous level of unemployment,” said Jonathan Portes, director of Britain’s National Institute for Economic and Social Research.

Growth alone will not stabilise Europe - Europe is in a race against time. After six years of economic crisis, extremist political parties are well-entrenched across the continent. Set against that, the European economy is in better shape than for some years. The question is whether economic optimism can return quickly enough to prevent the bloc’s politics slithering over the edge. The signs of political rot are very evident. In France this weekend the far-right National Front (FN) notched up about 25 per cent of the vote in regional elections, confirming its strong performance in last year’s European parliamentary elections. Prime Minister Manuel Valls has warned that Marine Le Pen, leader of the FN, could actually win the presidential election in 2017. That same year, Britain could vote to leave the EU. And by then the single currency could also be well on the way to disintegration, with Greece out and Italy heading for the exit. But while the political signals are still bleak, there are grounds for economic hope. Spain and Ireland, two of the countries that have suffered worst from debt crises and austerity economics, are finally recovering. Spain is expected to grow at 2 per cent this year and unemployment in Ireland will drop below 10 per cent soon. Even Greece, before the latest twist in the crisis, had experienced a return to economic growth. More broadly, the combination of lower oil prices, a falling currency and monetary easing by the European Central Bank should deliver a considerable stimulus to the EU economy this year. A return to growth might give Europe some breathing space and head off the chance of political disaster. The difficulty is that, although there is clearly a connection between economic hardship and political extremism, the relationship is not precise. Fear of immigration and anger about elite corruption have bolstered the FN — and driven the rise of fringe political movements in Italy, Germany and the UK.

ECB's balance sheet expands as stimulus plan gains momentum (Reuters) - The balance sheet of the European Central Bank and the euro zone's national central banks expanded by 15.725 billion euros (11.6 billion pounds) to 2.158 trillion euros in the week to March 20, the ECB said on Tuesday. The increase was due to a rise in ECB holdings of securities and came after the central bank began buying sovereign bonds a week earlier under an asset purchase plan with which it aims to pump 1 trillion euros into the economy. Last week's balance sheet increase was more than twice the size of the gain of the previous week, when the ECB began the sovereign bond-buying plan. With its asset purchases, the ECB is aiming to lift euro zone inflation from below zero back up towards its target of just under 2 percent. The ECB's gold reserves were unchanged at 343.8 billion euros.

ECB to Continue Buying Debt Until Inflation Stabilizes - WSJ: —The European Central Bank will purchase large amounts of public and private debt for at least 18 months and until it is convinced that inflation will stabilize near annual rates of 2%, the bank’s president Mario Draghi said on Monday, underscoring the ECB’s willingness to flood the eurozone with freshly minted money far into the future. In testimony to European parliament, Mr. Draghi also urged Greece to commit to fully honoring its debt obligations. Its government also must be specific about areas of economic and fiscal reforms where it is in agreement with its international creditors and, where there is disagreement, “how (the reforms) are going to be replaced has to be specified,” he said. Referring to the ECB’s bond purchase program, now entering its third week, Mr. Draghi said: “We intend to carry out our purchases at least until end-September 2016, and in any case until we see a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term.” Mr. Draghi’s testimony comes two weeks after the ECB launched a program to purchase more than €1 trillion in bonds—mostly government debt—by September 2016. The purpose of the program, known as quantitative easing, or QE, is to raise inflation rates closer to the ECB’s target of near 2%. The ECB has said it would buy bonds at a monthly clip of €60 billion and that the purchases could even extend beyond September of next year.

Low interest rates causing 'huge problems' in Germany: Schaeuble (Reuters) - German Finance Minister Wolfgang Schaeuble said on Thursday that record low interest rates were causing considerable problems in Germany but added that he was not criticizing the European Central Bank which needed to defend its inflation target. "We have an interest rate environment that is causing huge problems for us in Germany," he said at a banking event in Berlin. "A low interest rate leads to a misallocation of resources with all the risks and side-effects that you see when bubbles are forming," he said, adding that there was too much central bank money and debt in the world.

SNB Warns of "Temporary Deflation", Promises Further "Unconventional Measures" Including Forex Interventions to Achieve "Stability"  - Swiss Bonds are negative out to 10 years. They briefly went negative out to 15 years in the wake of the sudden removal of the Swiss National Bank peg to the euro back on January 13 as show in the following chart.Yield on 20-year Swiss bonds plunged to 0.10% on January 13 as well. You can now get 0.19% for 15 years or 0.31% for 20 years. That's how crazy things are.  Please consider SNB Warns of ‘Difficult Times’ as Currency Move Hits HomeSwitzerland is facing “difficult times” and a short period of deflation following January’s abrupt unwinding of a currency peg, one of the Swiss National Bank’s most senior policy makers said on Thursday night. The comments from Fritz Zurbrugg, one of three permanent members of the SNB’s governing board, show the impact of the January 15 currency move on an economy often regarded as a safe harbour during the eurozone crisis. The Swiss franc has shot up in value since the removal of the peg that capped it at SFr1.20 per euro, making Swiss exports and Swiss holidays more expensive. A euro is now worth SFr1.05. Mr Zurbrugg said that the fall in prices that Switzerland faces is “temporary” and would not threaten price stability in the medium term. “A damaging deflationary spiral is not expected.” Swiss inflation is already in negative territory, with prices falling 0.8 per cent in February — worse than the 0.3 per cent fall in prices across the eurozone in the month. The SNB complemented January’s currency move by reducing deposit interest to -0.75 per cent in an effort to prevent a wave of cash flowing into Switzerland in anticipation of the Swiss franc’s rise in value.  “Efforts to circumvent negative interest rates by obtaining exemptions or shifting to cash are not in the interests of Switzerland as a whole in the current climate.”

ECB’s Weidmann: Ending Preferential Tax Treatment of Debt Would Be ‘Major Boon’ to Stability - Ending the preferential treatment of debt would be a big help to financial stability, said European Central Bank Governing Council member Jens Weidmann in a speech Friday. In remarks to a conference, Mr. Weidmann invoked American founding father Benjamin Franklin’s famous remark that only death and taxes are certain in the world. “But actually, this timeless quip does not apply to debt. Interest expenses are tax-deductible, while equity disbursements are not,” said Mr. Weidmann. The central banker, who also heads Germany’s Bundesbank, then quoted an IMF study suggesting that ending preferential tax treatment of debt would increase average unweighted bank equity by 2.2 to 4.2 percentage points. “Even though the authors caution that the effect is likely to be lower for the biggest banks, these numbers are sizable by any measure, especially considering that the proposed Basel III leverage ratio is 3%,” said Mr. Weidmann. “Doing away with the preferential tax treatment of debt could therefore provide a major boon for financial stability,” he said.

Repeat after me: sectoral balances must sum to zero - I do like sectoral net lending charts. This one is from the OBR's latest Economic Forecast: The thing to remember about sectoral balances is they must sum to zero. It is not possible to have a negative external balance, as the UK does, with concurrent surpluses in the public, household and corporate sectors. If the UK is a net borrower from the rest of the world because of its current account deficit, then somewhere in the domestic economy must be a balancing deficit. It is pretty obvious where this deficit has been. In 2010, the external sector was in deficit (green line on chart) and corporates (yellow line) were net saving. The external balance had been in deficit for a long time, but corporate net saving commenced at the same time as the public sector (red line) switched from surplus to deficit. This may have been a traumatic response to the dot-com crash, but to me this looks more like a policy change around 2001 that encouraged corporate saving. I wonder what it was. Any suggestions?The net saving of corporates and foreigners during the pre-crisis years was balanced both by a public sector deficit and by a growing deficit in the household sector (blue line). We now know that the household deficit was associated with unsustainable credit growth. When the crash came, households switched abruptly from deficit to surplus. Foreigners, corporates and households were all net saving at the same time. As I said, the sectoral balances have to sum to zero: so the increase in the government deficit balanced the desire of all three private sectors to save at the same time. When no-one wants to spend, someone must, and that someone is inevitably government. Government is the "spender of last resort".